February 3, 2012

Relatively speaking, the bank did quite well in 2011 and we are optimistic about a better year in 2012.

•  Tier 1 Capital is 6.74%, up from 6.05% on 12/31/2010. The Capital level was increased in the second quarter by $1.5 million by action taken by the Board.
• “Bad Bank” expenses totaled $3,567,262:

$1,238,035      Provision expense
$1,547,139      Write-downs due to impairment, REO sales
$521,901         REO expenses
$260,187         Problem loan expenses

•  “Good Bank” earnings in 2011 of $2,201,000 allowed the bank to post a lesser loss of $1,365,000.  
• Loss of $1,365,000 in 2011 compares to a Loss of $3,779,000 in 2010.
• Adverse Assets (Non-accrual Loans, Troubled Debt Restructurings and Real Estate Owned have declined from $35,944,000 as of 6/30/10 to $25,469,000 as of 6/30/11 (last Safety & Soundness exam) to a current level  of $17,066,000.
• Adverse Assets are 120% of Tier 1 Capital and LLR, down from 194% as of 6/30/10 and 165% as of 6/30/11(last Safety & Soundness exam). NPAs are down to 6.77% of Total Assets. Texas Ratio is down to 81%; 138% as of 12/31/10.
• Criticized Loans (Classified Loans and Special Mention), a key article in our Consent Order, have declined from $ 31,215,000 as of 6/30/10 to $20,911,000 as of 6/30/11(last Safety & Soundness exam) to a current level of $14,884,000. 
• Past dues are .40% of Loans.
• The LLR/Loans is 2.36%. The rolling 12 month c/o rate for the four quarters of 2011 (chronologically listed) was at 3.03%, 1.81%, 1.55% and 1.70%.
• The bank’s net interest margin in 2011 improved to 3.72%. Tactics in place will lead to further improvement.
• Core deposits are 88% of assets. There are no brokered deposits and Liquidity remains strong. Contingent Liquidity Funds are at a higher level than in 2010.
• Our newly adopted strategic plan has the bank at 8% Tier 1 Capital by June, 2013. This will be achieved with a smaller asset base and reduced expenses associated with asset quality problems.

Dennis Burnette

Still improving.

As of 9/30/2011, our Texas Ratio was 91%, down from a high of 145% earlier in the year. With #1 being the bank with the worst Texas Ratio, we are ranked #71 in Georgia. It’s been hard work and we still have a lot of work to do. But relatively speaking, that ranking is satisfying. For an explanation of the term “Texas Ratio”, click here. 

Dennis Burnette
 

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

‘Most likely’ rate forecast- provided to us by our friends at CenterState Bank, N.A.  as an Acrobat Reader PDF file.

View Rate Forecast now.

If you need a copy of the free Acrobat Reader software to view the file, get it here – http://www.adobe.com/products/reader/

May 25, 2011

Through April, Cherokee Bank had a Year to Date Loss of ($34,983).

Adverse Assets are still too high and we are a troubled bank. The good news is that we have reason to be cautiously optimistic as the bank’s Adverse Assets were at their lowest level in 12 months at the end of April.

Our Tier 1 Capital level is above 6%. While we are below the required capital minimum in the Consent Order with our regulator, we would ordinarily fall into the category of Well-Capitalized. As of 12/31/2010, our Texas Ratio was 137%, 58th in the state with #1 being the worse. At the end of the first quarter of this year, our Texas Ratio was 145% and we moved from 58th to 54th due to some banks faiming in the first quarter.

We are a troubled bank with a Texas Ratio of 145% ———– but to put things in perspective, most all banks that have failed had ratios exceeding 3-400%. That’s why 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

February 11, 2011

A loyal shareholder recently wrote me and said, “Also, I  must talk with you about Cherokee Bank stock. I admit I am in the dark as to why my shares went from $3.50 to $1.75. You said nothing is going on, so let’s get together so I can understand what happened.”

As a small and not well known company, Cherokee Banking Company stock has historically been thinly traded. Transactions occur only infrequently, and there are a limited number of interested buyers and sellers compared to larger companies. Prices of thinly traded securities tend to be more volatile than those traded more actively because just a few trades can substantially affect the market price.

It can also be more difficult to sell shares of thinly traded securities, especially in a downturn, if there are no ready buyers. The lack of ready buyers and sellers for any stock generally leads to large discrepancies between the asking price and the bidding price.  In the last several months, few shares of Cherokee Banking Company have traded. We know of two instances where shares were sold by Wells Fargo at “market”. Our shareholders told us that they did not receive notice of a newly imposed annual fee and some of their shares were sold to generate a cash balance to charge the fee! We love those big banks.

The last trade was at $1.80. The market is an “auction” and the current Bid is $1.10 and the Ask is $4.50. So, if you gave an order to sell “at market”, you would get $1.10. Don’t do that. If your shares are held by a broker, the account statements may provide an unreliable valuation. My broker has reported my shares as low as $.55 each! For the same month, my wife’s broker priced her shares at $3.50 each. This is another problem with a thinly traded stock.

Quotes and charts are available at various internet financial sites. A recommended site is http://www.otcmarkets.com; our stock symbol is CHKJ.

What’s the answer to this question  — “Would you sell your house in this market?”.  Most shareholders holding our stock have a long term investment horizon and are not interested in selling in a downturn.

Dennis Burnette

February 5, 2011

As banks continue to fail in Georgia, our friends and family, need to continue to deliver the message that those banks failing are unlike Cherokee Bank.

Despite our setback by losing the entire Tax Deferred Asset on 12/31 due to accounting/regulatory guidance, our Tier 1 Capital level is 6%+. The banks that failed yesterday, North Georgia Bank and American Trust Bank, were at 0.55% & 0.71%. Our Texas Ratio is 137% as of 12/31 and theirs were 1,351% and 1,060%. On 9/30, their ratios were 755% & 590%.

At the end of the third quarter of 2010, our Texas Ratio was down to 104%; putting us about 70th in the state. With the accounting change that impacted Capital on 12/31, our Texas Ratio rose to 137%, moving us up to 58th in the state with #1 being the worse. Most all banks that have failed had ratios exceeding 3-400%.

Dennis Burnette

February 2, 2011

Following year end 2010, our management team, after prolonged discussions with our accountants, made the decision to create a full disallowance for our Deferred Tax Asset as of 12/31/10. The consequence is that our bank’s Capital has been reduced by $3,746,564.

This decision was primarily made on accounting and regulatory guidance when a bank has three consecutive years of losses. While we don’t like what a full disallowance does to our capital, this is the appropriate action in keeping with our bank’s conservative values regarding disclosure.

What does this mean? At this time, Rick Roberts, EVP/CFO, is estimating our Tier 1 and Risk Based capital ratios will fall to 6.05% and 10.13% respectively.

New Capital of $950,000 was injected in the Bank in the 3rd Quarter to maintain the Consent Order required Tier 1 and Risk Based capital ratios of 8% and 12% respectively. We are dedicating much of our time to exploring several options to boost Capital back to at least the Consent Order minimums.

Dennis Burnette

February 1, 2011

The bank posted an unaudited net loss of $3.8 million because of horriffic expenses related to Adverse Assets. Continued strong Core Bank (or “Good Bank”) earnings of $2.6 million absorbed “Bad Bank” expenses estimated for 2010 at $6,402,111:

* $ 3,629,342 Provision expense
* $ 2,005,370 Write-downs due to impairment
* $ 430,307 REO expenses
* $ 337,083 Problem loan expenses

The good news is that we are getting results in improving the bank’s Adverse Assets.

At the end of 2010, Non-performing Loans totaled $12,989,587 and Real Estate Owned totaled $7,921,247.

Dennis Burnette

From: Cindy Poole
Sent: Friday, December 24, 2010 10:10 AM
To: Dennis Burnette
Subject: Coats for Christmas
We collected 1,855 coats in previous years and the total collected this year is 237, bringing the grand total to 2,092!  Plus we received numerous miscellaneous donations of gloves, mittens, scarves, clothing & purses.

Cindy Poole CPS/CAP
First Vice President
& Board Secretary
Cherokee Bank
(770) 479-3400, Ext. 104
cindypoole@cherokeebank.com

From: Katie Brookshire
Sent: Monday, November 29, 2010 10:45 AM
To: Dennis Burnette
Cc: Cindy Poole
Subject: My Hero
Mr. Burnette,
As part of my Business Management course for this semester, we were given an assignment to “make a hero” of someone who we look up to on a daily basis. It did not take me very long to realize that my Hero is Cindy Poole! Almost immediately after I began working for Cherokee Bank in 2007, I have admired Mrs. Poole on a multitude of levels for everything she does not only for the bank as a whole, but for all employees as well! She is constantly willing to lend a helping hand in any way that she can and has even helped proof one of my school papers before! It seems as though she always has time to help even when I know she is busy 99.9% of the time! Nonetheless, she is right there to make certain she puts on her new hat and gives her undivided attention and complete effort to anyone in need! In addition to always making time to lend a hand, Cindy never gets too caught up in all of her responsibilities that she forgets the most important aspects of life in general. She is the first person to be there for anyone suffering the loss of a loved one or any personal tragedy whether it be by offering a patient ear, comforting hug, or simply sending flowers; no matter what she makes certain you know she is thinking of you! Simply put, I could write a novel on all of the reasons Cindy Poole is my Hero and Cherokee Bank would definitely not be the same without her! Even though I am sure you are aware of her worth, I wanted to let you know how much I appreciate Cindy and what a true “diamond in the rough” I find her to be!
Thank you,
Katie Brookshire

From: Hannah Smith
Sent: Friday, November 26, 2010 12:17 PM
To: North Canton Employees; South Canton Employees; Woodstock Employees
Subject: Scorecard Rewards Promotion for the month of December
GREAT NEWS!!!
Beginning December 1st and going through December 31st, Cherokee Bank is running a promotion to QUADRUPLE rewards points for every signature based debit card transaction! That’s right, our clients will be receiving 2 points per every $1.00 spent by selecting the credit option (normally they receive 1 point per every $2.00 spent). This is on top of the promotion that Scorecard is already running (the contest from my previous e-mail).
Please join me in spreading this exciting news to our clients. We will also be adding this message to the December statements as well as updating it to our website. Clients can keep track of their earned points by registering through the Scorecards website: www.scorecardrewards.com. If you have any questions, please feel free to give me a call. Thank you! J

Hannah Smith
Assistant Office Manager – South Canton
Cherokee Bank
770-345-7500
hannahsmith@cherokeebank.com

From: ______________________@gmail.com [mailto:_________________@gmail.com]
Sent: Tuesday, November 23, 2010 9:42 PM
To: Dennis Burnette
Subject: Re: News from Cherokee Bank
I really enjoy and appreciate your newsletter.
Thank you for sending it to me.
______ ________

Sent from my HTC on the Now Network from Sprint!

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From: June Payne
Sent: Friday, November 19, 2010 11:36 AM
To: North Canton Employees; South Canton Employees; Woodstock Employees
Subject:
Everyone:  attached are pictures of the Christmas Tree at the Library in Canton – please join me in thanking the ladies that decorated the tree, Katie Parker, Katie Brookshire, Rosie Goodner and Michele Forsman – other members of the committee are Amy Rowe and Cheryl Guenther, who will take care of removing the tree after Christmas – also, a thank you to the NC folks that made the ornaments – if you have a chance, please go by the Library and view the trees – also, remember that the mittens will be donated to MUST along with the others that have been collected – June