FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[ X ]    ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002

[   ]    TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                        Commission file number 000-22473

                             VOLUNTEER BANCORP, INC.
                 (Name of small business issuer in its charter)

                  TENNESSEE                               62-1271025
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
corporation or organization)

                              210 East Main Street
                          Rogersville, Tennessee 37857
              (Address of principal executive offices and Zip Code)

                    Issuer's telephone number (423) 272-2200


Securities registered under Section 12(b) of the Exchange Act:  None
Securities registered under Section 12(g) of the Exchange Act:  Common Stock

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X  No
                                                                      ---   ---

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]

     The  registrant's  revenues for the twelve  months ended  December 31, 2002
were $7,658,504.


         The aggregate market value of the shares of Common Stock held by
     nonaffiliates of the registrant as of March 17, 2003 is approximately $4.9
million. (For purposes of this calculation only, all executive officers and
directors are classified as affiliates.)

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.  Outstanding at March 17, 2003,
Common Stock, $.01 par value, 539,027.

                    Documents Incorporated by Reference: None



                                      - 1 -

<PAGE>



                                     PART I

ITEM 1.    DESCRIPTION OF BUSINESS

THE COMPANY

Volunteer Bancorp, Inc. is a registered bank holding company organized under the
laws of Tennessee,  chartered in 1985. Volunteer, with consolidated total assets
of  approximately  $111  million at  December  31,  2002,  is  headquartered  in
Rogersville,  Tennessee with offices in Church Hill and  Sneedville,  Tennessee,
and we conduct  operations  through our  subsidiary,  The Citizens  Bank of East
Tennessee (the "Bank"),  a state bank  organized  under the laws of the state of
Tennessee in April 1906. We do not engage in any activities other than acting as
a bank holding company for the Bank. We believe we can present an alternative to
recent mega-mergers by offering local ownership, local decision making and other
personalized  service  characteristics  of community  banks. The holding company
structure  provides  flexibility for expansion of our banking  business  through
acquisition  of  other  financial   institutions  and  provision  of  additional
banking-related  services which the traditional  commercial bank may not provide
under present laws.

The Bank  provides a full range of retail  banking  services,  including (i) the
acceptance  of demand,  savings and time  deposits;  (ii) the making of loans to
consumers,  businesses  and other  institutions;  (iii) the investment of excess
funds in the sale of federal funds, U.S. government and agency obligations,  and
state,  county  and  municipal  bonds;  and (iv) other  miscellaneous  financial
services usually handled for customers by commercial banks.

MARKET AREA AND COMPETITION

We compete with other commercial banks,  savings and loan  associations,  credit
unions and finance  companies  operating  in Hancock and  Hawkins  counties  and
elsewhere. One other commercial bank is doing business in Hancock County, and in
Hawkins   County  there  are  five   commercial   banks  and  savings  and  loan
associations.  The Bank is subject to substantial  competition in all aspects of
its  business.  Intense  competition  for loans and  deposits  comes  from other
financial  institutions  in the market area. In certain aspects of its business,
the Bank also  competes  with credit  unions,  small loan  companies,  insurance
companies,  mortgage  companies,  finance companies,  brokerage houses and other
financial  institutions,  some of which are not  subject  to the same  degree of
regulation  and  restriction  as the  Bank  and  some of  which  have  financial
resources  greater than those of the Bank.  The future  success of the Bank will
depend  primarily  upon  the  difference  between  the  cost  of  its  borrowing
(primarily  interest  paid on deposits)  and income from  operations  (primarily
interest  or fees  earned on loans,  sales of loans and  investments).  The Bank
competes  for  funds  with  other  institutions,   which,  in  most  cases,  are
significantly  larger and are able to provide a greater variety of services than
the Bank and thus may obtain deposits at lower rates of interest.



































                                      - 2 -

<PAGE>



NET INTEREST INCOME

The following  table sets forth  weighted  average yields earned by Volunteer on
our earning assets and the weighted  average rates paid on our average  deposits
and other  interest-bearing  liabilities  for the years  indicated,  and certain
other information:

<TABLE>
<CAPTION>

                                                       2002                                           2001
(Fully taxable equivalent)                           Interest      Average                          Interest     Average
(Dollars in thousands except             Average      Income/      Yields/              Average      Income/     Yields/
for per share data)                      Balance      Expense       Rate                Balance      Expense       Rate
                                         -------      -------       ----                -------      -------       ----
<S>                                     <C>            <C>           <C>                <C>           <C>          <C>

Assets:

Interest-earning assets:

Loans net of unearned income             $69,672       $5,711        8.20%             $ 74,989       $7,137       9.52%
U.S. Treasury and other U.S.
  government agencies                     23,468        1,117        4.76%               24,585        1,468       5.97%
States and municipalities                  5,541          367        6.62%                2,889          190       6.58%
FHLB stock                                   361           16        4.43%                  341           23       6.74%
Federal funds sold                         4,924           74        1.50%                6,056          234       3.86%
                                           -----           --                             -----          ---
    Total interest-earning
      assets/interest income             103,966        7,285        7.01%              108,860        9,052       8.32%
                                         -------        -----                           -------        -----
Cash and due from banks                    2,936                                          2,953
Other assets                               6,250                                          6,626
Allowance for loan losses                   (995)                                          (971)
                                           -----                                          -----
    Total                               $112,157                                       $117,468
                                        ========                                       ========

Liabilities and stockholders'
  equity:

Interest-bearing liabilities:

Demand deposits                         $ 19,303          239        1.24%            $  21,541       $  644                2.99%
Savings                                    7,096          106        1.49%                5,477          135       2.46%
Individual retirement accounts             8,768          284        3.24%                8,829          471       5.33%
Time certificates                         53,857        1,694        3.15%               59,843        3,331       5.57%
FHLB advances                                  0            0        0.00%                  162            7       4.32%
Securities sold under repurchase           1,749           50        2.86%                  992           53       5.34%
Note payable                               1,841           71        3.86%                2,186          139       6.36%
                                           -----        -----                             -----       ------
  Total interest-bearing
    liabilities/interest expense          92,614        2,444        2.64%               99,030        4,780       4.83%
                                          ------        -----                            ------        -----
Non-interest bearing demand
  deposits                                12,276                                         11,328
Other liabilities                            677                                          1,510
Stockholders' equity                       6,590                                          5,600
                                          ------                                         ------
  Total                                 $112,157                                       $117,468
                                        ========                                       ========
Net interest earnings                                  $4,841                                         $4,272
                                                       ------                                         ------
Net interest on interest earning
  assets                                                             4.66%                                         3.92%
                                                                     -----                                         -----

Return on average assets                   0.34%                                          0.53%
Return on average equity                   5.87%                                         11.19%
Cash dividends declared                 $ 53,903                                       $ 75,464
Dividend payout ratio                     13.94%                                         12.04%
Net income                              $386,577                                       $626,659


</TABLE>


                                      - 3 -

<PAGE>

The following table presents a summary of changes in interest  income,  interest
expense, and the interest rate differential aggregated by the changes in volumes
and rates:

<TABLE>
<CAPTION>

                                                December 31,                                          December 31,
                                                    2002                                                  2001
                                                   versus                                                versus
                                                December 31,                                          December 31,
                                                    2001                                                  2000
                                            Increases (decreases)                                Increases (decreases)
(Dollars in Thousands)                       Change Due To: (1)                                    Change Due To: (1)
                                      Volume       Rate          Total                     Volume      Rate       Total
<S>                                     <C>        <C>           <C>                    <C>           <C>        <C>

Increase (decrease) in:
Loans net of unearned income            $ (460)    $   (966)     $ (1,426)              $    297      $ (316)    $ (19)
U.S. Treasury and other U.S.
  Government agencies                      (56)        (295)         (351)                   146        (105)       41
States and municipalities                  175            2           177                    (99)          3       (96)
FHLB stock                                   1           (8)           (7)                     2          (2)        0
Federal funds sold                         (23)        (137)         (160)                   183        (124)       59

Total interest income                   $ (363)    $ (1,404)     $ (1,767)              $    529      $ (544)    $ (15)


Increase (decrease) in:
Demand deposits                         $  (34)    $   (371) $       (405)              $     50      $ (258)    $(208)
Savings                                     31          (60)          (29)                    21         (28)       (7)
Individual retirement accounts              (2)        (185)         (187)                     1         (34)      (33)
Time certificates                         (215)      (1,422)       (1,637)                   243        (167)       76
FHLB advances                               34          (37)           (3)                     1          (3)       (2)
Securities sold under repurchase           (16)         (52)          (68)                   (12)         (3)      (15)
Note payable                               (19)          (9)          (28)                   (23)        (50)      (73)

Total interest expense                  $ (221)    $ (2,136) $     (2,357)              $    281      $ (543)    $(262)

Increase (decrease) in
  net interest income                   $ (142)    $    732  $        590               $    248      $   (1)    $ 247

</TABLE>

     (1)  Increases  (decreases)  are  attributable  to volume  changes and rate
     changes on the following basis: Volume Change equals change in volume times
     prior year rate. Rate Change equals change in rate times prior year volume.
     The  Rate/Volume  Change  equals the  change in volume  times the change in
     rate,  and it is  allocated  between  Volume  Change and Rate Change at the
     ratio  that the  absolute  value of each of these  components  bears to the
     absolute value of their total.

     For  purposes  of this  schedule,  non-accruing  loans are  included in the
     average  balances and tax exempt  income is  reflected on a tax  equivalent
     basis.  As tax exempt income is exempt only for Federal income tax purposes
     and  not  Tennessee  purposes,  tax  equivalent  income  is  based  upon an
     effective  34% tax rate.  Loan fees  included  in  interest  income are not
     material to the presentation.

LIABILITY AND ASSET MANAGEMENT

The matching of assets and  liabilities  may be analyzed by examining the extent
to which such  assets and  liabilities  are  "interest  rate  sensitive"  and by
monitoring  an  institution's  interest  rate  sensitivity  "gap."  An  asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference  between the amount of interest- earning assets
maturing  or  repricing  within  a  specific  time  period  and  the  amount  of
interest-bearing  liabilities  maturing or repricing  within that time period. A
gap is considered  positive when the amount of interest  rate  sensitive  assets
exceeds the amount of interest rate sensitive  liabilities.  A gap is considered
negative  when the amount of interest  rate  sensitive  liabilities  exceeds the
amount of interest rate  sensitive  assets.  During a period of rising  interest
rates, a negative gap would tend to adversely affect net interest income while a
positive gap would tend to result in an increase in net interest income.  During
a period of falling  interest  rates,  a negative gap would tend to result in an
increase in net  interest  income  while a positive  gap would tend to adversely
affect net interest income.

The  asset/liability  committee,  which consists of Reed D. Matney, Jim Friddell
and other officers,  is charged with monitoring the liquidity and funds position
of Volunteer. The Committee regularly reviews (a) the rate

                                      - 4 -

<PAGE>

sensitivity position on a three-month, six-month, and one-year time horizon; (b)
loans to deposit  ratios;  and (c) average  maturity for certain  categories  of
liabilities.

We currently  utilize the  asset/liability  modeling services of First Tennessee
Financial  Corporation,  with  which we  simulate  operations  and  subsequently
develop  policies  regarding   permitted  gap  positions,   permitted  risks  in
deviations  from budget  earnings and liquidity.  We apply the system  quarterly
using rate fluctuations of +/-2%.

At December 31, 2002, we had a negative cumulative repricing gap within one year
of approximately $29.4 million, or approximately 29.03% of total earning assets.
This negative repricing gap indicates that our future earnings may be materially
adversely  impacted  by a rise in market  interest  rates,  as occurred in early
1995,  and such impact would  primarily be felt in the twelve month period after
such a rise in rates.

The following table represents an interest  sensitivity profile for Volunteer as
of December 31, 2002 and 2001.  The table  represents a static point in time and
does not consider other  variables,  such as changing  spread  relationships  or
interest  rate levels.  "Net  repricing  gap" is the  difference  between  total
earning  assets and total  interest-bearing  liabilities  repricing in any given
period and  "cumulative  gap" is the sum of the net repricing gap from period to
period.  Interest-bearing  demand, savings and money market account deposits are
presented as repricing in the earliest period presented.

<TABLE>
<CAPTION>


                                                               December 31, 2002
                                           ----------------------------------------------------
                                                       After 3  After 12
                                                       months    months
                                          Within     Within 12  Within 5     After
                                         3 months     months     years      5 years     Total
                                         --------    ---------  --------    -------     -----
(Dollars in thousands)

Earning assets:
<S>                                       <C>         <C>        <C>         <C>        <C>

Loans                                     $19,426     $18,321    $16,443     $13,935    $68,125
Investment securities:
   Available for sale                         576         543      8,729      16,087     25,935
   Held to maturity                                                            1,053      1,053
Equity securities                           1,831                                         1,831

Federal funds sold                          4,450                                         4,450
                                            -----     -------    -------     -------   --------
    Total earning assets                  $26,283     $18,864    $25,172     $31,075   $101,394
                                          =======     =======    =======     =======   ========

Interest-bearing liabilities:

Interest-bearing deposits                 $47,322     $23,161    $17,315                $87,798
Securities sold under
  repurchase agreements                     2,289                                         2,289

Long-term debt                              1,810                                         1,810
                                            -----     -------    -------     -------    -------
  Total interest-bearing liabilities      $51,421     $23,161    $17,315          $0    $91,897
                                          =======     =======    =======      ======    =======

Net repricing gap                       ($25,138)    ($4,297)     $7,857     $31,075     $9,497
                                        ---------    --------     ------     -------     ------
Rate sensitivity gap:

Net repricing gap as a percentage
  of total earning assets                (24.79)%     (4.24)%      7.75%      30.65%      9.37%
                                         --------   ---------  ---------      ------     ------
Cumulative gap                          ($25,138)   ($29,435)  ($21,578)      $9,497
                                        ---------   ---------  ---------      ------
Cumulative gap as a percentage of
  total earning assets                    (24.79)%    (29.03)%   (21.28)%      9.37%
                                        ---------   ---------  ---------      ------

</TABLE>

                                      - 5 -

<PAGE>



<TABLE>
<CAPTION>


                                                             December 31, 2001
                                       ------------------------------------------------------
                                                      After 3    After 12
                                          Within       months     months
                                                     Within 12   Within 5     After
                                         3 months      months     years      5 years     Total
                                         --------      ------     -----      -------     -----
<S>                                       <C>          <C>       <C>          <C>       <C>

(Dollars in thousands)
Earning assets:

Loans                                     $22,733      $16,073   $27,656     $ 6,604   $ 73,066
Investment securities:
   Available for sale                       2,849          523     5,705      16,535     25,612
   Held to maturity                                                  584          43        627
FHLB stock                                    355                                           355
Federal funds sold                          6,275                                         6,275
                                           ------      -------   -------     -------   --------
    Total earning assets                  $32,212      $16,596   $33,945     $23,182   $105,935
                                          =======      =======   =======     =======   ========
Interest-bearing liabilities:
Interest-bearing deposits                 $53,637      $33,725   $ 5,213               $ 92,575
Securities sold under
   repurchase agreements                    1,110                                         1,110
Long-term debt                              2,170                                         2,170
                                            -----      -------   -------     -------   --------
  Total interest-bearing liabilities      $56,917      $33,725   $ 5,213     $     0   $ 95,855
                                          =======      =======   =======     =======   ========
Net repricing gap                        ($24,705)    ($17,129)  $28,732     $23,182   $ 10,080
                                         ---------    ---------  -------     -------    -------
Rate sensitivity gap:
Net repricing gap as a percentage
  of total earning assets                  (23.32)%     (16.17)%   27.12%      21.88%      9.52%
                                         ---------    ---------   -------     -------    -------
Cumulative gap                           ($24,705)    ($41,834) ($13,102)    $10,080
                                         ---------    --------- ---------    -------
Cumulative gap as a percentage of
  total earning assets                    (23.32)%      (39.49)%  (12.37)%      9.52%
                                         --------      --------  --------    -------

</TABLE>


Management has made the following assumptions in the above analysis:

(a)  Assets and liabilities are generally  assigned to a period based upon their
     earliest  repricing  period when the repricing is less than the contractual
     maturity.

(b)  Nonaccrual loans are included in the loan category.

(c)  Investment  securities available for sale are currently treated in the same
     manner  as  comparable  securities  in the  investment  securities  held to
     maturity  portfolio in that they are scheduled  according to the earlier of
     their  contractual  maturities or earliest  repricing dates;  however,  the
     maturities of callable agency  securities are scheduled  according to their
     call dates when valued at a premium to par.

(d)  Money  market  deposits  and  savings  deposits  that  have no  contractual
     maturities are scheduled in the within 3 months category.

                                      - 6 -

<PAGE>

DEPOSITS

Our primary source of funds is  interest-bearing  deposits.  The following table
sets forth our deposit structure at December 31, 2002 and 2001.
<TABLE>
<CAPTION>


                                                                           December 31
                                                                     -----------------------
                                                                     2002               2001
                                                                     ----               ----
<S>                                                                <C>                <C>

Non interest-bearing deposits:
Individuals, partnerships and corporations                         $11,036           $ 10,604
U.S. Government and states and political subdivisions                  716                106
Commercial banks and other depository institutions                      63                133
Certified and official checks                                          345                492
                                                                   -------           --------
  Total non-interest bearing deposits                               12,160             11,335
                                                                   -------           --------

Interest-bearing deposits:
Interest-bearing demand accounts                                    20,791             18,455
Savings accounts                                                     7,062              6,112
Individual retirement accounts                                       2,405              2,204
Certificates of deposit, less than $100,000                         40,421             45,548
Certificates of deposit, greater than $100,000                      17,119             20,256
                                                                   -------           --------
  Total interest-bearing deposits                                   87,798             92,575
                                                                   -------           --------

  Total deposits                                                   $99,958           $103,910
                                                                   =======           ========

</TABLE>


The following  table presents a breakdown by category of the average  amounts of
deposits  and the  weighted  average  rate  paid  on  deposits  for the  periods
indicated:

<TABLE>
<CAPTION>

                                                                           December 31,
                                                   --------------------------------------------------------
                                                             2002                            2001
                                                   ------------------------        ------------------------
<S>                                                <C>                <C>          <C>                <C>
Non-interest bearing deposits                     $ 12,276                         $ 11,328
Savings deposits                                     7,096            1.49%           5,477           2.46%
Individual retirement accounts                       8,768            3.24%           8,829           5.33%
Time deposits                                       53,857            3.15%          59,843           5.57%
Interest bearing demand deposits                    19,303            1.24%          21,541           2.99%
                                                  --------                         --------
  Total deposits                                  $101,300                         $107,018
                                                  ========                         ========
</TABLE>

At December 31, 2002 and 2001, time deposits greater than $100,000 aggregated
approximately $17 million and $20 million, respectively. The following table
indicates, as of December 31, 2002 and 2001, the dollar amount of $100,000 or
more deposits by time remaining until maturity:


<TABLE>
<CAPTION>

                                    December 31, 2002                                December 31, 2001
                            ---------------------------------            ---------------------------------------
                                               1 year                                        1 year
                           3 Months  3 to 12   through                   3 Months  3 to 12   through
                            or less   Months   5 years  Total            or less    Months   5 years      Total
                            -------   ------   -------  -----            -------    ------   -------      ------
(In thousands)
<S>                         <C>       <C>     <C>     <C>                <C>        <C>       <C>         <C>

Time certificates           $2,948    6,785   7,386   $17,119            $5,927     12,905    1,424       $20,256

</TABLE>

                                      - 7 -

<PAGE>

ASSETS

Our   management   considers  many  criteria  in  managing   assets,   including
creditworthiness,  diversification and structural characteristics,  maturity and
interest rate  sensitivity.  The following table sets forth our interest earning
assets by category at December 31, 2002 and 2001.



                                                       December 31,
                                                 2002            2001
                                                 ----            ----
(In thousands)
Investment securities:
  Available for sale
    U.S. Government and agencies              $ 19,392         $ 21,948
    Obligations of states and political
      subdivisions                               6,543            3,664
    FHLB stock                                     371              355
    FNMA preferred stock                         1,460
                                              --------         --------
      Total available for sale                  27,766           25,967
  Held to maturity                               1,053              627
Federal funds sold                               4,450            6,275
Loans:
  Real estate                                   50,702           46,552
  Commercial and other                          17,423           26,514
                                              --------         --------
    Total loans                                 68,125           73,066
Interest earning assets                       $101,394         $105,935
                                              ========         ========


INVESTMENT PORTFOLIO

At year end 2002,  obligations  of the United States  Government or its agencies
and obligations of states and political subdivisions  represented 100.00% of the
investment portfolio.

The  following  table sets forth the  composition  of the carrying  value of our
investment portfolio at December 31, 2002 and 2001:


                                                         December 31,
                                                  -------------------------
                                                     2002              2001
                                                     ----              ----
(In thousands)
Held to maturity:
Obligations of U.S. Government
  agencies                                         $ 1,053          $   627
                                                   -------          -------



Available for sale:
U.S. Treasury securities                           $   515          $   523
Obligations of U.S. Government
  agencies                                          18,877           21,425
Obligations of states and
  political subdivisions                             6,543            3,664
FNMA preferred stock                                 1,460                0
FHLB stock                                             371              355
                                                   -------          -------

                                                   $27,766          $25,967
                                                   =======          =======







                                      - 8 -

<PAGE>



The following table presents the maturity distribution of the amortized cost and
estimated  market value of the Volunteer's  debt securities at December 31, 2002
and 2001. The weighted  average yields on these  instruments are presented based
on final  maturity.  Yields on states and political  subdivisions  have not been
adjusted to a fully-taxable equivalent basis.

<TABLE>
<CAPTION>


                                              December 31, 2002                     December 31, 2001
                                        -------------------------------     ---------------------------------
                                                   Estimated   Weighted                 Estimated    Weighted
                                      Amortized     Market      Average     Amortized     Market     Average
                                        Cost         Value       Yield         Cost       Value       Yield
                                        ----        ------       -----         ----       -----       -----
<S>                                   <C>          <C>          <C>         <C>         <C>           <C>

(Dollars in thousands)
Held to maturity:
  Obligations of U.S. Government
    agencies:
    Due after 1 year but within
      5 years                                                               $   585     $   583
    Due after 5 years but within
     10 years                         $     6      $     7                        8           9
    Due after 10 years                  1,047        1,047                       34          35
                                      -------        -----                       --          --
      Total                           $ 1,053      $ 1,054      4.82%       $   627     $   627       3.28%
                                      -------       ------                  -------     -------

Available for sale:
--------- --- -----
  U.S. Securities:
    Due within 1 year                     501          515
    Due after 1 year but within
      5 years                                                                   502         523
                                                                               ----        ----
      Total                               501          515      5.44%           502         523       5.47%
                                          ---          ---                      ---         ---
  Obligations of U.S. Government
    agencies:
    Due within 1 year                      38           38                       36          36
    Due after 1 year but within
      5 years                           6,113        6,213                    4,605       4,556
    Due after 5 years but within
      10 years                          6,775        6,912                   88,958       8,952
    Due after 10 years                  5,545        5,714                    7,895       7,881
                                        -----        -----                    -----       -----
       Total                           18,471       18,877      4.68%        21,431      21,425       5.21%
                                       ------       ------                   ------      ------
  Obligations of states and
      political subdivisions
    Due after 1 year but within
      5 years                             495          515                    1,231       1,250
      Due after 5 years but within
        10 years                        2,365        2,414                    1,585       1,563
    Due after 10 years                  3,516        3,614                      887         851
                                        -----        -----                      ---         ---
        Total                           6,376        6,543      5.92%         3,703       3,664       4.30%
                                        -----        -----                    -----       -----

Total                                 $25,348      $25,935      4.87%       $25,636     $25,612       5.04%
                                      =======      =======      =====       =======     =======

Equity securities with
  No stated maturity:
     FHLB stock                       $   371      $   371                  $   355     $   355
    FNMA stock                          1,475        1,460                        0           0
                                      -------      -------                  -------     -------

                                      $ 1,846      $ 1,831      4.55%       $   355     $   355       6.74%
                                      =======      =======                  =======     =======

</TABLE>


                                      - 9 -

<PAGE>

INVESTMENT POLICY

The objective of our investment  policy is to invest funds not otherwise  needed
to meet the loan demand of its market area to earn the maximum return, yet still
maintain  sufficient  liquidity  to meet  fluctuations  in our loan  demand  and
deposit  structure.  In doing so, we balance the market and credit risks against
the potential  investment  return,  make investments  compatible with the pledge
requirements  of  our  deposits  of  public  funds,   maintain  compliance  with
regulatory investment requirements,  and assist the various public entities with
their  financing  needs.  Reed D.  Matney  is  authorized  to  execute  security
transactions  for  the  investment  portfolio  based  on  the  decisions  of the
investment committee. The investment committee,  which consists of the President
and Chief  Executive  Officer,  the Executive Vice President and the Senior Vice
President,  has full authority over the investment portfolio and makes decisions
on purchases and sales of securities.  All the investment transactions occurring
since the previous board of directors'  meeting are reviewed by the board at its
next monthly  meeting,  and the entire  portfolio  is reviewed on a  semi-annual
basis.  The investment  policy allows portfolio  holdings to include  short-term
securities  purchased  to provide  Volunteer  needed  liquidity  and longer term
securities  purchased  to generate  level income for us over periods of interest
rate fluctuations.

Our  investment  securities  portfolio  of  $28,818,746  at December  31,  2002,
consisted of  $1,052,991 of  securities  held to maturity,  which are carried at
amortized  cost and  $27,765,755  of  securities  available  for sale  which are
carried at market value. In addition,  unrealized gains on investment securities
available  for sale were  $596,270  and  unrealized  losses  were  $19,431.  Our
investment  securities  portfolio of $26,593,781 at December 31, 2001, consisted
of $626,859 of securities held to maturity,  which are carried at amortized cost
and  $25,966,922  of  securities  available for sale which are carried at market
value. In addition, unrealized gains on investment securities available for sale
were $142,971 and unrealized losses were $166,745.

As reflected in Note 2 to  Consolidated  Financial  Statements,  the  investment
securities held to maturity had unrealized gains of $1,430 at December 31, 2002,
compared to $1,597  unrealized  gains and $1,867  unrealized  losses at year end
December 31, 2001.

LOAN PORTFOLIO

Total  loans of  $68,125,000  at  December  31,  2002,  reflected  a decrease of
$4,941,000  compared  to total  loans  for the year  ended  December  31,  2001.
Residential real estate loans,  which historically have had low loss experience,
increased  $2,371,000 or 8.14%.  Construction and land development  loans, loans
secured by farmland and commercial  real estate loans increased by $1,779,000 or
6.0%.  Commercial  and  industrial  loans and  agricultural  loans  decreased by
$3,924,000 or 34.95%.  These types of loans carry a higher level of risk in that
the  borrowers'  ability  to repay may be  affected  by local  economic  trends.
Installment and other consumer loans decreased by $5,322,000,  or 34.90%.  These
loans,  generally  secured by automobiles  and other consumer  goods,  contain a
historically higher level of risk;  however,  this risk is mitigated by the fact
that these loans generally  consist of small  individual  balances.  As the loan
portfolio is concentrated in Hawkins and surrounding  counties,  there is a risk
that the  borrowers'  ability to repay the loans could be affected by changes in
local economic conditions.

The following table sets forth the composition of Volunteer's  loan portfolio as
December 31, 2002 and 2001.



                                                            December 31,
                                                      --------------------------
(In thousands)                                         2002                2001
                                                       ----                ----
Real estate loans:
  Construction and land development                  $ 2,647            $ 4,296
  Secured by farmland and improvements                 1,403              1,491
  Secured by residential properties                   31,482             29,111
  Commercial real estate loans                        15,170             11,654
                                                     -------            -------
    Total real estate loans                           50,702             46,552
Loans to farmers                                       1,413              1,862
Commercial and industrial loans                        5,889              9,364
Installment loans                                      7,725             11,923
Other consumer loans                                   2,233              3,357
All other loans                                          163                  8
                                                     -------            -------
    Total loans                                      $68,125            $73,066
                                                     =======            =======


                                     - 10 -

<PAGE>

The  following  table sets forth the  maturities  of the loan  portfolio and the
sensitivity  to  interest  rate  changes  of that  portion of  Volunteer's  loan
portfolio that matures after one year.


<TABLE>
<CAPTION>

                                                                      December 31, 2002
                                               --------------------------------------------------------------
                                                                       Maturity Range
                                               --------------------------------------------------------------
                                                  One Year          One Through          Over
                                                  or Less            Five Years       Five Years         Total
<S>                                                 <C>               <C>             <C>              <C>
(In thousands)
Real estate construction loans                      $ 2,278           $    14         $   355          $ 2,647
Real estate mortgage loans                           11,839            11,164          25,052           48,055
Commercial and industrial loans                       4,663             1,011             215            5,889
Agricultural loans                                    1,101               312                            1,413
All other loans                                       2,745             6,891             485           10,121
                                                    -------           -------         -------          -------
  Total loans                                       $22,626           $19,392         $26,107          $68,125
                                                    =======           =======         =======          =======
</TABLE>

The  sensitivity  to interest rate changes of that portion of  Volunteer's  loan
portfolio that matures after one year is set below:

Real estate, commercial and industrial and agricultural loans maturing after one
year as of December 31, 2002 (in thousands);

Fixed rate                                                $ 20,678
Floating rate                                               17,445
                                                          --------
                                                            38,123
                                                          ========
Other loans maturing after one year:
Fixed rate                                                $  7,356
Floating rate                                                   20
                                                          --------
                                                             7,376
  Total loans maturing after one year                     $ 45,499
                                                          ========

LOAN POLICY

All of our lending  activities are under the direct  supervision  and control of
the  Executive  Vice  President  and Senior  Credit  Officer  and the Board loan
committee,  which consists of eight directors.  The loan committee enforces loan
authorizations  for each  officer,  decides  on  loans  exceeding  such  limits,
services all requests for officer credits to the extent  allowable under current
laws and  regulations,  administers  all problem  credits,  and  determines  the
allocation  of funds for each lending  division.  Our  established  maximum loan
volume to deposits is 85%. The loan portfolio consists primarily of real estate,
commercial,  farming and installment  loans.  Commercial loans consist of either
real estate loans or term loans.  Maturity of term loans is normally  limited to
five to seven years. Conventional real estate loans may be made up to 90% of the
appraised  value  or  purchase  cost  of the  real  estate  for no  more  than a
thirty-year  term.  Installment  loans are  based on the  earning  capacity  and
vocational stability of the borrower.

The board of directors at its regularly scheduled meetings reviews all new loans
in excess of $100,000 made the preceding month.  Loans which are 30 days or more
past due are reviewed monthly.

Management periodically reviews the loan portfolio, particularly nonaccrual and
renegotiated loans. The review may result in a determination that a loan should
be placed on a nonaccrual status for income recognition. In addition, to the
extent that management identifies potential losses in the loan portfolio, it
reduces the book value of such loans, through charge-offs, to their estimated
collectible value. Volunteer's policy is to classify as nonaccrual any loan on
which payment of principal or interest is 90 days or more past due except where
there is adequate collateral to cover principal and accrued interest and the
loan is in the process of collection. Management defines "in the process of
collection" as that point where the customer has agreed to an accelerated
repayment plan to bring the loan current, which definition is in accordance with
generally accepted accounting principles ("GAAP") but is not in accordance with
such definition as contained in Banking Bulletin 91-19. No concessions are
granted and late fees are collected. In addition, a loan will be classified as
nonaccrual if, in the opinion of the management, based upon a review of the
borrower's or guarantor's financial condition, collateral value or other
factors, payment is questionable, even though payments are not 90 days or more
past due.

                                     - 11 -

<PAGE>



When a loan is classified as nonaccrual, any unpaid interest is reversed against
current  income.  Interest is included in income  thereafter  only to the extent
received in cash.  The loan  remains in a nonaccrual  classification  until such
time  as the  loan  is  brought  current,  when it may be  returned  to  accrual
classification.  When  principal  or  interest on a  nonaccrual  loan is brought
current, if in management's  opinion future payments are questionable,  the loan
would remain  classified as nonaccrual.  After a nonaccrual or renegotiated loan
is charged  off, any  subsequent  payments of either  interest or principal  are
applied  first to any remaining  balance  outstanding,  then to  recoveries  and
lastly to income.

The large number of consumer  installment  loans and the relatively small dollar
amount of each  makes an  individual  review  impracticable.  It is  Volunteer's
policy to charge off any consumer  installment loan which is past due 90 days or
more.

In  addition,  mortgage  loans  secured by real estate are placed on  nonaccrual
status when the  mortgagor is in  bankruptcy,  or  foreclosure  proceedings  are
instituted.  Any  accrued  interest  receivable  remains  an  obligation  of the
borrower,  except  in those  cases  when the  loan to value  ratio is more  than
adequate to recover accrued principal and interest.

Our  underwriting  guidelines  are  applied to four major  categories  of loans,
commercial and industrial, consumer, agricultural and real estate which includes
residential,  construction  and development and certain other real estate loans.
We require our loan  officers  and loan  committee  to consider  the  borrower's
character,  the borrower's financial condition as reflected in current financial
statements,  the borrower's management  capability,  the borrower's industry and
the economic  environment in which the loan will be repaid.  Before  approving a
loan,  the loan  officer  or  committee  must  determine  that the  borrower  is
basically  creditworthy,  determine  that the  borrower  is a  capable  manager,
understand the specific  purpose of the loan,  understand the source and plan of
repayment,  determine that the purpose,  plan and source of repayment as well as
collateral are acceptable,  reasonable and practical given the normal  framework
within which the borrower operates.

CREDIT RISK MANAGEMENT AND RESERVE FOR LOAN LOSSES

Credit risk and  exposure to loss are  inherent  parts of the banking  business.
Management  seeks to  manage  and  minimize  these  risks  through  its loan and
investment  policies  and loan review  procedures.  Management  establishes  and
continually reviews lending and investment criteria and approval procedures that
it believes  reflect the risk  sensitive  nature of  Volunteer.  The loan review
procedures  are set to monitor  adherence  to the  established  criteria  and to
ensure that on a continuing basis such standards are enforced and maintained.

Management's  objective in establishing  lending and investment  standards is to
manage  the risk of loss and  provide  for  income  generation  through  pricing
policies.  To effectuate this policy, we make commercial real estate and farming
loans with one year or less fixed maturity.

The loan portfolio is regularly reviewed and management determines the amount of
loans to be charged-off.  In addition, such factors as Volunteer's previous loan
loss  experience,  prevailing  and  anticipated  economic  conditions,  industry
concentrations  and the overall  quality of the loan  portfolio are  considered.
While  management  uses available  information to recognize  losses on loans and
real estate owned,  future  additions to the allowance may be necessary based on
changes in economic conditions. In addition,  various regulatory agencies, as an
integral part of their examination  process,  periodically review the allowances
for losses on loans and real  estate  owned.  Such  agencies  may  require us to
recognize additions to the allowances based on their judgments about information
available at the time of their  examinations.  In addition,  any loan or portion
thereof which is classified as a "loss" by regulatory examiners is charged-off.

The reserve for loan losses is  increased  by  provisions  charged to  operating
expense.  The reserve is reduced by  charging  off loans or portions of loans at
the time they are deemed by management to be  uncollectible  and increased  when
loans  previously  charged off are  recovered.  The  resulting  reserve for loan
losses is viewed by management as a single,  unallocated  reserve  available for
all loans and, in  management's  opinion,  is adequate to provide for reasonably
foreseeable  potential loan losses.  Rules and formulas relative to the adequacy
of the reserve,  although  useful as guidelines to  management,  are not rigidly
applied. The reserve, however, is determined by management based on formulas and
techniques  applied by the Bank's  regulatory  agencies.  The  reserve  for loan
losses was  $1,110,481 at year end 2002, or 1.63% of loans  outstanding,  net of
unearned income, compared to $908,016 or 1.24% at year end 2001.

                                     - 12 -

<PAGE>

RESERVE FOR LOAN LOSSES

The following  table presents the data related to  Volunteer's  reserve for loan
losses for the years ended December 31, 2002 and 2001:

                                                            December 31,
                                                        -------------------
                                                        2002            2001
                                                        ----            ----
(In thousands)

Balance at beginning of period                       $  908           $  986
Charge offs:
  Commercial, financial and agricultural               (174)             (32)
  Real estate mortgage                                  (90)             (64)
  Installment loans to individuals                     (371)            (271)
                                                     ------           ------
                                                       (635)            (367)
                                                     ------           ------

Recoveries:
  Commercial, financial and agricultural                  7
  Real estate mortgage                                                     4
  Installment loans to individuals                       35               20
                                                     ------           ------
                                                         42               24
                                                     ------           ------
Net charge offs                                        (593)            (343)
                                                     ------           ------
Additions charged to operations                         795              265
                                                     ------           ------
Balance at end of period                             $1,110           $  908
                                                     ------           ------
Ratio of net charge offs during the period to
  average loans outstanding during the period          0.85%            0.46%
                                                     ------           ------
Average allowance for loan losses to average
  total loans                                          1.43%            1.29%
                                                     ------           ------

At December 31, 2002 and 2001,  the  allowance  for loan losses was allocated as
follows:
(In thousands)

<TABLE>
<CAPTION>
                                                        December 31, 2002                 December 31, 2001
                                                        -------------------------------------------------------
                                                                 Percent of                         Percent of
                                                        Amount    category                 Amount    category
                                                        ------   ----------               -------   ----------
<S>                                                    <C>        <C>                       <C>      <C>
  Commercial, financial and agricultural               $  236      10.96%                   $ 62      15.36%
  Real estate mortgage                                    178      74.42%                    221      63.71%
  Installment loans to individuals                        696      14.62%                    625      20.93%
                                                       ------     -------                   ----      ------
                                                       $1,110     100.00%                   $908     100.00%
                                                       ------     -------                   ----     -------
</TABLE>

The  allocation of the allowance is presented  based in part on  evaluations  of
past history and  composition  of the loan  portfolio.  Since these  factors are
subject to change,  the current  allocation of the allowance is not  necessarily
indicative of the breakdown of future losses.

                                     - 13 -

<PAGE>

The following table sets forth  information with respect to nonperforming  loans
of Volunteer on the dates  indicated.  Accrual of interest is discontinued  when
there is  reasonable  doubt as to the full,  timely  collections  of interest or
principal.  When a loan becomes  contractually  past due 90 days with respect to
interest or principal,  it is reviewed and a determination is made as to whether
it should be placed on  nonaccrual  status.  When a loan is placed on nonaccrual
status,  all interest  previously  accrued but not collected is reversed against
current period interest income.  Income on such loans is then recognized only to
the extent that cash is received and where the future collection of principal is
probable. Interest accruals are resumed on such loans only when they are brought
fully  current with respect to principal  and interest and when, in the judgment
of management,  the loans are estimated to be fully  collectible as to principal
and interest.  Restructured  loans are those loans on which concessions in terms
have been granted  because of a  borrower's  financial  difficulty.  Interest is
generally accrued on such loans in accordance with the new terms.

Non-performing assets (In thousands)
<TABLE>
<CAPTION>
                                                                                      December 31
                                                                                ------------------------
                                                                                   2002           2001
                                                                                   ----           ----
<S>                                                                                <C>          <C>

Nonaccrual loans                                                                   $ 923        $  619
Restructured loans                                                                     -             -
Other loans past due 90 days or more to principal or interest payments             $ 673        $1,640
Non-performing loans as a percentage of net loans before allowance
  for loan losses                                                                   2.34%         3.09%
Allowance for loan losses as a percentage of nonperforming loans                   69.55%        40.19%
</TABLE>

CAPITAL RESOURCES/LIQUIDITY

Of primary importance to depositors,  creditors and regulators is the ability to
have readily available funds sufficient to repay fully maturing liabilities. Our
liquidity,  represented  by cash and cash due  from  banks,  is a result  of its
operating,  investing  and  financing  activities.  In order to insure funds are
available at all times,  we devotes  resources to  projecting on a monthly basis
the amount of funds which will be required and  maintains  relationships  with a
diversified  customer base so funds are accessible.  Liquidity  requirements can
also be met through  short-term  borrowings  or the  disposition  of  short-term
assets which are generally matched to correspond to the maturity of liabilities.

Although we have no formal liquidity policy,  in the opinion of management,  its
liquidity  levels are  considered  adequate.  We are not subject to any specific
liquidity  requirements  imposed by  regulatory  orders.  The Bank is subject to
general  FDIC  guidelines  which do not  require a minimum  level of  liquidity.
Management  believes  its  liquidity  ratios  meet or exceed  these  guidelines.
Management does not know of any trends or demands which are reasonably likely to
result in liquidity increasing or decreasing in any material manner.

The following table sets forth liquidity ratios for the periods indicated:

                                                        2002            2001
                                                        ----            ----
Average loans to average deposits                      68.78%          70.07%


IMPACT OF INFLATION AND CHANGING PRICES.

The consolidated  financial statements and related  consolidated  financial data
presented  herein  have been  prepared in  accordance  with  generally  accepted
accounting  principles  which require the measurement of financial  position and
operating results in terms of historical dollars without considering the changes
in the relative  purchasing  power of money over time and due to inflation.  The
impact of  inflation  on  operations  of  Volunteer  is  reflected  in increased
operating costs. Unlike most industrial  companies,  virtually all of our assets
and liabilities are monetary in nature. As a result,  interest rates have a more
significant  impact on our  performance  than the  effects of general  levels of
inflation.  Interest rates do not  necessarily  move in the same direction or in
the same magnitude as the price of goods and services.

CAPITAL ADEQUACY

Capital adequacy refers to the level of capital required to sustain asset growth
over time and to absorb losses. The objective of our management is to maintain a
level of  capitalization  that is  sufficient  to take  advantage of  profitable
growth opportunities while meeting regulatory requirements.  This is achieved by
improving   profitability  through  effectively  allocating  resources  to  more
profitable businesses,  improving asset quality,  strengthening service quality,
and  streamlining  costs. The primary measures used by management to monitor the
results of these  efforts  are the ratios of average  equity to average  assets,
average tangible equity to average  tangible  assets,  and average equity to net
loans.

The  Federal  Reserve  Board  has  adopted  capital  guidelines   governing  the
activities of bank holding  companies.  These guidelines require the maintenance
of an amount of capital  based on  risk-adjusted  assets so that  categories  of
assets with  potentially  higher  credit risk will require more capital  backing
than assets with lower risk. In addition, banks

                                     - 14 -

<PAGE>



and bank holding  companies  are required to maintain  capital to support,  on a
risk-adjusted   basis,   certain  off-balance  sheet  activities  such  as  loan
commitments.

The capital  guidelines  classify capital into two tiers,  referred to as Tier I
and Tier II. Under risk-based  capital  requirements,  total capital consists of
Tier I capital which is generally common  stockholders' equity less goodwill and
Tier II capital  which is primarily a portion of the  allowance  for loan losses
and certain  qualifying  debt  instruments.  In determining  risk-based  capital
requirements,  assets  are  assigned  risk-weights  of  0%  to  100%,  depending
primarily on the regulatory  assigned levels of credit risk associated with such
assets.   Off-balance   sheet  items  are  considered  in  the   calculation  of
risk-adjusted  assets through conversion factors  established by the regulators.
The framework for calculating risk-based capital requires banks and bank holding
companies to meet the regulatory  minimums of 4% Tier I and 8% total  risk-based
capital.  In  1990  regulators  added a  leveraged  computation  to the  capital
requirements, comparing Tier I capital to total average assets less goodwill.

Our consolidated capital ratios are set forth below. See Note 12 to the Notes to
Consolidated Financial Statements for Bank-only capital ratios.


                                               December 31        December 31
                                                   2002              2001
                                                   ----              ----

(Dollars in thousands)
Capital:
Tier I capital:
        Stockholders' common equity             $  6,834         $  6,132
        Accumulated comprehensive income            (355)              15
         Dissallowed intangibles                    (131)            (131)
                                                --------         --------
              Total Tier I capital                 6,348            6,016

Tier II capital:
        ALL                                          867              907
                                                --------         --------
                        Total capital           $  7,215         $  6,923
                                                --------         --------

Risk-adjusted assets                            $ 69,115         $ 72,575

Quarterly average assets                        $111,032         $114,415

Ratios:
Tier I capital to risk-adjusted assets              9.18%            8.29%
Tier II capital to risk-adjusted assets             1.25%            1.25%
Total capital to risk-adjusted assets              10.44%            9.54%
Leverage - Tier I capital to quarterly
  average assets less disallowed intangibles        5.72%            5.26%

The Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
established five capital  categories for banks and bank holding  companies.  The
bank regulators  adopted  regulations  defining these five capital categories in
September 1992.  Under these new regulations each bank is classified into one of
the five categories based on its level of risk-based capital as measured by Tier
I  capital,  total  risk-based  capital,  and  Tier I  leverage  ratios  and its
supervisory ratings.

                                     - 15 -

<PAGE>

The following table lists the five categories of capital and each of the minimum
requirements for the three risk-based capital ratios.
<TABLE>
<CAPTION>

                                                                  Total Risk-Based    Tier I Risk-Based    Leverage
                                                                     Capital Ratio      Capital Ratio       Ratio
                                                                     -------------    -------------        ------------
<S>                                                                <C>                 <C>                 <C>

Well-capitalized.....................................              10% or above        6% or above         5% or above
Adequately capitalized...............................               8% or above        4% or above         4% or above
Undercapitalized.....................................               Less than 8%       Less than 4%        Less than 4%
Significantly undercapitalized.......................               Less than 6%       Less than 3%        Less than 3%
Critically undercapitalized..........................                    --                 --             2% or less

</TABLE>

On December 31, 2002, the Bank and Volunteer  exceeded the  regulatory  minimums
and qualified  under the  regulations as a  well-capitalized  institution and an
adequately capitalized institution, respectively.

CERTAIN REGULATORY CONSIDERATIONS

As  a  bank  holding  company,  Volunteer  is  subject  to  the  regulation  and
supervision  of the  Board of  Governors  of the  Federal  Reserve  System  (the
"Federal  Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). Under the BHCA, bank holding companies may not in general directly
or  indirectly  acquire the  ownership  or control of more than 5% of the voting
shares or substantially all the assets of any company, including a bank, without
the prior  approval of the Federal  Reserve  Board.  The BHCA also restricts the
types of activities  in which a bank holding  company and its  subsidiaries  may
engage. Generally, activities are limited to banking and activities found by the
Federal  Reserve  Board to be so  closely  related  to banking as to be a proper
incident thereto.

In addition,  the BHCA  prohibits the Federal  Reserve  Board from  approving an
application  by a bank  holding  company  to  acquire  shares  of a bank or bank
holding  company  located  outside the acquiror's  principal state of operations
unless such an acquisition is specifically authorized by statute in the state in
which the bank or bank  holding  company  whose  shares  are to be  acquired  is
located. Tennessee has adopted legislation that authorizes nationwide interstate
bank  acquisitions,  subject  to  certain  state law  reciprocity  requirements,
including  the  filing of an  application  with and  approval  of the  Tennessee
Commissioner  of Financial  Institutions.  The Tennessee  Bank  Structure Act of
1974, as amended,  restricts the acquisition by bank holding  companies of banks
in Tennessee.  A bank holding  company is prohibited  from acquiring any bank in
Tennessee  as long as banks  that it  controls  retain  30% or more of the total
deposits in individual,  partnership and corporate demand and other  transaction
accounts and in savings  accounts  and time  deposits in all  federally  insured
financial  institutions  in  Tennessee,   subject  to  certain  limitations  and
exclusions.  Also,  under this act, no bank holding company may acquire any bank
in  operation  for less than five years or begin a de novo bank in any county in
Tennessee  with a population,  in 1970,  of 200,000 or less,  subject to certain
exceptions.

Under Tennessee law, branch banking is permitted in any county in the state.

The Bank is a Tennessee  state-chartered  bank and is subject to the regulations
of and supervision by the Federal Deposit Insurance  Corporation (the "FDIC") as
well as the  Department  of Financial  Institutions,  Tennessee's  state banking
authority.  The Bank is also subject to various  requirements  and  restrictions
under federal and state law, including requirements to maintain reserves against
deposits, restrictions on the types and amounts of loans that may be granted and
the  interest  that may be  charged  thereon  and  limitations  on the  types of
investments  that  may be made  and the type of  services  that may be  offered.
Various consumer laws and regulations also affect the operations of the Bank. In
addition  to  the  impact  of   regulation,   commercial   banks  are   affected
significantly  by the  actions of the  Federal  Reserve  Board as it attempts to
control  the money  supply and credit  availability  in order to  influence  the
economy.

As a result  of  certain  findings  in the  Tennessee  Department  of  Financial
Institution's  Report of Examination  dated June 4, 2001, the Board of Directors
of Bank entered into a Memorandum of  Understanding  (Memorandum),  dated August
16,  2001,  with the  Commissioner  of the  Tennessee  Department  of  Financial
Institutions and the Memphis Regional  Director of the Federal Deposit Insurance
Corporation.  A Memorandum of Understanding is an informal  administrative  tool
for  institutions  that have some weaknesses that if not properly  addressed and
corrected  could lead to supervisory  concern  requiring  formal  administrative
action.  The areas addressed in the Memorandum cover capital adequacy,  laws and
regulations,  data  processing  audit and  review,  investment  policy  maturity
strategies, adequate documentation of each of the foregoing but primarily credit
administration.  As a  result,  the Board  has  revised  a number of the  Bank's
policies  and  procedures   including  its  loan  policy  and  has  incorporated
recommendations  designed to  strengthen  credit  quality and the Bank's  review
procedures regarding loan loss reserve adequacy. Management of Volunteer and the
Bank believe that the Bank is in substantial  compliance  with the provisions of
the Memorandum.

As a result  of  certain  findings  in the  Federal  Reserve  Bank's  review  of
Volunteer  as of  September  17, 2002,  Volunteer's  Board of Directors  adopted
certain  Board  Resolutions  as of  October  31,  2002.  Board  Resolutions  are
recommendations of the Federal Reserve adopted by Volunteer's Board of Directors
requesting that certain  actions be taken to strengthen the financial  condition
of Volunteer and its subsidiary.  The areas  addressed in the Board  Resolutions
include  restrictions on incurring  additional debt,  declaration and payment of
dividends  to  Volunteer's  shareholders,   and  certain  capital  transactions.
Management of Volunteer  believes that  Volunteer is in  substantial  compliance
with the provisions of the Resolutions.

                                     - 16 -

<PAGE>

PAYMENT OF DIVIDENDS

Volunteer is a legal entity  separate and distinct from its banking  subsidiary.
The  principal  source of cash  flow of  Volunteer,  including  cash flow to pay
dividends  on its stock or  principal  (premium,  if any) and  interest  on debt
securities,  is dividends  from the Bank.  There are  statutory  and  regulatory
limitations on the payment of dividends by the Bank to Volunteer,  as well as by
Volunteer to its shareholders.

The Bank is subject to the Tennessee  Banking Act, which provides that dividends
will be paid out of undivided profits.  Capital surplus,  however, must equal or
exceed 50% of capital stock, and in the event capital surplus falls below 50% of
capital stock, no dividends may be paid until net profits have been  transferred
to capital  surplus so that it equals 50% of capital stock.  Thereafter,  10% of
net profits must be transferred to capital surplus prior to payment of dividends
until capital  surplus  equals  capital  stock.  The Bank is also subject to the
minimum capital  requirements of the FDIC which impact the Bank's ability to pay
dividends.  If the Bank fails to meet these standards, it may not be able to pay
dividends or to accept additional  deposits because of regulatory  requirements.
See "Certain Regulatory Considerations."

Under  current  Tennessee  tax law, cash  dividends  paid by Tennessee  banks to
Tennessee  residents are exempt from state income tax.  Under federal income tax
law, dividends paid by the Bank would be considered taxable.

If, in the  opinion of the  applicable  federal  bank  regulatory  authority,  a
depository  institution or a holding company is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial condition of
the  depository  institution  or holding  company,  could include the payment of
dividends),  such authority may require that such institution or holding company
cease and desist from such practice. The federal banking agencies have indicated
that  paying  dividends  that  deplete a  depository  institution's  or  holding
company's  capital  base to an  inadequate  level  would be such an  unsafe  and
unsound banking practice.  Moreover,  the Federal Reserve Board, the Comptroller
of the Currency and the FDIC have issued  policy  statements  which provide that
bank holding companies and insured depository institutions generally should only
pay dividends out of current operating earnings.

The  payment of  dividends  by  Volunteer  and the Bank may also be  affected or
limited by other factors,  such as the requirement to maintain  adequate capital
above regulatory guidelines.

TRANSACTIONS WITH AFFILIATES

There are  various  legal  restrictions  on the extent to which we can borrow or
otherwise obtain credit from the Bank. There are also legal  restrictions on the
Bank's  purchases of or  investments in the securities of and purchase of assets
from  Volunteer,  a bank's  loans or  extensions  of  credit  to third  parties,
collateralized  by the securities or  obligations of Volunteer,  the issuance of
guaranties,  acceptances  and  letters  of credit on  behalf of  Volunteer,  and
certain bank  transactions  with  Volunteer,  or with respect to which Volunteer
acts as agent,  participates  or has a  financial  interest.  Subject to certain
limited exceptions,  the Bank may not extend credit to Volunteer or to any other
affiliate in an amount which exceeds 10% of the Bank's capital stock and surplus
and may not extend credit in the aggregate to such affiliates in an amount which
exceeds  20%  of its  capital  stock  and  surplus.  Further,  there  are  legal
requirements as to the type,  amount and quality of collateral which must secure
such extensions of credit by the Bank to Volunteer or to such other  affiliates.
Also, extensions of credit and other transactions between the Bank and Volunteer
or such other  affiliates  must be on terms and under  circumstances,  including
credit  standards,  that are  substantially the same or at least as favorable to
the  Bank as those  prevailing  at the time  for  comparable  transactions  with
non-affiliated  companies.  Also,  Volunteer and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.

HOLDING COMPANY STRUCTURE AND SUPPORT OF THE BANK

Because  Volunteer is a holding company,  its right to participate in the assets
of any  subsidiary  upon the  latter's  liquidation  or  reorganization  will be
subject to the prior claims of the subsidiary's  creditors (including depositors
in the case of bank subsidiaries) except to the extent that Volunteer may itself
be a creditor with recognized claims against the subsidiary.

Under Federal Reserve Board policy,  Volunteer is expected to act as a source of
financial  strength to, and commit resources to support,  the Bank. This support
may be  required  at times  when,  absent such  Federal  Reserve  Board  policy,
Volunteer may not be inclined to provide it. In addition, any capital loans by a
bank holding company to any of its subsidiary  banks are subordinate in right of
payment to deposits and to certain other  indebtedness of such subsidiary  bank.
In the event of a bank holding company's bankruptcy,  any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of a
subsidiary  bank will be assumed by the  bankruptcy  trustee  and  entitled to a
priority of payment.

CROSS-GUARANTEE LIABILITY

Under the Federal Deposit Insurance Act (the "FDIA"),  a depository  institution
insured by the FDIC can be held liable for any loss  incurred by, or  reasonably
expected to be incurred by, the FDIC after August 9, 1989 in connection with (i)
the default of a commonly controlled FDIC-insured depository institution or (ii)
any  assistance  provided by the FDIC to any  commonly  controlled  FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the  appointment  of a  conservator  or  receiver  and "in danger of default" is
defined  generally as the  existence  of certain  conditions  indicating  that a
default is likely to occur in the absence of regulatory  assistance.  The FDIC's
claim  for  damages  is  superior  to  claims  of  shareholders  of the  insured
depository  institution  or its holding  company but is subordinate to claims of
depositors,  secured  creditors  and  holders of  subordinated  debt (other than
affiliates) of the commonly controlled insured depository institution.  The Bank
is subject to these cross-

                                     - 17 -

<PAGE>

guarantee  provisions.  As a result, any loss suffered by the FDIC in respect of
the Bank would likely  result in assertion of the cross-  guarantee  provisions,
and a potential loss of Volunteer's investment in the Bank.

FDICIA

The Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
which was enacted on December 19,  1991,  substantially  revised the  depository
institution  regulatory and funding provisions of the FDIA and made revisions to
several other federal banking statutes.  Among other things, FDICIA requires the
federal  banking  regulators  to take "prompt  corrective  action" in respect of
FDIC-insured   depository   institutions   that  do  not  meet  minimum  capital
requirements.   FDICIA  establishes  five  capital  tiers:  "well  capitalized,"
"adequately capitalized,"  "undercapitalized,"  "significantly undercapitalized"
and "critically  undercapitalized." Under applicable regulations, a FDIC-insured
depository  institution  is defined to be well  capitalized  if it  maintains  a
Leverage  Ratio of at least 5%, a risk adjusted Tier 1 Capital Ratio of at least
6% and a Total  Capital Ratio of at least 10% and is not subject to a directive,
order or written  agreement to meet and maintain  specific  capital  levels.  An
insured  depository  institution  is defined to be adequately  capitalized if it
meets all of its minimum capital  requirements as described  above. In addition,
an insured  depository  institution  will be considered  undercapitalized  if it
fails to meet any minimum required measure, significantly undercapitalized if it
is significantly below such measure and critically  undercapitalized if it fails
to  maintain  a level of  tangible  equity  equal  to not less  than 2% of total
assets.   An  insured   depository   institution  may  be  deemed  to  be  in  a
capitalization  category  that is lower than is indicated by its actual  capital
position if it receives an unsatisfactory examination rating.

The  capital-based  prompt  corrective  action  provision  of  FDICIA  and their
implementing  regulations apply to FDIC- insured depository institutions and are
not directly  applicable to holding  companies which control such  institutions.
However,  the Federal  Reserve  Board has indicated  that,  in  regulating  bank
holding companies,  it will take appropriate action at the holding company level
based on an assessment of the effectiveness of supervisory  actions imposed upon
subsidiary depository institutions pursuant to such provisions and regulations.

FDICIA generally  prohibits an FDIC-insured  depository  institution from making
any  capital  distribution  (including  payment  of  dividends)  or  paying  any
management  fee to its  holding  company  if the  depository  institution  would
thereafter be  undercapitalized.  Undercapitalized  depository  institutions are
subject to  restrictions  on  borrowing  from the  Federal  Reserve  System.  In
addition,   undercapitalized  depository  institutions  are  subject  to  growth
limitations and are required to submit capital  restoration  plans. A depository
institution's  holding  company must guarantee the capital plan, up to an amount
equal to the lesser of 5% of the depository  institution's assets at the time it
becomes  undercapitalized  or the  amount  of the  capital  deficiency  when the
institution  fails to comply with the plan. The federal banking agencies may not
accept a capital plan without determining,  among other things, that the plan is
based on  realistic  assumptions  and is  likely to  succeed  in  restoring  the
depository institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.

Significantly  undercapitalized  depository  institutions  may be  subject  to a
number of requirements  and  restrictions,  including  orders to sell sufficient
voting  stock to become  adequately  capitalized,  requirements  to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized  depository  institutions  are  subject  to  appointment  of  a
receiver  or  conservator  generally  within  90 days of the date on which  they
became critically undercapitalized.

We believe that at December 31, 2002, the Bank was well capitalized under the
criteria discussed above.

FDICIA contain numerous other  provisions,  including new accounting,  audit and
reporting  requirements,  beginning in 1995 termination of the "too big to fail"
doctrine except in special cases,  limitations on the FDIC's payment of deposits
at foreign  branches,  new regulatory  standards in such areas as asset quality,
earnings and  compensation  and revised  regulatory  standards  for, among other
things, powers of state banks, real estate lending and capital adequacy.  FDICIA
also requires that a depository  institution provide 90 days prior notice of the
closing of any branches.

Various other  legislation,  including  proposals to revise the bank  regulatory
system and to limit the investments that a depository  institution may make with
insured funds, is from time to time introduced in Congress.

INTERSTATE ACT

The  Riegle-Neal  Interstate  Banking  and  Branching  Efficiency  Act  of  1994
("Interstate  Act"), which was enacted on September 29, 1994, among other things
and subject to certain conditions and exceptions, permits on an interstate basis
(i) bank holding  company  acquisitions  commencing one year after  enactment of
banks (of a minimum age of up to five years as  established  by state law in any
state),  (ii)  mergers of national and state banks after May 31, 1997 unless the
home state of either bank has opted out of the interstate bank merger provision,
(iii)  branching  de novo by  national  and  state  banks if the host  state has
opted-in to this provision of the  Interstate  Act, and (iv) certain bank agency
activities  after one year after  enactment.  The  Interstate Act contains a 30%
intrastate  deposit  cap,  except  for the  initial  acquisition  in the  state,
restriction that applies to certain interstate  acquisitions  unless a different
intrastate  cap  has  been  adopted  by the  applicable  state  pursuant  to the
provisions of the  Interstate  Act and a 10% national  deposit cap  restriction.
Regulations  have not yet been issued under the Interstate  Act. A bill has been
enacted by the Tennessee  legislature  which  repeals the  Tennessee  Reciprocal
Banking  Act,  amends  the  Tennessee  Bank  Structure  Act of 1974,  and amends
Tennessee's  bank branching laws by opting in to the Interstate Act.  Management
cannot predict the extent to which the business of Volunteer and the Bank may be
affected.

                                     - 18 -

<PAGE>

BROKERED DEPOSITS AND PASS-THROUGH INSURANCE

The FDIC has adopted  regulations under FDICIA governing the receipt of brokered
deposits  and pass-  through  insurance.  Under the  regulations,  a bank cannot
accept or rollover or renew brokered  deposits unless (i) it is well capitalized
or (ii) it is adequately  capitalized  and receives a waiver from the FDICIA.  A
bank that cannot  receive  brokered  deposits  also cannot offer  "pass-through"
insurance on certain employee benefit  accounts.  Whether or not it has obtained
such a waiver,  an adequately  capitalized  bank may not pay an interest rate on
any deposits in excess of 75 basis points over certain index  prevailing  market
rates specified by regulation.  There are no such restrictions on a bank that is
well  capitalized.  Because we believe that the Bank was well  capitalized as of
December 31, 2001,  we believe the brokered  deposits  regulation  will have not
material effect on the funding or liquidity of the Bank.

FDIC INSURANCE PREMIUMS

The Bank is required to pay semiannual FDIC deposit  insurance  assessments.  As
required  by  FDICIA,  the FDIC  adopted a  risk-based  premium  schedule  which
increased the assessment rates for most  FDIC-insured  depository  institutions.
Under the  schedule,  the premiums  initially  range from $.23 to $.31 for every
$100 of deposits. Each financial institution is assigned to one of three capital
groups -- well capitalized,  adequately  capitalized or  undercapitalized -- and
further  assigned to one of three subgroup  within a capital group, on the basis
of  supervisory  evaluations  by  the  institution's  primary  federal  and,  if
applicable,   state   supervisors   and  other   information   relevant  to  the
institution's  financial  condition  and the risk posed to the  applicable  FDIC
deposit  insurance  fund. The actual  assessment rate applicable to a particular
institution   will,   therefore,   depend  in  part  upon  the  risk  assessment
classification so assigned to the institution by the FDIC.

Under the FDIA,  insurance  of  deposits  may be  terminated  by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices,  is in
an unsafe or unsound  condition  to  continue  operations  or has  violated  any
applicable law,  regulation,  rule, order or condition imposed by a federal bank
regulatory agency.

DEPOSITOR PREFERENCE

The Omnibus Budget Reconciliation Act of 1993 provides that deposits and certain
claims for administrative  expenses and employee compensation against an insured
depositary institution would be afforded a priority over other general unsecured
claims  against  such an  institution,  including  federal  funds and letters of
credit,  in the "liquidation or other  resolution" of such an institution by any
receiver.

EFFECT OF GOVERNMENTAL POLICIES

The Bank is affected by the policies of  regulatory  authorities,  including the
Federal Reserve System.  An important  function of the Federal Reserve System is
to regulate the national money supply.  Among the instruments of monetary policy
used by the  Federal  Reserve  are:  purchases  and  sales  of  U.S.  Government
securities in the  marketplace;  changes in the discount rate, which is the rate
any  depository  institution  must pay to borrow from the Federal  Reserve;  and
changes  in  the  reserve   requirements  of  depository   institutions.   These
instruments are effective in influencing economic and monetary growth,  interest
rate levels and inflation.

The  monetary  policies of the  Federal  Reserve  System and other  governmental
policies  have had a significant  effect on the operating  results of commercial
banks in the past and are  expected to continue to do so in the future.  Because
of changing  conditions in the national economy and in the money market, as well
as the result of actions by monetary and fiscal authorities,  it is not possible
to predict with certainty future changes in interest rates, deposit levels, loan
demand or the business  and  earnings of  Volunteer  and the Bank or whether the
changing  economic  conditions  will  have a  positive  or  negative  effect  on
operations and earnings.

Bills are pending before the United States Congress and the Tennessee General
Assembly which could affect the business of Volunteer and the Bank, and there
are indications that other similar bills may be introduced in the future. It
cannot be predicted whether or in what form any of these proposals will be
adopted or the extent to which the business of Volunteer and the Bank
subsidiaries may be affected thereby.

EMPLOYEES

At December 31,  2002,  Volunteer  had a total of 57  employees  with 4 of those
employed on a part-time basis.

ITEM 2.  DESCRIPTION OF PROPERTY

The  Bank's  main  office is  located  at 210 East Main  Street in  Rogersville,
Tennessee. The property consists of a masonry building with approximately 10,000
square  feet,  7,500  square  feet of which is used by the Bank.  The Bank has a
branch in Sneedville,  Tennessee  which is a masonry  building of  approximately
7,000  square  feet,  which is  constructed  on a half acre of land owned by the
Bank.  The Bank  operates  a third  location  as a branch  in Church  Hill.  All
facilities have improvements  including  drive-through  tellers,  vaults,  night
depository and certain facilities have safe deposit boxes. During 2002, the Bank
acquired a building  adjacent to its main office which is being  utilized by the
loan  administration  department on the first floor and as storage on the second
floor.

ITEM 3.  LEGAL PROCEEDINGS

The Bank is currently  involved in litigation as the plaintiff in a suit against
another financial  institution involving a participation loan purchase from that
financial institution.  In the opinion of management, no material adverse effect
on the financial  position of Volunteer and the Bank is  anticipated as a result
of this litigation.

                                     - 19 -

<PAGE>

There are no other material pending legal  proceedings to which Volunteer or the
Bank is a party or of which any of their  properties are subject;  nor are there
material  proceedings  known  to us  to  be  contemplated  by  any  governmental
authority;  nor are there other  material  proceedings  known to us,  pending or
contemplated,  in which any  director,  officer or  affiliate  or any  principal
security  holder of Volunteer,  or any associate of any of the  foregoing,  is a
party or has an interest adverse to Volunteer or the Bank.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

We conducted a public offering of our Common Stock in 1997 at a price of $15 per
share (the  "Offering").  There is no established  public market for the shares.
Management  is aware that isolated  transactions  in the Common Stock occur from
time to time. To our best  knowledge the most recent  transaction  in the Common
Stock was December 17, 1997 and was for the price of $15.00 per share.

There were 483 holders of record of the Common Stock as of March 17, 2003.

Payment of  dividends  is at the  discretion  of the board of  directors  but is
presently  subject to the approval of the Federal Reserve in accordance with the
Board  Resolutions  adopted  October 31, 2002.  While we have paid  dividends in
recent years, the board of directors cannot predict when such dividends, if any,
will be made. The payment of dividends, if any, shall at all times be subject to
the payment of our expenses,  the maintenance of reasonable  working capital and
risk reserves, and minimum capitalization requirements for state banks.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The  purpose of this  discussion  and  analysis  is to provide the reader with a
concise  description of our financial  condition and changes therein and results
of our operations and the Bank for the years ended December 31, 2002 and 2001.

This  discussion  and analysis is intended to complement  the audited  financial
statements  and  footnotes  and  the  supplemental  financial  data  and  charts
appearing elsewhere in this report, and should be read in conjunction therewith.
This discussion and analysis will focus on the following major areas: Results of
Operations,  Financial Position, Capital Resources, Asset Quality, and Liquidity
and Interest-Sensitivity.

RESULTS OF OPERATIONS

Net income for 2002 was $386,577 decreasing $240,082 compared with net income of
$626,659  for 2001.  Our return on average  assets was 0.34% for 2002 or 64% the
return  on  average  assets  of 0.53% for 2001.  Our  return on  average  equity
decreased to 5.87% for 2002 compared with 11.19% for 2001.

Our net income for 2002 and 2001 were impacted by the following:

     --   The  yield on  average  interest  earnings  assets  was 7.01% for 2002
          decreasing 131 basis points from 8.32% for 2001.

     --   Average earning assets  decreased  $4,894,000 to $103,966,000 for 2002
          compared to $108,860,000 for 2001.

     --   Yield on average  interest  bearing  liabilities  decreased  219 basis
          points from 4.83% in 2001 to 2.64% for 2002.

     --   Average  interest   bearing   liabilities   decreased   $6,416,000  to
          $92,614,000 for 2002 compared to $99,030,000 for 2001.

     --   Average  interest  earning  assets to average  total assets  increased
          slightly from 92.67% for 2001 to 92.70% for 2002.

     --   Average interest bearing liabilities to average total assets decreased
          from 84.30% for 2001 to 82.58% for 2002.

As a result of the  foregoing  net interest  income as a  percentage  of average
interest  earning  assets  increased  from  3.92%  for 2001 to 4.66%  for  2002.
Accordingly,  net interest  income for 2002 of $4,715,248  was $508,424  greater
than net interest income of $4,206,824 for 2001.

Net interest  income for 2002 was positively  impacted by a decrease in interest
expense of $68,000 on parent  company only  borrowings.  Average  parent company
only borrowings  were $1,841,000 for 2002 or a decrease of $345,000  compared to
2001 of $2,186,000.  The decrease of $68,000 was  attributable  to a decrease in
the average rate on such outstanding borrowings from 6.36% for 2001 to 3.86% for
2002.  The  borrowing  was  incurred  in order to  increase  the  capital of our
subsidiary bank. Without this borrowing,  the Bank would not have had sufficient
capital to permit the Bank to open branches in Rogersville and Church Hill.

                                     - 20 -

<PAGE>

Volunteer is in violation of certain loan covenants with respect to this loan in
that annualized earnings to tangible assets are less than the 0.75% required and
the ratio of  nonperforming  assets is greater than 2.5%.  These violations have
not been waived by the lender.

Because  of these  violations,  the  lender  may,  at its  option,  by notice to
Volunteer declare the note in default. In such an event Volunteer would have ten
days to remedy compliance with all loan covenants. If Volunteer did not or could
not comply with all loan covenants  within such ten day period the note would be
in default.  In such a case the lender may declare the note  immediately due and
payable and among other things  proceed to  foreclose  upon 100% of the stock of
Citizens Bank of East Tennessee which is pledged as security for the note.

The lender has been  notified by  Volunteer of our  non-compliance  with certain
covenants  of the note  that  could  lead to the  lender  declaring  the note in
default.  However,  the  lender  has not  given us  notification  that we are in
default under the terms of the loan agreement.

Volunteer is in discussions  with the lender and anticipates the lender to first
pursue remedies other than foreclosure.  Accordingly, Volunteer expects that the
note will be  restructured  resulting  in, among other  things,  increasing  the
interest rate on the note and substantially  reducing the final maturity date on
the note. In such a case, there can be no assurance that Volunteer could satisfy
the  restructured  debt without  obtaining new  financing  from other lenders or
funds from a stock  offering.  Further,  there can be no assurance  that a stock
offering by Volunteer  would be  successful  or that new lenders  would  provide
funds to Volunteer.


                                     - 21 -

<PAGE>


The following table indicates the average  balance,  interest income or expense,
average interest rates earned or paid, interest rate spread, and interest margin
for the years ended December 31, 2002 and 2001.

<TABLE>
<CAPTION>

                                                    2002                                           2001
(Fully taxable equivalent)                        Interest      Average                          Interest     Average
(Dollars in thousands except          Average      Income/      Yields/              Average      Income/     Yields/
for per share data)                   Balance      Expense       Rate                Balance      Expense       Rate
                                      -------      -------       ----                -------      -------       ----
<S>                                  <C>            <C>           <C>               <C>            <C>          <C>

Assets:

Interest-earning assets:

Loans net of unearned income         $ 69,672       $5,711        8.20%             $ 74,989       $7,137       9.52%
U.S. Treasury and other U.S.
  government agencies                  23,468        1,117        4.76%               24,585        1,468       5.97%
States and municipalities               5,541          367        6.62%                2,889          190       6.58%
FHLB stock                                361           16        4.43%                  341           23       6.74%
Federal funds sold                      4,924           74        1.50%                6,056          234       3.86%
                                     --------       ------                          --------       ------
    Total interest-earning
      assets/interest income          103,966        7,285        7.01%              108,860        9,052       8.32%
                                     --------       ------                          --------       ------
Cash and due from banks                 2,936                                          2,953
Other assets                            6,250                                          6,626
Allowance for loan losses                (995)                                          (971)
                                     --------                                       --------
    Total                            $112,157                                       $117,468
                                     ========                                       ========

Liabilities and stockholders'
  equity:

Interest-bearing liabilities:

Demand deposits                      $ 19,303          239        1.24%             $ 21,541       $  644                2.99%
Savings                                 7,096          106        1.49%                5,477          135       2.46%
Individual retirement accounts          8,768          284        3.24%                8,829          471       5.33%
Time certificates                      53,857        1,694        3.15%               59,843        3,331       5.57%
FHLB advances                               0            0        0.00%                  162            7       4.32%
Securities sold under repurchase        1,749           50        2.86%                  992           53       5.34%
Note payable                            1,841           71        3.86%                2,186          139       6.36%
                                     --------       ------                          --------       ------
  Total interest-bearing
    liabilities/interest expense       92,614        2,444        2.64%               99,030        4,780       4.83%
                                     --------       ------                          --------       ------
Non-interest bearing demand
  deposits                             12,276                                         11,328
Other liabilities                         677                                          1,510
Stockholders' equity                    6,590                                          5,600
                                     --------                                       --------
  Total                              $112,157                                       $117,468
                                     ========                                       ========
Net interest earnings                               $4,841                                         $4,272
                                                    ------                                         ------
Net interest on interest earning
  assets                                                          4.66%                                         3.92%
                                                                  -----                                         -----

Return on average assets                0.34%                                          0.53%
Return on average equity                5.87%                                         11.19%
Cash dividends declared               $53,903                                        $75,464
Dividend payout ratio                  13.94%                                         12.04%
Net income                           $386,577                                       $626,659

</TABLE>



                                     - 22 -

<PAGE>





Non-interest  expense increased  $574,848 from $3,312,050 for 2001 to $3,886,898
for 2002.  Non-interest  expense as a percentage of average assets  increased by
0.65% from 2.82% in 2001 to 3.47% for 2002.

The following table presents non-interest expense for 2002 compared to 2001 as a
percentage of average assets and the changes therein (in thousands):

NONINTEREST EXPENSE




                                               % Average               % Average
                                  2002           Assets       2001       Assets
                                  ----           ------       ----       ------

Salaries and employee benefits   $1,846          1.65%      $1,743       1.48%
Occupancy, net                      263          0.23%         267       0.23%
Furniture and equipment             399          0.36%         368       0.31%
Directors fees                       68          0.06%          76       0.06%
Advertising                          31          0.03%          30       0.03%
FDIC insurance                       48          0.04%          17       0.01%
Office supplies                     133          0.12%         117       0.10%
Professional services               206          0.18%          75       0.06%
Telephone                            53          0.05%          51       0.04%
Postage and courier                  79          0.07%          60       0.05%
Loss on other real estate owne      299          0.27%          89       0.08%
Other                               462          0.41%         419       0.36%
                                 ------                     ------

                                 $3,887          3.47%      $3,312       2.82%
                                 ======          =====      ======       =====


Non-interest  expenses  increased 17.36% in absolute terms from 2001 to 2002 and
increased as a percentage  of average  total  assets.  The increase is primarily
attributable to losses on other real estate sales, FDIC insurance,  professional
services,   telephone  and  postage  and  courier  expenses.  Occupancy  expense
increased in 2002 by 4.25%  primarily  attributable  to increased  furniture and
equipment  expenses.  Non-interest  expense as a percentage of average assets is
expected to decline as growth in Bank assets is expected to increase faster than
the growth in non-interest expense.

The  provision  for loan losses in 2002 was $795,000 and for 2001 was  $265,000.
The  provision  for loan  losses is the amount  management  deems  necessary  to
maintain a reserve for loan losses at a level  sufficient to meet risks inherent
in the  Bank's  loan  portfolio.  The  level of the  reserve  is  determined  by
management  after  considering  ongoing reviews of the loan portfolio as well as
considering  the  level  and  magnitude  of   non-performing   assets  and  loan
delinquencies,  general  economic  conditions  in the areas served by Volunteer,
historic  loan-loss  experience,  loan mix and the  level of loans  relative  to
reserves.

Non-interest income increased $159,732 from $339,884 in 2001 to $499,616 in 2002
primarily due to an increase in service charges on deposit accounts.

Income tax expense decreased $196,610 from $342,999 in 2001 to $146,389 in 2002.

FINANCIAL POSITION

Our total assets decreased 2.52% or $2.88 million during 2002 to $111.37 million
at year end 2002  from  $114.25  million  at year end  2001.  This  decrease  is
primarily attributable to a decrease of $2.77 million in deposits and securities
sold under repurchase agreements during 2002 to $102.25 million at year end 2002
from $105.2 million at year end 2001.

Portfolio  securities  increased $2.23 million in 2002 to $28.82 million at year
end 2002 from  $26.59  million at year end 2001 while  federal  funds  decreased
$1.83 million during 2002.

Loans  decreased  $4.95 million  during 2002 to $68.12  million at year end 2002
compared to $73.07 million at year end 2001. Real estate and commercial mortgage
loans  increased $4.15 million in 2002 and consumer loans decreased $8.0 million
in 2002.  Real estate  mortgage loans  represented  74.42% of gross  outstanding
loans at year end 2002.  Consumer loans represented  14.62% of gross outstanding
loans at year end 2002.  Commercial loans represented 8.64% of gross outstanding
loans at year end 2002.

                                     - 23 -

<PAGE>

Deposits and securities sold under repurchase agreements decreased $2.77 million
in 2002 from  $105.02  million at year end 2001 to  $102.25  million at year end
2002.

CAPITAL REQUIREMENTS

Our equity  capital was $6.83 million at year end 2002 compared to $6.13 million
at year end 2001. This increase of  approximately  $700,000  consists of our net
income for 2002 of $386,577,  an increase in the accumulated other comprehensive
income of $370,000 less dividends paid of $53,903.

Volunteer  is  a  "small  one-bank   holding  company"  within  the  meaning  of
regulations promulgated by the Board of Governors of the Federal Reserve System.
Accordingly,  Volunteer's capital compliance, for bank holding company purposes,
will be  measured  solely  with  respect  to the Bank and not on a  consolidated
basis.

Management  believes,  as of  December  31,  2002,  that  we  meet  all  capital
requirements  to which we are  subject  and that we are in  compliance  with all
conditions  and  commitments  to banking  regulators  regarding the approval and
opening of branches in Rogersville and Church Hill, Tennessee.  However,  events
beyond our control,  such as a downturn in the local  economy,  could  adversely
affect  future  earnings  and,  consequently,  our ability of to meet our future
minimum capital requirements.

The Bank would be considered "well capitalized" within the applicable regulatory
capital guidelines at December 31, 2002.

LIQUIDITY RESOURCES

Liquidity  management  focuses  on the  need to  meet  both  short-term  funding
requirements  and long-term  growth  objectives.  Primary  sources for liquidity
include deposits,  loan repayments and security repayments or sales of available
for sale securities.

ASSET LIABILITY MANAGEMENT

Our long-term  profitability  depends on properly  priced products and services,
asset  quality  and asset-  liability  management.  Historically,  we have had a
mismatch between the maturities of our assets and liabilities  because customers
have  traditionally  preferred  short-term  deposits and longer-term loans. This
mismatch  makes us  sensitive  to changes in  interest  rates and the  resulting
effect on interest  income and the market value of assets.  We attempt to manage
this  mismatch  and thus  reduce  its  effect  on  earnings  during  periods  of
significant changes in interest rates. Our strategies include the origination of
shorter-term  fixed  rate  loans and  adjustable  rate  loans or loans with call
provisions.  We also emphasize checking accounts and other transaction  accounts
which management believes are less rate sensitive than certificate accounts.

A traditional  measure of interest rate sensitivity and its impact upon the next
years  earnings is our one-year gap position  (total assets subject to repricing
less total liabilities  subject to repricing).  A negative one-year gap position
generally  exposes our  earnings to rising  short term rates over the period and
thus reduced net interest income because current liabilities reprice faster than
current  assets.  However,  this earnings  exposure can be mitigated  during the
period if total asset  growth is  sufficient  such that new assets are priced at
relatively higher rates and new deposit maturities are extended. At December 31,
2002 we had a  cumulative  one year  negative gap of (29.03%) or a net of $29.44
million in liabilities repricing faster than assets.

While the one-year-gap  measure helps provide some information about a financial
institution's  interest  sensitivity,  it does not  predict the trends of future
earnings.

ASSET QUALITY

Non-performing  and other loans past due 90 days or more were $1,595,984 at year
end 2002  compared to  $2,258,495  at year end 2001  representing  a decrease of
$662,511. Non-performing loans as a percentage of net loans before the allowance
for loan  losses  was  2.34% at year end 2002 and  3.09% at year end  2001.  The
reserve  for loan  losses to  non-performing  loans,  which is a measure  of the
Bank's  ability to cover problem  assets with existing  reserves,  was 69.55% at
year end 2002 and 40.19% at year end 2001.  Other real  estate  owned  increased
$96,632 to  $1,241,402 at year end 2002 compared to $1,144,770 at year end 2001.
We had no material  restructured  loans in 2002 or 2001.  Our asset  quality has
deteriorated  as a result of a weakening  economy and a lapse in underwriting at
one of our branches.  Our loan policies and  procedures  have been tightened and
the problems have been addressed.  We intent to continue  aggressive  collection
efforts.

The  level  of  non-accrual   loans  and  other  real  estate  owned  is  mainly
attributable  to a real estate  development  and  commercial  real estate loans.
Management  has adopted more stringent  underwriting  guidelines to address this
problem along with aggressive  collection efforts. In addition,  the Bank hired,
in  February  2002  a  senior  experienced  credit  officer  to  oversee  credit
administration,  including  policies and  procedures,  underwriting,  and credit
analysis.

EFFECTS OF INFLATION AND CHANGING PRICES

The  consolidated  financial  statements  and related  financial  data presented
herein have been  prepared in  accordance  with  generally  accepted  accounting
principles,  which require the  measurement of financial  position and operating
results in terms of historical dollars,  without considering changes in relative
purchasing power over time due to inflation.

                                     - 24 -

<PAGE>



Unlike most industrial companies, virtually all of the assets and liabilities of
a financial  institution  are monetary in nature.  As a result,  interest  rates
generally  have  a  more  significant   impact  on  a  financial   institution's
performance  than does the effect of  inflation.  In the current  interest  rate
environment, the liquidity and maturity structures of our assets and liabilities
are critical to maintenance of acceptable performance levels.

Item 7.  Financial Statements

Index to Consolidated Financial Statements:                                 Page
                                                                            ----

Independent Auditor's Report.................................................F-1

Consolidated Balance Sheets at December 31, 2002 and 2001....................F-2

Consolidated Statements of Earnings for the years ended
  December 31, 2002 and 2001.................................................F-3

Consolidated Statements of Changes in Stockholders'
  Equity for the years ended December 31, 2002 and 2001......................F-4

Consolidated Statements of Cash Flows for the years
  ended December 31, 2002 and 2001...........................................F-5

Notes to Consolidated Financial Statements...................................F-6


Item 8.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
     Financial Disclosure

         None

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons

     Following  is certain  information  regarding  the  nominee  directors  and
executive officers of Volunteer.

     Reed D. Matney  (53)  assumed the  position of Chief  Executive  Officer in
November  1996 and has served as the President  and a Director  since 1994.  Mr.
Matney was employed by First Union  National Bank of Tennessee  until April 1994
and he was employed by the Bank in May 1994.

     G.  Douglas  Price (62) has served as a Director  since 1994.  Mr. Price is
retired and was the former Executive for Hawkins County, Tennessee.

     William E.  Phillips  (55) has served as  Chairman of the Board since 1994.
Mr.  Phillips  is an  attorney  with  the  law  firm  of  Phillips  and  Hale in
Rogersville, Tennessee.

     Gary E. Varnell (56) has served as a Director  since 1994.  Mr.  Varnell is
the  owner  and  operator  of a retail  office  products  store in  Rogersville,
Tennessee.

     George L.  Brooks  (73) has served as a Director  since  1994.  Mr.  Brooks
retired from Citizens Union Bank in 1993 and resides in Rogersville, Tennessee.

     Shirley A. Price (68) has served as a Director  since 1994. Ms. Price is an
insurance agent in Rogersville, Tennessee.

     Leon Gladson  (77) has served as a Director  since 1994.  Mr.  Gladson is a
retired businessman and resides in Rogersville, Tennessee.

     Neil D. Miller (83) has served as a Director  since 1994.  Mr.  Miller is a
farmer in Rogersville, Tennessee.

     M. Carlin Greene (60) has served as a Director  since 1994. Mr. Greene is a
real estate agent and farmer in Sneedville, Tennessee.

     Scott F. Collins (54) has served as a Director  since 1994.  Mr. Collins is
the Hancock County Clerk & Master in Sneedville, Tennessee.

     Lawrence  E. Gray (58) has  served as a Director  since  1994 and  formerly
served as Executive Vice President of the Bank.

     Jim Friddell (52) has served as a Director since 2002. Mr.  Friddell is the
former  president of Tennessee State Bank and currently  resides in Rogersville,
Tennessee.

                                     - 25 -

<PAGE>

     No director of Volunteer is a director or executive officer of another bank
holding company, bank, savings and loan association, or credit union.

     During  2002 the Board of  Directors  of  Volunteer  held 3  meetings.  The
Directors  of  Volunteer  also  serve as  directors  of the  Bank.  The Board of
Directors of the Bank held 15 meetings in 2002.  No director  attended less than
75% of the meetings  held by Volunteer  or the Bank during 2002.  The  Directors
received no  compensation as directors of Volunteer but as directors of the Bank
received $300 for each meeting attended.

     The Board of Directors has three committees.  Messrs. Phillips,  Miller and
Matney serve as the Executive Committee, Messrs. Doug Price, Gladson and Collins
serve as members of the Audit  Committee and Messrs.  Phillips,  Matney,  and G.
Douglas Price serve as members of the Trust Committee.  These persons receive no
compensation as members of such committees.

Item 10. Executive Compensation.

     The following  table sets forth the  aggregate  cash  compensation  paid by
Volunteer  to the chief  executive  officer  of  Volunteer.  No other  executive
officer  of  Volunteer   received  cash   compensation  in  excess  of  $100,000
(determined as of the end of 2002) for the years ended  December 31, 2002,  2001
and 2000.


                                                             Annual Compensation
Name and Position                               Year              Salary ($)
---- --- --------                               ----            ----------
Reed Matney                                     2002              105,000
Chief Executive Officer and President           2001              105,000
                                                2000              100,000


Item 11. Security Ownership of Certain Beneficial Owners and Management

     As of March 15, 2003,  Volunteer's  records  indicated  that the  following
number of shares were  beneficially  owned by (i) each person known by Volunteer
to  beneficially  own more than 5% of  Volunteer's  shares;  (ii)  directors and
persons nominated to become directors of Volunteer and executive  officers;  and
(iii) directors and executive officers of Volunteer as a group.

                                                               Amount and Nature
      Name of                   of  Beneficial Ownership            Percent
      Beneficial Owner            (Number of Shares)              of Class
      ----------------          ------------------------       -----------------
(i)   Ralph T. Hurley...........           85,500                   15.86%
      Rt. 2 Box 157
      Sneedville, TN  37869
(ii)  William E. Phillips(1)....           22,495                    4.17
      Lawrence E. Gray(2).......           18,641                    3.46
      Shirley A. Price..........            7,962                    1.48
      Reed D. Matney............            8,393                    1.56
      Leon Gladson..............            3,723                    *
      G. Douglas Price(3).......           15,934                    2.96
      Gary E. Varnell(4)........           16,260                    3.02
      Scott F. Collins..........            1,647                    *
      George L. Brooks..........            6,165                    1.14
      M. Carlin Greene..........           14,238                    2.64
      Neil D. Miller............           11,150                    2.07
      Jim Friddell..............            - 0 -                    *
(iii) Directors and executive officers
      as a group (12 persons)...          126,608                   23.49%

*        Less than 1%

(1)  Includes  12,211  shares  owned by the Joe H. Wilson  Trust,  for which Mr.
     Phillips serves as co-trustee.
(2)  Includes  12,211  shares  owned  jointly  with  his  father,  for  which he
     disclaims voting and investment power.
(3)  Includes  6,105 shares owned by his spouse,  for which he disclaims  voting
     and investment power.
(4)  Includes 320 shares owned jointly with his two sons.

Item 12. Certain Relationships and Related Transactions

     Volunteer  expects  to  have  in the  future  banking  and  other  business
transactions  in the ordinary  course of its banking  business  with  directors,
officers, and 10% beneficial owners of Volunteer and their affiliates, including
members of their families, or corporations, partnerships, or other organizations
in  which  such  officers  or  directors   have  a  controlling   interest,   on
substantially the same terms (including price, or interest rates and collateral)
as those  prevailing  at the time for  comparable  transactions  with  unrelated
parties.  Any such  banking  transactions  will not involve more than the normal
risk of collectibility  nor present other  unfavorable  features to Volunteer or
the Bank.

                                     - 26 -

<PAGE>

Item 13.          Exhibits and Reports on Form 8-K

(1) Exhibits
    --------
Exhibit Number    Description
--------------    ------------

     3.1*         Articles of Incorporation of Volunteer Bancorp, Inc.,
                  as amended

     3.2*         Bylaws of Volunteer Bancorp, Inc.

     21.1         List of Subsidiaries

     99.1**       Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted
                  Pursuant  to  Section  906  of the Sarbanes-Oxley Act of 2002,
                  signed by Reed D. Matney,  the President of Volunteer Bancorp,
                  Inc. on March 28, 2003.

     99.2**       Certification  Pursuant  to 18 U.S.C. Section 1350, as Adopted
                  Pursuant  to  Section  906  of the Sarbanes-Oxley Act of 2002,
                  signed by Greg Oliver, Vice President and Cashier of Volunteer
                  Bancorp, Inc. on March 28, 2003.

*    Incorporated by reference to exhibits filed with  Volunteer's  Registration
     Statement on Form SB-1, Registration No. 33-94050.

**   A signed  original of this  written  statement  required by Section 906 has
     been  provided to Volunteer and will be retained by Volunteer and furnished
     to the Securities and Exchange Commission or its staff upon request.

(2)  Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended December 31, 2002.

Item 14.  Controls and Procedures

(a)  Evaluation of Disclosure Controls and Procedures. Volunteer's President and
     its Vice  President  and Cashier have  evaluated the  effectiveness  of the
     design and operation of Volunteer's  disclosure controls and procedures (as
     defined in Exchange Act Rule  13a-14(c)) as of a date within 90 days of the
     filing date of this annual report. Based on that evaluation,  the President
     and  the  Vice  President  and  Cashier  have  concluded  that  Volunteer's
     disclosure  controls and  procedures  are effective to ensure that material
     information relating to Volunteer and Volunteer's consolidated subsidiaries
     is  made  known  to  such  officers  by  others   within  these   entities,
     particularly during the period this annual report was prepared, in order to
     allow  timely  decisions  regarding  required  disclosure.

(b)  Changes in Internal Controls.  There have not been any significant  changes
     in   Volunteer's   internal   controls  or  in  other  factors  that  could
     significantly  affect  these  controls  subsequent  to the  date  of  their
     evaluation.

                                     - 27 -

<PAGE>

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned,  thereunto
duly authorized.

                                             VOLUNTEER BANCORP, INC.

                                             By: /s/ Reed D. Matney
                                                 -------------------------------
                                                 President

                                                 Date: March 28, 2003

     In accordance  with the  requirements  of the Exchange Act, this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dates indicated.


Signature                      Capacity                           Date
----------                     --------                           -----

/s/ William E. Phillips
-------------------------
William E. Phillips          Chairman of the Board and Director   March 28, 2003

/s/ Reed D. Matney
---------------------------  President and Director               March 28, 2003
Reed D. Matney              (principal executive officer)

/s/ Greg Oliver
---------------------------  Vice President and Cashier           March 28, 2003
Greg Oliver                 (principal accounting officer)

/s/ Carlin Greene
---------------------------- Director                             March 28, 2003
Carlin Greene

/s/ Douglas Price
---------------------------  Director                             March 28, 2003
Douglas Price

/s/ Gary Varnell
---------------------------  Director                             March 28, 2003
Gary Varnell

/s/ George Brooks
---------------------------  Director                             March 28, 2003
George Brooks

/s/ Shirley Price
---------------------------  Director                             March 28, 2003
Shirley Price

/s/ Neil Miller
---------------------------  Director                             March 28, 2003
Neil Miller

/s/ Lawrence Gray
---------------------------- Director                             March 28, 2003
Lawrence Gray

/s/ Scott Collins
---------------------------- Director                             March 28, 2003
Scott Collins

/s/ Leon Gladson
---------------------------- Director                             March 28, 2003
Leon Gladson

/s/ Jim Friddell
---------------------------- Director                             March 28, 2003
Jim Friddell



<PAGE>



                           Certification of President
                         Pursuant to Section 302 of the
                           Sarbanes-Oxley Act of 2002

I, Reed D. Matney, certify that:

     1.   I have  reviewed  this  annual  report  on Form  10-KSB  of  Volunteer
          Bancorp, Inc. ("Volunteer");

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

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

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

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

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

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

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

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

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

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


Date: March 28, 2003                              /s/ Reed D. Matney
                                                  ------------------------------
                                                  Reed D. Matney
                                                  President



<PAGE>



                   Certification of Vice President and Cashier
                         Pursuant to Section 302 of the
                           Sarbanes-Oxley Act of 2002

I, Greg Oliver, certify that:

     1.   I have  reviewed  this  annual  report  on Form  10-KSB  of  Volunteer
          Bancorp, Inc. ("Volunteer");

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

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

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

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

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

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

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

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

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

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


Date:  March 28, 2003                             /s/ Greg Oliver
                                                  ------------------------------
                                                  Greg Oliver
                                                  Vice President and Cashier
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
Volunteer Bancorp, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets of  Volunteer
Bancorp,  Inc. and  subsidiary as of December 31, 2002 and 2001, and the related
consolidated statements of earnings, changes in stockholders' equity, cash flows
and comprehensive income for the years then ended. These consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Volunteer Bancorp,
Inc. and  subsidiary as of December 31, 2002 and 2001,  and the results of their
operations  and their cash flows for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States of America.



 /s/  Welch & Associates, Ltd.


February 6, 2003
Nashville, Tennessee

                                      F - 1

<PAGE>



                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                 2002               2001
                                                                                ------             -----
                                  ASSETS
<S>                                                                          <C>                <C>

Cash and due from banks (note 11)                                            $      4,705,507   $     2,628,179
Federal funds sold                                                                  4,450,000         6,275,000
                                                                             -----------------  ---------------
    Cash and cash equivalents                                                       9,155,507         8,903,179
Investment securities available for sale (amortized
    cost of $27,192,916 and $25,990,696, respectively) (note 2)                    27,765,755        25,966,922
Investment securities held to maturity (estimated market
    value of $1,054,421 and $626,589, respectively) (note 2)                        1,052,991           626,859
Loans, less allowance for possible loan losses
    of $1,110,481 and $908,016, respectively (note 3)                              67,014,982        72,158,156
Accrued interest receivable                                                           935,616         1,066,479
Premises and equipment, net (note 4)                                                3,788,671         3,866,358
Other real estate                                                                   1,241,402         1,144,770
Deferred income taxes (note 9)                                                         34,962           114,935
Goodwill (note 1)                                                                     131,259           131,259
Other assets                                                                          250,870           268,822
                                                                             -----------------  ---------------
    Total assets                                                             $    111,372,015   $   114,247,739
                                                                             =================  ===============


                   LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits (notes 2 and 5)
   Non-interest bearing                                                      $     12,159,852   $    11,334,627
   Interest bearing                                                                87,797,905        92,575,028
                                                                             -----------------  ---------------
     Total deposits                                                                99,957,757       103,909,655
Accrued interest payable                                                              411,322           894,347
Securities sold under repurchase agreements (note 17)                               2,288,784         1,109,603
Other accrued taxes, expenses  and liabilities                                         69,910            32,466
Long-term debt (note 6)                                                             1,810,000         2,170,000
                                                                             -----------------  ---------------
     Total liabilities                                                            104,537,773       108,116,071
                                                                             -----------------  ---------------
Commitments and contingent liabilities (note 10)

Stockholders' equity:
   Common stock, $0.01 par value, 1,000,000 shares
     authorized, 539,027 shares issued and outstanding                                  5,390             5,390
   Additional paid-in capital                                                       1,916,500         1,916,500
   Retained earnings                                                                4,557,192         4,224,518
   Accumulated other comprehensive income (note 1)                                    355,160           (14,740)
                                                                             -----------------  ---------------
     Total stockholders' equity                                                     6,834,242         6,131,668
                                                                             -----------------  ---------------
        Total liabilities and stockholders' equity                           $     111,372,015  $   114,247,739
                                                                             =================  ===============
</TABLE>



           See accompanying notes to consolidated financial statements

                                      F - 2

<PAGE>



                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                       Consolidated Statements of Earnings

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                  2002                 2001
                                                                                 ------               -----
<S>                                                                        <C>                  <C>

Interest income:
    Interest and fees on loans                                             $         5,710,663  $        7,136,898
    Interest on federal funds                                                           73,631             233,982
    Interest on investment securities:
           Taxable                                                                   1,132,633           1,490,965
           Exempt from Federal income tax                                              241,961             125,126
                                                                           -------------------  ------------------
              Total interest income                                                  7,158,888           8,986,971
                                                                           -------------------  ------------------

Interest expense:
    Interest on deposits                                                             2,322,582           4,581,452
    Interest on other borrowed funds                                                   121,058             198,695
                                                                           -------------------  ------------------
              Total interest expense                                                 2,443,640           4,780,147
                                                                           -------------------  ------------------
Net interest income                                                                  4,715,248           4,206,824
Provisions for possible loan losses (note 3)                                           795,000             265,000
                                                                           -------------------  ------------------
Net interest income after provision for possible loan losses                         3,920,248           3,941,824
                                                                           -------------------  ------------------

Non-interest income:
    Service charges on deposit accounts                                                297,299             164,833
    Other fees and commissions                                                         107,193             101,151
    Securities gains (note 2)                                                           39,222              25,260
    Other non-interest income                                                           55,902              48,640
                                                                           -------------------  ------------------
              Total non-interest income                                                499,616             339,884
                                                                           -------------------  ------------------

Non-interest expense:
    Salaries and employee benefits (note 8)                                          1,834,197           1,742,511
    Occupancy expenses, net                                                            262,800             266,854
    Furniture and equipment expense                                                    399,402             368,363
    Other non-interest expense (note 8)                                              1,390,499             934,322
                                                                           -------------------  ------------------
              Total non-interest expense                                             3,886,898           3,312,050
                                                                           -------------------  ------------------

              Net earnings before income taxes                                         532,966             969,658

Income tax expense (note 9)                                                            146,389             342,999
                                                                           -------------------  ------------------

Net income                                                                 $           386,577  $          626,659
                                                                           ===================  ==================

Income per common share                                                    $              0.72  $             1.16
                                                                           ===================  ==================

Common shares outstanding                                                              539,027             539,027
                                                                           ===================  ==================

</TABLE>


           See accompanying notes to consolidated financial statements

                                      F - 3

<PAGE>



                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

           Consolidated Statements of Changes in Stockholders' Equity

                 For the Years Ended December 31, 2002 and 2001
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>



                                                                                                  Accumulated
                                              Common                                                 Other
                                               Stock         Additional                             Compre-
                               Common         Stated          Paid-In           Retained            hensive
                               Shares          Value          Capital           Earnings            Income             Total
                              --------         -----         ---------          --------            ------             -----
<S>                               <C>      <C>            <C>              <C>                 <C>                <C>

Balance January
  1, 2001                    $    539,027  $       5,390  $      1,916,500 $        3,673,323  $        (275,080)  $      5,320,133
Net  income                             -              -                 -            626,659                  -            626,659
Dividends declared                      -              -                 -            (75,464)                 -            (75,464)
Other
  comprehensive
  income                                -              -                 -                  -            260,340            260,340
                            -------------  -------------  ---------------- ------------------  -----------------   ----------------
Balance December
  31, 2001                        539,027          5,390         1,916,500          4,224,518            (14,740)         6,131,668
Net income                              -              -                 -            386,577                  -            386,577
Dividends declared                      -              -                 -            (53,903)                 -            (53,903)
Other
  comprehensive
  income                                -              -                 -                  -            369,900            369,900
                            -------------  -------------  ---------------- ------------------  -----------------   ----------------
Balance December
  31, 2002                    $   539,027   $      5,390  $      1,916,500 $        4,557,192  $         355,160   $      6,834,242
                            =============  =============  ================ ==================  =================   ================

</TABLE>












           See accompanying notes to consolidated financial statements

                                      F - 4

<PAGE>



                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                             2002                2001
                                                                                            ------              -----
<S>                                                                                <C>                  <C>
Cash Flows from Operating Activities:
   Net income                                                                      $        386,577     $       626,659
   Adjustments to reconcile net income to net cash
       provided by operating activities:
     Deferred income taxes                                                                 (146,740)             46,859
     Provision for loan losses                                                              795,000             265,000
     Provision for depreciation and amortization                                            205,483             241,231
     Securities (gain)                                                                      (39,222)            (25,260)
     FHLB stock dividends                                                                   (16,400)            (22,800)
     Decrease in interest receivable                                                        130,863             146,840
     (Increase) in other assets                                                             (78,680)           (651,068)
     (Decrease) in other liabilities                                                       (445,581)           (337,246)
                                                                                   -------------------- -------------------
  Net cash provided by operating activities                                                 791,300             290,215
                                                                                   -------------------- -------------------

Cash Flows from Investing Activities:
    Proceeds from calls and maturity of held to maturity securities                         591,252           1,730,177
    Purchase of held to maturity securities                                              (1,017,384)         (1,290,488)
    Purchase of investment securities available for sale                                (20,071,988)        (33,025,682)
    Proceeds from calls and maturities of available for sale securities                  13,142,700          21,879,350
    Proceeds from sale of available for sale securities                                   5,782,690          11,070,043
    Net decrease in loans                                                                 4,348,174             615,764
    Capital expenditures                                                                   (127,796)            (37,662)
                                                                                   -------------------- -------------------
  Net cash provided by investing activities                                               2,647,648             941,502
                                                                                   -------------------- -------------------

Cash Flows from Financing Activities:
    Net increase (decrease) in demand deposits, NOW accounts,
      IRA and savings accounts                                                            4,310,945          (1,897,674)
    Net (decrease) in certificates of deposit                                            (8,262,843)           (200,357)
    Net increase in securities sold under
       repurchase agreements                                                              1,179,181              57,090
    FHLB advances                                                                                 -           2,000,000
    Repayment of FHLB advances                                                                    -          (2,000,000)
    Dividends paid                                                                          (53,903)            (75,464)
    Repayment of long-term debt                                                            (360,000)           (325,000)
                                                                                   -------------------- -------------------
   Net cash (used) by financing activities                                               (3,186,620)         (2,441,405)
                                                                                   -------------------- -------------------
Increase (decrease) in cash and cash equivalents                                            252,328          (1,209,688)
Cash and cash equivalents beginning of year                                               8,903,179          10,112,867
                                                                                   -------------------- -------------------
Cash and cash equivalents end of year (note 1)                                     $      9,155,507     $     8,903,179
                                                                                   ==================== ===================

Supplemental Disclosure of Cash Flow Information:
   Cash paid during the period for:
      Interest                                                                     $      2,926,665     $     5,025,833
                                                                                   ==================== ===================
      Income taxes                                                                 $        278,526     $       479,254
                                                                                   ==================== ===================

</TABLE>


           See accompanying notes to consolidated financial statements

                                      F - 5

<PAGE>



                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                 Consolidated Statements of Comprehensive Income

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                               2002                2001
                                                                               ----                ----
<S>                                                                  <C>                  <C>


Net income                                                           $            386,577 $           626,659
                                                                     -------------------- -------------------

Other comprehensive income, before tax:
Unrealized gains on securities available for sale:
    Unrealized holding gains arising during the  period                           635,835             445,164
    Less: reclassification adjustment for gains
      included in income                                                           39,222              25,260
                                                                     -------------------- -------------------
Other comprehensive income                                                        596,613             419,904
    Income taxes related to other comprehensive
       income                                                                    (226,713)           (159,564)
                                                                     -------------------- -------------------
  Other comprehensive income, net of income taxes                                 369,900             260,340
                                                                     -------------------- -------------------
Total comprehensive income                                           $            756,477 $           886,999
                                                                     ==================== ===================
</TABLE>





















           See accompanying notes to consolidated financial statements

                                      F - 6

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------



1.   Summary of Significant Accounting Policies
     ------------------------------------------

     The accounting policies of Volunteer Bancorp, Inc. (the Company) conform to
     generally  accepted  accounting  principles and to general practices within
     the  banking  industry.  The  following  is a  summary  of the  significant
     policies.

     a.   Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
     and its  subsidiary,  Citizens Bank of East Tennessee (the "Bank") of which
     the Company owns 133,300  (100.0%)  shares of the Bank's 133,300 issued and
     outstanding  shares of voting  common  stock at December 31, 2002 and 2001.
     All material  inter-company  accounts and transactions have been eliminated
     in consolidation.

     b.   Investment Securities

     Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
     Certain Investments in Debt and Equity Securities"  requires investments in
     equity  securities  that  have  a  readily   determinable  fair  value  and
     investments in debt securities to be classified into three  categories,  as
     follows:  held  to  maturity  debt  securities,   trading  securities,  and
     securities available for sale.

     Classification  of a debt  security  as held to  maturity  is  based on the
     Company's  positive  intent and ability to hold such  security to maturity.
     Securities held to maturity are stated at cost adjusted for amortization of
     premiums  and  accretion of  discounts,  unless there is a decline in value
     which is  considered  to be other  than  temporary,  in which case the cost
     basis of such  security  is  written  down to market  and the amount of the
     write-down is included in earnings.

     Securities that are bought and held  principally for the purpose of selling
     them in the near term are classified as trading account  securities,  which
     are valued at market with unrealized gains and losses included in earnings.
     Gains or losses on sales and adjustments to market value of trading account
     securities are included in non-interest income in the income statements.

     Securities  classified  as available  for sale are reported at market value
     with unrealized  gains and losses excluded from earnings and reported,  net
     of tax, in a separate  component  of  stockholders'  equity and include all
     securities not classified as trading account  securities or securities held
     to  maturity.  These  include  securities  used as  part  of the  Company's
     asset/liability  strategy  which  may be sold in  response  to  changes  in
     interest rates,  prepayment risk, the need or desire to increase regulatory
     capital,  and other similar factors.  Gains or losses on sale of securities
     available for sale are recognized at the time of sale,  based upon specific
     identification  of the  security  sold,  and are  included in  non-interest
     income in the income statements.

     Interest  income  on  investments  is  computed  on the  par  value  of the
     outstanding investment. Amortization of discounts and accretion of premiums
     is recorded as an  adjustment  to interest  income  utilizing the effective
     yield method.





                                      F - 7

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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


     c.   Loans, Less Allowance for Possible Loan Losses

          Statement  of   Financial   Accounting   Standards   (SFAS)  No.  114,
          "Accounting By Creditors For Impairment Of A Loan," as amended by SFAS
          No. 118,  "Accounting  By Creditors For  Impairment Of A Loan - Income
          Recognition And Disclosures"  state that an impaired loan is generally
          any loan,  excluding certain homogeneous small balance credits such as
          credit card  indebtedness,  that is not performing in accordance  with
          its contractual terms. SFAS No. 114 requires that impairment on a loan
          be measured by the difference  between  carrying value and the present
          value of expected future cash flows discounted at the loan's effective
          interest rate, the loan's observable market price, or the collateral's
          value if the loan is  collateral  dependent.  The  amount  of a loan's
          impairment or changes therein  require  charges to earnings.  SFAS No.
          118 allows a creditor to use existing  methods for the  recognition of
          interest income on an impaired loan.

          SFAS No. 125,  "Accounting  for  Transfers  and Servicing of Financial
          Assets and the  Extinguishment  of  Liabilities,"  establishes,  among
          other  things,  new  criteria  for  determining  whether a transfer of
          financial assets for cash or other considerations  should be accounted
          for as a sale or as a pledge of  collateral  in a  secured  borrowing.
          There are  certain  criteria  that must be met for the  transfer to be
          recorded as a sale: The transferred assets have been isolated from the
          transferor - put presumptively  beyond the reach of the transferor and
          its  creditors,  even  in  bankruptcy  or  other  receivership.   Each
          transferee  obtains the right - free of conditions  that  constrain it
          from  taking  advantage  of that  right - to  pledge or  exchange  the
          transferred  assets.  If these criteria are not met, the transfer must
          be  recorded  as a  secured  borrowing.  SFAS No.  125 also  addresses
          repurchase  agreements  that might  allow the  transferor  to maintain
          control over the  transferred  asset. If such an agreement  exists,  a
          transfer  should be  accounted  for as a secured  borrowing if (a) the
          assets to be repurchased are  substantially  the same, (b) they can be
          repurchased on  substantially  the agreed terms,  (c) repurchase  will
          occur before maturity at a fixed and  determinable  price, and (d) the
          agreement was entered into concurrently with the transfer.

          Loans are  stated  at the  principal  amount  outstanding  reduced  by
          unearned interest and an allowance for loan losses.  Unearned interest
          on  loans,   which  relates   principally  to  installment  loans,  is
          recognized  by the sum of the months'  digits  method,  which,  in the
          current case,  approximates  the level yield  method.  Interest on all
          other loans is computed on the outstanding loan balance.

          The  allowance  method is used by the Company to provide for  possible
          loan losses. Accordingly, all loan losses are charged to the allowance
          for possible loan losses and all  recoveries are credited to it. Loans
          are charged  against the allowance when  management  believes that the
          collection  of the  principal is unlikely.  The allowance is an amount
          that management believes will be adequate to absorb possible losses on
          existing  loans  that may  become  uncollectible.  The  provision  for
          possible  loan  losses  charged  to  operating  expense  is the amount
          management  considers  necessary to bring the allowance to an adequate
          level based on past loan loss  experience and other factors which,  in
          management's  judgment,  deserve  current  recognition  in  estimating
          possible  loan losses.  Such other  factors  considered  by management
          include growth and composition of the loan portfolio, the relationship
          of the  allowance for possible  loan losses to  outstanding  loans and
          current economic  conditions that may affect the borrower's ability to
          repay.

          Accrual  of  interest  is  discontinued  on  a  loan  when  management
          believes,  after  considering  economic  and business  conditions  and
          collection  efforts,  that the borrower's  financial condition is such
          that the collection of interest is doubtful.

                                      F - 8

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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


     d.   Loan Fees

          Loan fees are  credited  to  income  at the time of loan  origination.
          Direct  origination  costs for  loans are  charged  to  expenses  when
          incurred.  The results of using this  accounting  method do not differ
          materially from generally accepted accounting principles requiring the
          use of the level interest yield method.

     e.   Premises and equipment

          Premises and  equipment are stated at cost.  Depreciation  is computed
          primarily by the straight line method over the estimated  useful lives
          of the  related  assets.  Gain or loss on items  retired or  otherwise
          disposed of is credited or charged to operations  and cost and related
          accumulated  depreciation  are removed from the asset and  accumulated
          depreciation accounts.

          Expenditures  for major  renewals  and  improvements  of premises  and
          equipment are  capitalized  and those for  maintenance and repairs are
          charged to earnings as incurred.

     f.   Other Real Estate

          Real  estate  acquired  in  foreclosure  or in  settlement  of debt or
          repossessed  in  substance  is  carried  at the  lower of cost or fair
          market value less  estimated  costs to sell.  Fair market value at the
          time of  foreclosure  or  settlement  of debt is  based  on a  current
          appraisal of the  property.  Any  reduction in carrying  value to fair
          market value at the time the property is acquired is accounted  for as
          a loan loss.  Management evaluates the fair market value of individual
          properties  in  other  real  estate  periodically  and any  subsequent
          write-downs  of the carrying  value of the  properties  are charged to
          losses on other real  estate and  credited  directly  to the  carrying
          value of individual properties.

          If an individual  property is in condition for use or sale at the time
          of foreclosure,  any subsequent  holding costs are included in expense
          as incurred.  If an individual property is not in condition for use or
          sale at the time of  foreclosure,  completion  and  holding  costs are
          capitalized  until the property is in condition  for use or sale.  All
          legal fees and other direct costs incurred in foreclosure are expensed
          as incurred.

     g.   Income Taxes

          The provision  for income taxes  relates  primarily to items of income
          and expenses after  elimination of tax exempt  interest on investments
          and loans.  Deferred  income  taxes are  provided  on all  significant
          timing  differences  between  income  determined for financial and tax
          reporting purposes  principally  related to the methods used to report
          depreciation, and the provision for possible loan losses.

          The  Company  and the  Bank  file  consolidated  income  tax  returns.
          Therefore,  the provision  arising from the  operations of the Bank is
          payable to the Company as the amounts are utilized in the consolidated
          income tax  returns.  The amount due the Company at December  31, 2002
          and 2001 was $10,516 and $13,111, respectively.





                                      F - 9

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001




     h.   Goodwill

          The  Company's  acquisition  during 1995 and 1994 of 18,360  shares of
          subsidiary  Bank stock held by minority  shareholders  of the Bank was
          accounted for by the purchase method of accounting and resulted in the
          recording of goodwill in the amount of  $261,226.  Total costs for the
          18,360 shares  amounted to $559,306.  Goodwill  represents  the excess
          cost over the fair value of the assets acquired of the subsidiary.

          SFAS No. 142, "Goodwill and Other Intangible Assets", is effective for
          fiscal  years  beginning  after  December  15,  2001.  This  statement
          addresses financial accounting and reporting for acquired goodwill and
          other intangible assets and supercedes APB Opinion No. 17, "Intangible
          Assets".   It  addresses  how  intangible  assets  that  are  acquired
          individually  or with a group of other assets (but not those  acquired
          in a  business  combination)  should  be  accounted  for in  financial
          statements upon their  acquisition.  This Statement also addresses how
          goodwill and other  intangible  assets  should be accounted  for after
          they have been initially recognized in the financial statements. Under
          this  Statement,  goodwill and intangible  assets that have indefinite
          useful lives will not be amortized  but rather will be tested at least
          annually for  impairment.  Intangible  assets that have finite  useful
          lives will  continue to be  amortized  over their  useful  lives,  but
          without  the  constraint  of  an  arbitrary  ceiling.  This  Statement
          provides specific guidance for testing goodwill for impairment.

          The Company adopted the provisions of Statement 142 effective  January
          1, 2002.  As of the date of  adoption,  the  Company  had  unamortized
          goodwill  in the  amount  of  $131,259.  As  part of its  adoption  of
          Statement  142, the Company has  performed a  transitional  impairment
          test on its goodwill assets, which indicated that no impairment charge
          was  required.   The  Company  does  not  currently   have  any  other
          indefinite-lived  intangible  assets  recorded  in  its  statement  of
          financial  condition.  The  full  impact  of  adopting  Statement  142
          resulted  in an  increase  in net income of  approximately  $17,883 or
          approximately  $0.03 per share in 2002 as a result of the  Company  no
          longer  having  to  amortize  goodwill  against   earnings.   Assuming
          retroactive  adoption of Statement  142, net income for the year ended
          December  31, 2001 would have been  $644,542,  and  earnings per share
          would have been $1.19.

          The  following  table sets forth the  reconcilement  of net income and
          earnings per share excluding goodwill  amortization for the year ended
          December 31, 2001.

<TABLE>
<CAPTION>
                                                                   For the Year Ended
                                                                    December 31, 2001
                                                         ------------------------------------------
                                                                  Net               Earnings
                                                                 Income             Per Share
<S>                                                      <C>                     <C>

Earnings per common share computation:
  Net income/EPS as reported                             $              626,659  $             1.16
  Add back: Goodwill amortization                                        17,883                0.03
                                                         ----------------------  ------------------
    Adjusted net income /EPS                             $              644,542  $             1.19
                                                         ======================  ==================
</TABLE>








                                     F - 10

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001




     i.   Cash Flows

          For  purposes  of  reporting  cash  flows,  cash and cash  equivalents
          include cash on hand, amounts due from banks and federal funds sold.

     j.   Advertising Cost

          All advertising  costs are expensed when incurred.  Other  advertising
          expense was $31,287 and $29,594 for the years ended  December 31, 2002
          and 2001,  respectively.  There  was  no  direct-response  advertising
          costs incurred for 2002 or 2001.

     k.   Stock Based Compensation

          During 1997, the Company  adopted SFAS No. 123,  "Accounting for Stock
          Based  Compensation."  The Company  utilizes  the fair value method of
          determining  compensation  for stock based plans wherein  compensation
          cost is  measured  at the grant date at fair  value and is  recognized
          over the service period.

     l.   Risk Factors

          The  Company's  operations  are  affected  by  various  risk  factors,
          including  interest-rate  risk,  credit risk, and risk from geographic
          concentrations of lending  activities.  Management  attempts to manage
          interest-rate   risk  through   various   asset/liability   management
          techniques  designed to match  maturities  of assets and  liabilities.
          Loan  policies and  administration  are designed to provide  assurance
          that loans will only be granted to credit-worthy  borrowers,  although
          credit losses are expected to occur because of subjective  factors and
          factors  beyond the control of the Company.  In addition,  most of the
          Company's  lending  activities are within the geographic area where it
          is  located.  As a  result,  the  Company  and  its  borrowers  may be
          vulnerable to the consequences of changes in the local economy.

     m.   Estimates

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amount  of  assets  and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial  statements and the reported amounts of revenues
          and expenses  during the reporting  period.  Actual results may differ
          from those estimates.

          The  determination  of the  allowance  for loan  losses is a  material
          estimate that is particularly  susceptible to material  change.  While
          management  uses available  information to recognize  losses on loans,
          further  reductions  in the carrying  amount of loans may be necessary
          based on changes in local economic conditions. In addition, regulatory
          agencies,   as  an  integral  part  of  their   examination   process,
          periodically  review the estimated losses on loans.  Such agencies may
          require  the  Bank to  recognize  additional  losses  based  on  their
          judgements  about  information  available to them at the time of their
          examination.






                                     F - 11

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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



     n.   Accumulated Other Comprehensive Income

          Comprehensive  income is the change in the  Company's  equity during a
          period from  transactions and other events except those resulting from
          investments  by  investors  and   distributions  to  those  investors.
          Comprehensive  income  includes net income and other changes in assets
          and  liabilities  that are not  reported  in net  income,  but instead
          reported as a separate component of stockholders' equity.

          Accumulated  other  comprehensive  income is the cumulative  amount of
          revenues, expenses, and gains and losses that under Generally Accepted
          Accounting  Principles  are included as a component  of  stockholders'
          equity,  but  excluded  from net income.  The net  unrealized  gain on
          investment  securities  available  for sale is the only  item of other
          comprehensive income currently recognized by the Company.

2. Investment Securities
   ---------------------

     The carrying  value of  investment  securities  classified as available for
sale at December 31, are as follows:

<TABLE>
<CAPTION>

                                                                        Available for Sale
                                                      --------------------------------------------------------
                                                                        December 31, 2002
                                                                        -----------------

                                                                       Gross             Gross
                                                   Amortized        Unrealized        Unrealized           Carrying
                                                     Cost              Gains            Losses              Value
                                                   ---------        ----------        ----------           --------
<S>                                           <C>                 <C>              <C>               <C>

Securities of U.S. Treasury                   $           500,901 $        13,789  $              -  $        514,690
Securities of U.S. Government
   agencies                                            18,470,129         411,984            (4,760)        18,877,353
Obligations of states and political
    subdivisions                                        6,376,115         166,497                  -         6,542,612
FNMA preferred stock                                    1,474,671               -           (14,671)         1,460,000
Restricted securities:
  Federal Home Loan Bank stock                            371,100               -                  -           371,100
                                              ------------------- ---------------  -----------------  ------------------
                                              $        27,192,916 $       592,270  $        (19,431)  $     27,765,755
                                              =================== ===============  =================  ==================

</TABLE>















                                     F - 12

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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


<TABLE>
<CAPTION>
                                                                          Available for Sale
                                                        ------------------------------------------------------
                                                                          December 31, 2001
                                                                          -----------------

                                                                         Gross             Gross
                                                     Amortized        Unrealized        Unrealized          Carrying
                                                       Cost              Gains            Losses              Value
                                                     ---------        ----------        -----------         ---------

<S>                                        <C>                 <C>                  <C>            <C>

Securities of U.S. Treasury                $           502,094 $        21,346      $          -   $          523,440
Securities of U.S. Government
   agencies                                         21,431,334         101,069          (107,499)          21,424,904
Obligations of states and political
    subdivisions                                     3,702,668          20,556           (59,246)           3,663,978
Restricted securities:
  Federal Home Loan Bank stock                         354,600               -                 -              354,600
                                           ------------------- ---------------  -----------------  ------------------
                                           $        25,990,696 $       142,971      $   (166,745)  $       25,966,922
                                           =================== ===============  =================  ==================

</TABLE>

     The Bank is a member of the  Federal  Home Loan Bank  (FHLB) and as such is
     required  to  maintain an  investment  in the capital  stock of the FHLB of
     Cincinnati. The FHLB stock is carried at cost which approximates the market
     value of the stock.  The amount of stock required to be held by the Bank is
     adjusted annually based on a determination made by the FHLB of Cincinnati.

          The  amortized  cost  and  approximate   market  value  of  investment
          securities classified as held to maturity at December 31, follows:


<TABLE>
<CAPTION>
                                                                           Held to Maturity
                                                          ---------------------------------------------------
                                                                           December 31, 2002
                                                                           -----------------

                                                                          Gross              Gross           Estimated
                                                      Amortized         Unrealized        Unrealized          Market
                                                         Cost             Gains             Losses             Value
                                                      ---------         ----------        ----------         ---------
<S>                                               <C>                <C>               <C>               <C>


Securities of U.S. Government agencies            $     1,052,991    $       1,430      $          -     $    1,054,421
                                                  ===============    =============      ============     ==============

</TABLE>

<TABLE>
<CAPTION>
                                                                           Held to Maturity
                                                          ---------------------------------------------------
                                                                           December 31, 2001
                                                                           -----------------
<S>                                               <C>                <C>                <C>             <C>

                                                                          Gross            Gross             Estimated
                                                      Amortized         Unrealized      Unrealized            Market
                                                         Cost             Gains           Losses               Value
                                                      ---------         ----------      ----------           ---------

Securities of U.S. Government agencies            $       626,859    $       1,597      $   (1,867)      $      626,589
                                                  ===============    =============      ============     ==============

</TABLE>
                                     F - 13

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------

     The components of the net unrealized  (loss) gain on investment  securities
     available for sale at December 31, recorded as a component of stockholders'
     equity are as follows:


                                                      2002               2001
                                                      ----               ----
Gross unrealized gains                      $         592,270  $        142,971
Gross unrealized losses                               (19,431)         (166,745)
                                            -----------------  ----------------
   Gross unrealized (loss) gain, net                  572,839           (23,774)
Deferred tax effect                                  (217,679)            9,034
                                            -----------------  ----------------
Net unrealized (loss) gain                  $         355,160  $        (14,740)
                                            =================  ================

     The  amortized  cost  and  estimated  market  value of debt  securities  at
     December 31,  2002,  by  contractual  maturity,  are shown below.  Expected
     maturities will differ from contractual  maturities  because  borrowers may
     have the  right  to call or  prepay  obligations  with or  without  call or
     prepayment penalties.

<TABLE>
<CAPTION>

                                                  Available for Sale                    Held to maturity
                                                  ------------------                    ----------------

                                                                    Estimated                             Estimated
                                                Amortized            Market            Amortized           Market
                                                  Cost                Value               Cost              Value
                                                ---------           ----------         ---------          ---------
<S>                                     <C>                 <C>                  <C>               <C>

Due in one year or less                 $           539,136 $           552,925  $            371  $             371
Due after one year and through
   five years                                     6,607,754           6,728,291                 -                  -
Due after five years and through
   ten years                                      9,139,649           9,325,151             5,696              6,358
Due after ten years                               9,060,606           9,328,288         1,046,924          1,047,692
                                        ------------------- -------------------  ----------------  -----------------
Total debt securities                            25,347,145          25,934,655         1,052,991          1,054,421
Equity securities with no
   stated maturity                                1,845,771           1,831,100                 -                  -
                                        ------------------- -------------------  ----------------  -----------------
Total investment securities             $        27,192,916 $        27,765,755  $      1,052,991  $       1,054,421
                                        =================== ===================  ================  =================

</TABLE>


     The  following  table  presents  the gross  realized  gains  and  losses on
     investment  securities  transactions  for the years ended December 31, 2002
     and 2001.


                                          Realized gains      Realized Losses
                                          --------------      ---------------

                                          2002       2001      2002     2001
                                          ----       ----      ----     ----

Available for sale securities           $ 39,222  $ 25,260    $   -    $   -

Held to maturity securities                    -        -         -        -
                                        ------------------------------------
                                        $ 39,222  $ 25,260    $   -    $   -
                                        ========  ========    =====    =====



                                     F - 14

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001




     At  December  31,  2002 a net gain of $24,204  was  realized , or a gain of
     $39,222 net of a tax expense of $15,018.  At December  31, 2001, a net gain
     of  $15,671  was  realized,  or a gain of $25,260  net of a tax  expense of
     $9,589.

     Investment securities with amortized cost of approximately  $11,601,000 and
     market value of approximately $11,888,000 at December 31, 2002 were pledged
     to secure public  deposits and for other purposes  required or permitted by
     law. In 2001,  investment  securities with amortized cost of  approximately
     $11,653,000 and market value of approximately $11,714,000 were pledged.

3.   Loans and Allowances for Possible Loan Losses
     ---------------------------------------------

     The  Bank  makes  commercial,  consumer,  and  real  estate  loans  to  its
     customers,  located  principally  within the Bank's primary markets,  which
     consists of Hancock,  Hawkins and surrounding  counties.  Although the Bank
     has a diversified  loan  portfolio,  a substantial  portion of its debtors'
     ability to honor their  contracts is  dependent  upon  economic  conditions
     within its primary markets.

     Loans are either secured or unsecured based upon the financial condition of
     the  borrower.  The  loans  are  expected  to be  repaid  from cash flow or
     proceeds  from the sale of selected  assets of the borrower;  however,  the
     Bank is exposed to risk of loss on loans due to a borrower's  difficulties,
     which may arise from any number of factors  including  problems  within the
     respective  industry or economic  conditions,  including  those  within the
     Bank's primary market.

     Loans,  less  allowance  for  possible  loan  losses at  December  31,  are
     summarized as follows:

<TABLE>
<CAPTION>

                                                                   2002                  2001
                                                                   ----                  ----
<S>                                                     <C>                   <C>

Commercial, financial and agricultural                  $          7,302,050  $         11,226,026
Real estate - construction                                         2,647,018             4,296,010
Real estate - mortgage                                            48,055,327            42,256,099
Consumer                                                           9,958,068            15,280,036
Other                                                                163,000                 8,001
                                                        --------------------  --------------------
                                                                  68,125,463            73,066,172
Less allowance for possible loan losses                            1,110,481               908,016
                                                        --------------------  --------------------
                                                        $         67,014,982  $         72,158,156
                                                        ====================  ====================
</TABLE>


     Transactions  in the allowance for possible loan losses of the Bank for the
     years ended December 31, are summarized as follows:

<TABLE>
<CAPTION>

                                                                 2002               2001
                                                                 ----               ----
<S>                                                    <C>                <C>
Balance - beginning of year                            $          908,016 $          985,784
Provisions charged to operating expense                           795,000            265,000
Loans charged-off                                                (635,246)          (367,126)
Recoveries                                                         42,711             24,358
                                                       ------------------ ------------------
Balance - end of year                                  $        1,110,481 $          908,016
                                                       ================== ==================

</TABLE>



                                     F - 15

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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



     Loans at December 31, 2002 are scheduled to mature as follows:

<TABLE>
<CAPTION>

                             Commercial,
                             Financial &       Real Estate       Real Estate
                            Agricultural      Construction        Mortgage          Consumer            Other
                            ------------      ------------       -----------        --------            -----
<S>                     <C>               <C>              <C>                <C>              <C>

One year  or less       $     5,763,734   $     2,278,182  $      11,838,852  $     2,699,019  $       144,805
After one through
  five years                  1,323,123            13,710         11,164,252        6,873,221           18,195
After five years
 through ten
 years                          123,342                 -          6,371,743          307,572                -
After ten years                  91,851           355,126         18,680,480           78,256                -
                        ---------------   ---------------  -----------------  ---------------  ---------------

Total                   $     7,302,050   $     2,647,018  $      48,055,327  $     9,958,068  $       163,000
                        ===============   ===============  =================  ===============  ===============
</TABLE>


     At December 31, 2002, fixed and variable rate loans were as follows:


Fixed rate loans                      $         36,860,494
Variable rate loans                             31,264,969
                                      --------------------
                                      $         68,125,463
                                      ====================

     Non-performing assets at December 31, were as follows:


                                            2002               2001
                                            ----               ----

Loans past due over 90 days            $   673,292    $    1,639,927
Non - accrual loans                        922,692           618,568
Other real estate owned                  1,241,402         1,144,770
                                      ------------------------------
                                       $ 2,837,386    $    3,403,265
                                      ==============================

     Foregone interest income on the above non - accrual loans was approximately
     $37,000 and $75,000 at December 31, 2002 and 2001, respectively.

     At December 31, 2002, the Company's recorded investment in impaired loans
     were as follows:


                                        Amount           Valuation
                                        ------           ----------

     Impaired Loans               $     1,595,984     $      155,196
                                  ===============     ==============

     Interest  payments  received  on  impaired  loans are  recorded as interest
     income  unless  collection of the  remaining  recorded  loan  investment is
     doubtful at which time  payments  received  are recorded as  reductions  of
     principal.  The average recorded  investment in impaired loans approximates
     the recorded investment in impaired loans at December 31, 2002.

     The valuation  allowance above is included with and a part of the allowance
     for loan losses on the Company's balance sheet.

                                     F - 16

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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



     At  December  31,  2002  and  2001,  the Bank  had  loans to its  executive
     officers,   directors  and  their  affiliates  of  $295,048  and  $450,255,
     respectively.  At December 31, 2002 and 2001,  the Bank had  commitments to
     extend credit to its executive officers,  directors and their affiliates of
     $1,160,389 and  $1,127,044,  respectively.  All such loans and  commitments
     were made in the  ordinary  course of  business on  substantially  the same
     terms as those  prevailing  at the time for  comparable  transactions  with
     unrelated  parties.  An analysis of related  party loans from  January 1 to
     December 31 is as follows:


                                                   2002               2001
                                                   ----               ----

Balance January 1                             $    450,255      $   415,954
Payments received                                 (263,792)        (187,028)
Advances made                                      108,585          221,329
                                              ------------      -----------
Balance December 31                           $    295,048      $   450,255
                                              ============      ===========

4.   Premises and Equipment, Net
     ---------------------------

     The detail of premises and equipment, net at December 31, is as follows:


                                                   2002              2001
                                                   ----              ----

Land                                        $      619,168   $        619,168
Buildings                                        3,317,755          3,252,099
Furniture and equipment                          1,258,516          1,365,272
                                            ------------------------------------
                                                 5,195,439          5,236,539
Less accumulated depreciation                    1,406,768          1,370,181
                                            ------------------------------------
                                            $    3,788,671   $      3,866,358
                                            ====================================


     Depreciation related to premises and equipment for the years ended December
     31, 2002 and 2001 was $205,483 and $223,348, respectively.

     The Bank  leases a parcel of real  estate in  Rogersville  . The  parcel is
     leased through September 1, 2009. The Bank subleased this parcel on January
     15, 2000,  to the town of  Rogersville  through  January 1, 2006.  The Bank
     leases a portion of a building in  Rogersville  used as a branch  location.
     This lease expires on December 1, 2009. In addition,  certain  computer and
     other equipment is leased under various long term operating  leases.  Total
     net rental expense for these leases,  net of sublease income of $12,000 per
     year,   was   $182,092  and  $154,168  for  December  31,  2002  and  2001,
     respectively.










                                     F - 17

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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



     Future net  minimum  rental  commitments  under  noncancellable  leases and
     subleases are as follows:


                              Gross                                  Net
           Year               Rents             Sublease            Rents
           ----               -----            --------             -----
           2003              166,418            (12,000)      $    154,418
           2004              129,393            (12,000)           117,393
           2005              129,393            (12,000)           117,393
           2006              118,411                  -            118,411
           2007               73,148                  -             73,148
        Thereafter            80,035                  -             80,035
                            --------           ---------      ------------
           Total            $696,798           $(36,000)      $    660,798
                            ========           =========      ============

5.   Deposits
     --------

     Deposits at December 31, are summarized as follows:


                                                 2002               2001
                                                 ----               ----

Demand deposits                            $  12,159,852     $  11,334,627
NOW and money market accounts                 20,790,523        18,455,488
Savings                                        7,062,092         6,111,829
Individual retirement accounts                 2,404,901         2,204,479
Certificates of deposits - under $100,000     40,421,176        45,547,468
Certificates of deposits - over $100,000      17,119,213        20,255,764
                                           -------------     -------------
                                           $  99,957,757     $ 103,909,655
                                           =============     =============

     The amounts and scheduled  maturities of  certificate  accounts at December
     31, are as follows:


                                                    2002               2001
                                                    ----               ----

     Within one year                     $      40,225,573  $      60,590,293
     After one but within two years             14,879,842          3,992,953
     After two but within three years            2,219,974          1,187,986
     After three but within four years              15,000             28,000
     After four but within five years              200,000              4,000
                                         -----------------  -----------------
                                         $      57,540,389  $      65,803,232
                                         =================  =================

     Demand deposits reclassified as loans (overdrafts) aggregated approximately
     $38,000 at December 31, 2002 and 2001, respectively.



                                     F - 18

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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




     Deposits of executive officers,  directors and their affiliates  aggregated
     approximately  $1,901,000  and  $2,061,000  at December  31, 2002 and 2001,
     respectively.

6.   Long-term debt
     --------------

     The  Company's  long-term  debt  consists of a single  note  payable in the
     amount of $1,810,000 due an  unaffiliated  national bank. The interest rate
     on the note  adjusts  quarterly  and is equal  to the  three-months  London
     Interbank  Offered  Rate (Three Month LIBOR) plus 1.95% per annum or at the
     option of the Company the rate on the note is equal to the  lender's  index
     rate as such  rate  changes  from  time to time.  The  Company  may  change
     interest rate options at any time with prior notice to the lender. Interest
     is  payable  quarterly.  At  December  31,  2002  the  rate on the note was
     3.60875% per annum.  Principal is payable annually  commencing  January 31,
     1996 and each January 31 thereafter as follows:

          January 31,               Principal Due
          -----------            ------------------
             2003                           395,000
             2004                           435,000
             2005                           470,000
     2006 (Final Maturity)                  510,000
                                 ------------------
                                 $        1,810,000
                                 ==================

     The loan is secured by all of the stock of Citizens Bank of East  Tennessee
     owned by the Company.

     The Company is in violation of certain loan  covenants with respect to this
     loan in that annualized earnings to tangible assets are less than the 0.75%
     required and the ratio of nonperforming  assets is greater than 2.5%. These
     violations have not been waived by the lender.

     Because of these  violations,  the lender may, at its option,  by notice to
     the Company declare the note in default. In such an event the Company would
     have ten days to remedy compliance with all loan covenants.  If the Company
     did not or could not comply  with all loan  covenants  within  such ten day
     period the note would be in default.  In such a case the lender may declare
     the note  immediately  due and payable and among  other  things  proceed to
     foreclose upon 100% of the stock of Citizens Bank of East  Tennessee  which
     is pledged as security for the note.

     The lender has been  notified  by the  Company of its  non-compliance  with
     certain  covenants of the note that could lead to the lender  declaring the
     note in default.  However,  the lender has not notified the Company that it
     is in default under the terms of the loan agreement.

     The Company is in discussions with the lender and anticipates the lender to
     first pursue  remedies  other than  foreclosure.  Accordingly,  the Company
     expects  that the note  will be  restructured  resulting  in,  among  other
     things, increasing the interest rate on the note and substantially reducing
     the  final  maturity  date on the  note.  In such a case,  there  can be no
     assurance  that the Company  could  satisfy the  restructured  debt without
     obtaining new financing from other lenders or funds from a stock  offering.
     Further,  there can be no  assurance  that a stock  offering by the Company
     would be successful or that new lenders would provide funds to the Company.




                                     F - 19

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------

7.   FHLB Advances
     -------------

     The Bank has an  agreement  with the Federal Home Loan Bank which allows it
     borrow up to an established  amount.  Any advances are secured by a blanket
     pledge of the Bank's qualifying 1-4 mortgage loans. The Bank is required to
     maintain  eligible  collateral  representing  165  percent  of the  current
     outstanding balance of all advances.  The Bank had no outstanding  advances
     at December 31, 2002 and 2001.

8.   Other Non-Interest Expenses
     ---------------------------

     The major  components  of other  non-interest  expense at December  31, are
     summarized as follows:


                                                       2002            2001
                                                       ----            ----

Directors fees                                   $     68,000    $    76,500
Professional services                                 206,453         74,802
Postage and courier                                    78,851         59,613
Stationary and printing                                99,269         87,085
Loss on other real estate owne                        299,179         88,813
Other                                                 638,747        547,509
                                                 ------------    -----------
   Total other non-interest expense              $  1,390,499    $   934,322
                                                 ============    ===========


9.   Income Taxes
     ------------

     The components of income tax expense are as follows:


                                                       2002            2001
                                                       ----            ----
Current                                          $    293,129    $   296,140
Deferred                                             (146,740)        46,859
                                                 ------------    -----------
                                                 $    146,389    $   342,999
                                                 ============    ===========

     The  sources  of  deferred  income  taxes and the tax effect of each are as
     follows:


                                                       2002            2001
                                                       ----            ----
Accrual to cash conversion                       $      1,721    $     2,148
Provision for loan losses                             (77,524)        29,521
Accelerated depreciation                               (2,841)        (9,352)
FHLB stock dividends                                    6,280          8,655
Other Real Estate charge-offs                         (61,846)             -
Other, net                                            (12,530)        15,887
                                                 ------------    -----------
                                                 $   (146,740)   $    46,859
                                                 ============    ===========






                                     F - 20

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001




     A  reconciliation  of the  provision  for  income  taxes  as  shown  in the
     statements  of earnings  with that which would be computed by applying  the
     statutory  Federal  income tax rate of 34 percent to income  before  income
     taxes is as follows:


                                                      2002           2001
                                                      ----           ----
Tax expense at statutory rate                     $  181,208     $  329,684
Increase (decrease) in taxes resulting from:
  Tax-exempt interest                                (74,301)       (34,768)
  Amortization of goodwill                                 -          6,080
  State income taxes net of
    Federal income tax                                22,911         38,860
  Other, net                                          16,571          3,143
                                                  -----------    -----------
                                                  $  146,389     $  342,999
                                                  ===========    ===========

     The components of the net deferred tax asset/liability recognized by the
     Company at December 31, are as follows:


                                                      2002           2001
                                                      ----           ----
Deferred tax liabilities:
  FHLB stock dividends                            $  (32,255)    $  (25,975)
  Accumulated depreciation                           (48,570)       (51,411)
  Unrealized gain on securities available for sale  (217,679)             -
  Other, net                                               -         (7,725)
                                                  -----------    -----------
       Total liabilities                            (298,504)       (85,111)
                                                  -----------    -----------
Deferred tax assets:
  Accrual to cash conversion                               -          1,721
  Allowances for loan losses                         266,815        189,291
  Other real estate owned charge-off                  61,846              -
  Unrealized loss on securities available for sale         -          9,034
  Other, net                                           4,805              -
                                                  -----------    -----------
        Total assets                                 333,466        200,046
                                                  -----------    -----------
Net deferred tax asset/liability                  $   34,962     $  114,935
                                                  ===========    ===========

10.  Commitments and Contingencies
     -----------------------------

     The Bank is currently  involved in  litigation  as the  plaintiff in a suit
     against  another  financial  institution  involving  a  participation  loan
     purchased from that financial institution.

     In the normal course of business, the Company makes various commitments and
     incurs  certain  contingent  liabilities  that  are  not  presented  in the
     accompanying balance sheet. The commitments and contingent  liabilities may
     include various guarantees,  commitments to extend credit,  standby letters
     of credit,  and  litigation.  The Company's  exposure to credit loss in the
     event of nonperformance by the other party to the financial  instrument for
     commitments  to extend credit and standby  letters of credit is represented
     by the contractual  notional amount of these instruments.  The Company uses
     the same credit policies in making commitments and conditional  obligations
     as it does for on-balance- sheet instruments.  Unless noted otherwise,  the
     Company does not require  collateral or other security to support financial
     instruments with credit risk.

                                     F - 21

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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

     Commitments  to extend credit are  agreements to lend to a customer as long
     as there is no  violation of any  condition  established  in the  contract.
     Since some commitments are expected to expire without being drawn upon, the
     total  commitment   amounts  do  not  necessarily   represent  future  cash
     requirements.  The Company evaluates each customer's credit worthiness on a
     case-by-case  basis. The amount of collateral  obtained if deemed necessary
     by the Company  upon  extension of credit is based on  management's  credit
     evaluation  of the  counter-party.  Collateral  held varies but may include
     accounts receivable, inventory, property, plant, and equipment.

     Standby letters of credit are conditional commitments issued by the Company
     to  guarantee  the  performance  of a  customer  to a  third  party.  Those
     guarantees  are primarily  issued to support  public and private  borrowing
     arrangements.  Most  guarantees  expire  within  one year with some  having
     automatic one year renewals  cancelable by the Company.  The credit risk in
     issuing  letters  of credit is  essentially  the same as that  involved  in
     extending loans to customers.


     The following table  summarizes the Company's  significant  commitments and
     contingent liabilities at December 31:


                                                2002               2001
                                                ----               ----
Commitments to extend credit          $    5,845,319    $     4,281,297
Standby letters of credit                    202,725            122,725
                                      --------------    ---------------
                                      $    6,048,044    $     4,404,022
                                      ==============    ===============


     In the opinion of management,  no material  adverse effect on the financial
     position of the Company and its  subsidiary is  anticipated  as a result of
     these items.

11.  Cash and Due From Banks
     -----------------------

     The Bank is required to maintain a minimum  cash  reserve  with the Federal
     Reserve Bank and/or in vault cash. The minimum  requirement at December 31,
     2002 and 2001 was $470,000 and $483,000, respectively.

     At  December  31,  2002,  the  Bank had cash on  deposit  of  approximately
     $277,000 at other  financial  institutions in excess of the amounts insured
     by the FDIC

12.  Stockholder's Equity
     ---------------------

     The Bank is subject to certain restrictions on the amount of dividends that
     it may declare without prior regulatory approval.









                                     F - 22

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001
--------------------------------------------------------------------------------




13.  Regulatory Matters
     ------------------

     The Bank is subject to various regulatory capital requirements administered
     by  the  federal  banking   agencies.   Failure  to  meet  minimum  capital
     requirements  can  initiate  certain  mandatory - and  possible  additional
     discretionary  - actions by regulators  that, if  undertaken,  could have a
     direct material effect on the Bank's financial statements.  The regulations
     require a bank to meet specific  capital  adequacy  guidelines that involve
     quantitative  measures  of the  Bank's  assets,  liabilities,  and  certain
     off-balance-   sheet  items  as  calculated  under  regulatory   accounting
     practices. The Bank's capital classification is also subject to qualitative
     judgments by the  regulators  about  components,  risk  weights,  and other
     factors.

     Quantitative  measures established by regulation to ensure capital adequacy
     require the Bank to maintain  minimum  amounts and ratios (set forth in the
     table  below) of Tier I capital  as defined  in the  regulations)  to total
     average assets (as defined), and minimum ratios of Tier I and total capital
     (as  defined)  to  risk-weighted  assets  (as  defined).  To be  considered
     adequately  capitalized  (as defined)  under the  regulatory  framework for
     prompt corrective  action,  the Bank must maintain minimum Tier I leverage,
     Tier I risk-based,  and total risk-based  ratios as set forth in the table.
     The Bank's  actual  capital  amounts and ratios,  at December  31, are also
     presented in the tables below.

<TABLE>
<CAPTION>

                                                                    December 31, 2002
                                                  ----------------------------------------------------
                                           Capital Adequacy                            Prompt Corrective Action
                                  ------------------------------------            ----------------------------------
                                     Required                 Actual                Required                 Actual
                                     --------                 ------                --------                 ------

(In Thousands)                  Amount    Ratio          Amount     Ratio          Amount    Ratio         Amount    Ratio
                                ------    -----          ------     -----          ------    -----         ------    -----
<S>                             <C>       <C>            <C>        <C>            <C>       <C>           <C>       <C>

Tier I Capital (to
     average assets)            $4,436    4.00%          $8,116     7.32%          $4,436    4.00%         $8,116    7.32%
                                ======    =====          ======     =====          ======    =====         ======    =====
Tier I Capital (to risk-
      weighted assets)          $2,764    4.00%          $8,116     11.73%         $2,764    4.00%         $8,116    11.73%
                                ======    =====          ======     ======         ======    =====         ======    ======
Total Capital (to risk-
     weighted assets)           $5,529    8.00%          $8,983     13.00%         $5,529    8.00%         $8,983    13.00%
                                ======    =====          ======     ======         ======    =====         ======    ======




                                                                    December 31, 2001
                                                      ----------------------------------------------------
                                           Capital Adequacy                            Prompt Corrective Action
                                  ------------------------------------            ----------------------------------
                                     Required                 Actual                Required                 Actual
                                     --------                 ------                --------                 ------

(In Thousands)                  Amount    Ratio          Amount     Ratio          Amount    Ratio         Amount    Ratio
                                ------    -----          ------     -----          ------    -----         ------    -----
Tier I Capital (to
     average assets)            $4,571    4.00%          $8,122     7.10%          $4,571    4.00%         $8,122    7.10%
                                ======    =====          ======     =====          ======    =====         ======    =====
Tier I Capital (to risk-
      weighted assets)          $2,903    4.00%          $8,122     11.19%         $2,903    4.00%         $8,122    11.19%
                                ======    =====          ======     ======         ======    =====         ======    ======
Total Capital (to risk-
     weighted assets)           $5,806    8.00%          $9,030     12.44%         $5,806    8.00%         $9,030    12.44%
                                ======    =====          ======     ======         ======    =====         ======    ======

</TABLE>


                                      F - 23


     Based solely upon the foregoing  ratios the Bank would be considered  "well
     capitalized" within applicable Federal banking regulatory guidelines.

     The Company is a "small  one-bank  holding  company"  within the meaning of
     regulations  promulgated  by the Board of Governors of the Federal  Reserve
     System.  Accordingly,  the Company's capital  compliance,  for bank holding
     company purposes,  will be measured solely with respect to the Bank and not
     on a consolidated basis.

     Management  believes,  as of December 31,  2002,  that the Bank and Company
     meet all capital  requirements to which they are subject.  However,  events
     beyond the control of the Company, such as a downturn in the local economy,
     could adversely  affect future earnings and,  consequently,  the ability of
     the Company to meet its future minimum capital requirements.

     As a result of certain  findings in the  Tennessee  Department of Financial
     Institution's  Report  of  Examination  dated  June 4,  2001,  the Board of
     Directors of Bank entered into a Memorandum of Understanding  (Memorandum),
     dated August 16, 2001, with the Commissioner of the Tennessee Department of
     Financial  Institutions  and the Memphis  Regional  Director of the Federal
     Deposit Insurance Corporation. A Memorandum of Understanding is an informal
     administrative  tool for institutions that have some weaknesses that if not
     properly  addressed  and  corrected  could  lead  to  supervisory   concern
     requiring  formal  administrative   action.  The  areas  addressed  in  the
     Memorandum cover capital  adequacy,  laws and regulations,  data processing
     audit  and  review,   investment  policy  maturity   strategies,   adequate
     documentation of each of the foregoing but primarily credit administration.
     As a result,  the Board has  revised a number of the  Bank's  policies  and
     procedures  including its loan policy and has incorporated  recommendations
     designed to  strengthen  credit  quality and the Bank's  review  procedures
     regarding  loan loss reserve  adequacy.  Management  of the Company and the
     Bank believe that the Bank is in substantial compliance with the provisions
     of the Memorandum.

     As a result of certain  findings in the Federal  Reserve  Bank's  review of
     Volunteer  Bancorp,  Inc. as of September 17, 2002, the Company's  Board of
     Directors  adopted certain Board  Resolutions as of October 31, 2002. Board
     Resolutions  are  recommendations  of the  Federal  Reserve  adopted by the
     Company's  Board of Directors  requesting  that certain actions be taken to
     strengthen the financial  condition of the Company and its subsidiary.  The
     areas addressed in the Board Resolutions include  restrictions on incurring
     additional  debt,  declaration  and payment of dividends  to the  Company's
     shareholders,  and certain capital transactions.  Management of the Company
     believe that the Company is in substantial  compliance  with the provisions
     of the Resolutions.














                                     F - 24

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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




14.  Condensed Financial Information
     -------------------------------

     Following is condensed  financial  information of Volunteer  Bancorp,  Inc.


                             Volunteer Bancorp, Inc.
                              (Parent Company Only)
                            Condensed Balance Sheets

<TABLE>
<CAPTION>

                                                                                      December 31
                                                                                -----------------------

                                                                                 2002              2001
                                                                                 ----              ----
<S>                                                                       <C>                <C>

Assets:
   Cash                                                                   $           28,538 $          59,536
   Investment in subsidiary                                                        8,485,186         8,106,525
   Goodwill                                                                          131,259           131,259
   Deferred income tax                                                                     -             6,869
   Tax benefit receivable                                                             10,516            13,111
                                                                          ------------------ -----------------
                                                                          $        8,655,499 $       8,317,300
                                                                          ================== =================

Liabilities and stockholders' equity
   Long-term debt                                                         $        1,810,000 $       2,170,000
   Accrued interest payable                                                           11,257            15,632
   Stockholders' equity                                                            6,834,242         6,131,668
                                                                          ------------------ -----------------
                                                                          $        8,655,499 $       8,317,300
                                                                          ================== =================


                                              Volunteer Bancorp, Inc.
                                               (Parent Company Only)
                                         Condensed Statements of Earnings

                                                                                       Years Ended December 31


                                                                                 2002              2001
                                                                                 ----              ----
Income:
   Dividends from subsidiary                                              $          435,798 $         485,336
                                                                          ------------------ -----------------
Expenses:
   Interest                                                                           71,421           139,123
   Professional services                                                              21,115            40,212
   Other (income) expenses                                                            (4,405)           12,869
                                                                          ------------------ -----------------
      Total expense                                                                   88,131           192,204
                                                                          ------------------ -----------------
   Income (loss) before tax benefit and equity  in
   undistributed subsidiary income                                                   347,667           293,132
   Tax benefit                                                                        30,149            68,576
   Equity in undistributed subsidiary income                                           8,761           264,951
                                                                          ------------------ -----------------
      Net  income                                                         $          386,577 $         626,659
                                                                          ================== =================

</TABLE>

                                      F-25

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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

                             Volunteer Bancorp, Inc.
                              (Parent Company Only)
                       Condensed Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                Years Ended December 31
                                                                                -----------------------
                                                                                 2002               2001
                                                                                 ----              -----
<S>                                                                       <C>                <C>
Operating Activities:
   Net income                                                             $          386,577 $         626,659
   Adjustment to reconcile net income to net cash
      provided by operating activities:
   Equity in undistributed subsidiary earnings                                        (8,761)         (264,951)
   Deferred income taxes                                                               6,869               270
   Amortization                                                                            -            17,883
   Decrease in other assets                                                            2,595            89,871
   (Decrease) in other liabilities                                                    (4,375)          (21,193)
                                                                          ------------------ -----------------
   Net cash provided by operating activities                                         382,905           448,539
                                                                          ------------------ -----------------
Financing activities:
   Dividends paid                                                                    (53,903)          (75,464)
   Repayment of note payable                                                        (360,000)         (325,000)
                                                                          ------------------ -----------------
   Net cash(used) provided by financing activities                                  (413,903)         (400,464)
                                                                          ------------------ -----------------
Change in cash and equivalents                                                       (30,998)           48,075
Cash and equivalents - beginning                                                      59,536            11,461
                                                                          ------------------ -----------------
Cash and equivalents - ending                                             $           28,538 $          59,536
                                                                          ================== =================


                             Volunteer Bancorp, Inc.
                              (Parent company only)
                  Condensed Statements of Comprehensive Income

                                                                                Years Ended December 31
                                                                                -----------------------

                                                                                 2002              2001
                                                                                 ----              ----

Net income                                                                $          386,577 $         626,659
                                                                          ------------------ -----------------

Other comprehensive income:
  Company's share of subsidiary's other comprehensive income
  (loss), net of tax                                                                 369,900           260,340
                                                                          ------------------ -----------------

Total comprehensive (loss) income                                         $          756,477 $         886,999
                                                                          ================== =================

</TABLE>

     The  Company is a legal  entity  separate  and  distinct  from its  banking
     subsidiary.  The  principal  sources of cash flow for the  Company,  to pay
     dividends  and  service  Company  debt,  are  dividends  from  its  banking
     subsidiary.  There are statutory and regulatory  limitations on the payment
     of dividends from banking subsidiaries to their parent companies as well as
     statutory and  regulatory  restrictions  on the payment of dividends by the
     Company (note 12 and 13).

                                     F - 26

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

--------------------------------------------------------------------------------
15.  Fair Value of Financial Instruments
     -----------------------------------

     The fair value of financial instruments at December 31, are as follows:

<TABLE>
<CAPTION>

                                                          2002                                      2001
                                                          ----                                      ----

                                           Carrying               Fair               Carrying               Fair
                                            Value                Value                 Value                Value
                                           --------              ------              --------               ------
<S>                                  <C>                  <C>                   <C>                  <C>

Financial assets:
    Cash and due from banks          $          4,705,507 $          4,713,642  $         2,628,179  $         2,628,179
    Federal funds sold                          4,450,000            4,450,000            6,275,000            6,275,000
    Investment securities:                     28,818,746           28,820,176           26,593,781           26,593,511
    Loans, net                                 67,014,982           70,002,286           72,158,156           75,955,019
                                     -------------------- --------------------  -------------------  -------------------
                                     $        104,989,235 $        107,986,104  $       107,655,116  $       111,451,709
                                     ==================== ====================  ===================  ===================
Financial liabilities:
    Deposits                         $         99,957,757 $        103,281,008  $       103,909,655  $       107,771,715
    Securities sold under
      repurchase agreements                     2,288,784            2,288,784            1,109,603            1,109,603
    Long-term debt                              1,810,000            1,810,000            2,170,000            2,170,000
                                     -------------------- --------------------  -------------------  -------------------
                                     $        104,056,541 $        107,379,792  $       107,189,258  $       111,051,318
                                     ==================== ====================  ===================  ===================
Unrecognized financial
    instruments:
    Commitments to extend
        credit                       $                  - $                  -  $                 -  $                 -
    Standby letters of credit        $                  - $                  -  $                 -  $                 -
                                     -------------------- --------------------  -------------------  -------------------
                                     $                  - $                  -  $                 -  $                 -
                                     ==================== ====================  ===================  ===================

</TABLE>












                                     F - 27

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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





     The following  methods and assumptions were used to estimate the fair value
     of each  class of  financial  instrument  for  which it is  practicable  to
     estimate that value:

          Cash and Federal funds sold:
               For  these  short-term  instruments,  the  carrying  value  is  a
               reasonable estimate of fair value.

          Investments:
               Fair value equals quoted market price, if available.  If a quoted
               market  price is not  available,  fair value is  estimated  using
               quoted market prices for similar securities.

          Loans, net
               The fair value of fixed rate loans is  estimated  by  discounting
               expected  future cash flows using  current rates at which similar
               fixed rate loans would be made to borrowers  with similar  credit
               ratings and for the same remaining maturities. The carrying value
               of variable rate loans is assumed to approximate fair value.

          Deposits:
               The fair value of demand deposits, IRAs, savings accounts and NOW
               and money market  accounts is the amount payable on demand at the
               reporting   date.   The  fair  value  of   fixed-rate-   maturity
               certificates  of deposits is estimated  using the rates currently
               offered for  deposits  of similar  remaining  maturities  using a
               discounted cash flow method.

          Securities sold under repurchase agreements:
               The  fair  value  of  fixed-rate   term   securities  sold  under
               repurchase  agreements is estimated  using the rates currently in
               effect  offered for  repurchase  agreements of similar  remaining
               maturities using a discounted cash flow method.

         Long-term debt:
              Rates currently available to the Company for debt with similar
              terms and maturities are used to estimate fair value of existing
              debt using a discounted cash flow method.

          Commitments to extend credit and standby letters of credit:
               The fair value of  commitments  is estimated by  considering  the
               fees currently charged to enter into similar  agreements,  taking
               into  account  the  remaining  terms  of the  agreements  and the
               present  creditworthiness of the counter parties.  For fixed rate
               loan  commitments,  fair value also  considers  current  level of
               interest rates and the committed rates. The fair value of letters
               of  credit  is  based  on  fees  currently  charged  for  similar
               agreements.  For this caption,  the "carrying amount"  represents
               the accrual or deferred  income  (fees)  arising from the related
               unrecognized financial instruments.

16.  Profit-Sharing Plan
     -------------------

     The  Company's  subsidiary,  The  Citizens  Bank of East  Tennessee,  has a
     profit-sharing  retirement  plan.  All  employees  who meet certain age and
     length of service  requirements  are eligible to participate on a voluntary
     basis.  Benefits,  which become 20% vested after two years, 40% after three
     years,  60% after  four  years,  80% after five  years,  and 100% after six
     years, are paid on death, disability or retirement.


                                     F - 28

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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


     The Board of Directors  has  discretion in  establishing  the amount of the
     Bank's  contributions to the plan, if any. Beginning in 2002, a participant
     cannot  elect to defer  annually  more than  $11,000  (which  amount  shall
     increase  by  $1,000  each  year  to  2006)  under  all  salary   reduction
     arrangements  with all  employers  in which  the  individual  participates.
     Effective  January 1, 2002,  employees  who are at least age 50 at any time
     during  the  calender  year can make an  additional  $1,000  of  "catch-up"
     elective  deferrals (which  "catch-up"  amount will increase by $1,000 each
     year through  2006).  The  participants  are fully vested in any  voluntary
     contributions  they make. The Bank  contributed  $15,910 and $18,530 to the
     plan for the years ended December 31, 2002 and 2001, respectively.

17.  Securities Sold Under Repurchase Agreements
     -------------------------------------------

     At December 31, 2002 and 2001, the carrying  value of the  securities  sold
     under repurchase agreements, including accrued interest, was $3,924,710 and
     $2,895,706,  respectively.  The maximum amount  outstanding during 2002 and
     2001 was  $2,364,513  and  $1,109,603,  respectively.  The daily average of
     outstanding  agreements  during 2002 and 2001 was  $1,748,884 and $991,783,
     respectively. The securities underlying the agreements are maintained under
     the Bank's control.

18.  Reclassification
     ----------------

     Certain reclassifications have been made to the December 31, 2001 financial
     statements  in order to conform with the  presentation  of the December 31,
     2001 financial statements.

19.  Impact of Recently Issued Accounting Standards
     ----------------------------------------------

     SFAS No. 140,  "Accounting for Transfers and Servicing of Financial  Assets
     and  Extinguishment  of  Liabilities",   is  effective  for  transfers  and
     servicing of financial assets and  extinguishment of liabilities  occurring
     after March 31,  2001.  This  Statement is effective  for  recognition  and
     reclassification   of   collateral   and  for   disclosures   relating   to
     securitization  transactions  and  collateral for fiscal years ending after
     December 15, 2000.  This statement  replaces SFAS No. 125,  "Accounting for
     Transfers  and  Servicing  of  Financial  Assets  and   Extinguisments   of
     Liabilities".  It revises the standards for accounting for  securitizations
     and other transfers of financial assets and collateral and requires certain
     disclosures,  but it carries over most of SFAS No. 125's provisions without
     reconsideration. This Statement provides accounting and reporting standards
     for  transfers  and  servicing of financial  assets and  extinguishment  of
     liabilities.  Those  standards  are based on  consistent  application  of a
     financial- components approach that focuses on control. Under the approach,
     after a transfer of financial  assets,  an entity  recognizes the financial
     and  servicing  assets it controls  and the  liabilities  it has  incurred,
     derecognizes  financial  assets  when  control  has been  surrendered,  and
     derecognizes   liabilities  when  extinguished.   This  Statement  provides
     consistent standards for distinguishing  transfers of financial assets that
     are sales from transfers that are secured  borrowings.  The adoption of the
     provisions  of this  Statement  did not have any  material  impact upon the
     financial position or results of operation of the Company.









                                     F - 29

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

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

     SFAS No. 142,  "Goodwill  and Other  Intangible  Assets",  is effective for
     fiscal years beginning  after December 15, 2001.  This statement  addresses
     financial   accounting  and  reporting  for  acquired  goodwill  and  other
     intangible assets and supercedes APB Opinion No. 17,  "Intangible  Assets".
     It addresses how intangible assets that are acquired individually or with a
     group of other  assets (but not those  acquired in a business  combination)
     should be accounted  for in financial  statements  upon their  acquisition.
     This  Statement  also  addresses how goodwill and other  intangible  assets
     should be accounted  for after they have been  initially  recognized in the
     financial statements. Under this Statement,  goodwill and intangible assets
     that have indefinite  useful lives will not be amortized but rather will be
     tested at least annually for impairment. Intangible assets that have finite
     useful lives will  continue to be amortized  over their useful  lives,  but
     without the constraint of an arbitrary  ceiling.  This  Statement  provides
     specific guidance for testing goodwill for impairment.  The adoption of the
     provisions  of this  Statement  did  have  any  material  impact  upon  the
     financial position or results of operation of the Company.

     SFAS  No.  147,  "Acquisitions  of  Certain  Financial  Institutions  -  an
     Amendment of SFAS No. 72 and No. 144 and FASB  Interpretation  No. 9." SFAS
     No.  72,  "Accounting  for  Certain   Acquisitions  of  Banking  or  Thrift
     Institutions,  and FASB Interpretation No. 9, "Applying APB Opinions No. 16
     and 17 When a Savings  and Loan  Association  or a Similar  Institution  is
     Acquired in a Business  Combination  Accounted for by the Purchase Method",
     provided interpretive guidance on the application of the purchase method to
     acquisitions of financial institutions. Except for transactions between two
     or  more  mutual  enterprises,   this  Statement  removes  acquisitions  of
     financial  institutions  from  the  scope  of  both  Statement  No.  72 and
     Interpretation  No. 9 and requires that those transactions be accounted for
     in accordance with F=SFAS Statements No. 141, "Business Combinations",  and
     No. 142, "Goodwill and Other Intangible  Assets".  Thus, the requirement in
     paragraph 5 of Statement No. 72 to recognize  (and  subsequently  amortize)
     any excess of the fair  value  liabilities  assumed  over the fair value of
     tangible and identifiable  intangible  assets acquired as an unidentifiable
     intangible asset no longer applies to the acquisitions  within the scope of
     this  Statement.   In  addition,   this  statement  amends  SFAS  No.  144,
     "Accounting  for the  Impairment  or Disposal  of  Long-Lived  Assets",  to
     include in its scope long-term customer-relationship intangible assets of a
     financial   institutions  such  as  depositor-  and   borrower-relationship
     intangible assets and credit card holder intangible  assets.  Consequently,
     those  intangible  assets are  subject to the same  undiscounted  cash flow
     recoverability   test  and  impairment  loss  recognition  and  measurement
     provisions that Statement No. 144 requires for other long-lived assets that
     are held and used.  Paragraph  5 of this  Statement,  which  relates to the
     application  of  the  purchase  method  of  accounting,  is  effective  for
     acquisitions  for which the date of  acquisition  is on or after October 1,
     2002.  The  provisions  in  paragraph  6  related  to  accounting  for  the
     impairment   or   disposal  of  certain   long-term   customer-relationship
     intangible assets are effective on October 1, 2002.  Transition  provisions
     for previously recognized  unidentifiable intangible assets in paragraphs 8
     - 14 are effective on October 1, 2002, with earlier application  permitted.
     The  adoption of the  provisions  of this  Statement  did have any material
     impact upon the financial position or results of operation of the Company.










                                     F - 30

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001




     SFAS No. 148,  "Accounting  for  Stock-Based  Compensation - Transition and
     Disclosure - an Amendment of SFAS No. 123". This Statement  amends SFAS No.
     123, "Accounting for Stock-Based Compensation",  to provide for alternative
     methods of transition for a voluntary change ot the fair value based method
     of accounting  for  sock-based  employee  compensation.  In addition,  this
     Statement  amends  the  disclosure  requirements  of  Statement  No. 123 to
     require  prominent   disclosures  in  both  annual  and  interim  financial
     statements  about  the  method  of  accounting  for  stack-based   employee
     compensation and the effect of the method use on the reported results. This
     Statement permits tow additional transition methods for entities that adopt
     the preferable method of accounting for stock- based employee compensation.
     Both of those methods  avoid the ramp-up  effect  arising from  prospective
     application  of the fair  value  based  method.  In  addition,  to  address
     concerns raised by some constituents about the lack of comparability caused
     by multiple transition  methods,  this Statement does not permit the use of
     the original Statement No. 123 prospective method of transition for changes
     to the fair  value  based  method  made in  fiscal  years  beginning  after
     December 15, 2003.  The adoption of the  provisions  of this  Statement did
     have any  material  impact  upon  the  financial  position  or  results  of
     operation of the Company.

     SFAS  No.  149,   "Accounting  for  Certain   Financial   Instruments  with
     Characteristics  of Liabilities and Equity" is expected to be issued in the
     first quarter of 2003.  This Statement  establishes  standards for issuers'
     classification as liabilities in the statement of financial position of the
     following   financial   instruments  that  have   characteristics  of  both
     liabilities  and equity:  (a) Financial  instruments  that are  mandatorily
     redeemable  on a fixed or  determinable  date or upon an event  certain  to
     occur even if the instrument si in th form of equity shares.  (b) Financial
     instruments  embodying,  or indexed  to, an  obligation  to  repurchase  an
     issuers'  equity  shares  that  requires  or could  require  settlement  by
     transfer  of  assets  shall  be  classified  as a  liability  (or  in  some
     circumstances as an asset). Examples include written put options or forward
     purchase  contracts  that are physically  settled or net cash settled.  (c)
     Financial instruments embodying an obligation that the issuer must or could
     settle  by  issuing  a  variable  number  of its  equity  shares  shall  be
     classified as a liability if the monetary  value of the obligation is based
     solely or  predominately on (a) a fixed monetary amount known at inception,
     (b)  variations  in  something  other than the fair  value of the  issuers'
     equity shares,  or (c) variations in the fair value of the issuers'  equity
     shares,  but  in the  direction  opposite  to  those  variations.  Examples
     include,  but are not  limited  to, a payable  settleable  with a  variable
     number of issuer shares, a financial  instrument indexed to the S&P 500 and
     settleable  with a  variable  number of issuer  shares,  and a written  put
     option that could be net share  settled.  This  Statement will be effective
     for all  contracts  created or  modified  after the date the  Statement  is
     issued and otherwise effective at the beginning of the first interim period
     beginning  after  June 15,  2003.  It will be  effected  by  reporting  the
     cumulative effect of a change in accounting principle for contracts created
     before  the  issuance  date and still  existing  at the  beginning  of that
     interim period. For nonpublic  companies,  mandatory  redeemable  financial
     instruments have special  presentation  requirements and are subject to the
     provisions of this  Statement for the first fiscal period  beginning  after
     December 15, 2003.  The adoption of the provisions of this Statement is not
     anticipated  to have any  material  impact upon the  financial  position or
     results of operation of the Company.

20.  Selected Quarterly Financial Data (Unaudited)
     ---------------------------------------------

     Summarized  below  are  selected   financial  data  regarding   results  of
     operations for the periods indicated.



                                     F - 31

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001


<TABLE>
<CAPTION>



                                            First              Second             Third              Fourth
                                           Quarter            Quarter            Quarter            Quarter              Year
                                     ------------------- ------------------ ------------------ ------------------ ------------------
                                                                                  2002
                                     ------------------- ------------------ ------------------ ------------------ ------------------
<S>                                  <C>                 <C>                <C>                <C>                <C>

Total interest income                $         1,829,512 $        1,874,864 $        1,769,573 $        1,684,939 $        7,158,888
Net interest income                            1,107,894          1,249,725          1,206,847          1,150,782          4,715,248
Provision for loan losses                         90,000            455,000             50,000            200,000            795,000
Non-interest income                              105,478             99,777            130,414            163,497            499,166
Non-interest expense                             894,175          1,090,092            915,309            987,332          3,886,908
Income before income taxes                       229,197           (195,590)           371,952            127,407            532,966
  (benefit) expense
Net income (loss)                    $           152,857 $         (110,055)$          247,140 $           96,635 $          386,577
                                     =================== ================== ================== ================== ==================

Common shares outstanding                        539,027            539,027            539,027            539,027            539,027
                                     =================== ================== ================== ================== ==================
Net income (loss) per
  common share outstanding           $              0.28 $           (0.20) $             0.46 $             0.18 $             0.72
                                     =================== ================== ================== ================== ==================

                                            First              Second             Third              Fourth
                                           Quarter             Quarter            Quarter            Quarter              Year
                                     ------------------- ------------------ ------------------ ------------------ ------------------
                                                                                  2001
                                     ------------------- ------------------ ------------------ ------------------ ------------------
Total interest income                $         2,393,691 $        2,353,824 $        2,218,588 $        2,020,868 $        8,986,971
Net interest income                            1,021,976          1,059,909          1,053,609          1,071,330          4,206,824
Provision for loan losses                         75,000             85,000                  -            105,000            265,000
Non-interest income                               90,139             82,962             87,136             79,647            339,884
Non-interest expense                             802,684            815,878            803,221            890,267          3,312,050
Income before income taxes                       236,431            241,993            337,524            153,710            969,658
  (benefit)
Net income                           $           152,197 $          155,084 $          214,769 $          104,609 $          626,659
                                     =================== ================== ================== ================== ==================

Common shares outstanding                        539,027            539,027            539,027            539,027            539,027
                                     =================== ================== ================== ================== ==================
Net income per
  common share outstanding           $              0.28 $             0.29 $             0.40 $             0.19 $             1.16
                                     =================== ================== ================== ================== ==================
</TABLE>


                                     F - 32

<PAGE>





















                          INDEPENDENT AUDITOR'S REPORT




Our audit was made for the  purpose of  forming  an opinion of the  consolidated
financial statements taken as a whole. The consolidating information represented
on the following  pages is presented for purposes of additional  analysis and is
not a required part of the consolidated  financial statements.  Such information
has been  subjected  to the  auditing  procedures  applied  in the  audit of the
consolidated financial statements and, in our opinion, the information is fairly
stated in all  material  respects  in  relation  to the  consolidated  financial
statements taken as a whole.





/s/  Welch & Associates, Ltd.


February 6, 2003
Nashville, Tennessee
















                                     F - 33

<PAGE>



                                      VOLUNTEER BANCORP, INC. AND SUBSIDIARY
                                            Consolidating Balance Sheet
                                                 December 31, 2002

<TABLE>
<CAPTION>


                                               Volunteer         Citizens Bank                             Consolidated
                                               Bancorp,             of East                                 Volunteer
                                                 Inc.              Tennessee                               Bancorp, Inc.
        ASSETS                                 (Parent)          (Subsidiary)         Eliminations        and Subsidiary
        ------                                 --------          ------------         ------------        --------------
<S>                                        <C>               <C>                 <C>                 <C>
Cash and due from banks                    $     28,538      $     4,705,507     $      (28,538)     $       4,705,507
Federal funds sold                                    -            4,450,000                   -             4,450,000
Investment in subsidiary                      8,485,186                    -         (8,485,186)                     -
Investment available for sale                         -           27,765,755                   -            27,765,755
Investments held to maturity                          -            1,052,991                   -             1,052,991
Loans, net                                            -           67,014,982                   -            67,014,982
Accrued interest receivable                           -              935,616                   -               935,616
Premises and equipment                                -            3,788,671                   -             3,788,671
Other real estate                                     -            1,241,402                   -             1,241,402
Deferred income taxes                                 -               34,962                   -                34,962
Goodwill                                        131,259                    -                   -               131,259
Other assets                                     10,516              240,354                   -               250,870
                                           ------------      ---------------     ---------------     -----------------
     Total assets                          $  8,655,499      $   111,230,240     $   (8,513,724)     $     111,372,015
                                           ============      ===============     ===============     =================


        LIABILITIES AND STOCKHOLDERS' EQUITY
        ------------------------------------

Liabilities:
  Deposits                                 $           -     $    99,986,295     $      (28,538)     $      99,957,757
  Accrued interest payable                       11,257              400,065                   -               411,322
 Securities sold under
   repurchase agreements                              -            2,288,784                   -             2,288,784
  Other liabilities                                   -               69,910                   -                69,910
  Long-term debt                              1,810,000                    -                   -             1,810,000
                                           ------------      ---------------     ---------------     ------------------
     Total liabilities                        1,821,257          102,745,054            (28,538)           104,537,773
                                           ------------      ---------------     ---------------     ------------------
Stockholders' equity:
  Capital stock                                   5,390              666,500           (666,500)                 5,390
  Additional paid-in capital                  1,916,500            5,068,016         (5,068,016)             1,916,500
  Retained earnings                           4,557,192            2,395,510         (2,395,510)             4,557,192
 Accumulated other
    comprehensive income                        355,160              355,160           (355,160)               355,160
                                           ------------     ----------------     ---------------     ------------------
     Total stockholders' equity               6,834,242            8,485,186         (8,485,186)             6,834,242
                                           ------------     ----------------     ---------------     ------------------
     Total liabilities and
        stockholders' equity               $  8,655,499     $    111,230,240     $   (8,513,724)     $     111,372,015
                                           ============     ================     ===============     ==================
</TABLE>
                                      F-34


<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY
                           Consolidating Balance Sheet
                                December 31, 2001




<TABLE>
<CAPTION>

                                               Volunteer         Citizens Bank                             Consolidated
                                               Bancorp,             of East                                 Volunteer
                                                 Inc.               Tennessee                              Bancorp, Inc.
        ASSETS                                 (Parent)          (Subsidiary)         Eliminations        and Subsidiary
        ------                                 --------          ------------         ------------        --------------
<S>                                        <C>                   <C>                  <C>                 <C>

Cash and due from banks                    $     59,536          $  2,628,179         $    (59,536)       $    2,628,179
Federal funds sold                                    -             6,275,000                    -             6,275,000
Investment in subsidiary                      8,106,525                     -           (8,106,525)                    -
Investment available for sale                         -            25,966,922                    -            25,966,922
Investments held to maturity                          -               626,859                    -               626,859
Loans, net                                            -            72,158,156                    -            72,158,156
Accrued interest receivable                           -             1,066,479                    -             1,066,479
Premises and equipment                                -             3,866,358                    -             3,866,358
Other real estate                                     -             1,144,770                    -             1,144,770
Deferred income taxes                             6,869               108,066                    -               114,935
Goodwill                                        131,259                     -                    -               131,259
Other assets                                     13,111               255,711                    -               268,822
                                           ------------         -------------        --------------       --------------
     Total assets                          $  8,317,300         $ 114,096,500        $  (8,166,061)       $  114,247,739
                                           ============         =============        ==============       ==============


        LIABILITIES AND STOCKHOLDERS' EQUITY
        ------------------------------------

Liabilities:
  Deposits                                 $          -         $ 103,969,191        $    (59,536)        $  103,909,655
  Accrued interest payable                       15,632               878,715                   -                894,347
 Securities sold under
    repurchase agreements                             -             1,109,603                   -              1,109,603
  Other liabilities                                   -                32,466                   -                 32,466
  Long-term debt                              2,170,000                     -                   -              2,170,000
                                           ------------         -------------        -------------        --------------
     Total liabilities                        2,185,632           105,989,975             (59,536)           108,116,071
                                           ------------         -------------        -------------        --------------
Stockholders' equity:
  Capital stock                                   5,390               666,500            (666,500)                 5,390
  Additional paid-in capital                  1,916,500             5,068,016          (5,068,016)             1,916,500
  Retained earnings                           4,224,518             2,386,749          (2,386,749)             4,224,518
 Accumulated other
    comprehensive income                        (14,740)              (14,740)             14,740                (14,740)
                                           ------------         -------------        -------------        --------------
     Total stockholders' equity               6,131,668             8,106,525          (8,106,525)             6,131,668
                                           ------------         -------------        -------------        --------------
     Total liabilities and
        stockholders' equity               $  8,317,300         $ 114,096,500        $ (8,166,061)        $  114,247,739
                                           ============         =============        =============        ==============

</TABLE>

                                     F - 35

<PAGE>



                             VOLUNTEER BANCORP, INC.
                       Consolidating Statement of Earnings
                                December 31, 2002



<TABLE>
<CAPTION>

                                                                       Citizens                           Consolidated
                                                   Volunteer             Bank                               Volunteer
                                                    Bancorp,           of East                            Bancorp, Inc.
                                                      Inc.            Tennessee                                and
                                                    (Parent)         (Subsidiary)      Eliminations        Subsidiary
                                                   ----------         ----------       ------------       ------------
<S>                                            <C>                <C>                 <C>              <C>

Interest income:
  Interest and fees on loans                   $                - $        5,710,663  $             -  $         5,710,663
  Interest on federal funds                                     -             73,631                -               73,631
  Interest and dividends on
     investments:
    Taxable                                                     -          1,132,633                -            1,132,633
    Exempt from federal income taxes                            -            241,961                -              241,961
                                               ------------------ ------------------ ----------------  -------------------
      Total interest income                                     -          7,158,888                -            7,158,888
                                               ------------------ ------------------ ----------------  -------------------
Interest expense:
  Interest on deposits                                          -          2,322,582                -            2,322,582
  Interest on other borrowed funds                         71,421             49,637                -              121,058
                                               ------------------ ------------------ ----------------  -------------------
    Total interest expense                                 71,421          2,372,219                -            2,443,640
                                               ------------------ ------------------ ----------------  -------------------
Net interest income                                       (71,421)         4,786,669                -            4,715,248
Provision for possible loan losses                              -            795,000                -              795,000
                                               ------------------ ------------------ ----------------  -------------------
Net interest income after loan
  provision                                               (71,421)         3,991,669                -            3,920,248
                                               ------------------ ------------------ ----------------  -------------------
Non-interest income:
  Equity in earnings of subsidiary                        444,559                  -        (444,559)                    -
  Service charges                                               -            297,299                -              297,299
  Other income                                                  -            202,317                -              202,317
                                               ------------------ ------------------ ----------------  -------------------
                                                          444,559            499,616        (444,559)              499,616
                                               ------------------ ------------------ ----------------  -------------------
Non-interest expense:
  Salaries and benefits                                         -          1,834,197                -            1,834,197
  Other                                                    16,710          2,035,991                -            2,052,701
                                               ------------------ ------------------ ----------------  -------------------
                                                           16,710          3,870,188                -            3,886,898
                                               ------------------ ------------------ ----------------  -------------------
Income before taxes                                       356,428            621,097        (444,559)              532,966
Income tax (benefit) expense                              (30,149)           176,538                -              146,389
                                               ------------------ ------------------ ----------------  -------------------
Net income                                     $          386,577 $          444,559 $      (444,559)  $           386,577
                                               ================== ================== ================  ===================

</TABLE>






                                     F - 36

<PAGE>



                             VOLUNTEER BANCORP, INC.
                       Consolidating Statement of Earnings
                                December 31, 2001

<TABLE>
<CAPTION>

                                                                       Citizens                           Consolidated
                                                   Volunteer             Bank                               Volunteer
                                                    Bancorp,           of East                            Bancorp, Inc.
                                                      Inc.            Tennessee                                and
                                                    (Parent)         (Subsidiary)      Eliminations        Subsidiary
                                                   ---------         ------------      ------------       ------------
<S>                                                <C>            <C>                 <C>              <C>

Interest income:
  Interest and fees on loans                       $            - $        7,136,898  $             -  $        7,136,898
  Interest on federal funds                                     -            233,982                -             233,982
  Interest and dividends on
    investments:
    Taxable                                                     -          1,490,965                -            1,490,965
    Exempt from federal income taxes                            -            125,126                -              125,126
                                               ------------------ ------------------  ---------------- -------------------
      Total interest income                                     -          8,986,971                -            8,986,971
                                               ------------------ ------------------  ---------------- -------------------
Interest expense:
  Interest on deposits                                          -          4,581,452                -            4,581,452
  Interest on other borrowed funds                        139,123             59,572                -              198,695
                                               ------------------ ------------------  ---------------  -------------------
    Total interest expense                                139,123          4,641,024                -            4,780,147
                                               ------------------ ------------------  ---------------  -------------------
Net interest income                                      (139,123)         4,345,947                -            4,206,824
Provision for possible loan losses                              -            265,000                -              265,000
                                               ------------------ ------------------  ---------------  -------------------
Net interest income after loan
   provision                                             (139,123)         4,080,947                -            3,941,824
                                               ------------------ ------------------  ---------------  -------------------
Non-interest income:
  Equity in earnings of subsidiary                        750,287                  -        (750,287)                    -
  Service charges                                               -            164,833                -              164,833
  Other income                                                  -            175,051                -              175,051
                                               ------------------ ------------------  ---------------  -------------------
                                                          750,287            339,884        (750,287)              339,884
                                               ------------------ ------------------  ---------------  -------------------
Non-interest expense:
  Salaries and benefits                                         -          1,742,511                -            1,742,511
  Other                                                    53,081          1,516,458                -            1,569,539
                                               ------------------ ------------------  ---------------  -------------------
                                                           53,081          3,258,969                -            3,312,050
                                               ------------------ ------------------  ---------------  -------------------
Income before taxes                                       558,083          1,161,862        (750,287)              969,658
Income tax (benefit) expense                              (68,576)           411,575                -              342,999
                                               ------------------ ------------------  ---------------  -------------------
Net income                                     $          626,659 $          750,287  $     (750,287)  $           626,659
                                               ================== ==================  ===============  ===================


</TABLE>





                                     F - 37

<PAGE>




                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY
                      Consolidating Statement of Cash Flows
                                December 31, 2002

<TABLE>
<CAPTION>


                                                                         Citizens                           Consolidated
                                                       Volunteer           Bank                              Volunteer
                                                       Bancorp,           of East                           Bancorp, Inc.
                                                         Inc.            Tennessee                               and
                                                       (Parent)         (Subsidiary)       Eliminations     Subsidiary
                                                   ----------------- ----------------- ----------------- ----------------
<S>                                                <C>               <C>               <C>               <C>

Cash Flows From Operating Activities:
  Net income                                       $         386,577 $         444,559 $       (444,559) $        386,577
  Adjustments to reconcile net income to
    net cash provided by operating activities:
    Subsidiary earnings undistributed                         (8,761)                -            8,761                 -
    Deferred income taxes                                      6,869          (153,609)               -          (146,740)
    Provision for loan losses                                      -           795,000                -           795,000
    Depreciation and amortization                                  -           205,483                -           205,483
    Securities (gains)                                             -           (39,222)               -           (39,222)
    FHLB stock dividends                                           -           (16,400)               -           (16,400)
    Decrease in other assets                                   2,595            49,588                -            52,183
    (Decrease) in other liabilities                           (4,375)         (441,206)               -          (445,581)
                                                   ----------------- ----------------- ----------------- -----------------
  Net cash provided by operating activities                  382,905           844,193         (435,798)          791,300
                                                   ----------------- ----------------- ----------------- -----------------
Cash Flows From Investing Activities:
    {Increase) in investment securities                            -        (1,572,730)               -        (1,572,730)
    Decrease in loans                                              -         4,348,174                -         4,348,174
    Capital expenditures                                           -          (127,796)               -          (127,796)
                                                   ----------------- ----------------- ----------------- -----------------
  Net cash provided by investing activities                        -         2,647,648                -         2,647,648
                                                   ----------------- ----------------- ----------------- -----------------
Cash Flows From Financing Activities:
    (Decrease) in deposits                                         -        (3,982,896)          30,998        (3,951,898)
    Increase in securities sold under
      repurchase agreements                                        -         1,179,181                -         1,179,181
    Dividends paid                                           (53,903)         (435,798)         435,798           (53,903)
    Repayment of long-term debt                             (360,000)                -                -          (360,000)
                                                   ----------------- ----------------- ----------------- -----------------
  Net cash (used) by financing activities                   (413,903)       (3,239,513)         466,796        (3,186,620)
                                                   ----------------- ----------------- ----------------- -----------------
Change in cash and equivalents                               (30,998)          252,328           30,998           252,328
Cash and equivalents - beginning                              59,536         8,903,179          (59,536)        8,903,179
                                                   ----------------- ----------------- ----------------- -----------------
Cash and equivalents - ending                      $          28,538 $       9,155,507 $        (28,538) $      9,155,507
                                                   ================= ================= ================= =================


</TABLE>






                                     F - 38

<PAGE>



                                       VOLUNTEER BANCORP, INC. AND SUBSIDIARY
                                        Consolidating Statement of Cash Flows
                                                  December 31, 2001


<TABLE>
<CAPTION>
                                                                         Citizens                           Consolidated
                                                       Volunteer           Bank                              Volunteer
                                                       Bancorp,           of East                           Bancorp, Inc.
                                                         Inc.            Tennessee                               and
                                                       (Parent)         (Subsidiary)       Eliminations     Subsidiary
                                                   ----------------- ----------------- ----------------- ------------------
<S>                                                <C>               <C>                 <C>              <C>
Cash Flows From Operating Activities:
  Net income                                       $         626,659 $         750,287   $      (750,287) $         626,659
  Adjustments to reconcile net income to
    net cash provided by operating activities:
    Subsidiary earnings undistributed                       (264,951)                -           264,951                  -
    Deferred income taxes                                        270            46,589                 -             46,859
    Provision for loan losses                                      -           265,000                 -            265,000
    Depreciation and amortization                             17,883           223,348                 -            241,231
    Securities (gains)                                             -           (25,260)                -            (25,260)
    FHLB stock dividends                                           -           (22,800)                -            (22,800)
    Decrease (increase) in other assets                       89,871          (491,117)         (102,982)          (504,228)
    (Decrease) in other liabilities                          (21,193)         (419,035)          102,982           (337,246)
                                                   ----------------- -----------------   ---------------  -----------------
  Net cash provided by operating activities                  448,539           327,012          (485,336)           290,215
                                                   ----------------- -----------------   ---------------  -----------------
Cash Flows From Investing Activities:
    Decrease in investment securities                              -           363,400                 -            363,400
    Decrease in loans                                              -           615,764                 -            615,764
    Capital expenditures                                           -           (37,662)                -            (37,662)
                                                   ----------------- -----------------   ---------------  -----------------
  Net cash provided by investing activities                        -           941,502                 -            941,502
                                                   ----------------- -----------------   ---------------  -----------------
Cash Flows From Financing Activities:
    (Decrease) in deposits                                         -        (2,049,956)          (48,075)        (2,098,031)
    Increase in securities sold under
      repurchase agreements                                        -            57,090                 -             57,090
    Dividends paid                                           (75,464)         (485,336)          485,336            (75,464)
    Repayment of long-term debt                             (325,000)                -                 -           (325,000)
                                                   ----------------- -----------------   ---------------  -----------------
  Net cash (used) by financing activities                   (400,464)       (2,478,202)          437,261         (2,441,405)
                                                   ----------------- -----------------   ---------------  -----------------
Change in cash and equivalents                                48,075        (1,209,688)          (48,075)        (1,209,688)
Cash and equivalents - beginning                              11,461        10,112,867           (11,461)        10,112,867
                                                   ----------------- -----------------   ---------------  -----------------
Cash and equivalents - ending                      $          59,536 $       8,903,179   $       (59,536) $       8,903,179
                                                   ================= =================   ===============  =================


</TABLE>








                                     F - 39

<PAGE>


                     VOLUNTEER BANCORP, INC. AND SUBSIDIARY
                Consolidating Statements of Comprehensive Income
                           December 31, 2002 and 2001


<TABLE>
<CAPTION>

                                                 December 31, 2002
-------------------------------------------------------------------------------------------------------------------------


                                                                       Citizens                            Consolidated
                                                    Volunteer            Bank                               Volunteer
                                                     Bancorp,           of East                            Bancorp, Inc.
                                                       Inc.            Tennessee                               and
                                                     (Parent)        (Subsidiary)       Eliminations        Subsidiary
                                                     --------        ------------       ------------       ------------

<S>                                             <C>                <C>               <C>                <C>

Net income                                      $          386,577 $         444,559 $        (444,559) $         386,577
                                                ------------------ ----------------- ------------------ ------------------
Other comprehensive income, before tax:
Unrealized gain on securities available or sale:
Unrealized holding gains arising
  during the period                                              -           635,835                 -            635,835
Less: reclassification adjustments for
   gains included in net income                                  -            39,222                 -             39,222
                                                ------------------ ----------------- ------------------ ------------------
Other comprehensive income                                       -           596,613                 -            596,613
Income taxes                                                     -          (226,713)                -           (226,713)
                                                ------------------ ----------------- ------------------ ------------------
Other comprehensive income net of
  income taxes                                                   -           369,900                 -            369,900
Company's share of subsidiary's other
  comprehensive income, net of tax                         369,900                 -          (369,900)                 -
                                                ------------------ ----------------- ------------------ ------------------
Total comprehensive income                      $          756,477 $         814,459 $        (814,459) $         756,477
                                                ================== ================= ================== ==================


                                                 December 31, 2001
--------------------------------------------------------------------------------------------------------------------------

Net income                                      $          626,659 $         750,287 $        (750,287) $         626,659
                                                ------------------ ----------------- ------------------ ------------------
Other comprehensive income, before
 tax
Unrealized gains on securities available for sale:
Unrealized holding gains arising during
 the period                                                      -           445,164                 -            445,164
Less: reclassification adjustments for
  (Losses) included in net income                                -            25,260                 -             25,260
                                                ------------------ ----------------- ------------------ ------------------
Other comprehensive income                                       -           419,904                 -            419,904
Income taxes                                                     -          (159,564)                -           (159,564)
                                                ------------------ ----------------- ------------------ ------------------
Other comprehensive income net of
 income taxes                                                    -           260,340                 -            260,340
Company's share of subsidiary's other
 comprehensive income, net of tax                          260,340                 -          (260,340)                 -
                                                ------------------ ----------------- ------------------ ------------------
Total comprehensive income                      $          886,999 $       1,010,627 $      (1,010,627) $         886,999
                                                ================== ================= ================== ==================

</TABLE>



                                     F - 40