FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

For Quarter ended June 30, 1999                           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: 1,358,588.

                                       1
<PAGE>
                         PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

     Condensed  Consolidated  Balance  Sheets - June 30, 1999 and  December  31,
     1998.

     Condensed  Consolidated  Statements  of  Earnings  - For the  three and six
     months ended June 30, 1999 and 1998.

     Consolidated  Statements  of  Comprehensive  Income - For the three and six
     months ended June 30, 1999 and 1998.

     Condensed  Consolidated  Statement  of  Stockholders  Equity  - For the six
     months ended June 30, 1999.

     Condensed Consolidated  Statements of Cash Flows - For the six months ended
     June 30, 1999 and 1998.

     Notes to Condensed Consolidated Financial Statements.

                                       2

<PAGE>
                         GREENE COUNTY BANCSHARES, INC.
                      Condensed Consolidated Balance Sheets
                       June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
                                                                       (Unaudited)
                                                                         June 30,       December 31,
                                                                           1999             1998*
                                                                           ----             -----
                                                                                (In Thousands)
                                                                        ----------------------------
                                     ASSETS
<S>                                                                 <C>                <C>
Cash and Due from Banks                                             $      20,262      $      19,592
Federal Funds Sold                                                         29,465             24,300
Securities available-for-sale                                              25,528             26,727
Securities held-to-maturity (with a market value of $3,430
  on June 30, 1999 and $3,620 on December 31, 1998).                        3,430              3,620

Loans                                                                     498,647            476,914
  Less: Allowance for Loan Losses                                          10,417             10,253
                                                                     ------------         ----------
  Net Loans                                                               488,230            466,661
                                                                     ------------         ----------
Bank Premises and Equipment, Net of
    Accumulated Depreciation                                               12,252             11,715

Other Assets                                                               17,839             15,565
                                                                     ------------      -------------
     Total Assets                                                    $    597,006      $     568,180
                                                                     ============      =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                             $    506,066      $     459,184
Federal Funds Purchased                                                         0              4,800
Securities Sold under Repurchase Agreements                                 5,308              2,416
Other Borrowings                                                           16,462             36,627
Other Liabilities                                                          10,302              9,767
                                                                     ------------      -------------
    Total Liabilities                                                     538,138            512,794
                                                                     ============      =============

                              SHAREHOLDERS' EQUITY

Common Stock,  par value  $10,  authorized  5,000,000  shares;
    issued  and outstanding 1,358,588 and 1,357,198 shares at
    June 30, 1999 and December 31, 1998, respectively                      13,586             13,572
Paid in Capital                                                             4,396              4,298
Retained Earnings                                                          40,843             37,421
Accumulated Other Comprehensive Income                                         43                 95
                                                                     ------------       ------------
    Total Shareholders' Equity                                             58,868             55,386
                                                                     ------------       ------------
    Total Liabilities & Stockholders' Equity                         $    597,006       $    568,180
                                                                     ============       ============
</TABLE>

* Condensed from Audited Financial Statements.

See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)

                                       3
<PAGE>
                         GREENE COUNTY BANCSHARES, INC.
                   Condensed Consolidated Statements of Income
                Three and Six Months Ended June 30, 1999 and 1998
                                   (UNAUDITED)
                (Dollars in thousands except for per share data)
<TABLE>
<CAPTION>
                                                                   Three Months Ended              Six Months Ended
                                                                        June 30,                         June 30,
                                                             ---------------------------      -------------------------------
                                                                1999                1998             1999             1998
                                                                ----                ----             ----             ----
    Interest Income:
<S>                                                       <C>                <C>                <C>              <C>
      Interest and Fees on Loans                          $     12,799       $      11,733      $    25,819      $    23,710
      Interest on Investment Securities                            349                 557              758            1,178
      Interest on Federal Funds Sold and Other
        Interest-earning Deposits                                  462                 277              661              410
                                                          ------------        ------------      -----------      -----------
                         Total Interest Income                  13,610              12,567           27,238           25,298
                                                          ------------        ------------      -----------      -----------
    Interest Expense:
      Interest on Deposits                                       4,788               4,560            9,293            9,223
      Interest on Borrowings                                       220                 103              389              280
                                                          ------------        ------------      -----------      -----------
                         Total Interest Expense                  5,008               4,663            9,682            9,503
                                                          ------------        ------------      -----------      -----------
                         Net Interest Income                     8,602               7,904           17,556           15,795

    Provision for Loan Losses                                      756                 637            1,550              974
                                                          ------------        ------------      -----------      -----------
         Net Interest Income after
           Provision for Loan Losses                             7,846               7,267           16,006           14,821
                                                          ------------        ------------      -----------      -----------
    Noninterest Income:
      Service Charges, Commissions and Fees                      1,143                 959            2,515            1,605
      Other Income                                                 180                  86              509              343
                                                          ------------        ------------      -----------      -----------
                         Total Noninterest Income                1,323               1,045            3,024            1,948
                                                          ------------        ------------      -----------      -----------
    Noninterest Expense:
      Salaries and Benefits                                      3,357               2,594            6,502            5,238
      Occupancy and Furniture and Equipment Expense                975                 680            1,708            1,299
      Other Expenses                                             1,498               1,310            3,220            2,471
                                                          ------------        ------------      -----------      -----------
                         Total Noninterest Expenses              5,830               4,584           11,430            9,008
                                                          ------------        ------------      -----------      -----------
         Income Before Income Taxes                              3,339               3,728            7,600            7,761

    Income Taxes                                                 1,051               1,452            2,657            2,975
                                                          ------------        ------------      -----------      -----------
         Net Income                                       $      2,288        $      2,276      $     4,943      $     4,786
                                                          ------------        ------------      -----------      -----------
    Average Number of Shares, Assuming Dilution              1,368,339           1,363,101        1,368,309        1,362,566
                                                          ============        ============      ===========      ===========

    Per Share of Common Stock:
      Net Income, Basic                                          $1.68               $1.68            $3.64            $3.53
                                                          ============        ============      ===========      ===========
      Net Income, Assuming Dilution                              $1.67               $1.67            $3.61            $3.51
                                                          ============        ============      ===========      ===========
      Dividends                                                  $0.56               $0.50            $1.12            $1.00
                                                          ============        ============      ===========      ===========
</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)

                                       4
<PAGE>
                         GREENE COUNTY BANCSHARES, INC.
                 Consolidated Statements of Comprehensive Income
                Three and Six Months Ended June 30, 1999 and 1998
                                   (UNAUDITED)
                  (Dollars in thousands except per share data)
<TABLE>
<CAPTION>

                                                          Three Months Ended                     Six Months Ended
                                                               June 30,                              June 30,
                                                       -----------------------------     -------------------------------
                                                              1999            1998              1999              1998
                                                              ----            ----              ----              ----

<S>                                                    <C>               <C>              <C>                <C>
     Net Income                                        $     2,288       $     2,276      $      4,943       $     4,786

     Other Comprehensive Income (Loss), net of tax:
       Unrealized Gains (Losses) on Securities                 (43)               (4)              (52)              (17)
                                                        ----------       -----------      ------------       -----------
     Other Comprehensive Income (Loss)                         (43)               (4)              (52)              (17)
                                                        ----------       -----------      ------------        ----------
     Comprehensive Income                              $     2,245       $     2,272      $      4,891       $     4,769
                                                       ===========       ===========      ============       ===========
     Average Number of Shares, Assuming Dilution         1,368,339         1,363,101         1,368,309         1,362,566
                                                       ===========       ===========      ============       ===========
     Per Share of Common Stock:
       Comprehensive Income                                  $1.65             $1.68             $3.60             $3.52
                                                       ===========       ===========      ============       ===========
       Comprehensive Income, Assuming Dilution               $1.64             $1.67             $3.57             $3.50
                                                       ===========       ===========      ============       ===========
       Dividends                                             $0.56             $0.50             $1.12             $1.00
                                                       ===========       ===========      ============       ===========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)

                                       5

<PAGE>
                         GREENE COUNTY BANCSHARES, INC.
            Condensed Consolidated Statement of Shareholders' Equity
                     For the Six Months Ended June 30, 1999
                                   (UNAUDITED)
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                                 Accumulated
                                                                                                    Other
                                                            Common       Paid in    Retained    Comprehensive
                                                            Stock        Capital    Earnings       Income           Total
                                                            -----        -------    --------       ------           -----
<S>                                                       <C>          <C>          <C>            <C>           <C>
     January 1, 1999                                      $ 13,572     $   4,298    $  37,421      $       95    $   55,386

       Net income                                                -             -        4,943               -         4,943

       Other comprehensive income (loss), net of tax:
          Unrealized gains (losses) on securities                -             -            -             (52)          (52)
          Tax benefit from exercise of nonincentive
            stock options                                        -             8            -               -             8

       Dividends paid                                            -             -       (1,521)              -        (1,521)

       Exercise of stock options                                14            90            -               -           104
                                                          --------     ---------    ---------      ----------    ----------
     June 30, 1999                                        $ 13,586     $   4,396    $  40,843      $       43    $   58,868
                                                          ========     =========    =========      ==========    ==========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)

                                       6
<PAGE>
                         GREENE COUNTY BANCSHARES, INC.
                      Consolidated Statement of Cash Flows
                 For the Six Months Ended June 30, 1999 and 1998
                                   (UNAUDITED)
                                 (In Thousands)
<TABLE>
<CAPTION>
                                                                                   June 30,          June 30,
                                                                                    1999              1998
                                                                                    ----              ----
     Net Cash Provided By Operating Activities:
<S>                                                                             <C>                <C>
       Net Income                                                               $    4,943         $     4,786
       Adjustments to reconcile net income to
         net cash provided by operating activities:
           Provision for loan losses                                                 1,550                 974
           Provision for depreciation and amortization                                 653                 575
           Amortization of security premiums, net of accretion                         173                 165
           Loss on sale of fixed assets, net of gains                                  199                   0
           Decrease in interest receivable                                             416                 292
           (Increase) Decrease in other assets, net of intangibles                  (2,824)                867
           (Decrease) in accrued interest payable and other
              liabilities                                                           (1,033)             (2,257)
                                                                                ----------         -----------
                 Net cash provided by operating activities                           4,077               5,402
                                                                                ----------         -----------
     Cash Flows From Investing Activities:
       Net increase in securities, federal funds and
         other interest-earning deposits                                            (3,776)             (8,110)
       Net (increase) decrease in loans                                            (21,732)             13,057
       Improvements in other real estate owned and other, net                         (524)                (16)
       Recoveries of loan losses                                                       488               1,039
       Proceeds from sale of fixed assets                                              401                   0
       Fixed asset additions                                                        (1,656)               (979)
                                                                                ----------         -----------
                 Net cash (used) provided by investing activities                  (26,799)              4,991
                                                                                ----------         -----------
     Cash Flows From Financing Activities:
       Net increase (decrease) in deposits                                          46,882              (5,373)
       Cash dividends paid                                                          (1,521)             (1,355)
       Exercise of stock options                                                       104                  33
       Decrease in federal funds purchased                                          (4,800)                  0
       Increase in securities sold under repurchase agreements                       2,892               1,718
       Decrease in other borrowings, net                                           (20,165)             (8,190)
                                                                                ----------         -----------
                 Net cash provided (used) by financing activities                   23,392             (13,167)
                                                                                ----------         -----------
     Net Increase (Decrease) in Cash                                                   670              (2,774)
                                                                                ----------         -----------
     Cash at beginning of year                                                      19,592              20,687
                                                                                ----------         -----------
     Cash at end of period                                                      $   20,262         $    17,913
                                                                                ==========         ===========
</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements(Unaudited)

                                       7
<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 subsidiary,  Greene County
Bank (the  "Bank"),  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  periods  herein are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 1999. 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, 1998.

2-ALLOWANCE FOR LOAN LOSSES

Transactions  in the Allowance for Loan Losses for the six months ended June 30,
1999 were as follows:

                                                In
                                             Thousands
                                             ---------

Balance, January 1, 1999                   $    10,253

Add (Deduct):
    Charge-offs                                 (1,874)
    Recoveries                                     488
    Provisions                                   1,550
                                           -----------
Balance, June 30, 1999                     $    10,417
                                           ===========

                                       8
<PAGE>
3-NET INCOME PER SHARE OF COMMON STOCK

Basic net income per share of common stock is computed by dividing net income by
the weighted  average  number of common  shares  outstanding  during the period.
Diluted net income per share of common  stock is computed by dividing net income
by the weighted  average  number of common  shares and common stock  equivalents
outstanding  during the  period.  Stock  options are  regarded  as common  stock
equivalents.  Common stock  equivalents  are computed  using the treasury  stock
method.

The following is a reconciliation of the numerators and denominators used in the
basic and diluted  earnings per share  computations for the three and six months
ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>

                                                                       Three Months Ended June 30,
                                         -------------------------------------------------------------------------------------------
                                                            1999                                            1998
                                         --------------------------------------------     ------------------------------------------
                                                                       (dollar amounts in thousands)
                                                Income                 Shares                   Income                Shares
                                              (Numerator)           (Denominator)            (Numerator)          (Denominator)
    Basic EPS
<S>                                             <C>                   <C>                       <C>                 <C>
    Income available to
      common shareholders                       $2,288                1,358,110                 $2,276              1,355,019

    Effect of Dilutive Securities
    Stock options outstanding                        -                   10,229                      -                  8,082
                                         -------------------------------------------------------------------------------------------

    Diluted EPS
    Income available to common
      shareholders plus assumed
      conversions                               $2,288                1,368,339                 $2,276              1,363,101
                                         ===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                                         Six Months Ended June 30,
                                         -------------------------------------------------------------------------------------------
                                                            1999                                            1998
                                         --------------------------------------------     ------------------------------------------
                                                                       (dollar amounts in thousands)
                                                Income                 Shares                   Income                Shares
                                              (Numerator)           (Denominator)            (Numerator)          (Denominator)
    Basic EPS
<S>                                             <C>                   <C>                       <C>                 <C>
    Income available to
      common shareholders                       $4,943                1,357,986                 $4,786              1,354,809

    Effect of Dilutive Securities
    Stock options outstanding                        -                   10,323                      -                  7,757
                                         -------------------------------------------------------------------------------------------
    Diluted EPS
    Income available to common
      shareholders plus assumed
      conversions                               $4,943                1,368,309                 $4,786              1,362,566
                                         ===========================================================================================
</TABLE>

                                       9
<PAGE>
4-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.  Collectively,  these  subsidiaries  have sufficient
revenue to constitute a separate  segment of the business of the Company.  These
subsidiaries  have been disclosed  below in the "other"  column,  as they do not
meet the quantitative threshold on an individual basis.

Intersegment  revenues and expenses are  accounted  for as if they were received
from or incurred to 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.

Segment Information:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999      Bank            Other        Eliminations        Total
                                  -------------    -------------   -------------    -------------
<S>                             <C>              <C>             <C>              <C>
Interest income                 $       11,751   $        2,754  $        (895)   $       13,610
Interest expense                         4,959              944           (895)            5,008
                                  -------------    -------------   -------------    -------------
Net Interest income             $        6,792   $        1,810  $           0    $        8,602
                                  =============    =============   =============    =============

Provision for loan losses       $          300   $          456  $           0    $          756
Noninterest income                       1,246              395           (318)            1,323
Noninterest expense                      4,363            1,541            (74)            5,830
Income tax expense                         966               85              0             1,051
                                  -------------    -------------   -------------    -------------
Segment net income              $        2,409   $          123  $        (244)   $        2,288
                                  =============    =============   =============    =============
Segment assets                  $      596,868   $      109,833  $    (109,695)   $      597,006
                                  =============    =============   =============    =============


Three Months Ended June 30, 1998      Bank            Other        Eliminations        Total
                                  -------------    -------------   -------------    -------------

Interest income                 $       10,527   $        2,705  $        (665)   $       12,567
Interest expense                         4,195            1,133           (665)            4,663
                                  -------------    -------------   -------------    -------------
Net Interest income             $        6,332   $        1,572  $           0    $        7,904
                                  =============    =============   =============    =============

Provision for loan losses       $         (39)   $          676  $           0    $          637
Noninterest income                         662              443            (60)            1,045
Noninterest expense                      3,209            1,474            (99)            4,584
Income tax expense                       1,496             (44)              0             1,452
                                  -------------    -------------   -------------    -------------
Segment net income              $        2,328   $         (91)  $           39   $        2,276
                                  =============    =============   =============    =============
Segment assets                  $      484,724   $      127,150  $     (86,272)   $      525,602
                                  =============    =============   =============    =============

                                       10
<PAGE>

Six Months Ended June 30, 1999        Bank            Other        Eliminations        Total
                                  -------------    -------------   -------------    -------------

Interest income                 $       23,230   $        5,719  $      (1,711)   $       27,238
Interest expense                         9,633            1,760         (1,711)            9,682
                                  -------------    -------------   -------------    -------------
Net Interest income             $       13,597   $        3,959  $           0    $       17,556
                                  =============    =============   =============    =============

Provision for loan losses       $          600   $          950  $           0    $        1,550
Noninterest income                       2,656            1,242           (874)            3,024
Noninterest expense                      8,369            3,181           (120)           11,430
Income tax expense                       2,294              363              0             2,657
                                  -------------    -------------   -------------    -------------
Segment net income              $        4,990   $          707  $        (754)   $        4,943
                                  =============    =============   =============    =============
Segment assets                  $      596,868   $      109,833  $    (109,695)   $      597,006
                                  =============    =============   =============    =============


Six Months Ended June 30, 1998        Bank            Other        Eliminations        Total
                                  -------------    -------------   -------------    -------------

Interest income                 $       21,059   $        5,475  $      (1,236)   $       25,298
Interest expense                         8,622            2,117         (1,236)            9,503
                                  -------------    -------------   -------------    -------------
Net Interest income             $       12,437   $        3,358  $           0    $       15,795
                                  =============    =============   =============    =============

Provision for loan losses       $          111   $          863  $           0    $          974
Noninterest income                       1,589              756           (397)            1,948
Noninterest expense                      6,390            2,810           (192)            9,008
Income tax expense                       2,828              147              0             2,975
                                  -------------    -------------   -------------    -------------
Segment net income              $        4,697   $          294  $        (205)   $        4,786
                                  =============    =============   =============    =============
Segment assets                  $      484,724   $      127,150  $     (86,272)   $      525,602
                                  =============    =============   =============    =============
</TABLE>

                                       11
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

         THIS   QUARTERLY   REPORT  ON  FORM  10-Q,   INCLUDING   ALL  DOCUMENTS
INCORPORATED   HEREIN  BY  REFERENCE,   CONTAINS   FORWARD-LOOKING   STATEMENTS.
ADDITIONAL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS MAY BE MADE BY THE COMPANY
FROM TIME TO TIME IN FILINGS  WITH THE  SECURITIES  AND EXCHANGE  COMMISSION  OR
OTHERWISE.  THE WORDS  "BELIEVE",  "EXPECT",  "SEEK",  AND  "INTEND" AND SIMILAR
EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
THE STATEMENT IS MADE. SUCH FORWARD-LOOKING STATEMENTS ARE WITHIN THE MEANING OF
THAT TERM IN SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED,  AND SECTION
21E OF THE  SECURITIES  EXCHANGE ACT OF 1934, AS AMENDED.  SUCH  STATEMENTS  MAY
INCLUDE,  BUT ARE NOT LIMITED TO,  PROJECTIONS OF INCOME OR LOSS,  EXPENDITURES,
ACQUISITIONS,  PLANS FOR FUTURE OPERATIONS, FINANCING NEEDS OR PLANS RELATING TO
SERVICES OF THE  COMPANY,  AS WELL AS  ASSUMPTIONS  RELATING  TO THE  FOREGOING.
FORWARD-LOOKING  STATEMENTS ARE INHERENTLY  SUBJECT TO RISKS AND  UNCERTAINTIES,
SOME OF WHICH  CANNOT BE  PREDICTED  OR  QUANTIFIED.  FUTURE  EVENTS  AND ACTUAL
RESULTS  COULD DIFFER  MATERIALLY  FROM THOSE SET FORTH IN,  CONTEMPLATED  BY OR
UNDERLYING THE FORWARD-LOOKING STATEMENTS.

GENERAL

         Greene  County  Bancshares,  Inc.  (the  "Company") is the bank holding
company for Greene County Bank (the "Bank"),  a  Tennessee-chartered  commercial
bank that  conducts the  principal  business of the Company.  In addition to its
commercial banking operations, the Bank conducts separate businesses through its
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 subprime  automobile lending company;  and Fairway Title Co., a
title company formed in 1998.

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 subsidiary  Bank.  Further,  any
dividend payments are subject to the continuing  ability of the Bank to maintain
its 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 a line of credit of $20 million
with the Federal Home Loan Bank of  Cincinnati  and five federal  funds lines of
credit totaling $37.5 million at five correspondent banks.

                                       12
<PAGE>
         The Company's  liquid assets  include  investment  securities,  federal
funds sold and other  interest-earning  deposits,  and cash and due from  banks.
Including securities pledged to collateralize  municipal deposits,  these assets
represented  14.26% of the total liquidity base at June 30, 1999, as compared to
14.0% at December 31, 1998. The liquidity  base is generally  defined to include
deposits,  securities sold under repurchase  agreements and short-term  borrowed
funds and other borrowings.

         For the six months ended June 30,  1999,  operating  activities  of the
Company provided  $4,077,000 of cash flows.  Net income of $4,943,000,  adjusted
for non-cash operating  activities,  including  $1,550,000 in provision for loan
losses and amortization  and depreciation of $653,000,  provided the majority of
the cash generated from  operations.  The principle offset to these cash inflows
was  the  decrease  in  other  assets,  net of  intangibles,  in the  amount  of
$2,824,000.

         Investing  activities,  including  lending,  used  $26,799,000  of  the
Company's  cash flow during the six months  ended June 30, 1999.  The  Company's
increase  in   investment   securities   and   federal   funds  sold  and  other
interest-earning  deposits used $3,776,000 in cash flows, while the net increase
in loans originated net of principal collected used $21,732,000 in cash flows.

         Financing  activities  provided  $23,392,000 of the Company's cash flow
during  the six  months  ended  June  30,  1999.  Net  deposit  growth  provided
$46,882,000  in cash inflows,  while the net decrease in other  borrowings  used
$20,165,000  in  cash  flows.  Cash  dividends  paid  to  shareholders  used  an
additional $1,521,000 in cash flows.

         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 June 30, 1999 was $58,868,000,  an increase of
$3,482,000  or 6.29%,  from  $55,386,000  on December 31, 1998.  The increase in
shareholders'  equity reflects net income for the six months ended June 30, 1999
of  $4,943,000  ($3.61 per share,  assuming  dilution),  and  proceeds  from the
exercise of stock  options  during the six months  ended June 30, 1999  totaling
$104,000. This increase was offset by quarterly dividend payments during the six
months  ended  June 30,  1999  totaling  $1,521,000  ($1.12  per  share) and the
reduction  in equity  associated  with the  decrease in the value of  securities
available for sale of $52,000.

         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.

                                       13

<PAGE>

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.  At June 30,  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.

================================================================================
                         Capital Ratios at June 30, 1999
--------------------------------------------------------------------------------
                                      Required
                                      Minimum    Company       Bank
                                       Ratio
--------------------------------------------------------------------------------
 Tier 1 risk-based capital             4.00%     12.23%       12.48%
--------------------------------------------------------------------------------
  Total risk-based capital             8.00%     13.49%       13.74%
--------------------------------------------------------------------------------
       Leverage Ratio                  4.00%      9.45%        9.67%
================================================================================

CHANGES IN RESULTS OF OPERATIONS

         NET INCOME. Net income for the three and six months ended June 30, 1999
was $2,288,000 and $4,943,000,  respectively, an increase of $12,000, or .5% and
$157,000,  or 3.3%,  as compared  to net income of  $2,276,000  and  $4,786,000,
respectively, for the same periods in 1998.

         The  increase  for the  three  months  ended  June  30,  1999  resulted
primarily  from an increase in net  interest  income of  $698,000,  or 8.8%,  to
$8,602,000 for the three months ended June 30, 1999 from $7,904,000 for the same
period in 1998.  The increase in net  interest  income  reflects  the  Company's
continued  growth in average  loan  balances for the three months ended June 30,
1999,  as  compared to the same period in 1998,  through  its  expanding  branch
network,  primarily  through  increases in commercial and commercial real estate
loans.  These  increases were offset in part by the $1,246,000 or 27.2% increase
in  non-interest  expense to $5,830,000 for the three months ended June 30, 1999
from  $4,584,000  for  the  same  period  in  1998,  attributable  primarily  to
increasing  compensation  and occupancy  and  furniture  and equipment  expenses
associated with the growth of the Company's branch network.

         The increase for the six months ended June 30, 1999 resulted  primarily
from an increase in net interest income of $1,761,000,  or 11.1%, to $17,556,000
for the six months ended June 30, 1999 from  $15,795,000  for the same period in
1998. This increase reflects the same basic trends in existence during the three
months  ended  June  30,  1999.  These  increases  were  offset  in  part by the
$2,422,000,  or 26.9%,  increase in non-interest  expense to $11,430,000 for the
six months  ended June 30,  1999 from  $9,008,000  for the same  period in 1998,
again primarily attributable to increasing compensation, occupancy and furniture
and  equipment  expense  and other  expenses  associated  with the growth of the
Company's branch network.

                                       14
<PAGE>
         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 that 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 and six months ended June 30, 1999,
net interest income was $8,602,000 and $17,556,000, respectively, as compared to
$7,904,000 and $15,795,000 for the same periods in 1998,  representing increases
of 8.8% and 11.1%, respectively. With respect to the three months and six months
ended June 30, 1999, this increase was due primarily to an increase in volume of
average interest-earning assets and further enhanced by decreasing rates paid on
interest-bearing liabilities.

         PROVISION FOR LOAN LOSSES. During the three and six month periods ended
June 30, 1999, loan charge-offs  were $1,267,000 and $1,874,000,  and recoveries
of  charged-off  loans were $165,000 and $488,000,  respectively.  The Company's
provision for loan losses increased to $756,000 and $1,550,000 for the three and
six month periods ended June 30, 1999, respectively,  from $637,000 and $974,000
for the  respective  periods in 1998.  This  increase is primarily the result of
increased  loan  volume  in both the Bank and its  subsidiaries,  together  with
management's assessment of the heightened risk associated with loans at Superior
Financial  and  GCB  Acceptance,   the  Bank's  consumer  finance  and  subprime
automobile  lending  subsidiaries,  respectively.  As a  result,  the  Company's
allowance for loan losses  increased by $164,000 to $10,417,000 at June 30, 1999
from  $10,253,000  at December 31,  1998.  The ratio of the  allowance  for loan
losses to  nonperforming  assets  was 150.6%  and  156.34% at June 30,  1999 and
December 31, 1998, respectively,  and the ratio of nonperforming assets to total
assets was 1.16% and 1.15% at June 30, 1999 and December 31, 1998, 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 and  six-month  periods ended
June 30,  1999 was  $1,323,000  and  $3,024,000,  respectively,  as  compared to
$1,045,000 and $1,948,000 for the same periods in 1998. The largest component of
non-interest  income is service  charges,  commissions  and fees,  which totaled
$1,143,000  and  $2,515,000,  respectively,  for the three and six month periods
ended June 30, 1999, as compared to $959,000 and $1,605,000,  respectively,  for
the same periods in 1998. The $184,000,  or 19.2%, increase for the three months
ended  June  30,  1999  compared  to the  same  period  in  1998  is  reflective
principally  of  management's  continued  focus on the  generation of fee income
through   implementation  of  additional  fees  and  increasing  existing  fees,
especially  additional  loan and other fees resulting from increased loan volume
at the Company's  finance and mortgage  banking  subsidiaries.  Service charges,
commissions and fees for the six months ended June 30, 1999 increased  $910,000,
or 56.7%, from the same period in 1998, primarily for the same reasons discussed
above relative to the three months ended June 30, 1999.

         Other  income for the three and six month  periods  ended June 30, 1999
was $180,000 and

                                       15
<PAGE>

$509,000, respectively, as compared to $86,000 and $343,000 for the same periods
in 1998. These increases totaled $94,000, or 109.3%, and $166,000, or 48.4%, for
three and six month periods ended June 30, 1999, respectively. The increases for
the three months period are primarily attributable to additional earnings on the
cash  surrender  value of certain  Company-owned  life insurance  policies.  The
increase for the six months period is also primarily  attributable to additional
earnings on the cash  surrender  value of certain  Company-owned  life insurance
policies,  as well as additional  earnings  recorded on the  Company's  minority
investment in an insurance partnership.

         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 increased to $5,830,000
and  $11,430,000  for the three  and  six-month  periods  ended  June 30,  1999,
respectively,  as compared to $4,584,000  and $9,008,000 for the same periods in
1998. These increases totaled  $1,246,000,  or 27.2%, and $2,422,000,  or 26.9%,
for the three and six month periods ended June 30, 1999, respectively. Primarily
as a result of this increase in non-interest  expense,  the Company's efficiency
ratio was adversely  affected,  as the ratio  increased  from 50.77% at June 30,
1998 to 55.54% at June 30, 1999. The efficiency  ratio  illustrates  how much it
costs the Company to generate  revenue;  for example,  it cost the Company 55.54
cents to generate one dollar of revenue for the six months ended June 30, 1999.

         Personnel costs are the primary  element of the Company's  non-interest
expenses.  For the three and six month periods ended June 30, 1999, salaries and
benefits represented  $3,357,000,  or 57.6%, and $6,502,000,  or 56.9%, of total
noninterest expenses,  respectively. This was an increase of $763,000, or 29.4%,
and $1,264,000,  or 24.1%, over the $2,594,000 and $5,238,000 for the respective
three and six month periods  ended June 30, 1998.  For the six months ended June
30, 1998, salaries and benefits represented 58.1% of total noninterest expenses.
These  increases  were  due  to  opening  new  branches  and  expanding  certain
operational  areas,  which required  increased  staff at varying  experience and
compensation levels and increased employee benefit costs. Overall, the number of
full-time  equivalent  employees at June 30, 1999 was 341 versus 272 at June 30,
1998, an increase of 25.4%.

         Occupancy and furniture and equipment expense also increased during the
three and six month  periods ended June 30, 1999 compared to the same periods in
1998 as the Company  increased its size to 38 branches at June 30, 1999, from 30
branches at June 30, 1998.

         Other  expenses for the three and six month periods ended June 30, 1999
were $1,498,000 and $3,220,000,  increases of $188,000,  or 14.4%, and $749,000,
or 30.3%,  respectively,  from the same  periods in 1998.  These  increases  are
reflective of the Company's new branches which required additional  advertising,
postage,  telephone and other expenses, as well as increased expenses related to
new programs for customer product delivery.

                                       16
<PAGE>
CHANGES IN FINANCIAL CONDITION

         Total assets at June 30, 1999 were $597.0 million, an increase of $28.8
million,  or 5.1%,  from 1998's  year-end  total assets of $568.2  million.  The
increase in assets was  reflective  of the  increase in loans and federal  funds
sold, funded principally by an increase in deposits.

         At June 30, 1999,  loans, net of unearned income and allowance for loan
losses,  were $488.2 million compared to $466.7 million at December 31, 1998, an
increase of $21.5  million,  or 4.6%,  from  December 31, 1998.  The increase in
loans  during  the  first  half of  1999  is  primarily  due to an  increase  in
commercial and commercial real estate loans generated primarily by the Company's
increased  emphasis on loan growth through  implementation of a more competitive
commercial loan rate structure and the hiring of a senior commercial lender from
a regional  bank.  This lender  brought  new and  significant  seasoned  lending
relationships  to the  Company,  as well as an  experienced  commercial  lending
staff.

         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 heavily  involved.  Nonaccrual  loans  decreased by $574,000,  or
13.8%,  during the six months ended June 30,  1999,  as compared to December 31,
1998.

         The Company  maintains a securities  portfolio to provide liquidity and
earnings. Securities at June 30, 1999 had an amortized cost of $28.9 million and
a market value of $29.0 million. At year-end 1998, investments with an amortized
cost of $30.2  million  had a market  value of  $30.3  million.  This  decrease,
resulting from normal maturing of securities,  was principally used to fund part
of the increase in loans.

         In  planning  for the  funding of the  additional  loan  demand,  which
developed  during  late  1998 and the first  half of 1999,  the  Company  became
aggressive in soliciting deposits. As a result,  deposits, which are the primary
funding mechanism for the Company's assets,  increased $46.9 million,  or 10.2%,
to $506.1  million at June 30, 1999  compared to $459.2  million at December 31,
1998. Most of the increase occurred in  higher-costing  certificate of deposits.
As the increase in deposits  exceeded the  immediate  amount needed for the loan
funding,  the Company chose to reduce its borrowings  from the Federal Home Loan
Bank of Cincinnati and also eliminate its federal funds purchased.  Accordingly,
other  borrowings  declined by  approximately  $20.2  million and federal  funds
purchased decreased by $4.8 million. These borrowings were costing more than the
earnings being generated from federal funds sold.

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

                                       17
<PAGE>

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 impacts 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  is effective  for 1999 for the  Company;  however,
management does not expect this  pronouncement  to have a significant  impact on
the Company's financial position.

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, temporary inability to process transactions and/or invoices or engage in
similar normal business activities.

         The Company has been actively  involved in Year 2000 ("Y2K") issues and
has assessed its state of readiness by  evaluating  its  information  technology
("IT")  and  non-IT  systems.  IT  systems  commonly  include  data  processing,
accounting,  telephone/PBX  systems,  etc.  Examples of non-IT systems are alarm
systems, fax machines and other miscellaneous systems.

         With respect to its mission critical IT systems,  the Company estimates
that its Y2K  identification,  assessment,  remediation  and testing efforts are
substantially  complete.  Test  results

                                       18
<PAGE>

have been reviewed by the Company's internal auditing coordinator in conjunction
with  financial  industry  consultants.  During  1999,  further  testing will be
carried  out in order to ensure  that all  systems  are  working  properly.  The
Company  has  assessed  its Y2K  status  in regard  to  non-IT  systems  and has
determined that no material risk exists.

         The Company has also verbally communicated with its significant vendors
in order to  determine  the extent to which  interfaces  with such  entities are
vulnerable  to Y2K issues and whether the products and services  purchased  from
such  entities  are Y2K  compliant.  The Company has received  either  verbal or
written  assurance  from these  vendors  that they  expect to address  all their
significant  Y2K issues on a timely  basis.  Further,  the Company has conducted
telephonic Y2K evaluations with significant  depositors and/or borrowers and has
evaluated  the  responses  as part  of its  Y2K  assessments.  With  respect  to
significant depositors, the Company does not anticipate any material Y2K issues.
The Company has assessed  the results of its  evaluation  regarding  significant
borrowers  and results are  reflected in its  allowance  for loan losses for the
quarter ended June 30, 1999.  The Company also began in June 1998  incorporating
the  Y2K  issue  in  its  underwriting  process  as it  relates  to  significant
borrowers,  and is communicating  the Y2K issue to its checking account base via
statement fliers.  Further,  the Company began conducting Y2K awareness seminars
with its customer base in January 1999.

         The  Company  believes  that  the  cost  of  its  Y2K   identification,
assessment, remediation and testing efforts will not exceed $250,000 in terms of
incremental cash outflows.  The Company spent approximately  $175,000 as of June
30, 1999 and expects to spend an additional $75,000 on such efforts.  The source
of these funds will be provided from cash flows from operations of the Company.

         The Company  anticipates  that the most likely worst case scenario will
be a  combination  of several  borrowers  experiencing  short term Y2K cash flow
problems and a pre-Y2K increased cash demand from its overall customer base. The
Company does not  consider a computer  system  failure as likely  because of the
extensive  pre-Y2K  preparation  by the Company.  The other  commonly  discussed
failure is a collapse of the power grid, which the Company considers unlikely in
view of the reports made by the various power  companies in the newspapers  with
respect to their Y2K readiness.

         During the second half of 1999,  the Company will focus its Y2K efforts
on  contingency  planning  and  customer/community  awareness.  The  Company has
developed  a Y2K  contingency  plan,  which  has been  approved  by the Board of
Directors  and reviewed by federal  banking  regulators.  The  contingency  plan
represents the process anticipated to ensure continued delivery of the Company's
core business processes in the event of a Y2K-related  system failure.  The plan
will be tested during the third and fourth quarters of 1999.

         The  Company  will  continue  its  efforts  to  inform  its  employees,
customers and communities  about Y2K issues.  The Company will utilize statement
stuffers,  lobby brochures and posters,  radio and print  advertising,  training
videos,  seminars and other  appropriate  media to communicate its Y2K

                                       19
<PAGE>

readiness and to minimize unfounded public concern.

         If  the  Company  has borrowers that experience Y2K cash flow problems,
they will be dealt with in the same  routine  manner in which  normal  cash flow
interruptions by borrowers are handled; however, the Company does not anticipate
any  material  Y2K failure of  borrowers  due to the  Company's  ongoing  review
process. Any Y2K increases in cash demand will be funded by the Company's normal
currency ordering process.

         The Company's Y2K coordinator will continue to review the status of the
Company's Y2K readiness and report his findings to the Board of Directors.

                                       20
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

                                       21
<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

                 (a)  The  1998  Annual  Meeting of  Shareholders of the Company
                      was held on April 28, 1999.

                 (b)  Not applicable.

                 (c)  The  following  proposal was considered by shareholders at
                      the Annual Meeting:

                  Proposal  1-Election of Directors
                  ---------------------------------
                  The following directors were re-elected:

                                                        Votes
                                             -----------------------------
                                             For       Against     Abstain
                                             ---       -------     -------

                  J.W. Douthat             993,347         0           990
                  Jerald Jaynes            955,283         0        39,054

                  Directors  in  Proposal  1 above were  elected to terms  which
                  expire in 2002.

Item 5.           Other Information

                  None.

                                       22
<PAGE>
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
                                       23
<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: 8/9/99                  Greene County Bancshares, Inc.
                              ------------------------------
                                      Registrant

Date: 8/9/99                  /s/
                              ------------------------------
                              R. Stan Puckett
                              President and CEO
                              (Duly authorized officer)

Date: 8/9/99                  /s/
                              ------------------------------
                              William F. Richmond
                              Sr. Vice President and Chief Financial Officer
                              (Principal financial and accounting officer)

                                       24