Bank Is Improving

September 1, 2011

Through June 30th, Cherokee Bank had a Year to Date (YTD) Loss of ($540,739).
As bad as that is, it’s quite a turnaround from a YTD Loss of ($3,003,986) for
the first six months of 2010. Still plagued by loan losses and related expenses
due to our clients’ problems, our performance is improving.

Problem loans continue to trend down. But the process is much slower and
harder than we ever imagined. Consequently, we look for operating losses to
continue in the coming quarters.

Despite these losses, our Capital to Assets Ratio remains strong at 7.17%.
This has been accomplished by (1) strong core earnings, (2) an increase in Capital
by $4,000,000 in a 2009 stock offering and (3) an increase in Capital again in
June of this year by $1,500,000. The June increase was a result of the holding company
taking responsibility for the retirement and deferred compensation program
maintained by the bank. Executive officers and board members agreed to receive
stock from the holding company in lieu of vested cash benefits at the time of
retirement. These benefits had been previously frozen.

As of 6/30/2011, our Texas Ratio was 107%, down from 145% at the end of the
first quarter of this year. With #1 being the worst Texas Ratio, we ranked #77.
Even with several banks ranked above us failing, we dropped from #54 at the end
of the first quarter down to #77.

Again, we can say that we are troubled but that we are doing relatively well
given the state of the banking industry in Georgia.

Dennis Burnette