<PAGE>
 
                                   FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


For Quarter ended March 31, 1997             Commission File Number
                                                     0-14289



                        GREENE COUNTY BANCSHARES, INC.
                        ------------------------------
            (Exact name of Registrant as specified in its charter)



                 Tennessee                            62-1222567               
        ------------------------------     --------------------------------
        State or other jurisdiction of       (IRS Employer Identification
        incorporated or organization)                   Number)


            Main & Depot Street
          Greeneville, Tennessee                         37743
        ------------------------------     --------------------------------   
          (Address of principal                        (Zip Code)
           executive offices)

Registrant's telephone number, including area code 423-639-5111
                                                   ------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes  X    No
                                   -----    -----


Indicate the number or shares outstanding of each of the Issuers classes of
common stock as of the latest practicable date: 451,500.

                                       1
<PAGE>
 
                         PART 1 - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

The unaudited condensed consolidated financial statements of the Registrant and
its wholly-owned subsidiaries are as follows:

     Condensed Consolidated Balance Sheets - March 31, 1997 and 
     December 31, 1996.

     Condensed Consolidated Statements of Earnings - For the three 
     months ended March 31, 1997 and 1996.

     Condensed Consolidated Statement of Stockholders' Equity- For 
     the three months ended March 31, 1997.

     Condensed Consolidated Statements of Cash Flows - For the 
     three months ended March 31, 1997 and 1996.

     Notes to Condensed Consolidated Financial Statements.

                                       2
<PAGE>
 
                GREENE COUNTY BANCSHARES,INC. AND SUBSIDIARIES
                     Condensed Consolidated Balance Sheets
                     March 31, 1997 and December 31, 1996

<TABLE> 
<CAPTION> 
                                                     (UNAUDITED)
                                               March 31,    December 31,
                                                 1997          1996*
                                               ---------    ------------
                                                    (In Thousands)
<S>                                            <C>          <C> 
                    ASSETS                                            
                    ------ 
Cash and Due from Banks                         $ 17,916      $ 21,332
Federal Funds sold                                 7,600          -

Securities available-for-sale                     40,746        42,925
Securities held-to-maturity (with a 
 market value of $9,043 on March 31, 1997 
 and $9,418 on December 31, 1996).                 9,148         9,456

Loans                                            405,397       388,603
  Less: Allowance for Loan Losses                  7,616         7,331
                                                --------      --------
  Net Loans                                      397,781       381,272
                                                --------      --------
Bank Premises and Equipment, Net of 
 Accumulated Depreciation                          9,661         9,839
Other Assets                                      13,269        13,224
                                                --------      --------
    Total Assets                               $496,121      $478,048
                                                ========      ========

     LIABILITIES AND SHAREHOLDERS' EQUITY
     ------------------------------------

Deposits                                        $422,640      $408,722
Securities Sold under Repurchase Agreements
 and Short-Term Borrowed Funds                     5,398         3,272
Other Borrowings                                  13,129        15,805
Other Liabilities                                  7,181         4,524
                                                --------      --------
    Total Liabilities                            448,348       432,323
                                                --------      --------


             SHAREHOLDERS' EQUITY
             --------------------
Common Stock, par value $10, authorized 
 1,000,000 shares; issued and outstanding 
 451,500 and 451,485 shares at March 31, 
 1997 and December 31, 1996, respectively          4,514         4,514
Paid in Capital                                    4,136         4,133
Retained Earnings                                 39,057        37,133
Net unrealized holding gains/(losses) on
 available-for-sale securities                        66           (55)
                                                --------      --------
    Total Shareholders' Equity                    47,773        45,725
                                                --------      --------
                                                $496,121      $478,048
                                                ========      ========
</TABLE> 

* Condensed from Audited Financial Statements.
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)

                                       3
<PAGE>
 
                GREENE COUNTY BANCSHARES,INC. AND SUBSIDIARIES
                 Condensed Consolidated Statements of Earnings
                  Three Months Ended March 31, 1997 and 1996
                                  (UNAUDITED)

<TABLE> 
<CAPTION> 
                                                         Three Months Ended
                                                              March 31
                                                        1997          1996
                                                      --------      -------- 
                                                 (in thousands except per share data)
                                                 ------------------------------------
<S>                                                   <C>           <C> 
Interest Income:                     
  Interest and Fees on Loans                          $ 10,332      $ 7,922
  Interest on Investment Securities                        761        1,078
  Interest on Federal Funds Sold                            35          296
                                                      --------      -------
             Total Interest Income                      11,128        9,296
                                     
Interest Expense:                    
  Interest on Deposits                                   4,058        3,865
  Interest on Borrowings                                   260          112
                                                      --------      -------
            Total Interest Expense                       4,318        3,977
                                                      --------      -------
               Net Interest Income                       6,810        5,319
                                     
Provision for Loan Losses                                  421          165
                                                      --------      -------
  Net Interest Income after          
     Provision for Loan Losses                           6,389        5,154
                                                      --------      -------
Noninterest Income:                  
  Income from Fiduciary Activities                          11           18
  Service Fees on Deposit Accounts                         671          528
  Other Income                                             427          415
                                                      --------      -------
                                                         1,109          961
Noninterest Expense:                 
  Salaries and Benefits                                  2,055        1,781
  Occupancy and Furniture and Equipment Expense            603          543
  Other Expenses                                           837          760
                                                      --------      -------
                                                         3,495        3,084
                                                      --------      -------
Earnings Before Income Taxes                             4,003        3,031
                                          
Income Taxes                                             1,515        1,065
                                                      --------      -------
Net income                                            $  2,488      $ 1,966
                                                      ========      =======
                                          
                                          
Average Number of Shares                               452,518      444,626
Per Share of Common Stock:                
  Net Earnings                                        $   5.50      $  4.42
                                                      ========      =======
  Dividends                                           $   1.25      $  1.12
                                                      ========      =======
</TABLE> 

See accompanying notes to Condensed Consolidated Financial 
Statements (Unaudited)

                                       4
<PAGE>
 
                        GREENE COUNTY BANCSHARES, INC.
           Condensed Consolidated Statement of Shareholders' Equity
                   For the Three Months Ended March 31, 1997

                                (In Thousands)

<TABLE> 
<CAPTION> 
                                                              Net
                                                           Unrealized
                                                          Appreciation
                                                          on Available
                            Common   Paid in   Retained    for Sale
                            Stock    Capital   Earnings   Securities     Total
                            ------   -------   --------   ------------  -------
<S>                         <C>      <C>       <C>        <C>           <C> 
January 1, 1997             $4,514    $4,133    $37,133          ($55)  $45,725
                                                         
Net income                     -         -        2,488            -      2,488
                                                         
Change in unrealized                                     
appreciation, net of tax       -         -          -             121       121
                                                         
Dividends paid                 -         -         (564)           -       (564)
                                                         
Exercise of incentive                                    
stock options                  -           3        -              -          3
                            ------   -------   --------      --------   -------
                                                         
March 31, 1997              $4,514    $4,136    $39,057          $ 66   $47,773
                            ======   =======   ========      ========   =======

</TABLE> 

See Accompanying Notes to Condensed Consolidated Financial Statements(Unaudited)

                                       5
<PAGE>
 
                GREENE COUNTY BANCSHARES, INC. AND SUBSIDIARIES
                     Consolidated Statement of Cash Flows
                For the Quarters Ended March 31, 1997 and 1996
                                (In Thousands)
<TABLE> 
<CAPTION> 

                                                              March 31,         March 31,
                                                                1997              1996
                                                              ---------         --------- 
<S>                                                           <C>               <C> 
Net Cash Provided By Operating Activities:           
    Net Income                                                $   2,488         $   1,966 
    Adjustments to reconcile net income to                                                
    net cash provided by operating activities:                                            
      Provision for loan losses                                     421               165 
      Provision for depreciation and amortization                   222               238 
      Amortization of investment security premiums,                                       
        net of accretion                                            112               117 
      (Increase) decrease in interest receivable                    (88)              136 
      Increase in unearned income                                   470                73 
      Increase in other assets, net of intangibles                 (232)             (787)
      Increase in accrued interest payable                                                
        and other                                                 2,721             2,048  
                                                              ---------         --------- 
      Net cash provided by operating activities                   6,114             3,956
                                                              ---------         --------- 
Cash Flows From Investing Activities:                      
      Net (increase) decrease in investment                
        securities and federal funds                             (5,113)           14,623 
      Net increase in loans                                     (17,137)          (18,835)
      Improvements in other real                                                          
        estate owned and other, net                                (121)              (54)
      Recoveries of loan losses                                     127               214 
      Fixed asset additions                                         (93)             (190) 
                                                              ---------         --------- 
      Net cash used by investing activities                     (22,337)           (4,242)
                                                              ---------         --------- 
Cash Flows From Financing Activities:                  
      Net increase in demand deposits, NOW,                
        money market and savings accounts                        13,918             1,661  
      Cash dividends paid                                          (564)             (505) 
      Exercise of stock options                                       3               431  
      Increase (decrease) in securities sold under                                         
        agreements to repurchase                                  2,126              (768) 
      Decrease in other borrowings, net                          (2,676)             (821) 
      Cash acquired in acquisition of subsidiary bank              -                1,730   
                                                              ---------         --------- 
      Net cash provided by financing activities                  12,807             1,728
                                                              ---------         --------- 
Net Increase (Decrease) in Cash                                  (3,416)            1,442
                                                              ---------         --------- 
Cash at beginning of quarter                                     21,332            13,723
                                                              ---------         --------- 
Cash at end of quarter                                          $17,916           $15,165
                                                              =========         =========
</TABLE> 
 
See Accompanying Notes to Condensed Consolidated Financial Statements(Unaudited)


                                       6
<PAGE>
 
                        GREENE COUNTY BANCSHARES, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             ----------------------------------------------------


1-PRINCIPLES OF CONSOLIDATION
-----------------------------

The accompanying unaudited consolidated financial statements of Greene County
Bancshares, Inc. (the "Company") and its wholly owned subsidiaries, Greene
County Bank ("GCB") and Premier Bank of East Tennessee("PBET"), have been
prepared in accordance with generally accepted accounting principles for interim
information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X as promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments(consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. All
interim amounts are subject to year-end audit and the results of operations for
the interim period herein are not necessarily indicative of the results that may
be expected for the year ending December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.

2-ALLOWANCE FOR LOAN LOSSES
---------------------------

Transactions in the Allowance for Loan Losses for the three months ended March
31, 1997 were as follows:
<TABLE>
<CAPTION>
 
                               (In Thousands)
                            -------------------
<S>                         <C>      
 
Balance, January 1, 1997          $7,331   

Add(Deduct):
 Charge-offs                        (263)
 Recoveries                          127
 Provision                           421
                                  ------
 
Balance, March 31, 1997           $7,616
                                  ======
</TABLE>

                                       7
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         ---------------------------------------
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS
         ---------------------------------------------

GENERAL

     Greene County Bancshares, Inc. (the "Company") is the bank holding company
for Greene County Bank("GCB") and Premier Bank of East Tennessee("PBET"), and
collectively referred to as the "Banks", which are Tennessee-chartered
commercial banks that conduct the principal business of the Company.  The
Company also wholly owned American Fidelity Bank, whose assets were combined
with Greene County Bank during 1996.  In addition, Greene County Bank wholly
owns a finance company, a mortgage company and, beginning in 1997, an acceptance
corporation.

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
Banks.  Applicable Tennessee statutes and regulations impose restrictions on the
amount of dividends that may be declared by the subsidiary Banks.  Further, any
dividend payments are subject to the continuing ability of each of the Banks to
maintain their respective compliance with minimum federal regulatory capital
requirements and to retain their characterization under federal regulations as
"well-capitalized" institutions. In addition, the Company maintains a line of
credit of $20 million with the Federal Home Loan Bank of Cincinnati and a $5
million line of credit with a correspondent bank.

     The Company's liquid assets include investment securities, federal funds
sold, and cash and due from banks.  These assets represented 17.1% of the total
liquidity base at March 31, 1997, as compared to 17.2% at December 31, 1996. The
liquidity base is generally defined to include deposits, securities sold under
repurchase agreements and short-term borrowed funds and other borrowings.

     For the three months ended March 31, 1997, operating activities of the
Company provided $6,114,000 of cash flows.  Net income of $2,488,000, adjusted
for non-cash operating activities, including $421,000 in provision for loan
losses and amortization and depreciation of $334,000, provided the majority of
the cash generated from operations.

     Investing activities, including lending, used $22,337,000 of the Company's
cash flow during the three months ended March 31, 

                                       8
<PAGE>
 
1997. Loans originated net of principal collected used $17,137,000 in funds. The
Company's increase in investment securities and federal funds sold used
$5,113,000 in cash flows.

     Net additional cash inflows of $12,807,000 were provided by financing
activities during the three months ended March 31, 1997. Net deposit growth
accounted for $13,918,000 of the increase. Other increases arose from an
increase in securities sold under agreements to repurchase in the amount of
$2,126,000. Offsetting these increases were a net decrease in other borrowings
of $2,676,000 and cash dividends paid to shareholders of $564,000.

     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 continues to exhibit a strong capital
position while consistently paying dividends to its stockholders. Further, 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 March 31, 1997 was $47,773,000, an increase of
$2,048,000 or 4.48%, from $45,725,000 on December 31, 1996.  The increase in
shareholders' equity reflects net income for the three months ended March 31,
1997 of $2,488,000 ($5.50 per share), the increase in equity associated with the
increase in the value of securities available for sale of $121,000 and proceeds
from the exercise of stock options during the three months ended March 31, 1997
totaling $3,000.  This increase was offset by quarterly dividend payments during
the three months ended March 31, 1997 totaling $564,000 ($1.25 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
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 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 (consisting of stockholders' equity, less goodwill). At
March 31, 1997, the Company and the Banks each satisfied their respective
minimum regulatory capital requirements, and each of the Banks was "well-
capitalized" within the meaning of federal regulatory requirements.

                                       9
<PAGE>
 
<TABLE>
<CAPTION>
 
 
 
                 Capital Ratios at March 31, 1997
----------------------------------------------------------------
                              Required
                              Minimum   Company    GCB     PBET
                               Ratio
----------------------------------------------------------------
<S>                          <C>        <C>       <C>     <C>
 
Tier 1 risk-based capital        4.00%    11.53%  11.85%  10.04%
---------------------------------------------------------------- 
Total risk-based capital         8.00%    12.79%  13.11%  11.30%
----------------------------------------------------------------
Leverage Ratio                   4.00%     9.32%   9.51%   8.41%
================================================================
 
</TABLE>

CHANGES IN RESULTS OF OPERATIONS

          NET INCOME. Net income for the three months ended March 31, 1997 was
$2,488,000, an increase of $522,000 or 26.6% as compared to net income of
$1,966,000 for the same period in 1996.  The increase resulted primarily from an
increase in net interest income of $1,491,000, or 28.0%, to $6,810,000 for the
three months ended March 31, 1997 from $5,319,000 for the same period in 1996,
and an increase in non-interest income of $148,000, or 15.4%, to $1,109,000 for
the three months ended March 31, 1997 from $961,000 for the same period in 1996.
The increase in net interest income reflects the Company's continued growth in
loan production through its expanding branch network, primarily through
increases in real estate and consumer loans. These increases were offset in part
by the $411,000 or 13.3% increase in non-interest expense to $3,495,000 for the
three months ended March 31, 1997 from $3,084,000 for the same period in 1996,
attributable primarily to increasing compensation and fixed asset expenses
associated with the growth of the Company's branch network.

          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 the three months ended March 31,
1997, net interest income was $6,810,000 as compared to $5,319,000 for the same
period in 1996, an increase of 28.0%. This increase was due primarily to an
increase in volume and yield of interest-earning assets, offset by primarily
increased balances of interest-bearing liabilities.

          PROVISION FOR LOAN LOSSES. During the three month period ended March
31, 1997, loan charge-offs were $263,000 and recoveries of charged-off loans
were $127,000. The Company's provision for loan losses increased to $421,000 for
the three months ended March 31, 

                                       10
<PAGE>
 
1997, from $165,000 for the same period in 1996. Further, the Company's
allowance for loan losses increased to $7,616,000 at March 31, 1997 from
$7,331,000 at December 31, 1996. Management attributes the increase in both the
provision for loan losses and the allowance for loan losses to several factors,
including a)the increasing consumer loan portfolio in Greene County Bank's
consumer finance company, as consumer loans are generally considered to carry a
higher risk of loss than commercial and housing loans, b)an anticipated downturn
in the business cycle and attendant increases in net charge-offs, c)the
Company's more aggressive identification of potential problem loans and the
inclusion of the risk associated with such loans in the determination of the
Company's allowance for loan losses, and d)the perceived risk associated with
commercial loans originated by the Company which tend to have higher individual
balances and which management believes are more susceptible to delinquency than
mortgage installment and installment real estate loans. The ratio of the
allowance for loan losses to nonperforming assets was 433.47% and 315.27% at
March 31, 1997 and December 31, 1996, respectively, and the ratio of
nonperforming assets to total assets was .35% and .49% at March 31, 1997 and
December 31, 1996, respectively.

          NON-INTEREST INCOME.   Income that is not related to interest-earning
assets, consisting primarily of service charges, commissions and fees, has
become an important supplement to the traditional method of earning income
through interest rate spreads.

          Total non-interest income for the three months ended March 31, 1997
was $1,109,000 as compared to $961,000 for the same period in 1996, an increase
of 15.4%. The largest component of non-interest income is service fees on
deposit accounts, which totaled $671,000 for the three months ended March 31,
1997 as compared to $528,000 for the same period in 1996. This increase reflects
management's focus on the generation of fee income through implementation of
additional fees and increasing existing fees.

          Other income of $427,000 includes a $191,000 gain on the sale of GCB's
Sullivan County Walmart branch in connection with the Company's continuous
review of branch operations and market strategy.

          NON-INTEREST EXPENSE.   Control of non-interest expense also is an
important aspect in managing net income.  Non-interest expense includes
personnel, occupancy, and other expenses such as data processing, printing and
supplies, legal and professional fees, postage, Federal Deposit Insurance
Corporation assessment, etc.  Total non-interest expense was $3,495,000 for the
three months ended March 31, 1997 compared to $3,084,000 for the same period in
1996. Despite the increase in non-interest expense, the Company experienced an
improvement in its efficiency ratio which declined from 49.11% at March 31, 1996
to 44.13% at March 31, 1997. The efficiency ratio illustrates how much it costs
the Company to 

                                       11
<PAGE>
 
generate revenue; for example, it cost the Company 44.13 cents to generate one
dollar of revenue for the three months ended March 31, 1997.

          Personnel costs are the primary element of the Company's non-interest
expenses.  For the three months ended March 31, 1997, salaries and benefits
represented $2,055,000 or 58.8% of total noninterest expenses.  This was an
increase of $274,000 or 15.4% over the $1,781,000 for the three months ended
March 31, 1996. At March 31, 1996, salaries and benefits represented 57.7% of
total noninterest expenses. These increases were due to opening new branches
requiring increased staff at varying experience and compensation levels and
increased employee benefit costs. Overall, the number of full-time equivalent
employees at March 31, 1997 was 248 versus 226 at March 31, 1996, an increase of
9.7%.

          Occupancy and furniture and equipment expense also increased during
the three months ended March 31, 1997 compared to the same period in 1996 as the
Company increased its size to 27 branches at March 31, 1997 from 21 branches at
March 31, 1996.

          Other expenses increased by $77,000, or 10.1%, from the three months
ended March 31, 1996 to the same period in 1997. This increase is reflective of
the Company's new branches which required additional advertising, postage,
telephone and other expenses.

CHANGES IN FINANCIAL CONDITION

          Total assets at March 31, 1997 were $496.1 million, an increase of
$18.1 million, or 3.8%, over 1996's year end total assets of $478.0 million.
Asset growth was funded primarily by increases in deposits.

          At March 31, 1997, loans, net of unearned income and allowance for
loan losses, were $397.8 million compared to $381.3 million at December 31, 1996
and $326.8 million at March 31, 1996. Net loans increased $71.0 million, or
21.7% and $16.5 million, or 4.3%, from March 31, 1996 and December 31, 1996,
respectively. The increases are primarily due to increases in commercial and
installment lending, as well as additional real estate and consumer loans in the
quarter ended March 31, 1997.

          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. The Company has aggressive collection practices in which senior
management is much involved. Nonaccrual loans decreased by $19,000 during the
three month period ended March 31, 1997.

          The Company maintains an investment portfolio to provide 

                                       12
<PAGE>
 
liquidity and earnings. Investments at March 31, 1997 had both an amortized cost
and market value of $49.8 million. At year end 1996, investments with an
amortized cost of $52.5 million had a market value of $52.3 million. This
decrease, resulting from normal maturing of securities, was used to fund
increases in the loan portfolio.

          The funds to support the Company's asset growth have been provided
mainly by increased deposits, which were $422.6 million at March 31, 1997.  This
represents 3.4% increase from the deposits at year end 1996 of $408.7 million.
The increase is primarily the result of the Company's aggressive efforts to
attract new deposit customers, including the offering and advertising of highly
competitive CD rates in selected regions of the Company's market area.

EFFECT OF NEW ACCOUNTING STANDARDS

          In February 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards ("SFAS") No. 128, Earnings Per Share," which
(I) replaces the presentation of primary earnings per share ("EPS") with a
presentation of basic EPS; (ii) requires dual representation of basic and
diluted EPS on the face of the consolidated statements of income regardless of
whether basic and diluted EPS are the same; and (iii) requires a reconciliation
of the numerator and denominator used in computing basic and diluted EPS.  Basic
EPS excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period.  Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.  Diluted EPS is computed similarly to fully
diluted EPS pursuant to Accounting Principles Board Opinion No. 15.  SFAS No.
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods.  Earlier application is not
permitted. SFAS No. 128 requires restatement of all prior-period EPS data
presented. The Company does not anticipate that adoption of SFAS No. 128 will
have any material effect on the Company's financial condition or the results of
its operations.

                                       13
<PAGE>
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------------------------------------------------------------------

Not applicable.

                                       14
<PAGE>
 
                          PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          The Company and its subsidiaries are involved in various
          claims and legal actions arising in the ordinary course
          of business. Management currently is not aware of any
          material legal proceedings to which the Company or any of
          its subsidiaries is a party or to which any of their 
          property is subject.


Item 2.   Changes in Securities

          None.


Item 3.   Defaults upon Senior Securities

          None.


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

          None


Item 5.   Other Information

          None.


Item 6.   Exhibits and Reports on Form 8-K

          (a)Exhibits

             Exhibit 27 Financial Data Schedule(for SEC use only)

          (b)Reports on Form 8-K

             None
 

                                       15
<PAGE>
 
                                  SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date: 5/8/97                              Greene County Bancshares, Inc.
     -------------                        ------------------------------
                                                    Registrant



Date: 5/8/97                               /s/                            
     -------------                        -------------------------------
                                          R. Stan Puckett                
                                          President and CEO              
                                          (Duly authorized officer)       
 

Date: 5/8/97                               /s/                           
     -------------                        -------------------------------
                                          William F. Richmond            
                                          Sr. Vice President and Chief   
                                          Financial Officer              
                                          (Principal financial and       
                                          accounting officer)             

                                       16