SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                            1999           1998          1997          1996           1995
                                                            ----           ----          ----          ----           ----
                                                                   (In thousands of dollars, except per share data)
<S>                                                          <C>           <C>           <C>           <C>           <C>
Total interest income ....................................   $  55,230     $  50,792     $  49,005     $  39,521     $  31,387
Total interest expense ...................................      19,742        18,572        19,144        15,825        13,444
                                                             ---------     ---------     ---------     ---------     ---------
Net interest income ......................................      35,488        32,220        29,861        23,696        17,943
Provision for loan losses ................................      (3,133)       (3,417)       (5,953)       (2,973)       (1,424)
                                                             ---------     ---------     ---------     ---------     ---------
Net interest income after provision for loan losses ......      32,355        28,803        23,908        20,723        16,519
Non-interest income:
  Investment securities gains ............................          --            --             2            --             1
  Other income ...........................................       6,331         4,555         3,919         3,411         2,597
Non-interest expense .....................................     (24,611)      (20,462)      (17,009)      (14,800)      (11,257)
                                                             ---------     ---------     ---------     ---------     ---------
Income before income taxes ...............................      14,075        12,897        10,820         9,334         7,860
Income tax expense .......................................      (5,250)       (4,690)       (3,990)       (3,371)       (2,752)
                                                             ---------     ---------     ---------     ---------     ---------
Net income ...............................................   $   8,825     $   8,207     $   6,830     $   5,963     $   5,108
                                                             =========     =========     =========     =========     =========
Per Share Data:1
  Net income, basic ......................................   $    6.50     $    6.05     $    5.04     $    4.43     $    3.83
  Net income, assuming dilution ..........................   $    6.44     $    6.02     $    5.03     $    4.43     $    3.82
  Dividends declared .....................................   $    2.60     $    2.30     $    1.92     $    1.72     $    1.53
  Book value .............................................   $   44.70     $   40.81     $   37.00     $   33.76     $   30.94

Financial Condition Data:
  Assets .................................................   $ 656,012     $ 568,179     $ 534,102     $ 478,048     $ 420,581
  Loans, net .............................................   $ 546,897     $ 466,661     $ 441,390     $ 381,272     $ 293,834
  Cash and investment securities .........................   $  72,223     $  49,939     $  62,166     $  73,713     $  83,998
  Federal funds sold .....................................   $      --     $  24,300     $   5,500     $      --     $  23,800
  Deposits ...............................................   $ 522,382     $ 459,183     $ 461,728     $ 408,722     $ 365,951
  Long-term debt .........................................   $  46,309     $  36,627     $  15,487     $  15,806     $   3,448
  Other borrowed funds ...................................   $   2,961     $   2,416     $   1,414     $   3,272     $   4,784
  Shareholders' equity ...................................   $  60,772     $  55,386     $  50,113     $  45,725     $  41,074

Selected Ratios:
  Interest rate spread ...................................        5.90%         5.96%         5.70%         5.16%         4.57%
  Net yield on interest-earning assets ...................        6.39%         6.53%         6.21%         5.65%         5.09%
  Return on average assets ...............................        1.47%         1.56%         1.33%         1.32%         1.35%
  Return on average equity ...............................       14.90%        15.63%        13.93%        13.23%        13.17%
  Average equity to average assets .......................        9.89%         9.97%         9.55%         9.94%        10.24%
  Dividend payout ratio ..................................       40.02%        37.99%        38.08%        39.05%        40.17%
  Ratio of nonperforming assets to total assets...........        0.96%         1.15%         0.81%         0.49%         0.57%
  Ratio of allowance for loan losses to
    nonperforming assets .................................      163.48%       156.34%       210.15%       315.27%       225.05%
  Ratio of allowance for loan losses to total loans.......        1.81%         2.11%         2.01%         1.87%         1.55%
</TABLE>
1 Amounts  have been  restated  to reflect the effect of the  Company's  3-for-1
stock split effected in October 1997.

                                       1
<PAGE>
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CHANGES
                 IN FINANCIAL CONDITION AND RESULTS OF OPERATION

Forward-Looking Information

     The information contained herein contains  forward-looking  statements that
involve a number  of risks and  uncertainties.  A number of  factors,  including
those  discussed  herein,  could cause results to differ  materially  from those
anticipated   by   such   forward-looking    statements.   In   addition,   such
forward-looking statements are necessarily dependent upon assumptions, estimates
and data that may be incorrect or imprecise.  Accordingly,  any  forward-looking
statements  included herein do not purport to be predictions of future events or
circumstances  and  may  not  be  realized.  Forward-looking  statements  can be
identified by, among other things, the use of  forward-looking  terminology such
as "intends,"  "believes,"  "expects,"  "may," "will,"  "should,"  "seeks," "pro
forma" or "anticipates," or the negatives  thereof,  or other variations thereon
of comparable terminology, or by discussions of strategy or intentions.

General

     Greene  County  Bancshares,  Inc.  (the  "Company")  was formed in 1985 and
serves as the bank holding  company for Greene County Bank  ("GCB"),  which is a
Tennessee-chartered  commercial bank that conducts the principal business of the
Company. The Company also wholly owned American Fidelity Bank, whose assets were
combined with GCB during 1996, and Premier Bank of East Tennessee,  whose assets
were  combined  with  GCB  in  1998.  In  addition  to  its  commercial  banking
operations,   GCB  conducts  separate   businesses   through  four  wholly-owned
subsidiaries:  Superior  Financial  Services,  Inc.  ("Superior  Financial"),  a
consumer finance company;  Superior Mortgage Company  ("Superior  Mortgage"),  a
mortgage banking  company;  GCB Acceptance  Corporation  ("GCB  Acceptance"),  a
consumer  finance  company  specializing  in subprime  automobile  lending;  and
Fairway Title Co., a title company.

     The principal  business of the Company consists of accepting  deposits from
the general  public and investing  these funds and borrowed  funds  primarily in
loans  and,  to a  limited  extent,  securities  available  for  sale or held to
maturity.  Loans are originated by the Company within its primary market area of
east  Tennessee  and include  commercial  loans,  commercial  real estate loans,
mortgage installment loans and installment consumer loans.

     The Company's net income is dependent primarily on its net interest income,
which is the difference between interest income earned on its loans,  investment
assets and other interest-earning assets and interest paid on deposits and other
interest-bearing  liabilities. To a lesser extent, the Company's net income also
is affected  by the level of  non-interest  expenses  such as  compensation  and
employee benefits and Federal Deposit Insurance Corporation premiums.

     The  operations  of the Company are  significantly  affected by  prevailing
economic  conditions,  competition  and  the  monetary,  fiscal  and  regulatory
policies of  governmental  agencies.  Lending  activities  are influenced by the
general  credit  needs  of  small  businesses  in  the  Company's  market  area,
competition  among lenders,  the level of interest rates and the availability of
funds.  Deposit flows and costs of funds are  influenced  by  prevailing  market
rates of interest,  primarily on competing  investments,  account maturities and
the levels of personal income and savings in the Company's market area.

     As part of its overall  growth plans,  the Company  opened  branches of GCB
during 1999 in Monroe and Blount  Counties of  Tennessee.  In  addition,  during
1999,  GCB moved to a newer  and much  improved  facility  in  Sullivan  County,
Tennessee.  During 2000, the Company has opened a GCB branch

                                       2
<PAGE>
in Hawkins  County,  Tennessee  and an  additional  branch in  Sullivan  County,
Tennessee.  Further,  the Company intends to open a GCB branch in Loudon County,
Tennessee  and an  additional  branch in Blount  County,  Tennessee  during  the
remainder  of 2000.  In addition  to  Tennessee,  the Company  intends to pursue
opportunities  to establish  GCB branches in Virginia  and North  Carolina.  The
Company's ability to expand the presence of GCB outside of Tennessee will depend
in part upon the receipt of approvals  by banking  regulators  of other  states,
which  cannot be assured,  and the  availability  of branch  locations  that are
desirable to the Company.

Liquidity and Capital Resources

     Liquidity.  Liquidity refers to the ability or the financial flexibility to
manage future cash flows to meet the needs of depositors  and borrowers and fund
operations.  Maintaining  appropriate  levels of liquidity allows the Company to
have sufficient  funds available for reserve  requirements,  customer demand for
loans,  withdrawal  of deposit  balances  and  maturities  of deposits and other
liabilities.  The Company's primary source of liquidity is dividends paid by the
Bank.  Applicable  Tennessee statutes and regulations impose restrictions on the
amount of  dividends  that may be declared by the Bank.  Further,  any  dividend
payments  are  subject  to the  continuing  ability  of  the  Bank  to  maintain
compliance with minimum federal  regulatory  capital  requirements and to retain
its   characterization   under  federal  regulations  as  a   "well-capitalized"
institution.  In addition,  the Company  maintains  lines of credit totaling $30
million with the Federal Home Loan Bank of Cincinnati and federal funds lines of
credit  totaling $45 million at six  correspondent  banks.  Of these lines,  the
Company had $48.4 million available at December 31, 1999.

     In 1999,  operating  activities of the Company provided $11,624,179 of cash
flows,  reflecting  net income of  $8,825,258  and adjusted to include  non-cash
operating  expenses  such  as  $3,133,379  in  provision  for  loan  losses  and
amortization  and  depreciation of $1,303,697,  and exclude  non-cash  operating
income,  such as  $2,284,462  in the  increased  cash  surrender  value  of life
insurance  contracts and  $2,953,819  in the net change in accrued  interest and
other liabilities.  Cash flows from operating  activities were also increased by
the proceeds from the sale of available-for-sale loans of $61,534,853, offset in
part by cash used to originate  available-for-sale  loans of  $57,165,828.  This
increase  in overall  activity  in  available-for-sale  loans from 1998 and 1997
reflects growth in mortgages  originated and sold by GCB's subsidiary,  Superior
Mortgage,  as  borrowers  sought  to lock in  fixed-rate  mortgages  in a rising
interest rate environment.

     Investing activities,  including lending, used $93,056,245 of the Company's
cash flow,  a 290.7%  increase  from 1998 levels.  Origination  of loans held to
maturity  net  of  principal  collected  used  $89,988,893  in  funds,  up  from
$32,487,992 in 1998 as the Company's loan originations  increased as a result of
the Company's  expansion of branches into additional areas of East Tennessee and
the Company's  hiring of experienced  lending officers in targeted market areas.
Cash flows used by investing  activities  were offset in part by the maturity of
the  Company's  available-for-sale  securities  to a  greater  extent  than  the
Company's  purchases  of  additional  securities.  The use of cash by  investing
activities  also resulted in part from the Company's  investment in premises and
equipment of $8,055,485 primarily to furnish the new branches of GCB.

     Net  additional  cash  inflows of  $82,095,098  were  provided by financing
activities,  an increase of  $60,669,246  from 1998  levels.  The  increase  was
attributable  primarily  to  deposit  inflow  from  certificates  of  deposit of
$42,273,058  and  non-certificate  deposits  of  $26,149,253  as  well  as  from
$6,820,000  in federal  funds  purchased.  This  increase  in deposit  inflow as
compared  to 1998 was  attributable  to the  Company's  payment  of  competitive
interest rates and its branch expansion throughout East Tennessee. Cash provided
by financing  activities also included the Company's  reliance on long-term debt
of $79,000,000  during 1999, of which $69,277,626 was repaid during the year. As
in prior years, the

                                       3
<PAGE>
Company's  cash flow from  financing  activities  was decreased by the Company's
dividend payments during 1999 of $3,531,612.

     Capital  Resources.  The  Company's  capital  position is  reflected in its
shareholders'  equity,  subject to certain adjustments for regulatory  purposes.
Shareholders'  equity,  or  capital,  is a measure of the  Company's  net worth,
soundness and viability.  The Company's  capital  continued to exceed regulatory
requirements  at  December  31, 1999 and its record of paying  dividends  to its
stockholders  continued  uninterrupted  during  1999.  Management  believes  the
capital  base  of  the  Company   allows  it  to  take   advantage  of  business
opportunities  while  maintaining the level of resources  deemed  appropriate by
management of the Company to address  business  risks  inherent in the Company's
daily operations.

     Shareholders'  equity on December 31, 1999 was $60,772,367,  an increase of
$5,386,569  or 9.73%,  from  $55,385,798  on December 31, 1998.  The increase in
shareholders'  equity  arises  primarily  from net income for 1999 of $8,825,258
($6.50 per share, or $6.44 per share assuming  dilution),  and proceeds from the
exercise of stock  options  during 1998  totaling  $157,025.  This  increase was
offset  in part  by  quarterly  dividend  payments  during  1999  that  totalled
$3,531,612 ($2.60 per share).

     Risk-based  capital  regulations  adopted by the Board of  Governors of the
Federal Reserve Board (the "FRB") and the Federal Deposit Insurance  Corporation
("FDIC") require bank holding companies and banks, respectively,  to achieve and
maintain  specified  ratios of capital to risk-weighted  assets.  The risk-based
capital  rules  are  designed  to  measure  "Tier  1"  capital   (consisting  of
stockholders' equity, less goodwill) and total capital in relation to the credit
risk of both on- and off-balance sheet items. Under the guidelines,  one of four
risk weights is applied to the  different  on-balance  sheet items.  Off-balance
sheet items, such as loan commitments,  are also subject to risk weighting after
conversion to balance sheet equivalent  amounts.  All bank holding companies and
banks must maintain a minimum total capital to total risk-weighted  assets ratio
of  8.00%,  at  least  half of which  must be in the  form of  core,  or Tier 1,
capital.  At December 31, 1999,  the Company and the Bank each  satisfied  their
respective   minimum  regulatory   capital   requirements,   and  the  Bank  was
"well-capitalized" within the meaning of federal regulatory requirements.

Asset/Liability Management

     The operations  and  profitability  of the Company are largely  impacted by
changes in interest  rates and  management's  ability to control  interest  rate
sensitivity.  Management believes that its asset/liability  strategy reduces the
risk  associated with  fluctuation in interest rates.  The Company strives to be
neither asset  sensitive nor liability  sensitive by relying upon a mix of fixed
rate and variable rate products.  At December 31, 1999,  approximately  38.6% of
the Company's  gross loans had  adjustable  rates.  The Company has a mixture of
fixed rate loans and loans tied to its Prime Rate and the  investment  portfolio
also has a substantial amount of adjustable-rate  securities. It is management's
belief that while this mixture may not give maximum returns under certain market
conditions,  it can prevent  severe swings in earnings  under other  conditions.
Management  believes the Company is somewhat asset  sensitive;  therefore,  in a
falling  rate  environment  earnings  will tend to fall,  while in a rising rate
environment  earnings  will  tend to  improve.  Despite  the  implementation  of
strategies  to achieve a matching  position  of assets  and  liabilities  and to
reduce the exposure to fluctuating  interest rates, the results of operations of
the Company will remain subject to the level and movement of interest rates.

Changes in Results of Operations

     Net income. Net income for 1999 was $8,825,258,  an increase of $618,839 or
7.54% as compared to net income of $8,206,419  for 1998.  The increase  resulted
primarily  from an increase in net interest  income of $3,267,503 or 10.14%,  to
$35,487,811 in 1999 from  $32,220,308  in 1998, and an

                                       4
<PAGE>
increase in non-interest income of $1,775,793,  or 38.98%, to $6,331,282 in 1999
from $4,555,489 in 1998. The increase in net interest income primarily  reflects
an  increased  volume  of  loans  that  offset  the  dollar  effects  of  spread
compression  as the  average  yield on  interest-earning  assets  declined  to a
greater  extent  than  the  average  rate  on  the  Company's   interest-bearing
liabilities.  These  changes  were offset in part by the  $4,148,650,  or 20.27%
increase in  non-interest  expense to  $24,610,612  in 1999 from  $20,461,962 in
1998,  attributable primarily to increases in salaries and benefits and in other
expenses.

     Net income for 1998 was $8,206,419,  an increase of $1,376,245 or 20.15% as
compared to net income of $6,830,174 for 1997. The increase  resulted  primarily
from an increase in net interest income of $2,359,442,  or 7.90%, to $32,220,308
in 1998 from  $29,860,866  in 1997,  and an increase in  non-interest  income of
$634,373, or 16.18%, to $4,555,489 in 1998 from $3,921,116 in 1997. The increase
in net  interest  income  primarily  reflects an  increase  in  interest  income
attributable to loan growth and a decrease in interest  expense  associated with
reliance  on  lower-cost  debt.  These  changes  were  offset  in  part  by  the
$3,453,123,  or 20.30% increase in  non-interest  expense to $20,461,962 in 1998
from  $17,008,839 in 1997,  attributable  primarily to increases in salaries and
benefits and in other expenses.

     Net Interest Income.  The largest source of earnings for the Company is net
interest   income,   which  is  the  difference   between   interest  income  on
interest-earning assets and interest paid on deposits and other interest-bearing
liabilities. The primary factors which affect net interest income are changes in
volume and yields of earning assets and interest-bearing liabilities,  which are
affected in part by management's  responses to changes in interest rates through
asset/liability management.  During 1999, net interest income was $35,487,811 as
compared to  $32,220,308  in 1998, an increase of 10.14%.  This increase was due
primarily to an increase  from 1998 in the average  balance of  interest-earning
assets  that  offset the  effects of a decline in average  rates  earned on such
assets.  In addition,  the increase in net interest income was also attributable
to the decline in the average rate of  interest-bearing  liabilities to 4.04% in
1999 from  4.34% in 1998 that  offset  in large  part the cost of the  Company's
increased  reliance  during  1999 of deposits  to fund loan  growth.  Among such
liabilities, the Company increased its average level of deposits to $460,450,076
in 1999 from  $416,647,345 in 1998 while the average rate paid declined to 3.97%
in 1999 from 4.28% in 1998.

     Net interest  income for 1998 was $32,220,308 as compared to $29,860,866 in
1997,  an increase of 7.90%.  This  increase was due primarily to an increase in
loan  volume and lower  deposit  rates on  non-time  deposits.  The loan  volume
increase  was also due in part to the  Company's  implementation  during 1998 of
more  competitive  commercial  loan rates.  At the same time,  the Company's net
interest margin  increased in 1998 to 6.53% from 6.21% in 1997. This increase in
net  interest  margin  reflects  a  reduction  in the  cost of  interest-bearing
liabilities,  as well as a slight  increase in loan yield.  Contributing  to the
growth in net interest  income during 1998 was the decline in cost of funds,  as
reflected in the lower amount of interest expense in 1998 despite an increase in
average total deposits.

     Average  Balances,  Interest  Rates  and  Yields.  Net  interest  income is
affected by (i) the difference between yields earned on interest-earning  assets
and rates paid on interest-bearing liabilities ("interest rate spread") and (ii)
the   relative   amounts  of   interest-earning   assets  and   interest-bearing
liabilities.  The  Company's  interest  rate spread is  affected by  regulatory,
economic and competitive  factors that influence interest rates, loan demand and
deposit flows. When the total of interest-earning assets approximates or exceeds
the total of  interest-bearing  liabilities,  any positive  interest rate spread
will generate net interest  income.  An indication  of the  effectiveness  of an
institution's   net   interest   income   management   is  its  "net   yield  on
interest-earning  assets,"  which is net  interest  income  divided  by  average
interest-earning assets.

                                       5
<PAGE>
     The  following  table  sets  forth  certain  information  relating  to  the
Company's  consolidated  average  interest-earning  assets and  interest-bearing
liabilities  and  reflects  the  average  yield on assets  and  average  cost of
liabilities  for the  periods  indicated.  Such  yields and costs are derived by
dividing   income  or  expense  by  the  average  daily  balance  of  assets  or
liabilities,  respectively,  for  the  periods  presented.  During  the  periods
indicated, non-accruing loans, if any, are included in the net loan category.
<TABLE>
<CAPTION>
                                   1999                                1998                                 1997
                    -----------------------------------  ----------------------------------  -----------------------------------
                       Average     Revenue/    Yield/       Average      Revenue/   Yield/      Average       Revenue/   Yield/
                       Balance      Expense     Rate        Balance      Expense     Rate       Balance       Expense     Rate
                       -------      -------     ----        -------      -------     ----       -------       -------     ----

Interest-earning
assets:
Loans1
-----
<S>                 <C>           <C>           <C>      <C>           <C>          <C>      <C>            <C>          <C>
Commercial......... $ 246,370,459 $23,702,345    9.62%   $ 235,166,862 $ 21,002,417  8.93%   $ 240,601,635  $ 21,476,951  8.93%
Installment - net2.   264,096,187  24,771,213    9.38%     207,718,394   23,064,331 11.10%     190,304,270    22,024,965 11.57%
Fees on loans......            --   4,313,933                       --    3,754,124                     --     2,502,460
                    ------------- -----------            ------------- ------------          -------------  ------------
  Total loans
   (including fees).$ 510,466,646 $52,787,491   10.34%   $ 442,885,256 $ 47,820,872 10.80%   $ 430,905,905  $ 46,004,376 10.68%
                    ------------- -----------            ------------- ------------          -------------  ------------

Investment securities3
---------------------
Taxable............ $  23,760,807 $ 1,440,021    6.06%   $  29,326,409 $  1,865,083  6.36%   $  38,079,718  $  2,467,835  6.48%
Tax-exempt4........     4,084,851     159,747    3.91%       6,250,730      282,161  4.51%       9,210,719       403,507  4.38%
                    ------------- -----------            ------------- ------------          -------------  ------------
  Total investment
    securities..... $  27,845,658 $ 1,599,768    5.75%   $  35,577,139 $  2,147,244  6.04%   $  47,290,437  $  2,871,342  6.07%
                    ------------- -----------            ------------- ------------          -------------  ------------

Other short-term
  investments..........17,308,893     842,519    4.87%      14,808,885      824,340  5.57%       2,409,152       129,080  5.36%
                    ------------- -----------            ------------- ------------          -------------  ------------
  Total interest-
    earning assets. $ 555,621,197 $55,229,778    9.94%   $ 493,271,280 $ 50,792,456 10.30%   $ 480,605,494  $ 49,004,798 10.20%
                    ------------- -----------            ------------- ------------          -------------  ------------

Non-interest-earning
assets:
Cash and due from
 banks............. $  22,251,793                        $  17,855,077                       $  17,589,326
Premises and
  equipment........    12,936,091                            9,968,183                           9,355,616
Other, less
  allowance
  for loan losses..     8,001,783                            5,346,239                           5,945,568
                    -------------                        -------------                       -------------
  Total
    non-interest-
    earning assets. $  43,189,667                        $  33,169,499                       $  32,890,510
                    -------------                        -------------                       -------------
  Total average
    assets......... $ 598,810,864                        $ 526,440,779                       $ 513,496,004
                    =============                        =============                       =============
</TABLE>
----------------------------
1    Average loan balances include  nonaccrual loans.  Interest income collected
     on nonaccrual loans has been included.
2    Installment loans are stated net of unearned income.
3    The average  balance of and the related yield  associated  with  securities
     available for sale are based on the cost of such securities.
4    Tax exempt income has not been adjusted to tax-equivalent basis.

                                       6
<PAGE>
<TABLE>
<CAPTION>
                                   1999                                1998                                 1997
                     ----------------------------------  ----------------------------------  -----------------------------------
                        Average      Revenue/   Yield/      Average      Revenue/   Yield/      Average       Revenue/   Yield/
                        Balance      Expense     Rate       Balance      Expense     Rate       Balance       Expense     Rate
                        -------      -------     ----       -------      -------     ----       -------       -------     ----
Interest-bearing
liabilities:
Deposits
--------
<S>                  <C>           <C>          <C>      <C>           <C>           <C>     <C>            <C>           <C>
  Savings, NOW
    Accounts, and
    Money markets... $ 187,057,749 $  4,628,485 2.47%    $ 160,775,161 $  3,849,723  2.39%   $ 150,088,946  $  3,930,293  2.62%
  Time deposits.....   273,392,327   13,670,956 5.00%      255,872,184   13,975,781  5.46%     253,840,096    13,947,656  5.49%
                     ------------- ------------            -----------   ----------            -----------    ----------

     Total deposits. $ 460,450,076 $ 18,299,441 3.97%    $ 416,647,345 $ 17,825,503  4.28%   $ 403,929,042  $ 17,877,949  4.43%

Securities sold
  under repurchase
  agreement and
  short-term
  borrowings........     7,326,106     318,308  4.34%        2,943,827      115,784  3.93%       4,949,115       236,553  4.78%

Debt ...............    21,401,383   1,124,218  5.25%        8,503,098      630,861  7.42%      16,147,018     1,029,430  6.38%
                      ------------ -----------  ----     ------------- ------------           ------------  ------------

Total interest-
  bearing
  liabilities....... $ 489,177,565 $19,741,967  4.04%    $428,094,270  $ 18,572,148  4.34%    $425,025,175  $ 19,143,932  4.50%
                                                         ------------  ------------           ------------  ------------
Non-interest-bearing
liabilities:
  Demand deposits... $  42,277,708                       $ 39,821,855                         $ 33,540,018
  Other liabilities.     8,112,432                          6,033,556                            5,904,610
                     -------------                       ------------                         ------------
  Total liabilities. $  50,390,140                       $ 45,855,411                         $ 39,444,628

  Stockholders'
    equity..........    59,243,159                         52,491,098                           49,026,201
                     -------------                       ------------                         ------------
Total liabilities
 and stockholders'
 equity............. $ 598,810,864                       $ 526,440,779                       $ 513,496,004
                     =============                       =============                       =============
Net interest income.               $35,487,811                         $ 32,220,308                         $ 29,860,866
                                   ===========                         ============                         ============

Margin analysis:
  Interest rate
    spread..........                            5.90%                                5.96%                                5.70%

Net yield on
   interest-earning
   assets (net interest
   margin)..........                            6.39%                                6.53%                                6.21%
                                                =====                                =====                                =====
</TABLE>
                                       7
<PAGE>
     Rate/Volume  Analysis.  The following table analyzes net interest income in
terms of changes in the volume of interest-earning  assets and  interest-bearing
liabilities  and changes in yields and rates.  The table  reflects the extent to
which changes in the interest  income and interest  expense are  attributable to
changes in volume (changes in volume  multiplied by prior year rate) and changes
in rate (changes in rate multiplied by prior year volume).  Changes attributable
to the combined impact of volume and rate have been separately identified.
<TABLE>
<CAPTION>
                                                  1999 vs. 1998                             1998 vs. 1997
                                  ------------------------------------------  ------------------------------------------
                                                           Rate/     Total                             Rate/     Total
                                    Volume      Rate      Volume    Change     Volume       Rate      Volume     Change
                                    ------      ----      ------    ------     ------       ----      ------     ------
                                                                           (In thousands)
Interest Income:
<S>                                <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
   Loans net of unearned income    $ 7,297    $(2,022)   $  (309)   $ 4,966    $ 1,278    $   523    $    15    $ 1,816
   Investment securities:
     Taxable ...................      (359)       (88)        17       (430)      (567)       (46)        11       (602)
     Tax exempt ................       (92)       (38)        13       (117)      (130)        12         (4)      (122)
   Other short-term investments        139       (104)       (17)        18        664          5         26        695
                                   -------    -------    -------    -------    -------    -------    -------    -------
  Total interest income ........     6,985     (2,252)      (296)     4,437      1,245        494         48      1,787
                                   -------    -------    -------    -------    -------    -------    -------    -------
Interest Expense:
   Savings, NOW accounts, and
     Money market accounts .....       630        128         21        779        280       (336)       (24)       (80)
   Time deposits ...............       957     (1,181)       (81)      (305)       111        (83)        (1)        27
   Short-term borrowings .......       172         12         18        202        (96)       (42)        17       (121)
   Debt ........................       957       (184)      (279)       494       (487)       169        (80)      (398)
                                   -------    -------    -------    -------    -------    -------    -------    -------
   Total interest expense ......     2,716     (1,225)      (321)     1,170       (192)      (292)       (88)      (572)
                                   -------    -------    -------    -------    -------    -------    -------    -------
Net interest income ............   $ 4,269    $(1,027)   $    25    $ 3,267    $ 1,437    $   786    $   136    $ 2,359
                                   =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>

     At December 31, 1999, loans outstanding and loans  available-for-sale,  net
of unearned income and allowance for loan losses,  were $546.9 million  compared
to $466.7  million at 1998 year end. The increase is primarily  due to increases
in lending activity through the addition in 1999 of experienced  lenders who had
previously  worked at other banks in the same  communities  in which the Company
opened branches. The combination of additional lenders,  first-hand knowledge of
the local  lending  market  and  competitive  loan rates  helped the  Company to
increase loan volume  sufficiently  to overcome the adverse  effect on income of
lower loan rates in the  market.  Average  outstanding  loans,  net of  unearned
interest,  for 1999 were  $510.5  million,  an  increase of 15.26% from the 1998
average of $442.9 million.  The average  outstanding  loans for 1997 were $430.9
million.  The growth in average loans for the past three years can be attributed
to the Company's  continuing market expansion into surrounding  counties through
the  Company's  branch  network and to the  development  of its other  financing
businesses  and indirect  financing.  During  1999,  the Company  continued  its
expansion with new branches in Monroe and Blount  Counties and moved  operations
of an existing  branch in Sullivan  County to a new facility.  In addition,  the
loan growth in 1999 was  attributable to a new management  group that joined the
Company. For 2000, the Company continued its expansion throughout East Tennessee
by establishing an additional  branch in Sullivan County and a branch in Hawkins
County.  During 1998, the marginal increase in interest income can be attributed
to the decrease in the prime rate during the latter part of 1998.

     Average  investment  securities  for 1999 were $27.8  million,  compared to
$35.6 million in 1998,  and $47.3 million in 1997. In 1999, the average yield on
investments  was 5.75%,  a decrease  from the 6.04%  yield in 1998 and the 6.07%
yield in 1997.  This decline in 1999  reflects the  prepayment  of a substantial
amount  of  loans  underlying  the  adjustable-rate  securities,  and  thus  the
amortization of the associated premiums,  as borrowers tended to refinance their
adjustable-rate  loans with fixed rate loans.  Income provided by the investment
portfolio  in 1999 was  $1,599,768  as  compared  to  $2,147,244  in  1998,

                                       8
<PAGE>

and  $2,871,342  in 1997.  The  decline in the  average  balance  of  investment
securities  from 1998 to 1999 was the result of the  Company's  use of  proceeds
from the  maturities of  available-for-sale  securities to fund  higher-yielding
loans.

     Provision  for  Loan  Losses.  The  Company's  provision  for  loan  losses
decreased $283,631,  or 8.3%, to $3,133,379 in 1999 from $3,417,010 in 1998. The
decrease in the  provision  for loan  losses is  primarily  attributable  to the
Company's  assessment  of the risk of  collection  inherent in its existing loan
portfolio. The ratio of non-performing assets to total assets decreased to 0.96%
at December  31, 1999 as compared  to 1.15% at  December  31,  1998.  Management
attributes  the  decline in  non-performing  assets to the  Company's  increased
emphasis on collection  efforts,  including the  recruitment  of an  experienced
collection  professional.  As a result,  despite the Company's reduced provision
for loan  losses  in 1999 as  compared  to  1998,  the  ratio  of the  Company's
allowance for loan losses to non-performing  assets increased in 1999 to 163.48%
from 156.34% in 1998.

     The Company's provision for loan losses in 1998 decreased by $2,536,195, or
42.6%,  to  $3,417,010  in 1998 from  $5,953,205  in 1997.  The  decrease in the
provision  for loan losses is primarily  attributable  to a reduction in problem
loans  associated  with  Superior  Financial  in prior  years  and  management's
assessment of the reduced risk profile in its existing  portfolio.  The ratio of
loans  30 days or  more  past  due to  total  gross  loans  for  consumer  loans
originated by Superior  Financial  decreased from 5.12% at December 31, 1997 and
increased  from  2.58% at  December  31,  1998 to 2.88% at  December  31,  1999.
Management of the Company believes that these past due and  nonperforming  loans
originated by its consumer finance  subsidiary reflect the risk inherent in this
type of business.  However, management also believes this risk is also offset by
the net benefits  attributable to operation of the finance company,  including a
higher net yield on these types of loans, market penetration and diversification
of the Company's activities into non-traditional lending areas.

     To further manage its credit risk on loans, the Company  maintains a "watch
list" of loans that, although currently  performing,  have  characteristics that
require closer supervision by management.  At December 31, 1999, the Company had
identified  $5.9  million  in loans  that  were  placed on its  "watch  list," a
significant  decrease  from $11.2  million as of December 31, 1998 because of an
enhanced  risk rating  system for loans and better  identification  of potential
problem loans.

     Non-Interest Income. Income that is not related to interest-earning assets,
consisting  primarily of service charges,  commissions and fees, has become more
important  as  increases  in  levels  of  interest-bearing  deposits  and  other
liabilities make it more difficult to maintain interest rate spreads.

     Total  non-interest  income for 1999 increased to $6,331,282 as compared to
$4,555,489  in  1998  and  $3,921,116  in  1997.   The  largest   components  of
non-interest  income are service  charges,  commissions and fees,  which totaled
$5,490,747 in 1999, $4,013,389 in 1998 and $3,312,347 in 1997. The increase from
1998 to 1999 reflects the increase in deposit  growth of the Company,  which has
associated  service charges and  commissions,  and also  management's  continued
focus on enhancing fee income.

     Non-Interest Expense.  Control of non-interest expense also is an important
aspect in managing net income.  Non-interest  expense  includes,  among  others,
personnel,  occupancy, and other expenses such as data processing,  printing and
supplies,  legal and professional  fees,  postage and Federal Deposit  Insurance
Corporation  assessments.  Total  non-interest  expense was $24,610,612 in 1999,
compared to $20,461,962 in 1998 and $17,008,839 in 1997.

     Personnel  costs are the  primary  element  of the  Company's  non-interest
expenses.  In 1999,  salaries and benefits  represented  $14,338,677 or 58.3% of
total  non-interest  expenses.  This was an

                                       9
<PAGE>

increase of  $2,879,909  or 25.1% over 1998's  total of  $11,458,768.  Personnel
costs for 1998  increased  $1,933,566 or 20.3% over 1997's total of  $9,525,202.
These increases reflect the increased staffing needs of the Company's  continued
expansion of the GCB and subsidiary  branch network  throughout  East Tennessee.
The higher costs in 1999 were also attributable to the usually higher expense of
hiring and  retaining  more  seasoned  lending  personnel in 1999 as part of the
Company's  overall goal to increase loan growth without a decline in the overall
quality of loans being originated.  Overall,  the number of full-time equivalent
employees  at  December  31, 1999 was 363 versus 307 at December  31,  1998,  an
increase of 18.2%.

     Occupancy and furniture  and  equipment  expense  exhibited the same upward
trend during the past three years as did personnel  costs due to essentially the
same reasons referenced above. At December 31, 1999, the Company had 48 branches
compared to 35 branches at December 31, 1998.

     Other expenses  increased $556,550 or 11.4% from 1998 to 1999. The increase
was  primarily   attributable  to  higher  operating  expenses  associated  with
additional  branches,  an increase in  advertisements  as part of the  Company's
deposit and loan growth program and increased  foreclosure costs associated with
more  aggressive  loan  collection  efforts.  The increase from 1997 to 1998 was
$675,533, or 16.11%.

Changes in Financial Condition

     Total assets at December 31, 1999 were $656.0 million, an increase of $87.8
million, or 15.5%, over 1998's year end total assets of $568.2 million.  Average
assets for 1999 were $598.8 million,  an increase of $72.4 million or 13.8% over
1998 average assets of $526.4 million. This increase was primarily the result of
an increase in the average  balance of loans to $510,466,646 in 1999 as compared
to an average  balance of $442,885,256 in 1998. This increase was offset in part
by the decline in the average balance of investment securities to $27,845,658 in
1999 from $35,577,139 in 1998, as the Company shifted its funding focus to loans
because of the relatively higher yields available and because of the loan demand
generated by its  additional  lending  personnel.  Return on average  assets was
1.47% in 1999,  as compared to 1.56% in 1998 and 1.33% in 1997,  reflecting  the
Company's  compressed  net  interest  margin  over  prior  years in a period  of
continuing asset growth and increasing non-interest expense.

     Earning  assets  consist of loans,  investment  securities  and  short-term
investments  that earn interest.  Average earning assets during 1999 were $555.6
million, an increase of 12.6% from an average of $493.3 million in 1998.

     Non-performing  loans include non-accrual and classified loans. The Company
has a policy of  placing  loans 90 days  delinquent  in  non-accrual  status and
charging  them off at 120 days  past  due.  Other  loans  past due that are well
secured and in the process of collection continue to be carried on the Company's
balance sheet. For further information,  see Note 1 of the Notes to Consolidated
Financial  Statements.  The Company has aggressive collection practices in which
senior management is significantly and directly involved.

     The Company  maintains an  investment  portfolio to provide  liquidity  and
earnings.  Investments  at December 31, 1999 had an amortized  cost and a market
value of $24.1 million. At December 31, 1998,  investments had an amortized cost
of  $27.0  million  had a  market  value  of  $27.2  million.  This  decline  in
investments in 1999 reflects the Company's focus on growth in its loan portfolio
and therefore its corresponding  use of its investment  portfolio as a source of
liquidity rather than a longer-term earning asset. An effect of this approach is
to maintain  investments with shorter-term  maturities that are less

                                       10
<PAGE>

susceptible to significant  changes in market value, as reflected in the absence
of any significant  difference between the securities' amortized cost and market
value at December 31, 1999.

     The  Company's  deposits  were $522.4  million at December 31,  1999.  This
represents an increase of $63.2  million,  or 13.8%,  from the $459.2 million of
deposits at December 31, 1998. Average interest-bearing deposits increased $43.6
million, or 10.5%, in 1999. In 1998, average interest-bearing deposits increased
$12.7 million or 3.1% over 1997.  These  increases in deposits are primarily the
result of the  Company's  expansion  of  full-service  branches  of GCB into new
markets in East Tennessee.  In addition,  the Company has actively  marketed its
money market  accounts and  certificates of deposits with  competitive  interest
rates.  Non-interest  bearing  demand deposit  balances  increased 7.5% to $39.8
million at December 31, 1999 from $37.1 million at December 31, 1998.

     The Company's  continued  ability to fund its loan and overall asset growth
remains dependent upon the availability of deposit market share in the Company's
existing market of East Tennessee.  As of June 30, 1999,  approximately 62.0% of
the deposit base of East Tennessee was controlled  primarily by five  commercial
banks,  one savings bank and one credit union and, as of September 30, 1999, the
total deposit base of Tennessee  commercial banks had a weighted average rate of
4.27%.  Management of the Company does not anticipate further significant growth
in its  deposit  base  unless it either  offers  interest  rates  well above its
prevailing  rate on average  interest-bearing  deposits  of 3.97% or it acquires
deposits from other financial institutions. During 1999, the premiums charged in
Tennessee by selling  financial  institutions  for deposit  accounts ranged from
4.9% to 38.0%.  If the  Company  takes  action to increase  its deposit  base by
offering  above-market  interest  rates  or by  acquiring  deposits  from  other
financial  institutions and thereby increases its overall cost of deposits,  its
net  interest   income   could  be  adversely   affected  if  it  is  unable  to
correspondingly increase the rates it charges on its loans.

     Interest  paid on deposits in 1999 totaled  $18,299,441  reflecting a 3.97%
cost on average  interest-bearing  deposits of $460.5 million. In 1998, interest
of  $17,825,503  was paid at a cost of  4.28%  on  average  deposits  of  $416.6
million. In 1997, interest of $17,877,949 was paid at a cost of 4.43% on average
deposits of $403.9 million.

Interest Rate Sensitivity

     Deregulation   of   interest   rates   and   more   volatile    short-term,
interest-bearing  deposits have created a need for shorter maturities of earning
assets.  An increasing  percentage of commercial and installment loans are being
made with  variable  rates or  shorter  maturities  to  increase  liquidity  and
interest rate sensitivity.

     The   difference   between    interest-sensitive    asset   repricing   and
interest-sensitive liability repricing within time periods is referred to as the
interest rate sensitivity gap. Gaps are identified as either positive  (interest
sensitive  assets in excess  of  interest  sensitive  liabilities)  or  negative
(interest  sensitive  liabilities in excess of interest sensitive  assets).  The
Company currently believes it is slightly asset sensitive. The Company considers
certain  demand and time deposits as having longer  maturities  than what may be
considered  typical for the  industry  and,  thus,  its  liabilities  are not as
sensitive to changes in interest  rates. On December 31, 1999, the Company had a
positive  cumulative  one-year gap position of $18.4  million,  indicating  that
while  $343.0  million  in  assets  were  repricing,   only  $324.6  million  in
liabilities would reprice in the same time frame.

                                       11
<PAGE>

     The following  table  reflects the Company's  interest rate gap position at
December 31, 1999 based upon repricing  dates rather than maturity  dates.  This
table  represents a static point in time and does not consider  other  variables
such as changing relationships or interest rate levels.
<TABLE>
<CAPTION>
                             -------------------------------------------------------------------------------------------------------
                                                                      Expected Maturity Date
                             -------------------------------------------------------------------------------------------------------
                                 2000         2001         2002         2003          2004      Thereafter     Total      Fair Value
                                 ----         ----         ----         ----          ----      ----------     -----      ----------
                                                                      (Dollars in Thousands)
Interest-Earning Assets:
<S>                          <C>          <C>          <C>          <C>           <C>          <C>          <C>          <C>
   Loans, net of allowance
   for loan losses.........  $   324,803  $    85,051  $   58,385   $   37,760    $   17,736   $   23,162   $  546,897   $  546,789
       Average interest rate        9.08%        8.99%       8.70%        8.45%         8.60%        9.06%        8.96%

   Investment securities...  $    14,595  $     3,921  $    3,985   $      150    $       --   $    1,396   $   24,047   $   24,052
       Average interest rate        5.75%        5.50%       5.64%        4.60%                      5.31%        5.67%

   FHLB and Bankers Bank
       stock...............  $     3,621  $        --  $       --   $       --    $       --   $       --   $    3,621   $    3,621
       Average interest rate        6.93%                                                                         6.93%

   Total interest-earning
     assets................  $   343,019  $    88,972  $   62,370   $   37,910    $   17,736   $   24,558   $  574,565   $  574,462

Interest-Bearing
Liabilities(1):
   Savings and time deposits $   256,536  $    35,257  $   14,266   $    4,257    $    3,712   $   23,780   $  337,808   $  324,895
       Average interest rate        4.81%        4.78%       4.89%        2.87%         2.58%        2.23%        4.56%

   Money market and
     transaction accounts..  $    38,098  $    10,993  $   10,993   $    7,153    $    7,153   $   70,354   $  144,744   $  110,651
      Average interest rate         2.66%        2.71%       2.71%        2.66%         2.66%        2.57%        2.62%

   Debt and other borrowed
     money(2)..............  $    26,980  $       339  $      460   $    2,402    $      368   $   27,380   $   57,929   $   57,825
       Average interest rate        5.76%        6.02%       6.45%        4.98%         7.31%        5.56%        5.65%

   Securities sold under
     agreement to repurchase $     2,961  $        --  $       --   $       --    $       --   $       --   $    2,961   $    2,961
       Average interest rate        4.05%                                                                         4.05%

   Total interest-bearing
     liabilities...........  $   324,575  $    46,589  $   25,719   $   13,812    $   11,233   $  121,514   $  543,442   $  496,332

Interest sensitivity gap...  $    18,444  $    42,383  $   36,651   $   24,098    $    6,503   $ (96,956)   $   31,123   $   78,130
Cumulative interest
  sensitivity gap..........  $    18,444  $    60,827  $   97,478   $  121,576    $  128,079   $   31,123   $   31,123   $   78,130
Interest sensitivity gap to
  total assets.............         2.81%        6.46%       5.59%        3.67%         0.99%      (14.78%)       4.74%       11.91%
Cumulative interest
  sensitivity gap to total
  assets...................         2.81%        9.27%      14.86%       18.53%        19.52%        4.74%        5.58%       11.91%

</TABLE>
(1)  The  Company  has  presented  substantial  balances of deposits as non-rate
     sensitive and/or not repricing within one year.
(2)  For further information regarding fair value of debt instruments,  see Note
     17 of Notes to Consolidated  Financial Statements.  Accounts also include a
     note  payable  to a  related  party.  See Note 4 of  Notes to  Consolidated
     Financial Statements.

     The above table was prepared for the Company by an  independent  consulting
firm as of December 31, 1999 and is based upon data provided by the Company. The
table is based on a number of assumptions regarding the future annual prepayment
rate  for  the  Company's  various  categories  of  loans  and   adjustable-rate
securities  and the  attrition  rate of certain  deposits.  With  respect to the
computation  of the fair value of certain  transaction  and time  deposits,  the
model makes  certain  assumptions  regarding  the core  deposit  status of these
deposits which tends to decrease the fair value of these liabilities as interest
rates increase.

     The above table also  reflects a positive  cumulative  gap  position in all
maturity classifications. This is the result of core deposits being used to fund
shorter term interest earning assets, such as loans and investment securities. A
positive cumulative gap position implies that interest earning assets (loans and

                                       12
<PAGE>

investments)  will  reprice at a faster rate than  interest-bearing  liabilities
(deposits).  In a rising rate  environment,  this position will generally have a
positive effect on earnings,  while in a falling rate  environment this position
will  generally  have a negative  effect on earnings.  Other  factors,  however,
including  the speed at which  assets and  liabilities  reprice in  response  to
changes in market  rates and the  interplay  of  competitive  factors,  can also
influence  the  overall  impact on net  income of  changes  in  interest  rates.
Management believes that a rapid, significant and prolonged increase or decrease
in rates could have a substantial  adverse  impact on the Company's net interest
margin.

Inflation

     The effect of inflation on financial  institutions  differs from its impact
on other  types  of  businesses.  Since  assets  and  liabilities  of banks  are
primarily  monetary  in nature,  they are more  affected  by changes in interest
rates than by the rate of inflation.

     Inflation  generates  increased  credit demand and  fluctuation in interest
rates.  Although  credit  demand and  interest  rates are not  directly  tied to
inflation, each can significantly impact net interest income. As in any business
or  industry,  expenses  such  as  salaries,  equipment,  occupancy,  and  other
operating  expenses  also  are  subject  to  the  upward  pressures  created  by
inflation.

     Since the rate of inflation has been stable during the last several  years,
the impact of inflation on the earnings of the Company has been insignificant.

Effect of New Accounting Standards

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities." The statement  establishes  accounting and
reporting  standards  requiring  that  every  derivative  instrument  (including
certain derivative  instruments  embedded in other contracts) be recorded in the
balance  sheet as either an asset or liability  measured at its fair value.  The
statement  requires  that changes in the  derivative's  fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting  for  qualifying  hedges  allows a  derivative's  gains and losses to
offset related results on the hedged item in the income statement,  and requires
that a company must formally document, designate and assess the effectiveness of
the transactions that receive hedge accounting.

     SFAS No. 133, as amended by SFAS No. 137,  is  effective  for fiscal  years
beginning  after June 15, 2000. A company may also implement the statement as of
the beginning of any fiscal  quarter after  issuance  (that is, fiscal  quarters
beginning  June 16,  1998,  and  thereafter).  SFAS No.  133  cannot be  applied
retroactively.  SFAS No. 133 must be applied to (a) derivative  instruments  and
(b) certain  derivative  instruments  embedded in the hybrid contracts that were
issued,  acquired or substantively modified after December 31, 1997 (and, at the
Company's election, before January 1, 1998).

     The Company has not yet  quantified  the impact of adopting SFAS No. 133 on
its  financial  statements  and has not  determined  the timing or method of its
adoption of SFAS No. 133.  However,  the statement could increase  volatility in
earnings and other comprehensive income.

     The  FASB  has  issued  SFAS  No.  134,   "Accounting  for  Mortgage-Backed
Securities  Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise." The statement requires that an entity engaged in
mortgage banking activities classify any resulting mortgage-backed securities or
other retained  interests  based on its ability and intent to sell or hold these
investments.  The statement was effective for 1999 for the Company.  Adoption of
this new  standard  did not have a material  effect on the  Company's  financial
position.

                                       13
<PAGE>
Year 2000

     The Year 2000 issue is the result of computer  programs being written using
two  digits  rather  than four to define  the  applicable  year.  The  Company's
computer  equipment and software and devices with imbedded  technology  that are
time-sensitive  may recognize a date using "00" as the year 1900 rather than the
year  2000  and   thereafter.   This  could  result  in  a  system   failure  or
miscalculations  causing  disruptions  of  operations,  including,  among  other
things, a temporary inability to process  transactions and/or invoices or engage
in similar normal business activities.

     Beginning  in 1997,  the Company  initiated a project to address  Year 2000
problems/issues.  Current  systems were analyzed and, if necessary,  were either
remediated  or  replaced.  Testing was done to ensure that all systems were Year
2000 compatible. Large customers were surveyed to determine any significant Year
2000 exposures and reserves were  established to reflect risks to the Company of
possible  customer  business  disruptions.  These  processes were  substantially
complete as of December 31, 1998.

     During 1999, the Company established and tested contingency plans to assure
minimal business  disruptions in the event of Year 2000 problems,  and continued
to  assess  the  status  of  its  computer  systems.   The  Company  also  spent
considerable  time and  effort  communicating  the facts  about Year 2000 to its
customers.

     During  December  and over  Year  2000  weekend,  the  Company  experienced
virtually no customer panic or computer problems.  Operations continued smoothly
for both the Company and its significant customers.

     It  is  estimated   that  the  Company  spent   $250,000   preparing   for,
communicating and successfully operating through the Year 2000 issue.

     Management will continue to monitor its computer  systems for problems that
may occur as other  significant  dates  during  Year 2000  approach  (month end,
quarter end, leap year,  etc.) and will report any  disruptions to the Company's
Board of Directors. No material disruptions are anticipated.

                                       14
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Greene County Bancshares, Inc.

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of income,  of  shareholders'  equity and of cash flows
present  fairly,  in all material  respects,  the  financial  position of Greene
County  Bancshares,  Inc. and its  subsidiary at December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999, in conformity with accounting  principles
generally  accepted in the United  States.  These  financial  statements are the
responsibility of the Corporation's management; our responsibility is to express
an opinion on these financial  statements based on our audits.  We conducted our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States,  which require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

                                                 /s/ PricewaterhouseCoopers LLP

                                                 PricewaterhouseCoopers LLP

Knoxville, Tennessee
January 28, 2000

                                       15
<PAGE>

GREENE COUNTY BANCSHARES, INC.
Consolidated Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS                                                                       1999              1998
<S>                                                                   <C>              <C>
Cash and due from banks                                               $    44,554,846  $    19,591,814
Securities available-for-sale (Note 2)                                     20,726,398       23,533,213
Securities held-to-maturity - approximate market value
   value of $3,326,253 and $3,619,748 in 1999 and 1998,
   respectively (Note 2)                                                    3,320,677        3,619,992
Federal Home Loan Bank stock                                                3,477,000        3,193,600
Bankers Bank stock                                                            143,934               --
Federal funds sold                                                                 --       24,300,000
Loans available-for-sale (Notes 3 and 4)                                    1,209,950        5,042,908
Loans held-to-maturity, net (Notes 3 and 4)                               545,687,266      461,618,237
Premises and equipment, net (Note 5)                                       18,106,430       11,715,143
Accrued interest receivable                                                 3,880,414        3,901,795
Deferred income taxes (Note 11)                                             2,866,880        2,648,178
Cash surrender value of life insurance contracts                            6,420,524        4,136,062
Other assets                                                                5,618,006        4,878,583
                                                                      ---------------  ---------------
           Total assets                                               $   656,012,325  $   568,179,525
                                                                      ===============  ===============

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits (Note 6):
   Noninterest bearing demand deposits                                            $    39,830,247  $    37,053,958
   Interest bearing accounts:
     NOW                                                                               14,767,965       12,883,063
     Money market transactions                                                        129,976,526      111,966,713
     Savings                                                                           45,781,251       47,526,285
     Certificates of deposit $100,000 and over                                         75,515,934       52,022,269
     Other certificates of deposit                                                    216,510,465      197,731,072
                                                                                  ---------------  ---------------
           Total deposits                                                             522,382,388      459,183,360
                                                                                  ---------------  ---------------

Federal funds purchased                                                                11,620,000        4,800,000
Securities sold under agreements to repurchase                                          2,961,000        2,416,000
Accrued interest and other liabilities                                                 11,967,088        9,767,259
Related party notes payable (Note 4)                                                    2,471,418        2,511,418
Long-term debt (Note 7)                                                                43,838,064       34,115,690
                                                                                  ---------------  ---------------
           Total liabilities                                                          595,239,958      512,793,727
                                                                                  ---------------  ---------------

Commitments and contingencies (Notes 8, 10, 12, 13 and 16)

Shareholders' equity (Note 9):
   Common  stock,  par  value  $10,  authorized  5,000,000  shares;  issued  and
     outstanding 1,359,647 and 1,357,198 shares
     in 1999 and 1998, respectively                                                    13,596,470       13,571,980
   Paid-in capital                                                                      4,479,117        4,298,328
   Retained earnings                                                                   42,714,797       37,421,151
   Accumulated other comprehensive (loss) income, net of income tax                      (18,017)           94,339
                                                                                  ---------------  ---------------
           Total shareholders' equity                                                  60,772,367       55,385,798
                                                                                  ---------------  ---------------
                                                                                  $   656,012,325  $   568,179,525
                                                                                  ===============  ===============
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       16
<PAGE>
GREENE COUNTY BANCSHARES, INC.
Consolidated Statements of Income
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
                                                                      1999             1998              1997
Interest income:
<S>                                                             <C>               <C>              <C>
   Loans                                                        $    52,787,491   $    47,820,872  $    46,004,376
   Securities, nontaxable                                               159,747           282,161          403,507
   Securities, taxable                                                1,440,021         1,865,083        2,467,835
   Federal funds sold                                                   842,519           824,340          129,080
                                                                ---------------   ---------------  ---------------
           Total interest income                                     55,229,778        50,792,456       49,004,798
Interest expense:
   Deposit accounts                                                  18,299,441        17,825,503       17,877,949
   Securities sold under agreements to repurchase                       318,308           115,784          236,553
   Related party notes payable                                          197,215           197,557          249,829
   Long-term debt                                                       927,003           433,304          779,601
                                                                ---------------   ---------------  ---------------
           Total interest expense                                    19,741,967        18,572,148       19,143,932
                                                                ---------------   ---------------  ---------------
           Net interest income                                       35,487,811        32,220,308       29,860,866
Provision for loan losses                                             3,133,379         3,417,010        5,953,205
                                                                ---------------   ---------------  ---------------
Net interest income after provision for loan losses                  32,354,432        28,803,298       23,907,661
Noninterest income:
   Service charges, commissions and fees                              5,490,747         4,013,389        3,312,347
   Net realized gains on calls of
     available-for-sale securities                                           --                --            1,982
   Gain on sale of branch                                                    --                --          191,261
   Other income                                                         840,535           542,100          415,526
                                                                ---------------   ---------------  ---------------
           Total noninterest income                                   6,331,282         4,555,489        3,921,116
                                                                ---------------   ---------------  ---------------
Noninterest expense:
   Salaries and benefits                                             14,338,677        11,458,768        9,525,202
   Occupancy expenses                                                 1,541,051         1,413,988        1,219,125
   Furniture and equipment expense                                    1,782,043         1,373,130        1,354,745
   (Gain) loss on other real estate owned                               118,812           (5,310)            6,053
   Professional services                                                751,256           824,804          438,686
   Communications                                                       653,121           527,480          271,459
   Other expenses                                                     5,425,652         4,869,102        4,193,569
                                                                ---------------   ---------------  ---------------
           Total noninterest expense                                 24,610,612        20,461,962       17,008,839
                                                                ---------------   ---------------  ---------------
Income before income taxes                                           14,075,102        12,896,825       10,819,938
Income tax expense                                                    5,249,844         4,690,406        3,989,764
                                                                ---------------   ---------------  ---------------
           Net income                                           $     8,825,258   $     8,206,419  $     6,830,174
                                                                ===============   ===============  ===============
Per share of common stock:
   Net income, basic                                            $          6.50   $          6.05  $          5.04
                                                                ===============   ===============  ===============
   Net income, assuming dilution                                $          6.44   $          6.02  $          5.03
                                                                ===============   ===============  ===============
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       17
<PAGE>
GREENE COUNTY BANCSHARES, INC.
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
                                                                                                Accumulated
                                                                                                   Other
                                                Common          Paid-In         Retained       Comprehensive
                                                 Stock          Capital         Earnings       Income (Loss)       Total
                                                 -----          -------         --------       -------------       -----
<S>                                         <C>              <C>             <C>               <C>              <C>
December 31, 1996                           $  4,514,850     $    4,132,909  $  37,133,040     $      (55,463)  $ 45,725,336

   Net income                                         --                 --      6,830,174                 --      6,830,174
   Other comprehensive income, net of tax             --                 --             --            155,289        155,289
                                                                                                                ------------
     Comprehensive income                                                                                          6,985,463
   Dividends paid ($1.92 per share)                   --                 --     (2,600,640)                --     (2,600,640)
   Issuance of 45 shares                             150              2,551             --                 --          2,701
   Three-for-one stock split                   9,030,000                 --     (9,030,000)                --             --
                                            ------------     --------------  -------------     --------------   ------------

December 31, 1997                             13,545,000          4,135,460     32,332,574             99,826     50,112,860

   Net income                                         --                 --      8,206,419                 --      8,206,419
   Other comprehensive loss, net of tax               --                 --             --             (5,487)        (5,487)
                                                                                                                ------------
     Comprehensive income                                                                                          8,200,932
   Tax benefit from exercise of
     nonincentive stock options                       --             43,344             --                 --         43,344
   Dividends paid ($2.30 per share)                   --                 --     (3,117,842)                --     (3,117,842)
   Issuance of 2,698 shares                       26,980            119,524             --                 --        146,504
                                            ------------     --------------  -------------    ---------------  -------------

December 31, 1998                             13,571,980          4,298,328     37,421,151             94,339    55,385,798

   Net income                                         --                 --      8,825,258                 --     8,825,258
   Other comprehensive loss, net of tax               --                 --             --           (112,356)     (112,356)
                                                                                                               ------------
     Comprehensive income                                                                                         8,712,902
   Tax benefit from exercise of
     nonincentive stock options                       --             48,254             --                 --        48,254
                                                                                                               ------------
   Dividends paid ($2.60 per share)                   --                 --     (3,531,612)                --    (3,531,612)
   Issuance of 2,449 shares                       24,490            132,535             --                 --       157,025
                                            ------------     --------------  -------------    ---------------  -------------
December 31, 1999                           $ 13,596,470     $    4,479,117  $  42,714,797    $       (18,017) $  60,772,367
                                            ============     ==============  =============    ===============  =============
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       18
<PAGE>
GREENE COUNTY BANCSHARES, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>

                                                                                  1999             1998             1997
Net cash provided by operating activities:
<S>                                                                        <C>             <C>             <C>
   Net income ..........................................................   $  8,825,258    $  8,206,419    $  6,830,174
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Provision for loan losses .........................................      3,133,379       3,417,010       5,953,205
     Depreciation and amortization .....................................      1,303,697         993,523       1,146,564
     Amortization of premiums on securities, net of accretion ..........        291,152         314,599         420,829
     Net realized (gain) loss on available-for-sale securities .........             --              --          (1,982)
     Loans originated for available-for-sale ...........................    (57,165,828)    (30,999,433)     (7,733,085)
     Proceeds from loans originated for available-for-sale .............     61,534,853      33,706,080         608,119
     Net realized (gain) loss on sale of loans originated for sale .....       (536,067)       (465,728)       (158,860)
     (Gain) loss on sale of fixed assets and branch ....................        201,628          (5,030)       (191,261)
     (Gain) loss on other real estate owned ............................        118,812          (5,310)          6,053
     Deferred income tax benefit .......................................       (149,840)       (200,320)       (573,157)
     Increase in cash surrender value of life insurance contracts ......     (2,284,462)       (231,387)       (154,003)
     Change in accrued income and other assets .........................       (694,584)        437,319      (1,033,423)
     Change in accrued interest and other liabilities ..................     (2,953,819)      4,929,375         555,121
                                                                           ------------    ------------    ------------
           Net cash provided by operating activities ...................     11,624,179      20,097,117       5,674,294
                                                                           ------------    ------------    ------------
Cash flows from investing activities:
   Purchases of available-for-sale securities ..........................     (7,327,334)     (1,950,832)       (578,184)
   Proceeds from maturities of available-for-sale securities ...........      9,238,760       8,770,371       9,510,288
   Purchases of securities held-to-maturity ............................       (100,000)        (75,000)             --
   Proceeds from maturities of securities held-to-maturity .............        395,000       4,065,000       1,800,000
   Net originations of loans held-to-maturity ..........................    (89,988,893)    (32,487,992)    (59,424,671)
   Proceeds from sales from other real estate owned ....................      2,683,061         544,369         347,370
   Improvements to other real estate owned .............................       (276,226)             --              --
   Proceeds from sale of fixed assets ..................................        374,872          34,267              --
   Additions to premises and equipment .................................     (8,055,485)     (2,718,705)     (1,048,526)
   Cash transferred in sale of branch ..................................             --              --        (988,302)
                                                                           ------------    ------------    ------------
           Net cash used by investing activities .......................    (93,056,245)    (23,818,522)    (50,382,025)
                                                                           ------------    ------------    ------------
Cash flows from financing activities:
   Net increase in non-certificate deposits ............................     26,149,253      14,755,810       5,259,522
   Net increase (decrease) in certificates of deposit ..................     42,273,058     (17,301,008)     49,078,207
   Increase in federal funds purchased .................................      6,820,000       4,800,000              --
   Increase (decrease) in securities sold under agreements to repurchase        545,000       1,002,000      (1,858,000)
   Payments on related party notes payable .............................        (40,000)        (50,000)        (50,000)
   Payments on long-term debt ..........................................    (69,277,626)     (2,309,612)    (19,769,657)
   Borrowings of long-term debt ........................................     79,000,000      23,500,000      19,500,637
   Proceeds from issuance of common stock ..............................        157,025         146,504           2,701
   Cash dividends paid .................................................     (3,531,612)     (3,117,842)     (2,600,640)
                                                                           ------------    ------------    ------------
           Net cash provided by financing activities ...................     82,095,098      21,425,852      49,562,770
                                                                           ------------    ------------    ------------
Net increase (decrease) in cash and cash equivalents ...................        663,032      17,704,447       4,855,039
Cash and cash equivalents at beginning of year .........................     43,891,814      26,187,367      21,332,328
                                                                           ------------    ------------    ------------
                                                                           $ 44,554,846    $ 43,891,814    $ 26,187,367
                                                                           ============    ============    ============
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       19
<PAGE>
Greene County Bancshares, Inc.
Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies. The accounting policies of Greene
County  Bancshares,  Inc. (the Corporation) and subsidiary  conform to generally
accepted  accounting  principles  and to general  practices  of the  banking and
financial services industry.  The following is a summary of the more significant
policies.

     Principles of Consolidation.  The consolidated financial statements include
the accounts of Greene County Bancshares,  Inc. and its wholly-owned subsidiary,
Greene County Bank (the Bank). The Corporation's other wholly-owned  subsidiary,
Premier Bank of East Tennessee, combined with the Bank in October 1998. Superior
Financial  Services,  Inc. and GCB  Acceptance  Corp.,  Inc.,  consumer  finance
companies,  are  wholly  owned  subsidiaries  of Greene  County  Bank.  Superior
Mortgage, Inc., a mortgage company and Fairway Title Co., Inc., a title company,
are  also  wholly  owned  subsidiaries  of  Greene  County  Bank.  All  material
intercompany balances and transactions have been eliminated in consolidation.

     Cash and Cash  Equivalents.  For  purposes of  reporting  cash flows,  cash
equivalents  includes  cash on hand,  cash items in the  process of  collection,
amounts due from banks and federal funds sold with a maturity of less than three
months.

     The Bank is required to maintain  certain daily reserve balances on hand in
accordance with Federal Reserve Board requirements.  The average reserve balance
maintained in accordance with such requirements was approximately $2,290,000 and
$1,197,000 for the years ended December 31, 1999 and 1998, respectively.

     Securities.   Investments  in  certain  debt  and  equity   securities  are
classified according to management's intent as either Held-to-Maturity (reported
at amortized  cost),  Trading  (reported at fair value with unrealized gains and
losses included in earnings), or Available-for-Sale (reported at fair value with
unrealized  gains and losses  excluded  from earnings and reported as a separate
component of comprehensive income).

     Premiums and discounts on securities are recognized in interest income on a
method which approximates the level yield method over the period to maturity.

     Gains and losses from sales of  securities  are  recognized  at the time of
sale based upon specific identification of the security sold.

     Effective  January 1, 1999,  the Bank adopted SFAS No. 134,  Accounting for
Mortgage Backed Securities  Retained after the  Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking  Enterprise.  The standard  requires that an
entity   engaged  in  mortgage   banking   activities   classify  any  resulting
mortgage-backed  securities or other retained interests based on its ability and
intent  to sell  or hold  these  investments.  The  statement  does  not  have a
significant impact on the Bank's financial position.

     Loans.  Loans are  stated at  principal  amounts  outstanding,  reduced  by
unearned income and an allowance for loan losses. Loans  available-for-sale  are
carried at the lower of aggregate cost or market.

     Interest income on installment loans originated prior to the second quarter
of 1999 is recognized in a manner that  approximates the level yield method when
related  to the  principal  amount  outstanding.  Interest  on  other  loans  is
calculated using the simple interest method on the principal amount outstanding.

                                       20
<PAGE>
Notes to Consolidated Financial Statements, continued

     Management  assesses  the  adequacy  of the  allowance  for loan  losses by
considering a combination  of regulatory  and credit risk  criteria.  The entire
loan  portfolio is graded and potential  loss factors are assigned  accordingly.
The potential  loss factors for impaired  loans are assigned based on regulatory
guidelines.  The  regulatory  criteria are set forth in the  Interagency  Policy
Statement on the Allowance for Loan and Lease Losses. The potential loss factors
associated with unimpaired loans are based on historical net loss experience and
management's review of trends within the portfolio and related industries.

     Generally, commercial and commercial real estate loans are assigned a level
of risk at inception.  Thereafter, these loans are reviewed on an ongoing basis.
The review  includes loan payment and collateral  status,  borrowers'  financial
data and borrowers'  internal  operating  factors such as cash flows,  operating
income, liquidity,  leverage and loan documentation,  and any significant change
can result in an  increase  or  decrease  in the  loan's  assigned  risk  grade.
Aggregate  dollar  volume by risk grade is  monitored on an ongoing  basis.  The
establishment of and any changes to risk grades for consumer loans are generally
based upon payment performance.

     Generally,  the Bank  maintains  only a general loan loss  allowance.  This
allowance  is increased or decreased  based on  management's  assessment  of the
overall risk of its loan portfolio. Occasionally, a portion of the allowance may
be allocated to a specific loan to reflect unusual circumstances associated with
that loan.

     Management  reviews  certain key  indicators  on a monthly basis as well as
year-end  loss  results.  This  review  process  provides a degree of  objective
measurement that is used in conjunction with periodic internal  evaluations.  To
the extent that this process  yields  differences  between  estimated and actual
observed  losses,  adjustments  are made to  provisions  and/or the level of the
allowance.

     Increases  and decreases in the allowance for loan losses due to changes in
the  measurement  of the impaired  loans are included in the  provision for loan
losses.  Loans  continue to be  classified  as impaired  unless they are brought
fully  current  and the  collection  of  scheduled  interest  and  principal  is
considered probable.

     The Bank uses several  factors in  determining  if a loan is impaired under
Statement of Financial  Accounting  Standards (SFAS) No. 114. The internal asset
classification  procedures  include a thorough  review of significant  loans and
lending  relationships  and include the  accumulation of related data. This data
includes  loan payment and  collateral  status,  borrowers'  financial  data and
borrowers'  operating factors such as cash flows,  operating income,  liquidity,
leverage  and  loan  documentation,  and  any  significant  changes.  A loan  is
considered impaired,  based on current information and events, if it is probable
that the Bank will be unable to collect the  scheduled  payments of principal or
interest  when due  according to the  contractual  terms of the loan  agreement.
Uncollateralized loans are measured for impairment based on the present value of
expected future cash flows discounted at the historical effective interest rate,
while all  collateral-dependent  loans are measured for impairment  based on the
fair value of the collateral.

                                       21
<PAGE>
Notes to Consolidated Financial Statements, continued

     At December 31, 1999 and 1998,  the recorded  investment in loans for which
impairment has been  recognized  was  approximately  $5,591,000 and  $7,345,000,
respectively,  and  these  loans  had a  corresponding  valuation  allowance  of
$709,000 and $1,079,000,  respectively.  The impaired loans at December 31, 1999
and 1998, were measured for impairment using the fair value of the collateral as
all of these loans were collateral  dependent.  For the years ended December 31,
1999,  1998 and 1997,  the average  recorded  investment  in impaired  loans was
approximately $6,263,632, $4,961,000 and $6,964,000, respectively.

     When a loan or portion of a loan is  determined  to be  uncollectible,  the
portion  deemed  uncollectible  is charged  against the allowance and subsequent
recoveries, if any, are credited to the allowance.

     Loans,  including impaired loans, are generally classified as nonaccrual if
they are past due as to  maturity  or payment of  principal  or  interest  for a
period of more than 90 days,  unless  such  loans  are  well-secured  and in the
process of collection.  If a loan or portion of a loan is classified as doubtful
or is partially  charged off, the loan is generally  classified  as  nonaccrual.
Loans  that are on a  current  payment  status or past due less than 90 days may
also be  classified  as  nonaccrual  if repayment  in full of  principal  and/or
interest is in doubt.

     Loans may be returned to accrual  status when all  principal  and  interest
amounts  contractually  due (including  arrearages)  are  reasonably  assured of
repayment  within an acceptable  period of time, and there is a sustained period
of repayment performance (generally a minimum of six months) by the borrower, in
accordance with the contractual terms of interest and principal.

     While a loan is classified as nonaccrual and the future  collectibility  of
the recorded loan balance is doubtful, collections of interest and principal are
generally  applied as a  reduction  to  principal  outstanding.  When the future
collectibility of the recorded loan balance is expected,  interest income may be
recognized  on a cash  basis.  In the  case  where a  nonaccrual  loan  has been
partially  charged  off,  recognition  of interest on a cash basis is limited to
that which  would  have been  recognized  on the  recorded  loan  balance at the
contractual  interest  rate.  Receipts in excess of that amount are  recorded as
recoveries to the allowance  for loan losses until prior  charge-offs  have been
fully recovered.

     Premises  and  Equipment.  Premises and  equipment  are stated at cost less
accumulated   depreciation   and  amortization   computed   principally  on  the
straight-line  method  based on the  estimated  useful  lives of the  respective
assets.  Leasehold  improvements  are stated at cost  adjusted  for  accumulated
amortization  computed  on a  straight-line  method  over  the  shorter  of  the
estimated useful life of the assets or the term of the lease.

     Other Real Estate  Owned.  Other real estate owned  represents  real estate
acquired  through  foreclosure or  repossession  and is recorded at the lower of
cost (principal balance and accrued interest of the former loan plus foreclosure
costs and subsequently  capitalized  expenditures) or fair value minus estimated
costs to sell.  Initial  writedowns  are charged  against the allowance for loan
losses. Valuations are periodically performed by management and, if the carrying
value of a property  exceeds its net  realizable  value the  property is written
down by a charge against income.

                                       22
<PAGE>
Notes to Consolidated Financial Statements, continued

     Other  Assets.  Included in other assets are core deposit  intangibles  and
goodwill,  which  arose  from  a  prior  acquisition.   Management  periodically
evaluates the net  realizability  of the carrying  amount of such assets.  These
assets are amortized on a straight-line  basis over their estimated useful lives
of ten years.

     Income Taxes.  The  Corporation  files a  consolidated  federal  income tax
return.

     There are two components of the income tax provision: current and deferred.
Current income tax provisions  approximate  taxes to be paid or refunded for the
applicable period.  Deferred income tax assets and liabilities are recognized on
the  temporary  differences  between  the bases of  assets  and  liabilities  as
measured by tax laws and their bases as  reported in the  financial  statements.
Deferred  tax expense or benefit is then  recognized  for the change in deferred
tax liabilities or assets between periods.

     Recognition of deferred tax assets is based on management's  belief that it
is more likely than not that the tax benefit  associated with certain  temporary
differences and tax credits will be realized in that sufficient  taxes have been
paid in prior years to provide for such realization.

     Stock-based   Compensation.   The  Corporation  has  adopted  Statement  of
Accounting  Standards No. 123,  Accounting  for Stock Based  Compensation  (SFAS
123). As permitted by SFAS 123, the  Corporation has chosen to apply APB Opinion
No.  25,  Accounting  for  Stock  Issued to  Employees  (APB  25),  and  related
interpretations  in accounting for its Plans.  The pro forma  disclosures of the
impact of SFAS 123 are described in Note 9 of the financial statements.

     Net Income Per Share of Common Stock. The Corporation  follows Statement of
Financial  Accounting Standards No. 128, Earnings Per Share, which requires dual
presentation  of basic and diluted EPS on the face of the income  statement  for
all entities with complex capital  structures and requires a  reconciliation  of
the numerator and  denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation.

     Accounting   for   Transfers   and   Servicing  of  Financial   Assets  and
Extinguishments of Liabilities.  The Corporation applies a  financial-components
approach that focuses on control when accounting and reporting for transfers and
servicing of financial  assets and  extinguishments  of liabilities.  Under that
approach,  after a  transfer  of  financial  assets,  an entity  recognizes  the
financial and servicing  assets it controls and the liabilities it has incurred,
derecognizes   financial   assets  when  control  has  been   surrendered,   and
derecognizes  liabilities when extinguished.  This approach provides  consistent
standards for  distinguishing  transfers of financial assets that are sales from
transfers that are secured  borrowings.  Due to the small number of transactions
and the immateriality of the revenue associated with these  transactions,  there
was no material impact on results of operations or financial position due to the
adoption of this statement.

     Comprehensive Income. On January 1, 1998, the Corporation adopted Statement
of  Accounting  Standards  No. 130,  Reporting of  Comprehensive  Income,  which
establishes  standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a complete set of financial
statements.  This statement also requires that all items that are required to be
recognized under accounting  standards as components of comprehensive  income be
reported in a financial  statement that is displayed with the same prominence as
other financial statements. Reclassification of financial statements for earlier
periods for comparative purposes is required.  Adoption of this new standard did
not have a  material  effect on the  Corporation's  financial  condition  or the
results of its operations.

                                       23
<PAGE>
Notes to Consolidated Financial Statements, continued

     For each of the three years in the period ended  December  31, 1999,  other
comprehensive  income was comprised solely of unrealized gains and losses net of
the  related tax effect of  $(68,862),  $(2,649)  and $93,655 in 1999,  1998 and
1997, respectively.

     Segment Reporting.  On December 31, 1998, the Corporation adopted Statement
of Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related  Information,  which  establishes  standards  for  reporting  by  public
companies of operating segments in annual financial statements and requires that
those enterprises also report selected  information about operating  segments in
interim   financial   reports  issued  to  shareholders.   This  statement  also
establishes  standards for related  disclosures  about products.  This statement
requires  the  reporting  of  financial  and  descriptive  information  about an
enterprise's  reportable operating segments. The segment disclosures of SFAS 131
are described in Note 19 of the financial statements.

     Deferred  Compensation.  On December  31,  1998,  the  Corporation  adopted
Statement of Accounting Standards No. 132, Employers' Disclosures about Pensions
and Other Postretirement  Benefits. The statement revises employers' disclosures
about pension and other  postretirement  benefit  plans.  It does not change the
measurement  or  recognition  of those plans.  Restatement  of  disclosures  for
earlier periods for comparative  purposes is required.  The disclosure impact of
SFAS 132 is described in Note 10 of the financial statements.

     Stock  Split.  On September 5, 1997,  the  Corporation  announced a 3-for-1
stock split effected in the form of a 200% stock dividend, payable on October 3,
1997, to  shareholders of record as of September 19, 1997. All references to the
outstanding number of shares and earnings/dividends per share have been restated
to reflect the split.

     Significant   Estimates.   The  preparation  of  financial   statements  in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities and disclosure of contingent  assets and liabilities at the dates of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting periods. Actual results could differ from these estimates.

     Effect of New Accounting Standards.  In June 1998, the FASB issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. The statement
establishes  accounting and reporting  standards requiring that every derivative
instrument   (including  certain  derivative   instruments   embedded  in  other
contracts)  be  recorded in the  balance  sheet as either an asset or  liability
measured  at  its  fair  value.  The  statement  requires  that  changes  in the
derivative's  fair value be  recognized  currently in earnings  unless  specific
hedge  accounting  criteria are met.  Special  accounting for qualifying  hedges
allows a derivative's  gains and losses to offset related  results on the hedged
item  in the  income  statement,  and  requires  that a  company  must  formally
document,  designate  and  assess the  effectiveness  of the  transactions  that
receive hedge accounting.

     SFAS No. 133, as amended by SFAS No. 137,  is  effective  for fiscal  years
beginning  after June 15, 2000. A company may also implement the statement as of
the beginning of any fiscal  quarter after  issuance  (that is, fiscal  quarters
beginning  June 16,  1998,  and  thereafter).  SFAS No.  133  cannot be  applied
retroactively.  SFAS No. 133 must be applied to (a) derivative  instruments  and
(b) certain  derivative  instruments  embedded in the hybrid contracts that were
issued,  acquired or substantively modified after December 31, 1997 (and, at the
Company's election, before January 1, 1998).

                                       24
<PAGE>

     The Company has not yet  quantified  the impact of adopting SFAS No. 133 on
its  financial  statements  and has not  determined  the timing or method of its
adoption of SFAS No. 133.  However,  the statement could increase  volatility in
earnings and other comprehensive income.

     Reclassifications.  Certain amounts from prior period financial  statements
have been reclassified to conform to the current year's presentation.

2. Securities.  The carrying amount of securities and their  approximate  market
values at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
                                                         Gross            Gross            Gross        Approximate
                                                       Amortized        Unrealized      Unrealized         Market
                                                          Cost            Gains           Losses           Value

1999
----
<S>                                                 <C>               <C>             <C>              <C>
Available-for-sale:
   U.S. treasury securities and
     obligations of U.S. government
     corporations and agencies                      $  19,220,227     $    104,892    $    (134,152)   $  19,190,967
   Obligations of state and political
     subdivisions                                       1,535,230            1,176             (975)       1,535,431
                                                    -------------     ------------    --------------   -------------
                                                    $  20,755,457     $    106,068    $    (135,127)   $  20,726,398
                                                    =============     ============    ==============   =============
Held-to-maturity:
   Obligations of state and political
     subdivisions                                   $   3,320,677     $      7,380    $      (1,804)   $   3,326,253
                                                    =============     ============    ==============   =============

1998
----
Available-for sale:
   U.S. treasury securities and
     obligations of U.S. government
     corporations and agencies                      $  22,286,787     $    247,880    $     114,194    $  22,420,473
   Obligations of state and political
     subdivisions                                       1,094,267           18,473               --        1,112,740
                                                    -------------     ------------    -------------    -------------
                                                    $  23,381,054     $    266,353    $     114,194    $  23,533,213
                                                    =============     ============    =============    =============

Held-to-maturity:
   Obligations of state and political
     subdivisions                                   $   3,619,992     $     59,143    $      59,387    $   3,619,748
                                                    =============     ============    =============    =============
</TABLE>
                                       25
<PAGE>
Notes to Consolidated Financial Statements, continued

     Debt securities at December 31, 1999 will mature on the following schedule:
<TABLE>
<CAPTION>
                                                           Available-for-sale                Held-to-maturity
                                                    -------------------------------   ------------------------------
                                                                       Approximate                      Approximate
                                                          Book            Market           Book            Market
                                                         Value            Value            Value           Value
<S>                                                 <C>               <C>             <C>              <C>
Due in one year or less                             $       339,021   $     339,001   $  1,408,106     $   1,410,644
Due after one year through five years                     6,982,395       6,896,088      1,415,543         1,418,609
Due after five years through ten years                    4,193,387       4,215,582             --                --
Due after ten years                                       9,240,654       9,275,727        497,028           497,000
                                                    ---------------   -------------   ------------     -------------
                                                    $    20,755,457   $  20,726,398   $  3,320,677     $   3,326,253
                                                    ===============   =============   ============     =============
</TABLE>

     Securities  with carrying  values of $8,610,705  and $8,238,621 at December
31,  1999 and  1998,  respectively,  were  pledged  to secure  public  and trust
deposits and for other purposes as required or permitted by law.

3.  Loans.  Major  classifications  of loans at  December  31, 1999 and 1998 are
summarized as follows:

                                                1999              1998
Commercial                                  $143,610,070       $121,294,075
Commercial real estate                       181,872,539        115,203,849
Mortgage installment                         164,796,153        148,117,005
Installment consumer                          69,559,718         80,147,158
Loans available-for-sale                       1,209,950          5,042,908
Other loans                                    9,770,181         17,102,345
                                           -------------       ------------
                                             570,818,611        486,907,340
Less:
Unearned income and net deferred
  origination fees                           (13,589,502)        (9,993,687)
Allowance for loan losses                    (10,331,893)       (10,252,508)
                                           -------------      -------------
                                            $546,897,216       $466,661,145
                                            ============       ============

     At December  31, 1999 and 1998,  loans on which the accrual of interest had
been discontinued  totaled $2,952,188 and $4,159,303,  respectively.  Unrecorded
interest income on these loans aggregated  approximately $212,962,  $260,554 and
$112,300 for 1999, 1998 and 1997, respectively.

     Loans-in-process  at December  31,  1999 and 1998  totaled  $5,294,350  and
$13,302,325, respectively.

     A summary of activity in the  allowance for loan losses for the years ended
December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
                                         1999               1998              1997
<S>                               <C>                 <C>               <C>
Balance at beginning of year      $    10,252,508     $     9,153,823   $     7,330,676
Provision for loan losses               3,133,379           3,417,010         5,953,205
Recoveries                                962,659             915,893         1,012,092
Loans charged to allowance             (4,016,653)         (3,234,218)       (5,142,150)
                                  ---------------     ---------------   ---------------
                                  $    10,331,893     $    10,252,508   $     9,153,823
                                  ===============     ===============   ===============
</TABLE>
                                       26
<PAGE>
Notes to Consolidated Financial Statements, continued

4. Related Party Transaction.  Certain officers,  employees and directors and/or
companies  in which they have ten  percent  or more  beneficial  ownership  were
indebted to the Bank as indicated below. In the opinion of management,  all such
loans were made in the ordinary course of business on the same terms,  including
interest rates and  collateral,  as those  prevailing at the time for comparable
transactions  with unrelated  borrowers and did not involve more than the normal
risk of collectibility.

          Balances December 31, 1998                       $     10,271,529
             Additions                                           12,397,467
             Reductions                                          11,230,240
                                                           ----------------
          Balances, December 31, 1999                      $     11,438,756
                                                           ================

     In addition to the above,  the Bank provides  financing  for  purchasers of
automotive  and  other  transportation  equipment  from  dealerships  in which a
director  has more than a ten  percent  beneficial  interest.  Loans  originated
through these dealerships  aggregated  $1,001,266 during 1999 and $1,739,085 for
1998.  Such  financing  is  represented  by  installment   notes  that  are  the
obligations of the purchasers and are primarily collateralized by the equipment.
Some of these notes,  totaling $8,854 and $65,198 at December 31, 1999 and 1998,
respectively, are secondarily collateralized by dealer finance reserves and also
provide for recourse against the dealerships to further protect the Bank against
potential losses.

     As a result of a prior  acquisition,  the Corporation has promissory  notes
and non-compete  agreements with the sellers,  a related party.  These notes are
summarized as follows at December 31, 1999:

   Non-compete agreement, payable in yearly principal
     installments through January 2000                           $     40,000

   8% note, interest payments due quarterly, principal payments
      January 15, 2003 through January 15, 2008                       231,418

   8% note, interest payments due quarterly, principal payments
      January 15, 2002 through January 15, 2008                     2,200,000
                                                                 ------------
                                                                 $  2,471,418
                                                                 ============

     Scheduled  principal  maturities  of notes  payable as of December 31, 1999
are:

                               2000                            $     40,000
                               2001                                      --
                               2002                                 100,000
                               2003                                 131,418
                               2004                                 240,000
                               Thereafter                         1,960,000

                                       27
<PAGE>

Notes to Consolidated Financial Statements, continued

5. Premises and Equipment.  Premises and equipment at December 31, 1999 and 1998
was comprised of the following:
<TABLE>
<CAPTION>

                                                          1999                 1998
<S>                                                <C>                  <C>
Land                                               $       3,521,173    $      1,892,120
Banking quarters                                           8,522,022           7,720,215
Leasehold improvements                                     1,831,743           1,515,708
Furniture and fixtures                                     7,621,503           6,061,456
Construction in progress                                   3,473,140             899,082
Automobiles                                                  675,664             361,257
                                                   -----------------    ----------------
                                                          25,645,245          18,449,838
Less accumulated depreciation and amortizations           (7,538,815)         (6,734,695)
                                                   -----------------    ----------------
                                                   $      18,106,430    $     11,715,143
                                                   =================    ================
</TABLE>

6.  Deposits.  At December 31, 1999,  scheduled  maturities of  certificates  of
deposit were as follows:

                 2000                            $     250,083,941
                 2001                                   30,683,183
                 2002                                    9,692,462
                 2003                                    1,055,870
                 2004                                      510,943

7. Long-term  Debt. The Bank has long-term  debt  arrangements  with the Federal
Home Loan Bank of Cincinnati  (FHLB) to provide  funding for the origination and
purchase of loans and other interest-earning assets. This debt is collateralized
by the  Bank's  blanket  pledge  of  mortgage  loans  aggregating  approximately
$103,257,000 and stock of the Federal Home Loan Bank.

                                       28
<PAGE>
Notes to Consolidated Financial Statements, continued

     Long-term debt at December 31, 1999 and 1998 was summarized as follows:
<TABLE>
<CAPTION>
                                                                   1999               1998
<S>                                                          <C>                <C>
5.65% note, payable in monthly installments of
   $21,854 through July 1, 2003                              $       848,909    $     1,039,901
6.35% note, payable in monthly installments of
   $7,368 through September 1, 2013                                  809,484            842,357
6.10% note, payable in monthly installments of
   $8,493 through July 1, 2008                                       679,671            733,432
4.38% note, interest payments due monthly,
   principal due November 18, 2008                                        --          2,500,000
4.74% note, interest payments due monthly,
   principal due November 20, 2008                                 3,000,000          3,000,000
4.64% note, interest payments due monthly,
   principal due December 11, 2003                                 2,000,000          2,000,000
4.56% note, interest payments due monthly,
   principal due December 8, 2008                                  2,000,000          2,000,000
4.23% note, interest payments due monthly,
   principal due December 15, 2008                                        --          2,000,000
5.50% note, interest payments due monthly,
   principal due January 4, 2000                                          --         20,000,000
5.49% note, interest payments due monthly,
   principal due November 24, 2009                                17,500,000                 --
6.25% note, interest payments due monthly,
   principal due January 10, 2000                                 15,000,000                 --
5.76% note, interest payments due monthly,
   principal due December 21, 2009                                 2,000,000                 --
                                                             ---------------    ---------------
                                                             $    43,838,064    $    34,115,690
                                                             ===============    ===============
</TABLE>
     Scheduled principal maturities of long-term debt outstanding as of December
31, 1999 are:

                    2000                            $    15,320,201
                    2001                                    339,347
                    2002                                    359,638
                    2003                                  2,270,841
                    2004                                    128,333
                    Thereafter                           25,419,704
                                                    ---------------
                                                    $    43,838,064
                                                    ===============

                                       29
<PAGE>

Notes to Consolidated Financial Statements, continued

     At December 31, 1999, the Corporation maintained six federal funds lines of
credit totaling $45,000,000,  of which $33,380,000 was available,  with interest
at the federal funds buy rate at the six  correspondent  banks.  The Corporation
also  maintains  an unused line of credit of  $10,000,000  with the Federal Home
Loan Bank of Cincinnati with the option of selecting a variable rate of interest
for up to 90 days.  The line of credit  will  expire on December  15,  2000.  In
addition, the Bank maintains another line of credit of $20,000,000 with the FHLB
at a fixed interest rate for the term chosen.  The Bank has used  $15,000,000 of
the fixed line of credit.  The line of credit will expire on December  30, 2000.
The Bank also maintains a $25,000,000  letter of credit with the FHLB,  which is
used to pledge the Corporation's public deposits with the state collateral pool,
at an annual fee of ten basis points, which will expire January 4, 2000.

8. Leases. The Corporation leases certain banking facilities and equipment under
long-term  operating lease  agreements,  which generally contain renewal options
for  periods  ranging  from 5 to 30 years,  and  require  the payment of certain
additional costs (generally maintenance and insurance).

     Future minimum lease  payments for these  noncancelable  operating  leases,
with a term in excess of one year,  at  December  31,  1999 for each of the next
five years and thereafter were as follows:

                      2000                              $   405,723
                      2001                                  357,965
                      2002                                  304,055
                      2003                                  201,990
                      2004                                  127,746
                      Thereafter                            390,791

     The total rental  expense for operating  leases was $466,804,  $396,982 and
$164,506 for the years ended December 31, 1999, 1998 and 1997, respectively.

9. Stock  Options.  The  Corporation  has a stock  option plan that grants a key
executive  fully  vested  options  to  purchase  1800  shares  per  year  of the
Corporation's  stock at one and  one-half  times  book  value at each  year end.
Compensation  expense  recognized by the  Corporation  in connection  with these
options was $156,200, $93,100 and $82,800 for the years ended December 31, 1999,
1998 and 1997, respectively.

     The  Corporation  also grants  certain  other key  executives  stock option
awards to purchase shares of the Corporation's stock. Shares under this plan are
to be awarded at market price at the date of grant.  In 1999, 1998 and 1997, the
Corporation  granted  additional  stock  options to certain  key  executives  to
purchase  7,747,  6,000  and  5,540  shares  at $150,  $115 and $100 per  share,
respectively.  If a key executive is a ten percent or greater stockholder at the
time of exercise,  the option  price is  increased  by ten percent.  The options
granted  since 1994 are  incentive  stock options and vest at the rate of twenty
percent per year and expire ten years from the date of grant.

                                       30
<PAGE>
Notes to Consolidated Financial Statements, continued

     A summary of the status of the Corporation's Plans as of December 31, 1999,
1998 and 1997,  including  weighted  average  exercise  price (WAEP) and changes
during the years then ended is presented below:
<TABLE>
<CAPTION>
1999                                              Key Executive         Other Key Executives            Total
----                                        ------------------------   ----------------------   --------------------
                                               Options        WAEP       Options       WAEP      Options      WAEP
<S>                                             <C>  <C>      <C>         <C>   <C>  <C>           <C>      <C>
Outstanding at beginning of year                5,400         $55.78      20,723     $  86.15      26,123   $  79.87
Granted                                         1,800          67.05       7,747       150.00       9,547     134.36
Exercised                                          --             --      (2,449)       64.12      (2,449)     64.12
Forfeited                                          --             --        (990)       96.24        (990)     96.24
                                            ---------                  ---------                ---------
Outstanding at end of year                      7,200          58.60      25,031       107.67      32,231      96.70
                                            =========                  =========                =========
Options exercisable at year end                 7,200          58.60       8,464        76.06      15,664      68.03
                                            =========                  =========                =========

Fair value of each option
   granted during the year                           $   86.18                  $ 35.29
                                                     =========                  =======

1998
----
Outstanding at beginning of year                3,600         $53.07      19,298     $  72.19      22,898   $  69.19
Granted                                         1,800          61.21       6,000       115.00       7,800     102.59
Exercised                                          --          --         (2,698)       54.30      (2,698)     54.30
Outstanding at end of year                         --          --         (1,877)       80.63      (1,877)     80.63
                                            ---------                  ---------                ---------
                                                5,400          55.78      20,723        86.15      23,123      79.87
                                            =========                  =========                =========
Options exercisable at year end                 5,400          55.78       7,785        68.19      13,185      63.11
                                            =========                  =========                =========

Fair value of each option
   granted during the year                           $   51.50                  $ 17.42
                                                     =========                  =======


1997
----
Outstanding at beginning of year                1,800         $50.64      13,803     $  60.99      15,603   $  59.80
Granted                                         1,800          55.50       5,540       100.00       7,340      89.09
Exercised                                          --             --         (45)       60.00         (45)     60.00
                                            ---------                  ---------                ---------
Outstanding at end of year                      3,600          53.07      19,298        72.19      22,898      69.19
                                            =========                  =========                =========
Options exercisable at year end                 3,600          53.07       7,434        55.63      11,034      54.79
                                            =========                  =========                =========

Fair value of each option
   granted during the year                           $   46.99                  $ 19.20
                                                     =========                  =======

</TABLE>
     The following table summarizes  information  about the Plans' stock options
at December 31, 1999:
<TABLE>
<CAPTION>
                                            Options Outstanding                         Options Exercisable
                                    --------------------------------------       ---------------------------------
                                       Number            Weighted-Average          Number              Weighted
          Range of                  Outstanding              Remaining           Exercisable           Average
       Exercise Prices              at 12/31/99          Contractual Life        at 12/31/99        Exercise Price

<S>           <C>                        <C>                     <C>                 <C>               <C>
 *$50.64  -   $ 67.05                    7,200                   8.5                 7,200             $  58.60
  $48.33  -   $ 71.67                    7,608                   6.1                 5,709             $  61.59
  $100.00 -   $155.00                   17,423                   9.2                 2,755             $ 106.04
</TABLE>

*Granted in connection with compensation for the key executive.

                                       31
<PAGE>
Notes to Consolidated Financial Statements, continued

     Had compensation cost for the Corporation's  Plans been determined based on
the fair value at the grant dates for awards under the Plans consistent with the
method of SFAS 123, the  Corporation's net income and net income per share would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
                                          1999                         1998                          1997
                               --------------------------   -------------------------    --------------------------
                                    As                           As                            As
                                 Reported      Pro Forma      Reported      Pro Forma       Reported      Pro Forma
<S>                            <C>            <C>           <C>           <C>            <C>             <C>
Net income                     $ 8,825,258    $ 8,743,098   $ 8,206,419   $ 8,151,888    $ 6,830,174     $6,775,830
Net income per share           $      6.50    $      6.44   $      6.05   $      6.01    $      5.04     $     5.00
Net income per share,
   assuming dilution           $      6.44    $      6.38   $      6.02   $      5.98    $      5.03     $     4.99
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the  Black-Scholes  option-pricing  model  with the  following  weighted-average
assumptions  used for  grants  in 1999,  1998 and 1997,  respectively:  dividend
growth rate of 15%, 15% and 12%; expected volatility of 10.07%, 9.8% and 10.38%;
risk-free interest rates of 6.45%, 5% and 5.5%; and expected lives of 7 years, 7
years and 7 years.

10. Profit Sharing and Deferred Compensation. The Corporation has a contributory
profit-sharing plan covering certain employees with one year or more of service.
Participating  employees have the option to contribute from three to ten percent
of their monthly salary to the Plan. In 1999 and 1998, the Corporation  provided
for a 3% and 2% company contribution,  respectively. The Corporation contributed
approximately  $132,000  and  $81,000  in  1999  and  1998,  respectively.   The
Corporation  made no  contribution  to this plan for the year ended December 31,
1997.

     The  Corporation  also has a  contributory  money  purchase  plan  covering
certain  employees with one year or more of service.  While the employees do not
contribute to the plan, the  Corporation  makes  contributions.  The Corporation
provided for a  contribution  in the amount of 12%, 13% and 15% of each eligible
participant's  gross  earnings,  less bonuses and  vacations,  actually  paid or
received  for  1999,  1998 and  1997,  respectively.  The  contributions  by the
Corporation for the money purchase plan were  approximately  $424,000,  $539,000
and $572,000 for 1999, 1998 and 1997, respectively.

     The Bank has established  supplemental  benefit plans for selected officers
and  directors.  These plans are  nonqualified  and  therefore,  in  general,  a
participant's or beneficiary's claim to benefits is as a general creditor.

     Directors  of  the  Corporation  and  the  Bank  also  have  the  right  to
participate in a deferred compensation plan which permits the directors to defer
director  compensation  and earn a  guaranteed  interest  rate on such  deferred
amounts. Compensation costs associated with the plan are charged to operations.

     Included in accrued  interest  and other  liabilities  in the  consolidated
financial statements is $1,094,292 and $1,033,053 at December 31, 1999 and 1998,
respectively,  related to the above  supplemental  benefit plans.  To fund these
plans,  the  Corporation  purchased  single  premium  universal  life  insurance
contracts on the lives of the related directors and officers. The cash surrender
value of such contracts is included in the consolidated  balance sheets.  If all
of the assumptions  regarding mortality,  interest rates, policy dividends,  and
other factors are realized,  the Corporation  will  ultimately  realize its full
investment in such contracts.

                                       32
<PAGE>
Notes to Consolidated Financial Statements, continued

11.  Income  Taxes.  The  components  of income tax  expense for the years ended
December 31, 1999, 1998 and 1997 were:

                                    1999              1998             1997
Current income taxes:
   Federal                     $   4,340,595    $   4,211,321     $   3,831,898
   State                           1,059,089          679,405           731,023
                               -------------    -------------     -------------
                                   5,399,684        4,890,726         4,562,921
Deferred income tax benefit         (149,840)        (200,320)         (573,157)
                               -------------    -------------     -------------
                               $   5,249,844    $   4,690,406     $   3,989,764
                               =============    =============     =============

     A  reconciliation  of expected  federal  tax  expense  based on the federal
statutory  rate of 35 percent to  consolidated  income tax expense for the years
ended December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
                                                                 1999              1998             1997
<S>                                                         <C>              <C>               <C>
Tax at statutory rates                                      $   4,785,535    $   4,513,889     $   3,786,978
Tax increases (decreases) attributable to:
   Tax exempt interest, net of disallowed expense                 (53,687)         (86,644)          (92,800)
   State income tax less federal tax benefit                      688,589          399,101           482,475
   Other                                                         (170,593)        (135,940)         (186,889)
                                                            -------------    -------------     -------------
                                                            $   5,249,844    $   4,690,406     $   3,989,764
                                                            =============    =============     =============
</TABLE>

     The  significant  components of the  Corporation's  deferred tax assets and
liabilities at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
                                                                         1999              1998
Deferred tax assets:
<S>                                                                <C>               <C>
   Allowance for loan losses and other real estate owned           $     3,901,839   $     3,652,946
   Deferred compensation                                                   521,500           376,719
   Unrealized loss on available-for-sale securities                         11,042                --
                                                                   ---------------   ---------------
         Gross deferred tax assets                                       4,434,381         4,029,665
                                                                   ---------------   ---------------
Deferred tax liabilities:
   Depreciation                                                            641,999           604,198
   Unrealized appreciation on available-for-sale securities                     --            57,820
   Core deposit intangible                                                 256,802           292,670
   FHLB stock                                                              306,436           210,085
   Other                                                                   362,264           216,714
                                                                   ---------------   ---------------
         Gross deferred tax liabilities                                  1,567,501         1,381,487
                                                                   ---------------   ---------------
Net deferred tax asset                                             $     2,866,880   $     2,648,178
                                                                   ===============   ===============
</TABLE>

12.  Financial  Instruments  With  Off-Balance-Sheet  Risk. The Bank is party to
financial  instruments  with  off-balance-sheet  risk in the  normal  course  of
business  to meet the  financing  needs of its  customers  and to reduce its own
exposure to fluctuations in interest rates. These financial  instruments include
commitments to extend credit and standby  letters of credit.  These  instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in consolidated balance sheets.

                                       33
<PAGE>

Notes to Consolidated Financial Statements, continued

     The Bank's  exposure to credit loss in the event of  nonperformance  by the
other party to the financial  instrument  for  commitments  to extend credit and
standby letters of credit is represented by the  contractual  notional amount of
those  instruments.  The Bank uses the same  credit  policies  in  making  these
commitments  and  conditional   obligations  as  it  does  for  on-balance-sheet
instruments.

     Commitments  to extend credit are  agreements to lend to a customer as long
as  there  is no  violation  of  any  condition  established  in  the  contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. Since many  commitments  expire without being
drawn upon, the total  commitment  amounts do not necessarily  represent  future
cash  requirements.  The Bank evaluates each  customer's  creditworthiness  on a
case-by-case basis. The amount of collateral obtained if deemed necessary by the
Bank upon extension of credit is based on management's  credit evaluation of the
borrower.  Collateral held varies but may include marketable  securities,  trade
accounts  receivable,  property,  plant, and equipment  and/or  income-producing
commercial properties.

     Standby letters of credit are conditional commitments issued by the Bank to
guarantee  the  performance  of a customer  to a third  party.  The credit  risk
involved in issuing  letters of credit is essentially  the same as that involved
in extending loan facilities to customers.

     Most of the Bank's  business  activities are with customers  located within
the state of  Tennessee  for  residential,  consumer  and  commercial  loans.  A
majority of the loans are secured by  residential  or commercial  real estate or
other personal  property.  The loans are expected to be repaid from cash flow or
proceeds from the sale of selected assets of the borrowers.

     Outstanding  standby  letters of credit as of  December  31,  1999 and 1998
amounted to $4,579,190 and $4,901,888, respectively.  Outstanding commitments to
lend at fixed rates were  $10,222,634 and $17,244,863 and at variable rates were
$9,378,140  and  $6,088,328  at  December  31,  1999  and  1998,   respectively.
Undisbursed   advances  on  customer  lines  of  credit  were   $83,036,254  and
$58,284,854 at December 31, 1999 and 1998,  respectively.  The amount  available
for borrowing  under inventory  collateralized  loans was $3,655,205 at December
31, 1999 and  $4,307,270 at December 31, 1998.  The Bank does not anticipate any
losses as a result of these  transactions  that would be unusual in  relation to
its historical levels of loan losses on its recorded loan portfolio.

13. Capital Requirements and Dividend Restrictions. The Corporation and the Bank
are  subject to various  regulatory  capital  requirements  administered  by the
federal  banking  agencies.  Failure to meet minimum  capital  requirements  can
initiate  certain  mandatory and possibly  additional  discretionary  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
financial  statements of the  Corporation and the Bank.  Under capital  adequacy
guidelines  and the  regulatory  framework  for prompt  corrective  action,  the
Corporation  and the Bank must meet  specific  capital  guidelines  that involve
quantitative measures of the assets, liabilities,  and certain off-balance-sheet
items of the Corporation and the Bank as calculated under regulatory  accounting
practices.   The  capital  amounts  and  classifications  are  also  subject  to
qualitative judgments by the regulators about components,  risk weightings,  and
other factors.

     Quantitative  measures established by regulation to ensure capital adequacy
require the Corporation and the Bank to maintain minimum amounts and ratios (set
forth in the  table  below)  of total  and Tier I  capital  (as  defined  in the
regulations)  to  risk-weighted  assets (as defined),  and of Tier 1 capital (as
defined) to average total consolidated assets (as defined). Management believes,
as of December  31,  1999 and 1998,  that the  Corporation  and the Bank met all
capital adequacy requirements to which they were subject.

                                       34
<PAGE>

Notes to Consolidated Financial Statements, continued

     The  Corporation  and the Bank are well  capitalized  under the  regulatory
framework for prompt  corrective  action. To be categorized as well capitalized,
the  Corporation  and the Bank must maintain  minimum total  risk-based,  Tier 1
risk-based and Tier 1 leverage ratios as set forth in the Table.
<TABLE>
<CAPTION>
                                                                               Regulatory                To Be Well
                                                                              Requirements            Capitalized Under
                                                                               For Capital            Prompt Corrective
                                                      Actual                Adequacy Purposes         Action Provisions
                                            --------------------------   -----------------------   -----------------------
                                                Amount         Ratio         Amount       Ratio       Amount        Ratio
                                                ------         -----         ------       -----       ------        -----
<S>                                         <C>                <C>       <C>               <C>     <C>              <C>
As of December 31, 1999:
   Total Capital (to Risk
     Weighted Assets):
       Consolidated                         $  65,383,000      12.75%    $  41,020,800     >8%     $51,276,000      >10%
                                                                                           -                        -
       Greene County Bank                      66,637,000      12.98%       41,055,360     >8%      51,319,200      >10%
                                                                                           -                        -
   Tier 1 Capital (to Risk
     Weighted Assets):
       Consolidated                            58,925,000      11.49%       20,510,400     >4%      30,765,600       >6%
                                                                                           -                         -
       Greene County Bank                      60,174,000      11.73%       20,527,680     >4%      30,791,520       >6%
                                                                                           -                         -
   Tier 1 Capital (to
     Average Assets):
       Consolidated                            58,925,000       9.47%       24,893,080     >4%      31,116,350       >5%
                                                                                           -                         -
       Greene County Bank                      60,174,000       9.64%       24,944,920     >4%      31,181,150       >5%
                                                                                           -                         -
As of December 31, 1998:
   Total Capital (to Risk
     Weighted Assets):
       Consolidated                         $  58,868,000      13.02%    $  36,182,960     >8%     $45,228,700      >10%
                                                                                           -                        -
       Greene County Bank                      60,368,000      13.35%       36,184,160     >8%      45,230,200      >10%
                                                                                           -                        -
   Tier 1 Capital (to Risk
     Weighted Assets):
       Consolidated                            53,158,000      11.75%       18,091,480     >4%      27,137,220       >6%
                                                                                           -                         -
       Greene County Bank                      54,657,000      12.08%       18,092,080     >4%      27,138,120       >6%
                                                                                           -                         -
   Tier 1 Capital (to
     Average Assets):
       Consolidated                            53,158,000       9.86%       21,570,320     >4%      26,962,900       >5%
                                                                                           -                         -
       Greene County Bank                      54,657,000      10.16%       21,524,840     >4%      26,906,050       >5%
                                                                                           -                         -
</TABLE>

     The Corporation's  principal source of funds is dividends received from the
Bank.  Under  applicable  banking  laws,  the Bank may only pay  dividends  from
retained  earnings and only to the extent that the remaining balance of retained
earnings  is at least  equal to the  capital  stock  amounts  of the Bank.  As a
practical  matter,  dividend  payments by the Bank to the  Corporation  would be
limited by the necessity to maintain  appropriate  amounts for capital  adequacy
purposes under federal banking regulations.

                                       35
<PAGE>

Notes to Consolidated Financial Statements, continued

14. Additional Cash Flow  Information.  Income taxes paid during the years ended
December  31,  1999,  1998 and  1997  amounted  to  $3,509,876,  $4,523,019  and
$4,460,000,  respectively.  Interest expense paid in cash during the years 1999,
1998  and  1997   amounted  to   $19,594,814,   $18,845,800   and   $18,970,895,
respectively.

     Significant  noncash  transactions  for the years ended  December 31, 1999,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
                                                                 1999              1998             1997
<S>                                                         <C>              <C>               <C>
Financed sales of other real estate owned                   $     432,900    $          --     $     147,128
Foreclosed loans transferred to OREO                            3,136,241        1,558,684           784,769
Tax benefits from exercise of nonincentive
   stock options, credited to paid-in capital                      48,254           43,344                --
</TABLE>

15. Parent Company Financial  Information.  Condensed financial  information for
Greene County Bancshares, Inc. (parent company only) is as follows:

                            Condensed Balance Sheets
<TABLE>
<CAPTION>
                                                                             December 31,
                                                                 ---------------------------------
                                                                        1999              1998

Assets

<S>                                                              <C>               <C>
Cash                                                             $       867,822   $       928,198
Investments in subsidiary                                             60,724,859        55,371,639
Cash surrender value of life insurance contracts                         212,585           202,963
Other Assets                                                           2,057,640         2,039,019
                                                                 ---------------   ---------------
                                                                 $    63,862,906   $    58,541,819
                                                                 ===============   ===============
Liabilities

Deferred income taxes                                            $       100,195   $       210,068
Related party notes payable                                            2,471,418         2,511,418
Other liabilities                                                        518,926           434,535
                                                                 ---------------   ---------------
                                                                       3,090,539         3,156,021
                                                                 ---------------   ---------------
Shareholders' equity

Common stock                                                          13,596,470        13,571,980
Paid-in capital                                                        4,479,117         4,298,328
Retained earnings                                                     42,714,797        37,421,151
Net unrealized depreciation on available-for-sale
   securities, net of income tax                                         (18,017)           94,339
                                                                 ----------------  ---------------

Total shareholders' equity                                            60,772,367        55,385,798
                                                                 ---------------   ---------------

         Total liabilities and shareholders' equity              $    63,862,906   $    58,541,819
                                                                 ===============   ===============
</TABLE>

                                       36
<PAGE>

Notes to Consolidated Financial Statements, continued

                        Condensed Statements of Earnings
<TABLE>
<CAPTION>
                                                                         Years ended December 31,
                                                            -------------------------------------------------
                                                                 1999              1998             1997
Revenue:
<S>                                                         <C>              <C>               <C>
   Equity in undistributed earnings of subsidiary           $   5,465,576    $   5,334,099     $   3,902,503
   Dividends from subsidiaries                                  3,769,087        3,355,057         3,347,855
   Other income                                                   198,972          147,130           126,212
                                                            -------------    -------------     -------------

   Total revenue                                                9,433,635        8,836,286         7,376,570

   Related party interest expense                                 197,215          197,557           247,215
   Other expense                                                  707,401          745,050           556,784
                                                            -------------    -------------     -------------

   Income before income taxes                                   8,529,019        7,893,679         6,572,571

   Income tax expense (benefit)                                  (296,239)        (312,740)         (257,603)
                                                            -------------    -------------     -------------

Net income                                                  $   8,825,258    $   8,206,419     $   6,830,174
                                                            =============    =============     =============
</TABLE>
                                       37
<PAGE>
Notes to Consolidated Financial Statements, continued

                                      Condensed Statements of Cash Flow
<TABLE>
<CAPTION>
                                                                 1999              1998             1997
Cash flows from operating activities:
<S>                                                         <C>              <C>               <C>
   Net income                                               $   8,825,258    $   8,206,419     $   6,830,174
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Equity in undistributed earnings of
         subsidiary                                            (5,465,576)      (5,334,099)       (3,902,503)
       Depreciation and amortization                              215,999          215,999           215,999
       Change in other assets                                    (344,493)        (281,713)          (71,344)
       Change in other liabilities                                 84,391          125,640           (30,959)
                                                            -------------    -------------     -------------
          Net cash provided by operating activities             3,315,579        2,932,246         3,041,367
                                                            -------------    -------------     -------------
Cash flows from investing activities:
   Increase in cash surrender value of life
     insurance contracts                                           (9,622)          (9,439)           (9,416)
                                                            -------------    -------------     -------------
          Net cash used by investing activities                    (9,622)          (9,439)           (9,416)
                                                            -------------    -------------     -------------

Cash flows from financing activities:
   Capital contributed to subsidiary                                   --               --          (500,000)
   Proceeds from issuance and sale of
     common stock                                                 205,279          189,848             2,701
   Repayments of related party debt                               (40,000)         (50,000)          (50,000)
   Dividends paid                                              (3,531,612)      (3,117,842)       (2,600,640)
                                                            -------------    -------------     -------------
          Net cash used by financing activities                (3,366,333)      (2,977,994)       (3,147,939)
                                                            -------------    -------------     -------------

Net decrease in cash                                              (60,376)         (55,187)         (115,988)
Cash at beginning of year                                         928,198          983,385         1,099,373
                                                            -------------    -------------     -------------
Cash at end of year                                         $     867,822    $     928,198     $     983,385
                                                            =============    =============     =============
</TABLE>
                                       38
<PAGE>
Notes to Consolidated Financial Statements, continued

16. Commitments and Contingencies. The Corporation is involved in various claims
and legal actions arising in the ordinary course of business.  In the opinion of
management,  the ultimate  disposition of these matters will not have a material
adverse effect on the Corporation's  consolidated financial position, results of
operations, or cash flows.

17. Fair Values of Financial Instruments. The following information is presented
as required by Statement of Financial  Accounting Standards No. 107, Disclosures
About  Fair  Value of  Financial  Instruments.  For  financial  instruments  not
described  below,  generally  short  term  financial  instruments,   book  value
approximates  fair value.  The following  methods and  assumptions  were used to
estimate the fair value of each class of financial instruments:

     Securities  and Interest  Bearing  Deposits.  Fair values of securities and
interest bearing deposits are based on quoted market prices.  If a quoted market
price is not available,  fair value is estimated  using quoted market prices for
similar securities.

     Federal  Funds Sold.  Fair values of federal funds sold are based on quoted
market prices.

     Loans, Net. The fair value for loans is estimated by discounting the future
cash flows  using the  current  rates at which  similar  loans  would be made to
borrowers with similar credit ratings and for the same remaining maturities.

     Deposits.  The fair value of demand  deposits,  savings  accounts and money
market  deposits is the amount payable on demand at the reporting date. The fair
value of  certificates  of deposit is estimated by  discounting  the future cash
flows  using  the  current  rate  offered  for  similar  deposits  with the same
remaining maturities.

     Securities Sold Under  Agreements to Repurchase.  Fair values of securities
sold under agreements to repurchase are based on quoted market prices.

                                       39
<PAGE>
Notes to Consolidated Financial Statements, continued

     The estimated  fair values of the  Corporation's  financial  instruments at
December 31, 1999 and 1998 were as follows (rounded to the nearest thousand):
<TABLE>
<CAPTION>
                                                    1999                               1998
                                                    ----                               ----
                                         Carrying            Fair           Carrying            Fair
                                           Value            Value             Value            Value

Financial assets:
<S>                                   <C>              <C>               <C>              <C>
   Securities                         $    24,047,000  $    24,052,000   $    27,153,000  $    27,153,000
   Federal funds sold                              --               --        24,300,000       24,300,000
   Loans, net                             546,897,000      546,789,000       466,661,000      467,521,000

Financial liabilities:
   Deposits                           $   522,382,000  $   522,979,000   $   459,183,000  $   460,307,000
   Securities sold under agreements
     to repurchase                          2,961,000        2,961,000         2,416,000        2,416,000
   Federal funds purchased                 11,620,000       11,620,000         4,800,000        4,800,000
   Long-term debt                          43,838,000       43,831,000        34,116,000       34,145,000
   Related party notes payable              2,471,000        2,374,000         2,511,000        2,465,000
</TABLE>

     The  Corporation  believes  that the fair  value of  commitments  to extend
credit and standby letters of credit  approximate the stated amounts at December
31, 1999 and 1998.

18. Earnings Per Share of Common Stock. Basic earnings per share of common stock
is computed by dividing  net income  available  for common  shareholders  by the
weighted average number of common shares outstanding. Diluted earnings per share
is computed by dividing  adjusted net income by the weighted  average  number of
common shares and assumed conversions of dilutive securities  outstanding during
each  year.  Stock  options  are  regarded  as  dilutive  securities.   Dilutive
securities are computed using the treasury stock method.

                                       40
<PAGE>
Notes to Consolidated Financial Statements, continued

     The following is a reconciliation  of the numerators and denominators  used
in the basic and diluted  earnings  per share  computations  for the years ended
December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
                                  1999                             1998                             1997
                                  ----                             ----                             ----
                         Income          Shares           Income          Shares           Income          Shares
                      (Numerator)     (Denominator)    (Numerator)     (Denominator)    (Numerator)     (Denominator)
Basic EPS
<S>                  <C>                   <C>        <C>                   <C>        <C>                   <C>
Income available
   to common
   shareholders      $  8,825,258          1,358,313  $  8,206,419          1,355,498  $  6,830,174          1,354,498

Effect of Dilutive
   Securities
Stock options
   outstanding                 --             11,025            --              7,782            --              4,109
                     ------------    ---------------  ------------    ---------------  ------------    ---------------

Diluted EPS
Income available
   to common
   shareholders
   plus assumed
   conversions       $  8,825,258          1,369,338  $  8,206,419          1,363,280  $  6,830,174          1,358,607
                     ============    ===============  ============    ===============  ============    ===============
</TABLE>

19. Segment  Information.  The Bank's principal  business consists of attracting
deposits from the general public and investing those funds,  together with funds
generated from  operations  and from  principal and interest  payments on loans,
primarily in commercial loans,  commercial real estate loans, consumer loans and
single-family  mortgage loans.  The Bank has four wholly owned  subsidiaries:  a
consumer finance business,  a mortgage banking operation,  a subprime automobile
lending operation and a title insurance  business.  These subsidiaries have been
disclosed  below in the  other  column,  as they do not  meet  the  quantitative
threshold on an individual basis.

     The accounting  policies of the segments are the same as those described in
the  summary of  significant  accounting  policies.  Intersegment  revenues  and
expenses are  accounted for as if they were  transactions  with third parties at
current market prices.

     The reportable  segments are strategic  business units that offer different
products  and  services.  They are  managed  separately  because  each  requires
different marketing strategies.

                                       41
<PAGE>

Notes to Consolidated Financial Statements, continued
<TABLE>
<CAPTION>
1999                                             Bank               Other           Eliminations          Total
<S>                                       <C>                 <C>                 <C>                <C>
Interest income                           $     48,119,718    $    10,844,654     $      (3,734,594) $    55,229,778
Interest expense                                19,544,752          3,931,809             3,734,594       19,741,967
                                          ----------------    ---------------     -----------------  ---------------
Net interest income                       $     28,574,966    $     6,912,845     $              --  $    35,487,811
                                          ================    ===============     =================  ===============

Provision for loan losses                 $      1,286,710    $     1,846,669     $             --   $     3,133,379
Noninterest income                               5,271,970          2,541,364            (1,482,052)       6,331,282
Noninterest expense                             18,481,967          6,450,951               322,306       24,610,612
Income tax expense                               4,843,596            406,248                    --        5,249,844
                                          ----------------    ---------------     -----------------  ---------------
Segment net income                        $      9,234,663    $       750,341     $      (1,159,746) $     8,825,258
                                          ================    ===============     =================  ===============
Segment assets                            $    652,752,139    $    44,592,481     $     (41,332,295) $   656,012,325)
                                          ================    ===============     =================  ===============

1998

Interest income                           $     45,035,584    $     8,424,664     $      (2,667,792) $    50,792,456
Interest expense                                18,374,592          2,865,348             2,667,792       18,572,248
                                          ----------------    ---------------     -----------------  ---------------
Net interest income                       $     26,660,992    $     5,559,316     $              --  $    32,220,208
                                          ================    ===============     =================  ===============

Provision for loan losses                 $      1,468,533    $     1,948,477     $              --  $     3,417,010
Noninterest income                               3,871,232          1,571,161              (886,904)       4,555,489
Noninterest expense                             15,757,712          4,978,006               273,756       20,461,962
Income tax expense                               4,616,824             73,582                    --        4,690,406
                                          ----------------    ---------------     -----------------  ---------------
Segment net income                        $      8,689,155    $       130,412     $        (613,148) $     8,206,319
                                          ================    ===============     =================  ===============
Segment assets                            $    566,318,271    $    45,193,888     $     (43,332,634) $   568,179,525
                                          ================    ===============     =================  ===============

1997

Interest income                           $     45,095,525    $     5,477,748     $      (1,568,475) $    49,004,798
Interest expense                                18,962,133          1,750,274             1,568,475       19,143,932
                                          ----------------    ---------------     -----------------  ---------------
Net interest income                       $     26,133,392    $     3,727,474     $              --  $    29,860,866
                                          ================    ===============     =================  ===============

Provision for loan losses                 $      2,816,227    $     3,136,978     $             --   $     5,953,205
Noninterest income                               2,439,416            966,171              515,529         3,921,116
Noninterest expense                             13,795,797          3,471,074              258,032        17,008,839
Income tax expense                               4,712,409            722,645                   --         3,989,764
                                          ----------------    ---------------     ----------------   ---------------
Segment net income                        $      7,248,375    $    (1,191,762)    $        773,561   $     6,830,174
                                          ================    ================    ================   ===============
Segment assets                            $    532,646,914    $    26,601,930     $    (25,147,143)  $   534,101,701
                                          ================    ===============     ================   ===============

</TABLE>
                                       42
<PAGE>
                         MARKET AND DIVIDEND INFORMATION

     There are 1,363,043  shares of Common Stock  outstanding and  approximately
1,760 shareholders of record of the Common Stock as of March 22, 2000.

     There is no established public trading market in which shares of the Common
Stock are regularly traded, nor are there any uniformly quoted prices for shares
of the Common Stock. The following table sets forth certain information known to
management  as to the prices at the end of each quarter for the Common Stock and
cash  dividends  declared per share of Common  Stock for the  calendar  quarters
indicated.

                                        Sales Price at      Dividends Declared
                                          Quarter-End          Per Share(1)
                                          -----------          ------------

     1998:
       First quarter                        $110.00                $0.50
       Second quarter                        110.00                 0.50
       Third quarter                         115.00                 0.50
       Fourth quarter                        115.00                 0.80
                                                                    ----
                                                                   $2.30
                                                                    ====
     1999:
       First quarter                        $125.00                $0.56
       Second quarter                        135.00                 0.56
       Third quarter                         145.00                 0.56
       Fourth quarter                        150.00                 0.92
                                                                    ----
                                                                   $2.60
                                                                    ====
-------------------------
(1)  For information  regarding  restrictions on the payment of dividends by the
     Bank to the Company, see "Management's Discussion and Analysis of Financial
     Condition  and Results of Operation - Liquidity  and Capital  Resources" in
     this Annual  Report.  See also Note 13 of Notes to  Consolidated  Financial
     Statements.

                                       43