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 June 30, 2000
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 June 30, 2000 was 775,325 shares.
Traditional Small Business Disclosure Format (check one): ___ Yes X No
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Balance Sheet
June 30, 2000
(Unaudited)
Assets
------
Cash & due from banks, including $1,205,662
bearing interest $5,618,884
Federal funds sold 1,120,000
---------
Total cash & cash equivalents 6,738,884
Investment securities available for sale, at fair value 511,612
Other investments 1,073,900
Loans, less allowance for loan losses
of $1,720,905 130,657,042
Premises and equipment, net 4,057,607
Accrued interest receivable and other assets 6,077,509
---------
Total Assets $149,116,554
============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits:
Interest-bearing deposits $110,835,876
Noninterest-bearing deposits 21,855,644
----------
Total deposits 132,691,520
Note payable and other borrowings 4,350,000
Accrued interest payable and other liabilities 1,059,003
---------
Total Liabilities 138,100,523
Stockholders' Equity:
Common stock ($1 par value; 10,000,000
shares authorized, 775,325 shares issued) 775,325
Additional paid-in-capital 6,900,777
Retained earnings 3,822,509
Treasury Stock (25,992 shares acquired
at cost) (475,119)
Accumulated other comprehensive
income, net of tax (7,461)
-------
Total Stockholders' Equity 11,016,031
----------
Total Liabilities and Stockholders' Equity $149,116,554
============
See notes to consolidated financial statements
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Statements of Earnings
For the six months ended June 30,
(Unaudited)
Interest income: 2000 1999
---- ----
Interest and fees on loans $6,338,831 $4,591,527
Interest on federal funds sold/overnight funds 18,391 157,426
Interest and dividends on investments 52,263 50,698
------ ------
Total interest income 6,409,485 4,799,651
Interest expense:
Interest on deposits 2,708,226 2,290,319
Interest on note payable and other borrowings 147,255 34,926
------- ------
Total interest expense 2,855,481 2,325,245
Net interest income 3,554,004 2,474,406
Provision for loan losses 392,590 128,533
------- -------
Net interest income after provision
for loan losses 3,161,414 2,345,873
--------- ---------
Other income:
Gain on sales of loans 259,497 570,867
Service charges on deposit accounts
and other income 699,557 537,830
------- -------
Total other income 959,054 1,108,697
------- ---------
Other expense:
Salaries and employee benefits 1,673,218 1,485,100
Occupancy 454,720 428,664
Other operating expense 971,902 1,014,150
------- ---------
Total other expense 3,099,840 2,927,914
--------- ---------
Earnings before income taxes 1,020,628 526,656
Income Tax expense 389,000 199,080
------- -------
Net earnings $631,628 $327,576
======== ========
Basic earnings per share $0.83 $0.58
===== =====
Diluted earnings per share $0.83 $0.50
===== =====
See notes to consolidated financial statements
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Statements of Earnings
For the three months ended June 30,
(Unaudited)
Interest income: 2000 1999
---- ----
Interest and fees on loans $3,363,370 $2,354,335
Interest on federal funds sold/overnight funds 10,908 35,482
Interest and dividends on investments 25,611 10,320
------ ------
Total interest income 3,399,889 2,400,137
Interest expense:
Interest on deposits 1,443,500 1,137,801
Interest on note payable and other borrowings 66,851 10,769
------ ------
Total interest expense 1,510,351 1,148,570
Net interest income 1,889,538 1,251,567
Provision for loan losses 221,000 45,165
------- ------
Net interest income after provision
for loan losses 1,668,538 1,206,402
--------- ---------
Other income:
Gain on sales of loans 97,103 319,675
Service charges on deposit accounts
and other income 378,633 281,524
------- -------
Total other income 475,736 601,199
------- -------
Other expense:
Salaries and employee benefits 842,445 720,480
Occupancy 234,812 222,112
Other operating expense 491,236 535,800
------- -------
Total other expense 1,568,493 1,478,392
--------- ---------
Earnings before income taxes 575,781 329,209
Income Tax expense 210,000 120,000
------- -------
Net earnings $365,781 $209,209
======== ========
Basic earnings per share $0.49 $0.37
===== =====
Diluted earnings per share $0.49 $0.32
===== =====
See notes to consolidated financial statements
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Statements of Comprehensive Income
For the six months ended June 30,
(Unaudited)
2000 1999
---- ----
Net earnings $631,628 $327,576
Other comprehensive income, net of tax:
Unrealized losses on securities available for sale:
Unrealized loss arising during the period, net
of tax of $831 and $4,850, respectively (1,341) (7,822)
------- -------
Other comprehensive income (1,341) (7,822)
------- -------
Comprehensive income $630,287 $319,754
======== ========
See Notes to Consolidated Financial Statements
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Statements of Comprehensive Income
For the three months ended June 30,
(Unaudited)
2000 1999
---- ----
Net earnings $365,781 $209,209
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Unrealized gain (loss) arising during the period, net
of tax of $242 and ($4,049), respectively 397 (6,637)
--- -------
Other comprehensive income 397 (6,637)
--- -------
Comprehensive income $366,178 $202,572
======== ========
See Notes to Consolidated Financial Statements
<PAGE>
First Cherokee Bancshares, Inc.
Consolidated Statements of Cash Flows
For the six months ended June 30,
(Unaudited)
2000 1999
---- ----
Cash flows from operating activities:
Net earnings $631,628 $327,576
Adjustments to reconcile net earnings to net cash
provided (used) in operating activities:
Depreciation, amortization and accretion 190,526 160,344
Provision for loan losses 392,590 128,533
Change in accrued interest payable and
other liabilities 35,207 (97,900)
Net gain on sale of OREO (7,389) 0
Change in accrued interest receivable and
other assets (225,084) (3,849,364)
------- -----------
Total adjustments 385,850 (3,658,387)
--------- ---------
Net Cash provided by operating activities 1,017,478 (3,330,811)
Cash flows from investing activities:
Purchases of other investments (222,100) 0
Proceeds from maturities and calls of investment
securities available for sale 18,999 27,184
Proceeds from sale of OREO 887,466 0
Net change in loans (21,834,351) (17,489,215)
Purchases of premises and equipment (79,536) (694,532)
-------- ---------
Net Cash used by investing activities (21,229,522) (18,156,563)
Cash flows from financing activities:
Net change in deposits 21,970,106 7,257,959
Proceeds from exercise of stock warrants 4,980 296,067
Proceeds from sale of treasury stock 41,569 76,674
Net proceeds from FHLB advances 1,000,000 3,000,000
Net proceeds (repayment) of note payable (625,299) 456,587
--------- -------
Net Cash provided by financing activities 22,391,356 11,087,287
Net change in cash and cash equivalents 2,179,312 (10,400,087)
Beginning cash and cash equivalents 4,559,572 15,319,736
--------- ----------
Ending cash and cash equivalents $6,738,884 $4,919,649
========== ==========
Noncash investing activities:
Change in accumulated other comprehensive
income, net of tax ($1,341) ($7,822)
Transfer of loans to OREO $104,500 $451,000
Financed sale of OREO $109,915 $0
Supplemental disclosure of cash flow information:
Interest Paid $2,648,415 $2,320,696
Income Taxes Paid $414,000 $194,000
See notes to consolidated financial statements
<PAGE>
FIRST CHEROKEE BANCSHARES, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
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 June 30, 2000, and the results of its
operations and its cash flows for the six-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 1999 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.
<PAGE>
Reconciliation of the amounts used in the computation of both "basic earnings
per share" and "diluted earnings per share" for the periods ended June 30, 2000
and June 30, 1999 are as follows:
For the six months ended June 30, 2000:
Net Earnings Common Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share $631,628 759,450 $0.83
Effect of dilutive securities
Stock options 0 1,899
- -----
Diluted earnings per share $631,628 761,349 $0.83
======== ======= =====
For the six months ended June 30, 1999:
Net Earnings Common Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share $327,576 564,574 $0.58
Effect of dilutive securities
Stock options 0 4,708
Warrants 0 79,668
- ------
Diluted earnings per share $327,576 648,950 $0.50
======== ======= =====
For the three months ended June 30, 2000:
Net Earnings Common Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share $365,781 748,096 $0.49
Effect of dilutive securities
Stock options 0 296
- ---
Diluted earnings per share $365,781 748,392 $0.49
======== ======= =====
For the three months ended June 30, 1999:
Net Earnings Common Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share $209,209 565,001 $0.37
Effect of dilutive securities
Stock options 0 5,004
Warrants 0 80,370
- ------
Diluted earnings per share $209,209 650,375 $0.32
======== ======= =====
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000
FORWARD LOOKING STATEMENTS
Various statements contained in this Quarterly Report on Form 10-QSB and the
exhibits to this Quarterly Report 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, various 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:
/o/ projections of revenues, income or loss, earnings or loss per share, the
payment or non-payment of dividends, capital structure and other financial
items;
/o/ statements of plans and objectives of the Company or its management or Board
of Directors, including those relating to products or services;
/o/ statements of future economic performance; and
/o/ statements of assumptions underlying such statements.
Words such as "believes," "anticipates," "expects," "intends," "targeted," and
similar expressions are intended 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:
/o/ the strength of the U.S. economy in general and the strength of the local
economies in which we conduct operations;
/o/ the effects of and changes in trade, monetary and fiscal policies and laws,
including the interest rate policies of the Board of Governors of the
Federal Reserve System;
/o/ inflation, interest rate, market and monetary fluctuations;
/o/ the timely development of new products and services and the overall value of
these products and services to users;
/o/ changes in consumer spending, borrowing and saving habits;
/o/ technological changes;
/o/ acquisitions;
/o/ the ability to increase market share and control expenses;
/o/ 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;
/o/ 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;
/o/ changes in the Company's organization, compensation and benefit plans;
/o/ the costs and effects of litigation and of unexpected or adverse outcomes in
such litigation; and
/o/ 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 unanticipated events or circumstances after the date on which a
statement is made.
<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 June 30, 2000 were $149.1 million compared to $126.1 million
as of December 31, 1999. Assets of the Company increased approximately $8.9
million during the second quarter of 2000 as compared to an increase of
approximately $14.1 million during the first quarter of 2000. This growth is due
to normal business transactions.
Loans increased from $102.1 million at June 30, 1999 to $109.2 at December 31,
1999 and $130.7 million at June 30, 2000. Management anticipates loan production
will continue to increase during the remainder of the year. The following table
presents major classifications of loans at June 30, 2000:
% of
Total
Total Loan
Loans Portfolio
----- ---------
Commercial $ 9,634,190 7.28%
SBA - unguaranteed 25,671,006 19.39%
Real estate - mortgage 49,424,040 37.34%
Real estate - construction 38,072,296 28.76%
Installment and other consumer 9,576,415 7.23%
--------- -----
Total loans 132,377,947 100.00%
=======
Less: Allowance for loan losses (1,720,905)
-----------
Total net loans $130,657,042
============
Net premises and equipment were $4.1 million at June 30, 2000 compared to $4.2
million at December 31, 1999. Other assets decreased from $6.7 million as of
December 31, 1999 to $6.1 million as of June 30, 2000.
Total deposits were $132.7 million at June 30, 2000 compared to $110.7 million
at December 31, 2000. The Bank received $8 million in brokered deposits during
the second quarter, but at costs lower than paid in the local market. As of June
30, 2000, interest-bearing deposits and non interest-bearing deposits were
$110.8 million and $21.9 million, respectively. As of December 31, 1999,
interest-bearing deposits and non interest-bearing deposits were $94.1 million
and $16.7 million, respectively.
<PAGE>
Management added a provision of $392,590 to the allowance for loan losses during
the first two quarters of 2000. The addition is primarily attributable to the
increased level of loans at June 30, 2000 compared to prior periods. The
allowance had a balance of $1,720,905 at June 30, 2000, representing 1.30% of
loans. Chargeoffs were $28,155 while recoveries were $17,779 resulting in net
chargeoffs of $10,376 during the first six months of 2000. Management believes
this allowance is adequate to cover possible loan losses. The following table
presents the activity in the allowance for the first two quarters of 2000. At
June 30, 2000, management determined that two loans required specific reserves
totaling $65,413. The allowance is allocated among the loan categories based on
the relative percentage of the particular category to total loans.
FIRST CHEROKEE BANCSHARES, INC.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
Balance, December 31, 1999 $1,338,691
Chargeoffs (28,155)
Recoveries
17,779
Provision for Loan Losses 392,590
-------
Balance, June 30, 2000 $1,720,905
==========
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
At June 30, 2000, the Bank had eight loans classified as nonaccrual totaling
$236,936, all of which are secured by real estate, vehicles, equipment or
inventory. The Bank's impaired loans consist of those nonaccrual loans that are
either greater than 90 days delinquent as of June 30, 2000 or are classified as
nonaccrual by management because the collection of interest from the borrower is
doubtful. Specific reserves totaling $65,413 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 $28,317 as of June 30,
2000. Interest income on such loans, recorded only when received, was
approximately $46,536, for the first six months of 2000. As of June 30, 2000,
the Bank had no properties classified as other real estate owned. The ratio of
loans past due 30 days or more to total loans was 3.37% at June 30, 2000
compared to .95% at December 31, 1999. There was one loan past due 90 days,
totaling $999,129, which was on accrual status as of June 30, 2000 due to
anticipated collection of interest. There were no loans past due 90 days or more
still accruing interest as of December 31, 1999. There were no restructured
loans as of June 30, 2000 or December 31, 1999.
<PAGE>
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 June 30, 2000, consolidated stockholders' equity was $11,016,031 or 7.39% of
total assets compared to $10,339,195 or 8.20% of total assets at December 31,
1999. Options exercised during the quarter resulted in the issue of 1,100 new
shares and the Bank's 401k plan purchased 2,284 shares from treasury stock. The
Company's common stock had a book value of $14.70 per share at June 30, 2000
compared to a book value of $13.86 per share at December 31, 1999. At the end of
the second quarter of 2000, 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).
<PAGE>
The following table sets forth information with respect to the risk-based and
leverage ratios for the Company and Bank at June 30, 2000 and 1999 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 June 30, 2000:
Total Capital (to Risk-Weighted Assets)
Consolidated $12,560 9.85% 10,206 8.00% 12,757 10.00%
Bank $12,786 10.02% 10,206 8.00% 12,757 10.00%
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated $10,964 8.59% 5,103 4.00% 7,654 6.00%
Bank $11,190 8.77% 5,103 4.00% 7,654 6.00%
Tier 1 Capital (to Average Assets)
Consolidated $10,964 7.71% 5,692 4.00% 7,114 5.00%
Bank $11,190 7.86% 5,692 4.00% 7,114 5.00%
As of June 30, 1999:
Total Capital (to Risk-Weighted Assets)
Consolidated $9,316 9.02% 8,262 8.00% 10,327 10.00%
Bank $10,341 10.01% 8,262 8.00% 10,327 10.00%
Tier 1 Capital (to Risk-Weighted Assets)
Consolidated $8,022 7.77% 4,131 4.00% 6,196 6.00%
Bank $9,047 8.76% 4,131 4.00% 6,196 6.00%
Tier 1 Capital (to Average Assets)
Consolidated $8,022 6.89% 4,658 4.00% 5,822 5.00%
Bank $9,047 7.77% 4,658 4.00% 5,822 5.00%
</TABLE>
RESULTS OF OPERATIONS
---------------------
The Company recognized earnings of $631,628 for the first two quarters of 2000.
In comparison, net earnings for the first two quarters of 1999 were $327,576.
Net interest income for the first six months of 2000 was $3,554,004 as compared
to $2,474,406 for the first six months of 1999. The average yield on earning
assets for the first two quarters of 2000 increased to 10.21% as compared to
9.39% for the first two quarters of 1999. The increase is primarily due to the
increase in the prime lending rate. The average cost of funds on
interest-bearing liabilities increased for the first six months of 2000 to
5.36%, as compared to 5.12% for the first six months of 1999. The increase is
primarily due to increased rates in the Bank's marketplace. Consequently, the
net interest spread for the first six months of 2000 increased to 4.85% compared
to 4.27% for the first six months of 1999.
Total other income for the first half of 2000 was $959,054 compared to
$1,108,697 for the first half of 1999. The decrease is primarily due to
decreased premiums from the sale of SBA loans.
Total other expense for the first half of 2000 was $3,099,840 compared to
$2,927,914 for the first half of 1999. The increase is primarily due to
increased personnel costs. The annualized ratio of operating expenses to average
assets improved to 4.48% for the first six months of 2000 from 5.07% for the
first six months of 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds
(a) None
(b) None
(c) In May, 2000, the Company sold 2,284 unregistered shares
of its common stock, par value $1.00 per share, to the
Bank's 401(K) Profit Sharing Plan for Bank employees. The
Company sold the unregistered shares for $16.00 per share.
Because the Company only sold these shares to the Bank's
401(K) Profit Sharing Plan, the transaction did not
involve public offering and is exempt from registration under
Section 4(2) of the Securities Act of 1933.
In May 2000, Carl C. Hames, Jr., president of the Company,
exercised an incentive stock option, granted him under his
Employment Agreement with the Company, to purchase 1,100
shares of Company stock. The Company sold 1,100
unregistered shares of its common stock, par value $1.00
per share, to Mr. Hames for $9.09 per share. Because the
Company only sold these shares to Mr. Hames under the terms
of his Employment Agreement, the transaction did not
involve a public offering and is exempt from registration
under Section 4(2) of the Securities Act of 1933.
(d) None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
(a) An Annual Shareholders Meeting was held on April 26, 2000.
(b) All of the thirteen incumbent directors were elected to
serve one-year terms until the annual meeting of
shareholders in 2001. The following table sets forth the
number of votes cast for and withheld with respect to each
nominated Director. There were no abstentions or broker
non-votes.
<PAGE>
Name of Nominee Votes for Votes Withheld
--------------- --------- --------------
Alan D. Bobo 506,285 220
Elwin K. Bobo 506,285 220
Michael A. Edwards 506,285 220
J. Stanley Fitts 506,285 220
Russell L. Flynn 506,275 230
Carl C. Hames, Jr. 506,010 495
C. Garry Haygood 506,175 330
Thomas D. Hopkins 506,285 220
Bobby R. Hubbard 506,285 220
R. O. Kononen, Jr. 506,285 220
Dennis M. Lord 506,285 220
Larry R. Lusk 506,285 220
Dr. Stuart R. Tasman 506,285 220
Pursuant to Rule 14a-4(c)(1) promulgated under the Securities Exchange Act of
1934, as amended, shareholders desiring to present a proposal for consideration
at the Company's 2001 Annual Meeting of Shareholders must notify the Company in
writing at its principal office at 9860 Highway 92, Woodstock, Ga. 30188, of the
contents of such proposal no later than December 1, 2000. Failure to timely
submit such a proposal will enable the proxies appointed by management to
exercise their discretionary voting authority when the proposal is raised at the
Annual Meeting of Shareholders without any discussion of the matter in the proxy
statement.
Item 5. Other Information - None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
3.1(1) Articles of Incorporation
10.1(3)(4) Employment Agreement (Carl Hames) dated May 11, 1995
10.2(3)(6) First Cherokee Bancshares, Inc. 1999 Stock Option Plan
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, 1988
10.6(3)(5) Form of Directors' Non-Qualified Stock Option Agreement
10.7(3) Employment Agreement (Carl Hames) dated May 11, 2000.
27 Financial Data Schedule (for SEC use only) for quarter
ended June 30, 2000
________________________
(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 10QSB 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.
(6) Incorporated herein by reference to Appendix A to the
Company's Proxy Statement filed on March 30, 1999.
(b) The Company has not filed any reports on Form 8-K during the six
months ended June 30, 2000.
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: August 14, 2000 BY: /s/Carl C. Hames, Jr.
--------------- ---------------------
Carl C. Hames, Jr.
President & CEO/Principal
Executive Officer
DATE: August 14, 2000 BY: /s/Kitty A. Kendrick
--------------- --------------------
Kitty A. Kendrick
Chief Financial Officer/
Principal Financial and Accounting Officer
<PAGE>
Exhibit 10.7(3)
EMPLOYMENT CONTRACT
THIS AGREEMENT made and entered into this May 11th, 2000 between First Cherokee
Bancshares, Inc. a national bank holding company ("BHC"), with its principal
subsidiary a national bank, the ("subsidiary"), a banking institution chartered
by the Office of the Comptroller of the Currency, ("employer"), and Carl C.
Hames, Jr. ("employee");
WHEREAS, the employer is a Bank Holding Company and National Bank in Cherokee
County, Georgia; and
WHEREAS, employee is the CEO/President of said BHC and CEO of its subsidiary;
and
WHEREAS, employer wishes to provide for the terms and conditions of employee's
employment;
NOW, therefore, in consideration of the premises and mutual covenants and
agreements set forth herein, the parties hereby agree as follows:
/1/ RELATIONSHIP ESTABLISHED AND DUTIES
(a.) Employer hereby employs employee as CEO/President of BHC and CEO of
subsidiary, to hold those offices, and to perform such services and duties as
its Board of Directors may, from time to time, designate during the term hereof.
Subject to the terms and conditions hereof, the employee will perform such
duties and exercise such authority as customarily performed and exercised by
persons holding such offices, subject to the general direction of the Board of
Directors of the employer, exercised in good faith in accordance with standards
of reasonable business judgment.
(b.) Employee shall serve on the Board of Directors of employer and of the
subsidiary and as a member of the subsidiary's Executive Committee, subject to
the terms hereof.
(c.) Employee accepts such employment and shall devote his full time, attention
and efforts to the diligent performance of his duties herein specified and as an
officer and director of employer and will not accept employment with any other
individual, corporation, partnership, governmental authority or other entity, or
engage in any other venture for profit which the employer may consider to be in
conflict with his business or its best interest or to be in competition with
employer's business, or which may interfere in any way with the employee's
performance of his duties hereunder.
<PAGE>
/2/ TERMS OF EMPLOYMENT
Employment shall commence upon the effective date hereof and term shall continue
for (5) consecutive years unless such is terminated pursuant to the terms hereof
or by the first to occur of the conditions to be stated hereinafter. The term
previously stated notwithstanding this contract shall be terminated by the
earlier to occur of any of the following:
(a.) the death of employee;
(b.) the complete disability of employee. "Complete disability" as used herein
shall mean the inability of employee, due to illness, accident, or any other
physical or mental incapacity to perform the services provided for hereunder for
an aggregate of sixty (60) days within any period of 120 consecutive days during
the term hereof;
(c.) the discharge of employee by the employer for "cause" as used herein shall
include, without limitation: dishonesty; theft; conviction of a crime; unethical
business conduct in conflict with Employer's interests. Discharge for cause will
require a three fourth's majority vote of the Board of Directors in their
entirety.
Termination of employee's employment under any of these terms shall constitute a
tender by employee of his resignation as an officer and director of employer.
/3/ COMPENSATION
For services which employee may render to employer during the term hereof,
employer shall pay to employee, subject to such deductions as may be required by
law:
(a.) Base Salary. An annual base salary of $140,000.00 payable in equal monthly
installments and subject to such deductions as may be required by law. Upon each
anniversary of the effective date of this agreement the annual base salary will
be adjusted by not less than the change in the consumer price index for
metropolitan Atlanta, Georgia(limited to a maximum of 8% cost of living
adjustment).
<PAGE>
(b.) Performance Bonuses. Each year a cash performance bonus may be paid to the
employee (not later than sixty days following the close of the bank's fiscal
year). ROA is to be calculated so that the accrual of the executive officers
bonuses would not reduce the ROA. The bonus plan would stay in effect as long as
the bank's CAMEL rating stays at (2) or higher. The criteria for the Performance
Bonus will be as follows:
Return on average assets Bonus as % of base salary
------------------------ -------------------------
Under.25% 0%
.25%-.50% 10%
.51%-.75% 20%
.76%-1.00% 30%
1.01% - 1.25% 40%
1.26% - 1.50% 45%
1.51% - 1.60% 50%
1.61% - 1.70% 60%
1.71% - 1.80% 70%
1.81% - 1.90% 80%
1.91% - 2.00% 90%
2.01% - 2.10% 100%
/4/ OTHER BENEFITS
During the term of his employment hereunder, employer shall furnish to employee
(i) an automobile allowance, ($750.00 per month). (ii) a term life insurance
policy providing for death benefits of at least 2 times annual salary (iii)
group health and hospital insurance covering employees family; (iv) long term
disability insurance policy with benefits of at least 60% of his annual salary,
provided that the employee shall be insurable. Employer will continue to provide
a pension plan (Benmark).
/5/ NOTICE UNDER SECTION 914 (FIRREA -12 U.S.C. 1831 i)
This contract shall cease and be null, void, and of no further force and effect
upon any notice of opposition given by the Office of Comptroller of the Currency
as defined in 12 CFR 5.51 (c) (3), (thirty day notice of a proposed change in
Senior Executive Officers).
/6/ EXPENSES
Upon presentment to employer of expense reports in sufficiently detailed form to
comply with standards for deductibility of business expenses established from
time to time by the Internal Revenue Service, employer will reimburse employee
for such reasonable business expenses incurred by employee in connection with
performance of his duties hereunder. Employee will submit expenses for his
monthly membership dues and business related expenses in his country club, for
reimbursement, on a monthly basis.
<PAGE>
/7/ POST TERMINATION COVENANTS
If during the term hereof employee shall cease employment hereunder for any
reason, then employee agrees that for one (1) year following such termination he
will not be employed in the banking business or any related field thereto in the
primary service area as defined in the national bank charter application to the
Office of the Comptroller of the Currency. Furthermore, following such
termination employee agrees he will not without the prior written consent of
employer: (1) furnish anyone with the name of, or any list or lists of
customers or stockholders of the employer or utilize such list or information
himself; or (ii) furnish, use, or divulge to anyone any information acquired by
him from employer relating to employer's methods of doing business; or (iii)
contact directly or indirectly any customer of employer; or (iv) hire for any
other employer ( including himself) any employee of employer or directly or
indirectly cause such employee to leave his employment to work for another; or
(v) undertake a business opportunity that came to the attention of employee
through his employment with employer which employee had not previously offered
in writing to employer and which employer had not rejected in writing.
It is understood and agreed by the parties hereto that the provisions of this
paragraph are independent of each other, and the invalidity of any such
provision or portion thereof shall not affect the validity or enforceability of
any other provisions of this agreement.
/8/ WAIVER OF PROVISIONS
Failure of any of the parties to insist, in one or more instances, on
performance by the others in strict accordance with the terms and conditions of
this agreement shall not be deemed a waiver or relinquishment of any right
granted hereunder or of the future performance of any such term or condition or
of any other term or condition of this agreement, unless such waiver is
contained in a writing signed by or on behalf of all the parties.
<PAGE>
/9/ GOVERNING LAW
This agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Georgia. If for any reason any provision of this
agreement shall be held by a court of competent jurisdiction to be void or
unenforceable, the same shall not affect the remaining provisions thereof.
/10/ MODIFICATION AND AMENDMENT
This agreement contains the sole and entire agreement among the parties hereto
and supersedes all prior discussions and agreements among the parties, and any
such prior agreements shall, from and after the date hereof, be null and void.
This agreement shall not be modified or amended except by an instrument in
writing signed by or on behalf of the parties hereto.
/11/ COUNTERPARTS AND HEADINGS
This agreement may be executed simultaneously in any number of counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument. The headings set out herein are for convenience of
reference and shall not be deemed a part of this agreement.
/12/ ARBITRATION
In the event of any dispute between employee and employer, then employee and
employer shall submit any claim to a mutually agreeable third party for
arbitration. The decision of the third party shall be binding on employee and
employer.
/13/ SUCCESSORS
The agreement shall insure to the benefit of and be binding upon the Employer,
its successors and assigns and upon the Employee, his personal representatives
and assigns.
<PAGE>
/14/ CONTRACT NONASSIGNABLE
Upon employer's receipt of any approvals necessary from the Federal Reserve Bank
of Atlanta, Georgia, Office of the Comptroller of the Currency, Federal Deposit
Insurance Corporation, the Secretary of State of the State of Georgia, State of
Georgia Department of Banking and Finance and any other regulator or authority
required, employer shall cause this agreement, in whole to be, for the benefit
of the BHC and its subsidiary.
This agreement may not be otherwise assigned or transferred by any party hereto,
in whole or in part, without prior written consent of the other.
15. EFFECTIVE DATE
This Agreement shall become effective on May 11th. 2000.
IN WITNESS WHEREOF, the parties hereto have executed this agreement under
seal as of the date first above.
Accepted- Employee
By the Executive Committee:
/s/C. Garry Haygood
-------------------
C. Garry Haygood
/s/J. Stanley Fitts
-------------------
J. Stanley Fitts
/s/Dennis M. Lord
-----------------
Dennis M. Lord
/s/Thomas D. Hopkins, Jr.
-------------------------
Thomas D. Hopkins, Jr.
