<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB



(Mark One)
[X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 

                  For the fiscal year ended December 31, 1998

Commission File Number       0-28496           
                        --------------------

Community Financial Group, Inc.
--------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)

              Tennessee                            62-1626938  
 --------------------------------               ------------------
   (State or other jurisdiction                   (IRS Employer
 of incorporation or organization)              Identification No.)

 401 Church Street           Nashville, Tennessee              37219-2213
--------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code   (615) 271-2000
                                                   -------------------- 

      Securities registered pursuant to Section 12(g) of the Act:

 Common Stock, par value $6 per share
--------------------------------------------------------------------------------
                      (Title of Class)

 Warrants, exercise price $12.50 per share
--------------------------------------------------------------------------------
                      (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not 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 ]

State issuer's revenues for its most recent fiscal year. $18,396,000.

The aggregate market value (price at which the stock sold) of Community
Financial Group, Inc., voting common stock held by non-affiliates as of February
26, 1999, was $40,067,058.



<PAGE>   2



State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

<TABLE>
<CAPTION>
                                                      Outstanding at
         Class                                        March 10, 1999 
         -----                                        -------------- 
<S>                                                  <C>             
Common stock $6 par value                            4,219,436 shares
</TABLE>


                   Documents Incorporated by Reference:

<TABLE>
<CAPTION>
     Document from which portions               Part of Form 10-KSB to
     are incorporated by reference                which incorporated
     -----------------------------                ------------------

<S>  <C>                                        <C>
1.    Annual Report to Shareholders for year     Part I - Item 1 
       ended December 31, 1998                   Part II - Items 5, 6
                                                  and 7

2.    Proxy Statement dated April 2, 1999        Part III - Items 9,
                                                  10, 11 and 12
</TABLE>




                                      -2-
<PAGE>   3

ITEM 1 - DESCRIPTION OF BUSINESS


On December 13, 1995, Community Financial Group, Inc. ("CFGI"), was incorporated
as a Tennessee Corporation. CFGI also filed an application with the Board of
Governors of the Federal Reserve System for prior approval to become a one bank
holding company pursuant to Section 3(a)(1) of the Bank Holding Company Act of
1956, as amended. This application was filed on January 22, 1996, and approval
was received on March 29, 1996. The holding company began operation April 30,
1996, following approval of a majority of the shareholders of The Bank of
Nashville.

As of December 31, 1998, the only subsidiary of CFGI was The Bank of Nashville
(The Bank). CFGI and The Bank are collectively referred to herein as "the
Company".

The Bank was incorporated under the laws of the State of Tennessee, on July 10,
1989. The Bank was approved as a State Bank, is a member of the Federal Reserve
System, and is insured by the Federal Deposit Insurance Corporation. The initial
business day for the Bank was November 20, 1989. The Company now has a total of
61 employees.

The present area and scope of the Company's activities include providing a full
range of banking and related financial services, including commercial banking,
consumer banking, financial and investment services, and real estate finance.
The Company has three traditional branches with its main office at 401 Church
Street, the Green Hills office at 3770 Hillsboro Pike and the Brentwood office
at 5105 Maryland Way. Additionally, these locations are complemented by the
Company's "Bank on Call" mobile branches which serve customers throughout the
market area with at your office banking convenience. LM Financial Partners,
Inc., a subsidiary of Legg Mason Wood Walker, Inc., operates an Investment
Center in the Company's primary location which provides bank customers at all
locations convenient access to a wide array of investment products and fiduciary
services.

The Company is well capitalized as demonstrated by a total risk-based capital
ratio of 31.6%, tier 1 risk-based capital ratio of 30.3% and tier 1 leverage
ratio was 23.0% at December 31, 1998. Additionally, at year end 1998, the Bank's
capital ratios reflected total risk based capital ratio at 16.9%, tier 1
risk-based capital ratio at 15.6% and tier 1 leverage ratio at 11.9%. These
capital ratios exceed the current regulatory minimum requirements.

The Company is focused on serving small/mid-sized businesses and individuals in
the middle Tennessee market, with a primary service area of the Metro
Nashville-Davidson County Metropolitan Statistical Area (MSA). Nashville,
located in the north central part of the State, is the State's largest MSA.
Situated midway between the Mississippi delta to the west, and the Great Smokey



                                      -3-
<PAGE>   4


Mountains to the east, Metropolitan Nashville covers 533 square miles. Over half
of the population of the United States is located within a 600 mile radius of
the City, and the central location has contributed to the emergence of Nashville
as an important transportation, tourism, and distribution center. Diversity is a
key element of the Nashville economy with printing and publishing, healthcare,
automobile manufacturing, financial services, real estate development and
construction, education, government, entertainment, tourism, hospitality,
manufacturing, warehousing, and various service sectors, all being major
contributors to the economic vitality of the area.

The activities in which the Company engages are very competitive. Generally, the
Company competes with other banks and nonbank financial institutions located
primarily in the middle Tennessee market area. The principal methods of
competition center around such aspects as interest rates on loans and deposits,
decision making relationship management, customer services, and other service
oriented fee based products. Most of the Company's competitors are major
corporations with substantially more assets and personnel than the Company.

The Company actively competes for loans and deposits with other commercial
banks, brokerage firms, savings and loan associations and credit unions.
Consumer finance companies, department stores, mortgage brokers, and insurance
companies are also significant competitors for various types of loans. There is
also active competition for various types of fiduciary and investment business
from other banks, trust companies, brokerage firms, investment companies, and
others.

The Company is headquartered in the downtown central business district of
Nashville. The Company occupies space in the lower level, the second floor, and
the third floor of the L & C Tower, located at 401 Church Street, a location
which serves as the Bank's main office. The Company opened its first Automated
Teller Machine (ATM) in 1989 and now operates ATM's and cash dispensers in
various locations throughout its market, serving local businesses and
individuals as well as tourists. In 1996, the Company received regulatory
approval to establish a mobile branch. The mobile branch brings traditional
banking services to the Company's customers at their locations. A full service
branch office, located in Green Hills, opened January 23, 1997. Another, located
in Maryland Farms in Brentwood, Tennessee opened in September 1998. Construction
started in October, 1998, on a full service branch to be located at 100 Maple
Drive North, Hendersonville, Tennessee. If deemed appropriate, additional
offices may be established subject to regulatory approval.

During 1998, the Company declared dividends of $.24 per share which resulted in
a dividend payout ratio of 22.22%. Other information relating to current banking
issues and the regulatory environment are addressed in the 1998 Annual Report to
Shareholders.




                                      -4-
<PAGE>   5


The following schedules are provided in accordance with Guide 3 "Statistical
Disclosure by Bank Holding Companies." All schedules, except those noted below,
have been omitted since the required information is either not applicable or is
incorporated by reference in the Company's 1998 Annual Report.

           -  Schedule III-A - Types of Loans
           -  Schedule III-B - Maturities and Sensitivities of Loans to
              Changes in Interest Rates


















                                      -5-
<PAGE>   6


III.     LOAN PORTFOLIO

         The following table presents a summary of loan types (net of unearned
         income) by categories for the last five years.

                                 SCHEDULE III-A

                                 TYPES OF LOANS

<TABLE>
<CAPTION>
                                               December 31,
                        --------------------------------------------------------------
                          1998          1997          1996         1995         1994
                        --------      --------      --------      -------      -------
<S>                     <C>           <C>           <C>           <C>          <C>    
Loans (net of
  unearned
  income of
  $295, $297,
  $256, $203
  and $202
  respectively)
Commercial              $ 51,970      $ 38,571      $ 35,721      $40,657      $35,108
  Real estate -
  mortgage
  loans                   79,455        71,055        58,763       48,648       41,800
  Real estate -
Real estate -
  construction            14,667         9,426         9,467        5,952        2,227
Consumer                   6,583         3,697         3,937        3,083        1,950
                        --------      --------      --------      -------      -------

                        $152,675      $122,749      $107,888      $98,340      $81,085
                        ========      ========      ========      =======      =======
</TABLE>

Most of the Company's business activity is with customers located in the Middle
Tennessee region. Generally, loans are secured by real estate, inventory,
accounts receivable, stock, time certificates, or other assets. The loans are
expected to be repaid from cash flow or proceeds from the sale of selected
assets of the borrowers. Real estate mortgage and construction loans reflected
in the preceding schedule are comprised primarily of loans to commercial
borrowers.

At December 31, 1998, funded and unfunded commitments to borrowers in the real
estate industry were approximately $27.2 million and $5.2 million, respectively,
and loans to building contractors were approximately $8.8 million and $10.1
million, respectively. At December 31, 1997, funded and unfunded loan
commitments as classified by Standard Industry Classification codes include
borrowers in the real estate industry approximating $25 million and $2.2
million, respectively, and loans to building contractors approximating $7.9
million and $11.2 million, respectively.




                                      -6-
<PAGE>   7


The following table presents the maturity distribution of loan categories at
December 31, 1998 (in thousands).

                                 SCHEDULE III-B

                                 TYPES OF LOANS

                    MATURITIES AND SENSITIVITIES OF LOANS TO
                            CHANGES IN INTEREST RATES

<TABLE>
<CAPTION>
                           One     After One      After
                          Year     But Within      Five
                        Or Less    Five Years      Years         Total
                        ------------------------------------------------
<S>                     <C>          <C>          <C>           <C>     
(Net of Unearned
  Income)
    Commercial          $28,008      $21,725      $  2,237      $ 51,970

    Real estate -
      mortgage           20,424       26,420        32,611        79,455

    Real estate -
      construction        8,486        6,181            --        14,667

    Consumer              4,653        1,875            55         6,583
                        -------      -------      --------      --------

                        $61,571      $56,201      $ 34,903      $152,675
                        =======      =======      ========      ========

For maturities
 over one year:
  Fixed                 $42,824
  Floating               48,280
</TABLE>

ITEM 2 - DESCRIPTION OF PROPERTY

The Company, located at 401 Church Street, Nashville, Tennessee, occupies a
total of 15,296 square feet on three floors of the L&C Tower, a 31-story office
building. The facility has a total of 158,907 gross square footage and is
located on .391 acres. The Company's space is leased from LC Tower, L.L.C. (the
"Landlord"). The lease has an initial term of ten years with three five-year
renewal options.

The Company occupies 4,670 square feet in the Glendale Shopping Center located
at 3770 Hillsboro Pike, Nashville, Tennessee. The Company's space is leased from
Coleman Partners, a Tennessee Partnership, and has an initial term of five years
with three five-year renewal options.

The Company occupies 4,000 square feet in the newly completed The Bank of
Nashville Building located at 5105 Maryland Way, Brentwood, Tennessee. The
Company's space is leased from Graystone, LLC and has an initial term of ten
years with three five-year renewal options.

In the spring of 1999, the Company will occupy 5,008 square feet in the newly
constructed building located at 100 Maple Drive North in Hendersonville,
Tennessee. The company purchased the land in June, 1998.



                                      -7-
<PAGE>   8

ITEM 3 - LEGAL PROCEEDINGS

None.


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

None.














                                      -8-
<PAGE>   9


                                     PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The following portion of the Company's 1998 Annual Report to Shareholders is
incorporated herein by reference:

Common Stock Information    Page 46


ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS

The following portions of the 1998 Annual Report are herein incorporated by
reference.

          Management's Discussion and Analysis of Results of Operations
                 and Financial Condition on pages 6 through 23.


ITEM 7 - FINANCIAL STATEMENTS

The following portions of the 1998 Annual Report are incorporated herein by
reference.

           Financial Statements and Report of Independent Auditors on
                        pages 24 through 43 and page 44.
                   Quarterly Results of Operations on page 45.


ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

                                    PART III


ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding directors and the information regarding executive
officers called for by this item is contained in the sections entitled "Election
of Directors" and "Executive Officers" in the Company's proxy statement for its
1999 Annual Meeting of Shareholders, dated April 2, 1999, and is incorporated
herein by reference.




                                      -9-
<PAGE>   10


ITEM 10 - EXECUTIVE COMPENSATION

The information called for by this item is contained in the section entitled
"Compensation of Management and Other Information" in the Company's proxy
statement for its 1999 Annual Meeting of Shareholders, dated April 2, 1999, and
is incorporated herein by reference.


ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by this item is contained in the section entitled
"Stock Ownership" in the Company's proxy statement for its 1999 Annual Meeting
of Shareholders dated April 2, 1999, and is incorporated herein by reference.


ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this item is contained in the section entitled
"Transactions with Directors and Executive Officers" in the Company's proxy
statement for its 1999 Annual Meeting of Shareholders dated April 2, 1999, and
is incorporated herein by reference.


ITEM 13 - EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)      The following documents are filed as part of this report:

                  (1)      Financial Statements

                           The following consolidated financial statements and
                           the Report of KPMG LLP, Independent Certified Public
                           Accountants, are on pages 24 through 43 and page 44
                           of the 1998 Annual Report and are incorporated herein
                           by reference.

                           -  Consolidated Balance Sheets at December 31, 1998
                               and 1997
                           -  Consolidated Statements of Income for the Years
                               Ended December 31, 1998, 1997 and 1996
                           -  Consolidated Statements of Shareholders' Equity
                               and Comprehensive Income for the Years Ended
                               December 31, 1998, 1997 and 1996
                           -  Consolidated Statements of Cash Flows for the
                               Years Ended December 31, 1998, 1997 and 1996
                           -  Notes to Consolidated Financial Statements




                                      -10-
<PAGE>   11


                  (2)      Exhibits

                           1.     Not required.

                           2.     Plan of acquisition,
                                    reorganization,arrangement, liquidation or
                                    succession. None

                           3.     Articles of Incorporation and By-Laws,
                                    incorporated by reference to Exhibit 3 to
                                    the Registrant's Annual Report Form 10-KSB
                                    for the year ended December 31, 1996.

                           4.     Instruments defining the rights of security
                                    holders, including debentures.

                           4.01   Warrant Agreement, incorporated by reference
                                    to Exhibit 4.01 to the Registrant's Annual
                                    Report Form 10-KSB for the year ended
                                    December 31, 1996.

                           4.02   Form of specimen Certificate of Common
                                    Stock, incorporated by reference to Exhibit
                                    4.02 to the Registrant's Annual Report Form
                                    10-KSB for the year ended December 31, 1996.

                           4.03   Form of specimen Certificate of Common Stock
                                    Purchase Warrant, incorporated by reference
                                    to Exhibit 4.03 to the Registrant's Annual
                                    Report Form 10-KSB for the year ended
                                    December 31, 1996.

                           4.04   Community Financial Group, Inc. and
                                    Registrar and Transfer Company, as Rights
                                    Agent, Shareholders Rights Agreement Dated
                                    as of January 21, 1998. Incorporated by
                                    reference to Exhibit 4.1 to the Registrant's
                                    Form 8-A dated January 26, 1998.

                           5.     Not required.

                           6.     Not required.

                           7.     Not required.

                           8.     Not required.

                           9.     Voting Trust Agreement. None.

                           10.    Material Contracts.

                           10.01  Employment Agreement between The Bank of
                                    Nashville and Mack S. Linebaugh, Jr. dated
                                    September 2, 1992, as amended. Incorporated
                                    by reference to Exhibit 10.01 to the
                                    Registrant's Annual Report Form 10-KSB for
                                    the year December 31, 1996.

                           10.02  Employment Agreement between The Bank of
                                    Nashville and Julian C. Cornett dated
                                    October 13, 1996. Incorporated by reference
                                    to Exhibit 10.02 to the Registrant's Annual
                                    Report Form 10-KSB for the year ended
                                    December 31, 1996.

                           10.03  Option Agreements between The Bank of
                                    Nashville and Mack S. Linebaugh, Jr. dated
                                    September 2, 1992 and July 27, 1993, and
                                    Option Agreement dated July 16, 1996 between
                                    Community Financial Group, Inc., and Mack S.
                                    Linebaugh, Jr. Incorporated by reference to
                                    Exhibit 10.03 to the Registrant's Annual
                                    Report Form 10-KSB for the year ended
                                    December 31, 1996.



                                      -11-
<PAGE>   12


                           10.04  Option Agreements between The Bank of
                                    Nashville and Julian C. Cornett dated
                                    October 13, 1992 and October 13, 1993, and
                                    Option Agreement dated July 16, 1996 between
                                    Community Financial Group, Inc., and Julian
                                    C. Cornett. Incorporated by reference to
                                    Exhibit 10.04 to the Registrant's Annual
                                    Report Form 10-KSB for the year ended
                                    December 31, 1996.

                           10.05  Lease Agreement dated July 19, 1989 between
                                    The Bank of Nashville and Metropolitan Life
                                    Insurance Company. Incorporated by reference
                                    to Exhibit 10.05 to the Registrant's Annual
                                    Report Form 10-KSB for the year ended
                                    December 31, 1996. Metropolitan Life
                                    Insurance Company has been succeeded as
                                    landlord by LC Tower, L.L.C.

                           10.06  Lease Agreement dated August 1, 1996 between
                                    The Bank of Nashville and Coleman Partners,
                                    a Tennessee Partnership. Incorporated by
                                    reference to Exhibit 10.06 to the
                                    Registrant's Annual Report Form 10-KSB for
                                    the year ended December 31, 1996.

                           10.07  The Bank of Nashville Retirement Savings
                                    Plan. Incorporated by reference to Exhibit
                                    10.07 to the Registrant's Annual Report Form
                                    10-KSB for the year ended December 31, 1996.

                           10.08  Community Financial Group, Inc.'s
                                    Associates' Stock Purchase Plan.
                                    Incorporated by reference to Exhibit 10.08
                                    to the Registrant's Annual Report Form
                                    10-KSB for the year ended December 31, 1996.

                           10.09  Community Financial Group, Inc. 1997
                                    Nonstatutory Stock Option Plan Incorporated
                                    by reference to Exhibit 10.9 to the
                                    Registrant's Form S-2 (SEC file
                                    333-24309) dated April 1, 1997.

                           10.10  Lease Agreement dated August 4, 1997 between
                                    The Bank of Nashville and Graystone, LLC.
                                    Incorporated by reference to Exhibit 10.10 
                                    to the Registrant's Annual Report Form 10KSB
                                    for the year ended December 31, 1997.

                           10.11  The Bank of Nashville letter of intent to
                                    purchase property from ShoLodge, Inc. dated
                                    January 23, 1998. Incorporated by reference 
                                    to Exhibit 10.11 to the Registrant's Annual 
                                    Report Form 10KSB for the year ended 
                                    December 31, 1997.

                           10.12  Financial Advisor Agreement dated May 1,
                                    1998 between The Bank of Nashville and
                                    Harold J. Castner.

                           10.13  Financial Advisor Agreement dated May 1,
                                    1998 between The Bank of Nashville and
                                    Pamela F. Morris.

                           10.14  Financial Advisor Promissory Note Repayment
                                    Agreement dated July 24, 1998 between The
                                    Bank of Nashville and Harold J. Castner, and
                                    Exhibit A Promissory Note.

                           10.15  Financial Advisor Promissory Note Repayment
                                    Agreement dated July 24, 1998 between The
                                    Bank of Nashville and Pamela F. Morris and
                                    Exhibit A Promissory Note.




                                      -12-
<PAGE>   13


                  (2)      Exhibits - Continued

                           10.16    Construction Contract between The Bank of
                                    Nashville and Ray Bell Construction Company
                                    dated October 2, 1998.

                           10.l7    Employment Agreement between The Bank of
                                    Nashville and Anne J. Cheatham, dated
                                    February 23, 1999.

                           11.      Statement re computation of per share
                                    earnings.

                           12.      Statement re computation of ratios. Not
                                    applicable.

                           13.      1998 Annual Report to Shareholders.

                           14.      Not required.

                           15.      Not required.

                           16.      Letter re change in certifying accountant.
                                    Not applicable.

                           17.      Not required.

                           18.      Letter re change in accounting principles.
                                    Not applicable.

                           19.      Not required.

                           20.      Not required.

                           21.      Subsidiaries of the registrant.

                           22.      Published report regarding matters submitted
                                    to vote of security holders. None.

                           23.      Consent of experts and counsel. None.

                           24.      Power of Attorney. None.

                           25.      Not required.

                           26.      Not required.

                           27.      Financial Data Schedule.

                           28.      Information from reports furnished to state
                                    insurance regulatory authorities. Not
                                    applicable.

                           99.      Additional Exhibits. None.

         (b)      Reports on Form 8-K

                  None




                                      -13-
<PAGE>   14



                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

THE BANK OF NASHVILLE

By: /s/ Mack S. Linebaugh, Jr.                        Date:   March 25, 1999
    ---------------------------
Mack S. Linebaugh, Jr.
Chairman of the Board,
  President, Chief Executive
  Officer and Chief
  Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons or behalf of the registrant and
in the capacities and on the dates indicated.

/s/ Mack S. Linebaugh, Jr.             /s/ L. Leon Moore
--------------------------             -----------------
Mack S. Linebaugh, Jr.                 L. Leon Moore
Chairman of the Board,                 Director
  President, Chief
  Executive Officer                    Dated March 25,1999
  and Chief Financial
  Officer

Dated March 25, 1999

/s/ J. B. Baker, Jr.                   /s/ Perry W. Moskovitz
--------------------                   ----------------------
J. B. Baker, Jr.                       Perry W. Moskovitz
Director                               Director

Dated March 25, 1999                   Dated March 25, 1999


/s/ Jo D. Federspiel                   /s/ C. Norris Nielsen
--------------------                   ---------------------
Jo D. Federspiel                       C. Norris Nielsen
Director                               Director

Dated March 25, 1999                   Dated March 25, 1999


/s/ Richard H. Fulton                  /s/ David M. Resha
---------------------                  ------------------
Richard H. Fulton                      David M. Resha
Director                               Director

Dated March 25, 1999                   Dated March 25, 1999



/s/ G. Edgar Thornton
-----------------------
G. Edgar Thornton
Director

Dated March 25, 1999



                                      -14-