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 September 30, 2002

                                       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 September 30, 2002 was 725,419 shares.

Traditional Small Business Disclosure Format (check one): __ Yes _X_ No
<PAGE>
                                      Index
                                      -----

                                                                        Page No.
                                                                        --------
Part I.  Financial Information

         Consolidated Financial Statements
         Consolidated Balance Sheet (unaudited) at September 30, 2002          3

         Consolidated Statements of Earnings (unaudited)
         for the nine months ended September 30, 2002 and 2001                 4

         Consolidated Statements of Earnings (unaudited)
         for the three months ended September 30, 2002 and 2001                5

         Consolidated Statements of Comprehensive Income (unaudited)
         for the nine months ended September 30, 2002 and 2001                 6

         Consolidated Statements of Comprehensive Income (unaudited)
         for the three months ended September 30, 2002 and 2001                7

         Consolidated Statements of Cash Flows (unaudited)
         for the nine months ended September 30, 2002 and 2001                 8

         Notes to Consolidated Financial Statements (unaudited)           9 - 11

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                       12 - 16

Item 3.  Controls and Procedures                                              17

Part II. Other Information

Item 1.  Legal Proceedings                                                    18

Item 2.  Changes in Securities and Use of Proceeds                            18

Item 3.  Defaults Upon Senior Securities                                      18

Item 4.  Submission of Matters to a Vote of Security Holders                  18

Item 5.  Other Information                                                    18

Item 6.  Exhibits and Reports on Form 8-K                                     18

Signatures                                                                    19
CEO Certification                                                             20
CFO Certification                                                             21
                                      -2-
<PAGE>
                         First Cherokee Bancshares, Inc.
                           Consolidated Balance Sheet
                               September 30, 2002
                                   (Unaudited)

                                     Assets
                                     ------
Cash & due from banks, including $10,044,237
     bearing interest                                               $15,201,145
Federal funds sold                                                   10,121,000
                                                                     ----------
          Total cash & cash equivalents                              25,322,145

Investment securities available for sale,
     at fair value                                                    6,235,495
Other investments                                                     1,142,900
Loans, less allowance for loan losses
     of $2,006,176                                                  144,940,601
Premises and equipment, net                                           4,631,758
Accrued interest receivable and other assets                         10,858,379
                                                                     ----------
                    Total Assets                                   $193,131,278
                                                                   ============


                      Liabilities and Stockholders' Equity
                      ------------------------------------
Liabilities:
Deposits:
     Interest-bearing deposits                                     $146,890,612
     Noninterest-bearing deposits                                    22,548,573
                                                                     ----------
          Total deposits                                            169,439,185

Trust preferred securities                                            9,000,000
Accrued interest payable and other liabilities                        1,480,989
                                                                      ---------
                    Total Liabilities                               179,920,174

Stockholders' Equity:
Common stock ($1 par value; 10,000,000 shares authorized,
     775,325 shares issued, 725,419 shares outstanding)                 775,325
Additional paid-in-capital                                            6,906,491
Retained earnings                                                     6,584,930
Treasury Stock (49,906 shares acquired
     at cost)                                                        (1,061,179)
Accumulated other comprehensive
     income, net of tax                                                   5,537
                                                                          -----
                    Total Stockholders' Equity                       13,211,104
                                                                     ==========

                    Total Liabilities and Stockholders' Equity     $193,131,278
                                                                   ============

                 See notes to consolidated financial statements

                                      -3-
<PAGE>
                         First Cherokee Bancshares, Inc.
                       Consolidated Statements of Earnings
                     For the nine months ended September 30,
                                   (Unaudited)

Interest income:                                          2002          2001
                                                          ----          ----
     Interest and fees on loans                        $9,376,176   $11,734,411
     Interest on federal funds sold/overnight funds       216,804       171,737
     Interest and dividends on investments                121,614       104,600
                                                          -------       -------
          Total interest income                         9,714,594    12,010,748

Interest expense:
     Interest on deposits                               4,049,570     5,639,553
     Interest on note payable and other borrowings        195,039       114,261
                                                          -------       -------
          Total interest expense                        4,244,609     5,753,814

Net interest income                                     5,469,985     6,256,934
Provision for loan losses                                (250,000)       67,000
                                                         --------        ------
Net interest income after provision
     for loan losses                                    5,719,985     6,189,934

Other income:
     Gain on sales of loans                               199,630             0
     Service charges on deposit accounts
          and other income                              1,285,573       879,634
                                                        ---------       -------
Total other income                                      1,485,203       879,634

Other expense:
     Salaries and employee benefits                     3,019,953     2,936,785
     Occupancy                                            747,193       771,598
     Other operating expense                            2,498,452     1,757,650
                                                        ---------     ---------
Total other expense                                     6,265,598     5,466,033

Earnings before income taxes                              939,590     1,603,535

Income tax expense                                        338,000       613,250
                                                          -------       -------
Net earnings                                             $601,590      $990,285
                                                         ========      ========
Basic earnings per share                                    $0.83         $1.37
                                                            =====         =====
Diluted earnings per share                                  $0.82         $1.35
                                                            =====         =====


                 See notes to consolidated financial statements

                                      -4-
<PAGE>


                         First Cherokee Bancshares, Inc.
                       Consolidated Statements of Earnings
                    For the three months ended September 30,
                                   (Unaudited)

Interest income:                                          2002          2001
                                                          ----          ----
     Interest and fees on loans                        $3,005,622    $3,871,053
     Interest on federal funds sold/overnight funds       113,616        22,419
     Interest and dividends on investments                 42,618        41,914
                                                           ------        ------
          Total interest income                         3,161,856     3,935,386

Interest expense:
     Interest on deposits                               1,241,943     1,827,857
     Interest on note payable and other borrowings        126,793        38,688
                                                          -------        ------
          Total interest expense                        1,368,736     1,866,545

Net interest income                                     1,793,120     2,068,841
Provision for loan losses                                (250,000)            0
                                                         --------             -
Net interest income after provision
     for loan losses                                    2,043,120     2,068,841

Other income:
     Gain on sales of loans                                 1,470             0
     Service charges on deposit accounts
          and other income                                436,993       325,607
                                                          -------       -------
Total other income                                        438,463       325,607

Other expense:
     Salaries and employee benefits                     1,000,216     1,004,451
     Occupancy                                            250,498       263,051
     Other operating expense                              733,043       576,123
                                                          -------       -------
Total other expense                                     1,983,757     1,843,625

Earnings before income taxes                              497,826       550,823
Income tax expense                                        179,000       209,000
                                                          -------       -------
Net earnings                                             $318,826      $341,823
                                                         ========      ========
Basic earnings per share                                    $0.44         $0.47
                                                            =====         =====
Diluted earnings per share                                  $0.43         $0.47
                                                            =====         =====


                 See notes to consolidated financial statements

                                      -5-
<PAGE>
                         First Cherokee Bancshares, Inc.
                 Consolidated Statements of Comprehensive Income
                     For the nine months ended September 30,
                                   (Unaudited)

                                                          2002          2001
                                                          ----          ----
Net earnings                                            $601,590       $990,285
Other comprehensive income, net of tax:
    Unrealized gain arising during the period, net
      of tax of $2,979 and $4,103, respectively            4,869          6,617
                                                           -----          -----
Comprehensive income                                    $606,459       $996,902
                                                        ========       ========


                 See Notes to Consolidated Financial Statements

                                      -6-
<PAGE>
                         First Cherokee Bancshares, Inc.
                 Consolidated Statements of Comprehensive Income
                    For the three months ended September 30,
                                   (Unaudited)
                                                          2002          2001
                                                          ----          ----
Net earnings                                            $318,826       $341,823
Other comprehensive income, net of tax:
    Unrealized loss arising during the period, net
      of tax of ($1,306) and ($105), respectively         (2,135)          (169)
                                                          ------           ----
Comprehensive income                                    $316,691       $341,654
                                                        ========       ========


                 See Notes to Consolidated Financial Statements

                                      -7-
<PAGE>



                         First Cherokee Bancshares, Inc.
                      Consolidated Statements of Cash Flows
                     For the nine months ended September 30,
                                   (Unaudited)
                                                          2002          2001
                                                          ----          ----
Cash flows from operating activities:
Net earnings                                            $601,590       $990,285
Adjustments to reconcile net earnings to net cash
  provided in operating activities:
    Depreciation, amortization and accretion             469,761        656,345
    Provision for loan losses                           (250,000)        67,000
    Change in accrued interest payable and
      other liabilities                                 (133,120)       (31,322)
    Gain on sales of loans, net                         (199,630)             0
    Net loss (gain) on sale of OREO                      334,330        (23,873)
    Change in accrued interest receivable and
      other assets                                       121,663       (704,315)
                                                         -------       --------
        Total adjustments                                343,004        (36,165)
                                                         -------        -------
        Net cash provided by operating activities        944,594        954,120

Cash flows from investing activities:
    Purchase of other cash surrender value
       life insurance                                   (657,000)      (498,000)
    Purchases of investment securities                (4,469,396)    (1,750,000)
    Purchases of other investments                       (42,000)       (13,500)
    Proceeds from sale of loans                        3,222,743              0
    Proceeds from sale of OREO                           530,331        103,338
    Improvements to OREO                                 (30,310)      (383,951)
    Proceeds from maturities and calls of investment
      securities available for sale                      154,587        539,247
    Net change in loans                                5,735,519    (11,000,458)
    Purchases of premises and equipment                 (477,305)    (1,219,593)
    Investment in unconsolidated subsidiary                    0       (226,125)
                                                               -       --------
        Net cash provided (used) by investing
           activities                                  3,967,169    (14,449,042)


Cash flows from financing activities:
    Net change in deposits                             3,707,639     13,342,059
    Proceeds from FHLB advances                                0              0
    Proceeds from exercise of stock options               10,000         10,000
    Proceeds from sale of  treasury stock                132,542        265,133
    Purchase of treasury stock                           (83,021)       (23,476)
    Proceeds from (repayment of) note payable         (1,863,259)       350,000
    Proceeds from issuance of trust preferred
       securities                                      9,000,000              0
    Transaction costs associated with trust
       preferred securities                             (241,012)             0
                                                        --------              -
        Net cash provided by financing activities     10,662,889     13,943,716

Net change in cash and cash equivalents               15,574,652        448,794
Beginning cash and cash equivalents                    9,747,493      5,772,135
                                                       ---------      ---------
Ending cash and cash equivalents                     $25,322,145     $6,220,929
                                                     ===========     ==========

Noncash investing activities:
    Change in accumulated other comprehensive
         income, net of tax                               $4,869         $6,617
    Transfer of loans to OREO                         $3,062,919       $732,986
    Financed Sale of OREO                            ($1,849,239)      $354,000

Supplemental disclosure of cash flow information:
    Interest Paid                                     $4,327,620     $5,830,721
    Income Taxes Paid                                   $137,500       $703,000


                 See notes to consolidated financial statements

                                      -8-
<PAGE>
                         FIRST CHEROKEE BANCSHARES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               September 30, 2002

NOTE (1) - BASIS OF PRESENTATION

The consolidated financial statements include the accounts of First Cherokee
Bancshares, Inc. (the "Company"), a financial holding company,  and its
wholly-owned subsidiary, First National Bank of Cherokee (the "Bank"), along
with its 60% owned subsidiary, Cherokee National Trust LLC ("CNT").  All
significant accounts have been eliminated in consolidation. Certain prior
period amounts have been reclassified to conform with current year presentation.

The Company's accounting policies are fundamental to understanding management's
discussion and analysis of results of operations and financial condition.  Some
of the Company's accounting policies require significant judgment regarding
valuation of assets and liabilities and/or significant interpretation of the
specific accounting guidance.  A description of the Company's significant
accounting policies can be found in Note 1 of the Notes to Consolidated
Financial Statements in the Company's 2001 Annual Report to Shareholders.

Many of the Company's assets and liabilities are recorded using various
valuation techniques that require significant judgment as to recoverability.
The collectibility of loans is reflected through the Company's estimate of the
allowance for loan losses.  The Company performs periodic detailed reviews of
its loan portfolio in order to assess the adequacy of the allowance for loan
losses in light of anticipated risks and loan losses.  In addition, the Company
makes certain estimates regarding the valuation of its servicing assets and
related interest only strips.

In December 2000, the Bank entered into an operating agreement with a
registered investment advisor to form CNT to offer services permitted by a
national bank trust charter. Pursuant to the operating agreement, the Bank
obtained a 60% interest in CNT with an initial investment of $300,000. CNT
began operations during the first quarter of 2001.

In May 2001, the Bank obtained a 33.34% ownership interest in Elizabeth
Station, LLC through an initial capital contribution of $226,125. Elizabeth
Station, LLC was formed for the purpose of acquiring, developing and leasing
real property.  As of September 30, 2002, Elizabeth Station, LLC had not begun
operations. The investment in Elizabeth Station is accounted for using the
equity method of accounting.

In October 2001, the Bank acquired a 12.82% ownership interest in EastPoint
Technologies, LLC ("EastPoint") through an initial capital contribution of
$1,000,000. EastPoint was formed for the purpose of providing and operating
licensed software applications and data processing services. The investment in
EastPoint is accounted for using the cost method of accounting.

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 September 30, 2002, and the
results of its operations and its cash flows for the nine-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 2001 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.

                                      -9-
<PAGE>


Reconciliations of the amounts used in the computation of both "basic earnings
per share" and "diluted earnings per share" for the periods ended September 30,
2002 and September 30, 2001 are as follows:

                  For the nine months ended September 30, 2002:

                                        Net Earnings  Common Shares  Per Share
                                        (Numerator)   (Denominator)   Amount
                                        -----------  -------------    ------
Basic earnings per share                   $601,590      725,587       $0.83
Effect of dilutive securities:
   Stock options                                  0        8,865
                                                  -        -----
Diluted earnings per share                 $601,590      734,452       $0.82
                                           ========      =======       =====

                  For the nine months ended September 30, 2001:

                                        Net Earnings  Common Shares  Per Share
                                         (Numerator)  (Denominator)   Amount
                                         -----------  -------------   ------
Basic earnings per share                   $990,285      722,310       $1.37
Effect of dilutive securities:
   Stock options                                  0        9,539
                                                  -        -----
Diluted earnings per share                 $990,285      731,849       $1.35
                                           ========      =======       =====

                 For the three months ended September 30, 2002:

                                        Net Earnings  Common Shares  Per Share
                                         (Numerator)  (Denominator)    Amount
                                         -----------  -------------    ------
Basic earnings per share                   $318,826      726,217       $0.44
Effect of dilutive securities:
   Stock options                                  0        8,661
                                                  -        -----
Diluted earnings per share                 $318,826      734,878       $0.43
                                           ========      =======       =====

                  For the three months ended September 30, 2001

                                       Net Earnings   Common Shares  Per Share
                                        (Numerator)   (Denominator)    Amount
                                        -----------   -------------    ------
Basic earnings per share                   $341,823      724,581       $0.47
Effect of dilutive securities:
   Stock options                                  0       10,069
                                                  -       ------
Diluted earnings per share                 $341,823      734,650       $0.47
                                           ========      =======       =====

                                      -10-
<PAGE>
NOTE (3) - TRUST PREFERRED ISSUANCE

In June, 2002 the Company formed a wholly owned Delaware  statutory trust,
First Cherokee Capital Trust I (the "Trust"), which issued $9 million
aggregate principal amount of trust preferred  securities.  The trust preferred
securities  represent  guaranteed preferred beneficial  interests in the
Company's junior  subordinated  deferrable  interest  debentures that qualify
as Tier I capital subject to the  limitations  under Federal  Reserve  Board
guidelines.  The Company owns all of the $300,000  aggregate  principal  amount
of the common  securities of the Trust. The proceeds from the issuance of the
common  securities and the trust preferred  securities were used by the Trust
to purchase $9.3 million of junior  subordinated  debentures  of the Company,
which pay interest at a floating rate equal to the  three-month  LIBOR plus 365
basis  points.  The  proceeds  received  by the  Company  from the sale of the
junior  subordinated debentures  were used to reduce the  Company's  debt by
approximately  $3.3  million.  The  remaining  proceeds will be used for other
purposes  deemed  necessary by the Board of  Directors  and  Management.  The
debentures  represent  the sole asset of the Trust.  The debentures and related
earnings statement effects are eliminated in the Company's financial statements.

The trust preferred  securities  accrue and pay quarterly  distributions  based
on the liquidation value of $1,000 per capital security at a floating rate
equal to the three-month LIBOR plus 365 basis points. The Company has entered
into contractual  arrangements  which, taken  collectively,  constitute a full
and  unconditional  guarantee on a subordinated  basis by the Company of the
obligations of the Trust under the trust preferred  securities.  The Company's
guarantee,  however,  does not apply if the Company does not make payments on
the debentures and, as a result, the Trust does not have sufficient funds to
make payments.

The trust  preferred  securities  are  mandatorily  redeemable  upon  maturity
of the  debentures  on June 30,  2032,  or upon  earlier redemption of the
debentures as provided in the indenture. The Company has the right to redeem
the debentures  purchased by the Trust in whole or in part, on or after June
30, 2007. As specified in the indenture, if the debentures are redeemed on or
after June 30, 2007 and prior to maturity,  the redemption price will be the
principal amount and any accrued but unpaid interest.  Additionally, the
Company may redeem, at any time (and possibly before June 30, 2007), within 180
days following the occurrence of a change in banking, tax, investment company
or other laws or  regulations that results in specified changes in the
treatment  of the trust  preferred securities for tax or regulatory  capital
purposes or under the  Investment  Company Act of 1940. If the debentures are
redeemed prior to June 30, 2007, the redemption price will be equal to 103% of
the principal amount plus any accrued and unpaid interest.

                                      -11-
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

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.

                                      -12-
<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 September 30, 2002 were $193.1 million compared to $181.8
million as of December 31, 2001.  This increase is due primarily to the
issuance of $9 million of trust preferred securities in the second quarter of
2002.  Assets of the Company decreased approximately $5.2 million during the
third quarter of 2002 as compared to an increase of approximately $2.4 during
the third quarter of 2001. This decline is due primarily to the maturity of
brokered deposits during the third quarter of 2002.

Securities available for sale increased to $6.2 million at September 30, 2002
from $1.9 million at December 31, 2001.  This increase is due primarily to the
purchase of approximately $4 million of mortgage backed securities in the third
quarter of 2002.

Net loans decreased to $144.9 million at September 30, 2002 from $154.7 million
at December 31, 2001. This decrease is due primarily to the decline in loan
demand as a result of a respective decline in the overall economy.  In
addition, during the first three quarters of 2002, there were approximately
$3.2 million in proceeds from the sale of loans as well as a transfer of
approximately $3.1 million from loans to other real estate owned.  The
following table presents major classifications of loans at September 30, 2002:

                                                                        % of
                                                                        Total
                                                        Total           Loan
                                                        Loans         Portfolio
                                                        -----         ---------
         Commercial                                 $11,822,937         8.05%
         SBA - unguaranteed                          23,175,056        15.77%
         Real estate - mortgage                      85,340,798        58.07%
         Real estate - construction                  16,413,686        11.17%
         Installment and other consumer              10,194,300         6.94%
                                                     ----------         ----
           Total loans                              146,946,777       100.00%
                                                                      ======
           Less: Allowance for loan losses           (2,006,176)
                                                     ----------
           Total net loans                         $144,940,601
                                                   ============




Net premises and equipment were $4.6 million at September 30, 2002 and $4.5
million at December 31, 2001.  Other assets increased $1 million, totaling
$10.9 million as of September 30, 2002 and $9.9 million as of December 31,
2001.  This increase is due primarily to the purchase of cash surrender value
life insurance.

Total deposits were $169.4 million at September 30, 2002 compared to $165.7
million at December 31, 2001. As of September 30, 2002, interest-bearing
deposits and non-interest-bearing deposits were $146.9 million and $22.5
million, respectively. As of December 31, 2001, interest-bearing deposits and
non-interest-bearing deposits were $144.2 million and $21.5 million,
respectively.

In June, 2002 the Company received $9 million in proceeds from trust preferred
securities that were used to reduce the Company's debt by approximately $3.3
million.  The remaining proceeds will be used for other purposes deemed
necessary by the Board of Directors and Management.  The trust preferred
securities have a positive effect on consolidated capital ratios and qualify as
Tier 1 capital subject to the limitations under Federal Reserve Board
guidelines.  Of the $9 million in trust preferred securities, $3,301,392
qualifies as Tier 1 capital and the remaining $5,698,608 of trust preferred
securities qualifies as Tier 2 capital.

The allowance for loan losses had a balance of $2,006,176 at September 30,
2002, representing 1.37% of loans. Charge-offs were $71,048 while recoveries
were $30,714, resulting in net charge-offs of $40,334 during the first nine
months of 2002. Management believes this allowance is adequate to cover
probable loan losses. At September 30, 2002, management determined that eight
loans required specific reserves totaling $247,512.  On a quarterly basis,
management prepares an analysis of the Allowance for Loan and Lease Losses.
The analysis considers, among other things, all criticized and classified
assets, loans tested for impairment, industry concentrations, and three-year
average historical net losses.  Based on the analysis as of September 30, 2002,
management determined that the allowance for loan losses was larger than
necessary to provide an appropriate and reasonable allowance for probable
future losses on the Company's loan portfolio, and after consultation with an
concurrence by their primary regulator, management reversed $250,000 from the
allowance for loan losses as of September 30, 2002.  The following table
presents the activity in the allowance for the first nine months of 2002.

                                      -13-
<PAGE>




                         FIRST CHEROKEE BANCSHARES, INC.
                    ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

                  Balance, December 31, 2001                         $2,296,510

                  Chargeoffs                                            (71,048)

                  Recoveries                                             30,714

                  Provision for Loan Losses                            (250,000)
                                                                       --------

                  Balance, September 30, 2002                        $2,006,176
                                                                     ==========



NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS

At September 30, 2002, the Bank had twenty-two credit relationships classified
as non-accrual totaling $3,551,036, most of which were secured by real estate,
vehicles, equipment or inventory. There was one non-accrual loan in the amount
of $2,558 that was unsecured.  The Bank's impaired loans consisted of those
non-accrual loans that were either greater than 90 days delinquent as of
September 30, 2002 or were classified as non-accrual by management because the
collection of interest from the borrower was doubtful. Specific reserves
totaling $247,512 were allocated to selected non-accrual loans considered to be
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 non-accrual loans had been accrued, that income
would have approximated $149,279 as of September 30, 2002.  Interest income on
such loans, recorded only when received, was approximately $200,933 for the
first three quarters of 2002. As of September 30, 2002, the Bank had seven
properties classified as other real estate owned, totaling $2,039,135. The
ratio of loans past due 30 days or more to total loans was .17% at September
30, 2002 compared to 1.29% at December 31, 2001. There were no loans past due
90 days or more and still accruing interest as of September 30, 2002 or
December 31, 2001. There were no restructured loans as of September 30, 2002 or
December 31, 2001.

LIQUIDITY

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's primary sources of funds are increases in deposits,
loan repayments, and sales and maturities of investments. In addition, the
Company is able to borrow funds from the Federal Reserve system, the Federal
Home Loan Bank, and The Bankers Bank and is also able to borrow from other
financial institutions.  The Company monitors its compliance with regulatory
liquidity requirements and anticipates that funding requirements will be
satisfactorily met.

                                      -14-
<PAGE>
CAPITAL RESOURCES

At September 30, 2002, consolidated stockholders' equity was $13,211,104 or
6.84% of total assets compared to $12,545,124 or 6.90% of total assets at
December 31, 2001. The Company's common stock had a book value of $18.21 per
share at September 30, 2002 compared to a book value of $17.38 per share at
December 31, 2001. At the end of the third quarter of 2002, the Company had
approximately 500 stockholders of record.

The Bank and the Company are subject to the capital requirements of the 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,
which is essentially common shareholders' equity less intangible assets).

The following table sets forth information with respect to the risk-based and
leverage ratios for the Company and Bank at September 30, 2002 and 2001
compared to minimum ratios required by regulation.
<TABLE>
<CAPTION>


                                                                                                                    To Be Well
                                                                                                                 Capitalized Under
                                                                                       For Capital               Prompt Corrective
                                                            Actual                  Adequacy Purposes            Action Provisions
                                                            ------                  -----------------            -----------------
                                                     Amount         Ratio         Amount         Ratio          Amount         Ratio
                                                     ------         -----         ------         -----          ------         -----
<S>                                                  <C>            <C>           <C>            <C>            <C>            <C>
                                                                                 (dollars in thousands)
As of September  30, 2002:
  Total Capital (to Risk-Weighted Assets)
             Consolidated                           $24,121         15.75%        12,252          8.00%            n/a          n/a
             Bank                                   $18,397         12.12%        12,139          8.00%         15,174        10.00%
  Tier 1 Capital (to Risk-Weighted Assets)
             Consolidated                           $16,507         10.78%         6,126          4.00%            n/a          n/a
             Bank                                   $16,499         10.87%         6,069          4.00%          9,104         6.00%
  Tier 1 Capital (to Average Assets)
             Consolidated                           $16,507          8.38%         7,879          4.00%            n/a          n/a
             Bank                                   $16,499          8.62%         7,652          4.00%          9,565         5.00%
As of September 30, 2001
  Total Capital (to Risk-Weighted Assets)
             Consolidated                           $14,206          9.23%        12,317          8.00%            n/a          n/a
             Bank                                   $15,839         10.29%        12,310          8.00%         15,388        10.00%
  Tier 1 Capital (to Risk-Weighted Assets)
             Consolidated                           $12,279          7.98%         6,158          4.00%            n/a          n/a
             Bank                                   $13,913          9.04%         6,155          4.00%          9,233         6.00%
  Tier 1 Capital (to Average Assets)
             Consolidated                           $12,279          6.96%         7,057          4.00%            n/a          n/a
             Bank                                   $13,913          7.89%         7,057          4.00%          8,821         5.00%
</TABLE>



                                      -15-
<PAGE>
RESULTS OF OPERATIONS

The Company recognized earnings of $601,590 for the first three quarters of
2002. In comparison, net earnings for the first three quarters of 2001 were
$990,285.  The decrease is primarily attributable to a decrease in net interest
income due to lower interest rates and an increase in other operating expense
due to losses on the sale of other real estate.  The decrease was partially
offset by an increase in other income due to gains on sales of loans and
increased service charges on deposit accounts.

Net interest income for the first nine months of 2002 was $5,469,985 as
compared to $6,256,934 for the first nine months of 2001. The average yield on
earning assets for the first three quarters of 2002 decreased to 7.12% as
compared to 9.99% for the first three quarters of 2001. The decrease is
primarily due to the decrease in the prime lending rate as well as maturities
in the loan portfolio. The average cost of funds on interest-bearing
liabilities decreased for the first three quarters of 2002 to 3.65% as compared
to 5.60% for the first three quarters of 2001. The decrease is primarily due to
decreased rates in the Bank's marketplace as well as the maturity of brokered
deposits in 2002. Consequently, the net interest spread for the first nine
months of 2002 and 2001 was 3.47% and 4.39%, respectively.

Total other income for the first three quarters of 2002 was $1,485,203 compared
to $879,634 for the first three quarters of 2001.  The increase is primarily
due to the gain on the sale of loans in the amount of $198,160 as well as an
increase of approximately $234,000 in bounce protection and NSF fee income.

Total other expense for the first three quarters of 2002 was $6,265,598
compared to $5,466,033 for the first three quarters of 2001.  The increase is
primarily due to net losses on the sale of other real estate owned in the
amount of $334,330.

FORMAL AGREEMENT WITH OCC

On July 22, 2002, the Board of Directors of the Bank entered into an agreement
with the OCC regarding the administration and operation of the Bank.  The
agreement is considered a formal agreement under 12 U.S.C. Section 1818, and as
such, could result in potential civil penalties if violated.  The agreement may
also impact adversely the Bank's and/or the Company's ability to engage in or
conduct activities that require the Bank to be classified as "well-managed"
under federal banking laws and regulations.  At present, however, we do not
anticipate that any such impact resulting from the agreement will materially
affect the operations or activities of the Bank or the Company.

The July 22, 2002 agreement effectively requires the Bank to take various
corrective actions.  Specifically, the agreement requires, among other items:
o    A Management and Board supervision study;
o    Adherence to a written program to reduce the level of credit risk;
o    Adherence to a written program to reduce the level of criticized assets;
o    A written program to improve construction loan underwriting standards;
o    The establishment of an independent and ongoing loan review system; and
o    An improved program for the maintenance of an adequate allowance for loan
     and lease losses.

The agreement does not impose any separate or additional capital requirements
or limitations  on the Bank.  Accordingly, we fully expect the Bank will
continue to be classified as "well-capitalized" under the National Bank Act and
Section 38 of the Federal Deposit Insurance Act.

                                      -16-
<PAGE>
ITEM 3.  CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.  Based
upon that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) that is required to be
included in the Company's periodic filings with the Securities and Exchange
Commission.  There have been no significant changes in the Company's internal
controls or, to the Company's knowledge, in other factors that could
significantly affect those internal controls subsequent to the date the Company
carried out its evaluation, and there have been no corrective actions with
respect to significant deficiencies or material weaknesses.

                                      -17-
<PAGE>
PART II - OTHER INFORMATION

         Item 1. Legal Proceedings - None

         Item 2. Changes in Securities and Use of Proceeds
                (a)      None
                (b)      None
                (c)      None
                (d)      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

          Exhibit
          Number                   Description
          ------                   -----------

          3.1(1)                   Articles of Incorporation
          3.2(2)                   Bylaws, as amended through March 29,1994
          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)(4)               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)(4)               Form of Directors' Non-Qualified Stock
                                   Option Agreement
          10.2(3)(5)               First Cherokee Bancshares, Inc. 1999 Stock
                                   Option Plan
          10.7(3)(6)               Employment Agreement (Carl Hames) dated May
                                   11, 2000.
          99.1                     Certification pursuant to 18 U.S.C. Section
                                   1350 as adopted pursuant to Section 906 of
                                   the Sarbanes-Oxley Act of 2002.

------------------------

         (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 Annual Report on Form 10-KSB for the
                  year ended December 31, 1998.

         (5)      Incorporated herein by reference to Appendix A to the
                  Company's Proxy Statement filed on March 30, 1999.

         (6)      Incorporated herein by reference to Exhibit of the same
                  number in the Company's Report on Form 10-QSB for the quarter
                  ended June 30, 2000.

         (b)      The Company has not filed any reports on Form 8-K during the
                  quarter ended September 30, 2002.


                                      -18-
<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: November 13, 2002                               BY:  /s/Carl C. Hames, Jr.
      -----------------                                   ----------------------
                                                              Carl C. Hames, Jr.
                                                       President & CEO/Principal
                                                               Executive Officer

DATE: November 13, 2002                               BY:   /s/Kitty A. Kendrick
      -----------------                                   ----------------------
                                                               Kitty A. Kendrick
                                                        Chief Financial Officer/
                                      Principal Financial and Accounting Officer

                                      -19-
<PAGE>
                            CHIEF EXECUTIVE OFFICER
                                 CERTIFICATION


I, Carl C. Hames, Jr., certify that:

1.       I have reviewed this quarterly report on Form 10-Q of First Cherokee
         Bancshares, Inc.;

2.       Based on my  knowledge,  this  quarterly  report does not contain any
         untrue  statement of a material  fact or omit to state a material fact
         necessary to make the statements  made, in light of the  circumstances
         under which such  statements  were made, not misleading with respect
         to the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material  respects the financial  condition,  results of operations
         and cash flows of the registrant as of, and for, the periods presented
         in this quarterly report;

4.       The registrant's  other certifying  officers and I are responsible for
         establishing and maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
         and we have:

         a)     designed  such  disclosure  controls and  procedures to ensure
                that material  information  relating to the  registrant,
                including its consolidated subsidiaries,  is made known to us
                by others within those entities,  particularly during the
                period in which this quarterly report is being prepared;

         b)     evaluated the  effectiveness of the registrant's  disclosure
                controls and procedures as of a date within 90 days prior to
                the filing date of this quarterly report (the "Evaluation
                Date"); and

         c)     presented in this quarterly report our conclusions about the
                effectiveness of the disclosure controls and procedures based
                on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)     all  significant  deficiencies in the design or operation of
                internal  controls  which could  adversely  affect the
                registrant's ability to record, process, summarize and report
                financial data and have identified for the registrant's
                auditors any material weaknesses in internal controls; and

         b)     any fraud, whether or not material, that involves management or
                other  employees who have a significant  role in the
                registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in
         this  quarterly  report  whether  or not there  were significant
         changes in internal controls or in other factors that could
         significantly  affect internal controls subsequent to the date of our
         most recent  evaluation, including any corrective actions with regard
         to significant deficiencies and material weaknesses.


Date:  November 13, 2002


                                                       BY: /s/Carl C. Hames, Jr.
                                                       -------------------------
                                                              Carl C. Hames, Jr.
                                                     President and CEO/Principal
                                                               Executive Officer

                                      -20-
<PAGE>

                            CHIEF FINANCIAL OFFICER
                                 CERTIFICATION


I, Kitty A. Kendrick, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of First Cherokee
         Bancshares, Inc.;

2.       Based on my  knowledge,  this  quarterly  report does not contain any
         untrue  statement of a material  fact or omit to state a material fact
         necessary to make the statements  made, in light of the  circumstances
         under which such  statements  were made, not misleading with respect
         to the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
         and we have:

         a)     designed  such  disclosure  controls and  procedures to ensure
                that material  information  relating to the  registrant,
                including its consolidated subsidiaries, is made known to us by
                others within those entities, particularly during the period in
                which this quarterly report is being prepared;

         b)     evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to
                the filing date of this quarterly report (the "Evaluation
                Date"); and

         c)     presented in this quarterly report our conclusions about the
                effectiveness of the disclosure  controls and procedures based
                on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)     all  significant  deficiencies  in the design or  operation  of
                internal  controls  which could  adversely  affect the
                registrant's ability to record, process, summarize and report
                financial data and have identified for the registrant's
                auditors any material weaknesses in internal controls; and

         b)     any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

6.       The  registrant's other certifying officers and I have indicated in
         this  quarterly  report  whether  or not there  were significant
         changes in internal controls or in other factors that could
         significantly  affect internal controls subsequent to the date of our
         most recent  evaluation, including any corrective actions with
         regard to significant deficiencies and material weaknesses.


Date:  November 13, 2002



                                                        BY: /s/Kitty A. Kendrick
                                                        ------------------------
                                                               Kitty A. Kendrick
                                                        Chief Financial Officer/
                                      Principal Financial and Accounting Officer

                                      -21-
<PAGE>
Exhibit 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of the Company on Form 10-QSB for the
period ended September 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), the undersigned, Carl C. Hames,
Jr., President and Chief Executive Officer of the Company, and Kitty A.
Kendrick, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

1.       To the best of undersigned's knowledge, the information contained in
         the Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

2.       To the best of undersigned's knowledge, the information contained in
         the Report fairly presents, in all material respects, the financial
         condition and results of operations of the Company.

This 13th day of November, 2002.


                                                       BY: /s/Carl C. Hames, Jr.
                                                       -------------------------
                                                              Carl C. Hames, Jr.
                                                     President and CEO/Principal
                                                               Executive Officer



                                                        BY: /s/Kitty A. Kendrick
                                                        ------------------------
                                                               Kitty A. Kendrick
                                                        Chief Financial Officer/
                                      Principal Financial and Accounting Officer

                                      -22-
<PAGE>