SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 1998

                                       Or

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

                  For the transition period from _____ to _____

                        Commission file number 001-14417

                              BANKFIRST CORPORATION
             (Exact name of registrant as specified in its charter)

               Tennessee                                   58-1790903
    (State or other jurisdiction of                     (I.R.S. Employer
     incorporation or organization)                    Identification No.)

           625 Market Street
         Knoxville, Tennessee                                 37902
 (address of principal executive offices)                   (Zip Code)

     Registrant's telephone number, including area code      423.595.1100

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

                               Yes _X_     No ___

The number of shares  outstanding of each of the registrant's  classes of common
stock as of October 31, 1998:

       Title of Class                                    Shares Outstanding
Common Stock, $2.50 par value                                 11,375,600

<PAGE>

                              BANKFIRST CORPORATION
                                      INDEX

PART I - FINANCIAL INFORMATION

   Item 1. Financial Statements .........................................    3

   Item 2. Management's Discussion and Analysis of Financial
   Condition and Results of Operations ..................................   10

   Item 3. Quantitative and Qualitative Disclosures about
   Market Risk ..........................................................   16

PART II - OTHER INFORMATION

   Item 1. Legal Proceedings ............................................   16

   Item 2. Changes in Securities ........................................   16

   Item 3. Defaults Upon Senior Securities ..............................   16

   Item 4. Submission of Matters to a Vote of Security Holders ..........   16

   Item 5. Other information ............................................   16

   Item 6. Exhibits and Reports on Form 8-K .............................   16

SIGNATURES

Note: The  accompanying  information has not been audited by independent  public
accountants; however, in the opinion of management such information reflects all
adjustments  necessary  for a fair  presentation  of the results for the interim
period. All such adjustments are of a normal and recurring nature.

      The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the disclosures
normally required by generally accepted accounting principles.


                                        2

<PAGE>

Part I - Financial Information

Item 1. Financial Statements

                              BANKFIRST CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
         (Dollar amounts in thousands, except share and per share data)
--------------------------------------------------------------------------------

                                                            Sept. 30,   Dec. 31,
                                                              1998       1997
                                                            --------   --------
ASSETS
  Cash and due from banks                                   $ 33,642   $ 24,290
  Federal Funds Sold                                           3,900      7,000
  Securities available for sale, at fair value               130,706    127,736
  Mortgage loans held for sale                                18,461        395
  Loans, net                                                 489,078    458,474
  Premises and equipment, net                                 24,755     21,466
  Mortgage servicing rights                                    7,379          0
  Federal Home Loan Bank Stock, at cost                        3,134      3,046
  Intangible assets                                            2,099        289
  Accrued interest receivable and other asset                  9,753      8,021
                                                            --------   --------
     Total assets                                           $722,907   $650,717
                                                            ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
  Noninterest-bearing deposits                              $112,065   $ 92,749
  Interest-bearing deposits                                  491,771    457,020
                                                            --------   --------
     Total deposits                                          603,836    549,769

  Securities sold under agreements to repurchase              25,869     16,302
  Federal funds purchased and other borrowings                   594      1,959
  Advances from the Federal Home Loan Bank                     2,296     12,121
  Accrued interest payable and other liabilities               9,162      9,134
                                                            --------   --------
     Total liabilities                                       641,757    589,285

Stockholders' equity
  Common stock:  $2.50 par value, 15,000,000 shares
    authorized, 11,375,600 and 9,995,519  shares
    outstanding                                               28,439     24,989
  Noncumulative convertible preferred stock:  $5 par
    value, 1,000,000 shares authorized, 181,050 and
    218,508 shares outstanding                                   905      1,093
  Additional paid-in capital                                  34,215     23,777
  Retained earnings                                           15,252     10,612
  Unrealized gain on securities available for sale             2,339        961
                                                            --------   --------
     Total stockholders' equity                               81,150     61,432
                                                            --------   --------
     Total liabilities and stockholders' equity             $722,907   $650,717
                                                            ========   ========

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

        See accompanying notes to the consolidated financial statements.


                                       3

<PAGE>

                              BANKFIRST CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
         (Dollar amounts in thousands, except share and per share data)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                     Three months ended Sept.30    Nine months ended Sept.30
                                            (Unaudited)                   (Unaudited)
                                          1998       1997                1998    1997
                                        --------   --------            --------  ------
<S>                                     <C>        <C>               <C>        <C>     
Interest income
    Interest and fees on loans          $ 12,506   $ 10,932          $ 36,896   $ 31,550
    Taxable securities                     1,217      1,490             4,186      5,191
    Nontaxable securities                    471        294             1,388        883
    Other                                    393        213             1,057        756
                                        --------   --------          --------   --------
                                          14,587     12,929            43,527     38,380
Interest expense
    Deposits                               5,879      5,395            16,985     15,813
    Short-term borrowings                    222        203             1,094        533
    Long-term borrowings                     255        220               733        584
                                        --------   --------          --------   --------
                                           6,356      5,818            18,812     16,930
                                        --------   --------          --------   --------
Net interest income                        8,231      7,111            24,715     21,450

Provision for credit losses                  323        376             1,390      1,096
                                        --------   --------          --------   --------
Net interest income after provision
for credit losses                          7,908      6,735            23,325     20,354
Noninterest income
    Service charges and fees               1,149      1,027             3,255      3,087
    Loan servicing income, net of            682         45             1,736        185
    amortization
    Net gain (loss) on loan sales           (182)        45              (597)       140
    Trust department income                  321        177               668        477
    Other                                    158        243               663         50
                                        --------   --------          --------   --------
                                           2,128      1,537             5,725      3,939
Noninterest expenses
    Salaries and employee benefits         3,879      2,718            11,024      8,382
    Occupancy expense                        575        393             1,686      1,066
    Equipment expense                        662        565             1,952      1,503
    Office expense                           462        559             1,366      1,142
    Data processing fee                      321        367             1,073        980
    FDIC assessments                           7         12                46         46
    Merger expense                            61       --                 337        --
    Other                                  1,309        580             3,331      2,932
                                        --------   --------          --------   --------
                                           7,276      5,194            20,815     16,051
                                        --------   --------          --------   --------
Income before income taxes                 2,760      3,078             8,235      8,242
Provision for income taxes                 1,081      1,196             3,370      2,974
                                        --------   --------          --------   --------
Net Income                              $  1,679   $  1,882          $  4,865   $  5,268
                                        ========   ========          ========   ========
Other comprehensive income,
net of tax
    Change in unrealized gain              1,158        407             1,378        370
      on securities
    Reclassification of realized
      amount                                 (44)       (83)              (47)      (134)
                                        --------   --------          --------   --------
Comprehensive income                    $  2,793   $  2,206           $ 6,198   $  5,504
                                        ========   ========          ========   ========
Earnings per share:
    Basic                               $   0.16   $   0.19         $    0.47   $   0.52
    Diluted                             $   0.14   $   0.17         $    0.43   $   0.49
</TABLE>

--------------------------------------------------------------------------------
        See accompanying notes to the consolidated financial statements.


                                       4

<PAGE>

                              BANKFIRST CORPORATION
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                      Nine Months ended September 30, 1998
                                   (Unaudited)
         (Dollar amounts in thousands, except share and per share data)

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

<TABLE>
<CAPTION>
                                                                                   Net                   
                                                                               Unrealized       Total
                                                       Additional                 Gains         Stock-
                                  Common    Preferred   Paid-in    Retained      (Losses)      holders'
                                   Stock      Stock     Capital    Earnings    on Securities    Equity
                                 --------   ---------   --------   ---------   ------------     -------
<S>                               <C>        <C>        <C>         <C>             <C>         <C>    
Balance, January 1, 1998          $24,553    $1,093     $22,674     $10,612         $961        $59,893
                                                                                              
Restatement for reclass-                                                                      
ification of ESOP shares              436        --       1,103          --           --          1,539
                                   ------     -----     -------      ------        -----         ------
Balance January 1, 1998                                                                       
as restated                        24,989     1,093      23,777      10,612          961         61,432
                                                                                              
Sales of common stock,                                                                        
428 shares                              1        --          15          --           --             16
                                                                                              
Stock options exercised,                                                                      
1,107 shares                            2        --          28          --           --             30
                                                                                              
Conversion of 37,458 shares of                                                            
preferred stock into 108,974                                                                  
shares of common stock                272      (188)        (84)         --           --             --
                                                                                              
Cash dividend on preferred stock       --        --          --        (113)          --           (113)
                                                                                              
Cash dividend on common stock          --        --          --        (114)          --           (114)
                                                                                              
Net income                             --        --          --       4,865           --          4,865
                                                                                              
Change in unrealized gains             --        --          --          --        1,378          1,378
                                                                                              
Proceeds from public offering                                                                 
of 1,270,000 common shares, net                                                           
of related expenses                 3,175         --     10,481         --           --          13,656
                                                                                              
                                 --------    --------   -------    --------     ---------       --------
Balance, Sept. 30, 1998           $28,439     $  905    $34,215     $15,250       $2,339        $81,150
                                 ========    ========   =======    ========     =========       ========
</TABLE>
                                                                                
--------------------------------------------------------------------------------
        See accompanying notes to the consolidated financial statements.


                                        5

<PAGE>

                              BANKFIRST CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
         (Dollar amounts in thousands, except share and per share data)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         Nine months ended September 30,
                                                                  (Unaudited)
                                                               1998        1997  
                                                             --------    --------
<S>                                                          <C>         <C>     
Cash flows from operating activities                         
   Net income                                                $  4,865    $  5,268
   Adjustments to reconcile net income to net cash from      
     operating activities                                    
     Provision for credit losses                                1,390       1,096
     Depreciation                                               1,749       1,271
     Security amortization and accretion, net                     124         179
     Gain on sale of mortgage loans                              (539)        (95)
     Gain on sale of securities                                    49         132
     Proceeds from sales of mortgage loans held for sale      135,870      17,665
     Purchases of mortgage loans held for sale                (30,382)       --
     Originations of mortgage loans held for sale             (84,801)    (16,159)
   Changes in assets and liabilities                         
     Accrued interest receivable and other assets              (1,782)       (552)
     Accrued interest payable and other liabilities                31       1,749
                                                             --------    --------
         Net cash used in operating activities                 26,574      10,554
                                                             
Cash flows from investing activities                         
   Net cash paid for mortgage company                          (7,449)       --
   Purchase of securities                                     (22,658)    (35,015)
   Proceeds from maturities of securities                      10,098      15,686
   Proceeds from sale of securities                            10,024      22,058
   Net increase in loans                                      (55,465)    (47,105)
   Purchase of FHLB stock                                         (88)       (365)
   Premises and equipment expenditures, net                    (1,868)     (1,224)
                                                             --------    --------
     Net cash used in investing activities                    (67,406)    (45,965)
                                                             
Cash flows from financing activities                         
   Net change in deposits                                      40,746      14,141
   Net change in securities sold                             
     under agreements to repurchase                             9,567       4,070
   Net change in federal funds purchased                          262           0
   Proceeds from public offering of common stock               13,392           0
   Net change in other borrowed funds                          (1,627)       (164)
   Repayments from the FHLB                                    (7,704)         --
   Advances from the FHLB                                       2,296      12,296
   Repayment of notes payable                                  (9,667)         91
   Preferred stock dividends paid                                (113)       (123)
   Common stock dividends paid                                   (114)       (344)
   Stock options exercised                                         30        --
   Repurchase of common stock                                      16        (178)
   Sale of common stock                                             0          25
                                                             --------    --------
     Net cash provided by financing activities                 47,084      29,814
                                                             
Net change in cash and cash equivalents                         6,252      (5,597)
                                                             
Cash and cash equivalents, beginning of period                 31,290      25,132
                                                             --------    --------
                                                             
Cash and cash equivalents, end of period                     $ 37,542    $ 19,535
                                                             ========    ========
Supplemental disclosures:                                    
   Interest paid                                             $ 20,268    $ 15,814
   Income taxes paid                                            2,763       2,177
   Loans converted to other real estate                         1,096         223
   Preferred stock converted to common stock                      188          --

</TABLE>
                                                         
--------------------------------------------------------------------------------
        See accompanying notes to the consolidated financial statements.


                                       6

<PAGE>

                              BANKFIRST CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (Dollar amounts in thousands, except share and per share data)
--------------------------------------------------------------------------------

Principles of Consolidation:  The consolidated  financial statements include the
accounts  of  BankFirst   Corporation   (the  "Company")  and  its  wholly-owned
subsidiaries, BankFirst and First National Bank and Trust Company (the "Banks"),
and  BankFirst's  wholly-owned   subsidiary,   Curtis  Mortgage  Company.  These
financial statements have been prepared to give retroactive effect to the merger
with First Franklin Bancshares, Inc. on July 2, 1998, which was accounted for as
a pooling of interests,  and  accordingly,  this document  presents the combined
financial information as if the entities were merged for all periods presented.

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information,   and  accordingly  they  do  not  include  all  of  the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements. In the opinion of management, all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation  have been included.  Operating  results for the nine month periods
ended September 30, 1998 and 1997 are not necessarily  indicative of the results
that may be expected for the year ended December 31, 1998, or for the year ended
December 31, 1997.

Mortgage Banking Activities:  Mortgage loans originated and intended for sale in
the  secondary  market are carried at the lower of cost or  estimated  aggregate
market  value.  Mortgage  loans  are sold  into the  secondary  market at market
prices,  which includes  consideration for normal servicing fees. The total cost
of mortgage loans  purchased or originated  with the intent to sell is allocated
between the loan servicing right and the mortgage loan without servicing,  based
on their relative fair values.  The capitalized cost of loan servicing rights is
amortized  in  proportion  to,  and over the  period  of,  estimated  net future
servicing  revenue.  Mortgage  servicing rights are  periodically  evaluated for
impairment by stratifying them based on predominant risk  characteristics of the
underlying  serviced loans,  such as loan type,  term and note rate.  Impairment
represents the excess of cost of an individual mortgage servicing rights stratum
over its fair value, and is recognized through a valuation allowance.

Borrowings:  Repurchase  agreements  and Federal  Funds  purchased are generally
overnight borrowings.

Comprehensive  Income:  Statement  of  Financial  Accounting  Standard  No. 130,
"Reporting  Comprehensive  Income",  requires reporting of comprehensive income,
defined as changes in equity other than those  resulting from  investments by or
distributions to stockholders.  Net income,  plus or minus "other  comprehensive
income" results in comprehensive  income.  The only item of other  comprehensive
income  applicable  to the Company is the change in  unrealized  gain or loss on
securities available for sale. Comprehensive income is reported on the statement
of income.  The period ended September 30, 1997 was restated to meet the current
reporting format.


                                        7

<PAGE>

                              BANKFIRST CORPORATION
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in
                   thousands, except share and per share data)
--------------------------------------------------------------------------------

Purchase  Transaction:  On January 16, 1998, the Bank acquired  Curtis  Mortgage
Company,  a mortgage loan  origination  and servicing  company,  for $7,500 in a
business combination  accounted for as a purchase.  The results of operations of
Curtis Mortgage  Company is included in the  accompanying  financial  statements
since the date of  acquisition.  The excess of the purchase  price over the fair
value of net assets  acquired  resulted  in $1,900 of  goodwill,  which is being
amortized on a straight-line  basis over 15 years. Upon the transaction,  $6,065
of the purchase  price was  allocated to mortgage  servicing  rights,  which are
being amortized on a level-yield basis over the life of the underlying loans.


Assets and liabilities acquired were:
    Cash                                                      $    51
    Loans held for sale                                         6,267
    Mortgage servicing rights                                   7,000
    Furniture and equipment                                       165
    Accrued interest receivable and other assets                  375
    Notes payable                                              (5,798)
    Accrued and other liabilities                              (2,460)

Earnings Per Share: Basic earnings per share is based on weighted average common
shares  outstanding.  Diluted earnings per share further assumes issuance of any
dilutive  potential  common  shares.  Earnings  per share are  restated  for all
subsequent stock dividends and splits.

A  reconciliation  of the numerators and denominators of the earnings per common
share and earnings per common share assuming dilution computations are presented
below:

                                   Three Months Ended      Nine months ended
                                      September 30,           September 30,
                                       (Unaudited)             (Unaudited)
                                    1998       1997         1998         1997
                                   -------   -------      --------    --------
Earnings Per Share

Net income                         $ 1,679  $ 1,882      $  4,865    $  5,268
Less:  Dividends declared
on preferred stock                    (36)      (41)         (113)       (123)
                                    ------   -------      --------    --------
Net income available to common
stockholders                      $  1,643  $ 1,841       $  4,752     $ 5,145
                                  ========  =======       ========     =======

Weighted average common shares
outstanding                     10,410,370 9,863,988    10,133,770  9,843,554
                                ==========  ========     =========  ==========

Earnings per share               $    0.16  $   0.19     $     .47  $     .52
                                 =========  ========     =========  ==========


                                        8

<PAGE>

                              BANKFIRST CORPORATION
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in
                   thousands, except share and per share data)
--------------------------------------------------------------------------------

Earnings Per Share (Continued):

<TABLE>
<CAPTION>
                                        Three Months Ended             Nine months ended 
                                          September 30,                  September 30,
                                           (Unaudited)                    (Unaudited)
                                        1998         1997              1998          1997 
                                     ----------   ----------        ----------    ----------
<S>                                    <C>           <C>              <C>           <C>    
Earnings Per Share Assuming                                                        
Dilution                                                                           
                                                                                   
Net income available to common                                                     
stockholders                           $  1,643      $ 1,841          $  4,752      $ 5,145
                                                                                   
Add back dividends upon assumed                                                    
Conversion of preferred stock                36           41               113          123
                                     ----------   ----------        ----------    ----------
Net income available to common                                                     
stockholders assuming conversion        $ 1,679      $ 1,882          $  4,865      $  5,268
                                        =======      =======          ========      ========
Weighted average common shares                                                     
outstanding                          10,410,370    9,863,988        10,133,770     9,843,554
                                                                                   
                                                                                   
Add:  Dilutive effects of assumed                                                  
Conversions and exercises:                                                         
   Convertible preferred stock          646,218      678,922           661,304       688,657
   Stock options                        474,735      320,259           474,735       320,259
                                     ----------   ----------        ----------    ----------
Weighted average common and
dilutive potential common
shares outstanding                   11,531,322   10,863,168        11,269,808    10,852,470
                                     ----------   ----------        ----------    ----------
Earnings per share                                                               
assuming dilution                       $  0.14     $   0.17         $    0.43     $    0.49
                                     ==========   ==========        ==========    ==========
</TABLE>


                                        9
<PAGE>

Part I - Financial Information

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

The  following   discussion   and  analysis  is  presented  to  facilitate   the
understanding of the consolidated  financial  position and results of operations
of BankFirst  Corporation  ("Company").  The consolidated  financial information
discussed herein primarily reflects the activities of the Company's wholly-owned
community  bank  subsidiaries,  BankFirst and The First  National Bank and Trust
Company ("FNB") or collectively the "Banks".  The discussion  identifies  trends
and material  changes that  occurred  during the reported  periods and should be
read in conjunction with the consolidated  financial statements and accompanying
notes appearing  elsewhere herein. The periods included within this document are
the nine months ending September 30, 1998 and 1997.

All  statements  other than  statements  of  historical  facts  included in this
discussion  regarding capital  expenditures,  the Company's  financial position,
business  strategies and other plans and objectives for future  operations,  are
forward-looking    statements.   The   Company   cautions   readers   that   all
forward-looking  statements are  necessarily  speculative and not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made,  and to advise  readers that various  risks and  uncertainties,  including
without limitation, regional and national economic conditions, changes in levels
of market interest rates, credit risks of lending activities and competitive and
regulatory  factors,  could affect financial  performance and could cause actual
results  for future  periods to differ  materially  from  those  anticipated  or
projected.

Overview

The Company is a community  banking  organization,  headquartered  in Knoxville,
Tennessee, which generates loans and deposits through its 30 offices and 46 ATMs
throughout  East  Tennessee.   The  Company's  operations   principally  involve
commercial and residential  real estate lending,  commercial  business  lending,
consumer lending,  construction lending and other financial services,  including
trust  operations,  credit card  services and  brokerage  services.  The Company
includes  two  wholly-owned  bank  subsidiaries:   BankFirst,  headquartered  in
Knoxville,  and First National Bank and Trust Company ("FNB"),  headquartered in
Athens.  Curtis  Mortgage  Company,  Inc.  ("Curtis  Mortgage")  a  wholly-owned
subsidiary of BankFirst,  was acquired in January 1998 and is accounted for as a
purchase  transaction.  FNB was a  merger  consummated  on July 2,  1998  and is
accounted for as a pooling of interests, and accordingly, this document presents
the  combined  financial  information  as if the  entities  were  merged for all
periods presented.

General

Total  assets grew from $650.7  million at  year-end  1997 to $722.9  million at
September  30, 1998, a $72.2  million  increase.  The primary  changes in assets
included  an $18.1  million  increase  in loans held for sale,  a $30.6  million
increase in net loans,  $7.4  million of mortgage  servicing  assets,  and other
intangible  assets which were each  attributable to the purchase of the mortgage
company in January,  1998. For the period from January 16, 1998 purchase date to
September 30, 1998,  Curtis Mortgage  purchased and originated $115.2 million of
loans held for sale.  Total  intangible  assets at September  30, 1998  included
goodwill  from the  purchase of Curtis  Mortgage and  approximately  $305,000 of
intangibles from previous transactions.


                                       10

<PAGE>

Total liabilities grew from $589.3 million at year-end 1997 to $641.7 million at
September  30, 1998,  an increase of $52.4  million.  Of this  growth,  deposits
accounted  for  $54.1  million  and  repurchase  agreements  accounted  for $9.6
million. Federal funds purchased were reduced from $2.0 million to $0.6 million,
and advances from the Federal Home Loan Bank declined from $12.1 million to $2.3
million.


From year-end 1997 to September  30, 1998,  equity grew $19.7 million  primarily
from net income of $4.8  million and proceeds  from a public  offering of common
stock, which provided $14.2 million in additional capital.  The leverage capital
ratio  increased  from 9.7% at year-end  1997 to 10.4% at  September  30,  1998,
mainly as a result of the  additional  capital  from the public  offering.  This
ratio maintains the Company in the "well capitalized"  category.  The individual
bank subsidiaries'  leverage ratios at year-end 1997 were 8.3% for BankFirst and
11.2% for FNB.

Management  expects growth to continue  through  expansion of retail  locations,
through  expansion  of  products  and  services,  including  mortgage  servicing
opportunities  by Curtis  Mortgage and trust  services  through FNB, and through
possible future mergers or acquisitions. At the present time, the Company has no
present  agreements,  arrangements  or  commitments  with  respect  to any other
acquisition.

Results of Operations

Nine Months Ended September 30, 1998 compared to Nine Months Ended September 30,
1997

Net interest income  increased $3.3 million,  or 15.3%, to $24.7 million for the
nine months ended  September  30, 1998,  from $21.5  million for the nine months
ended  September 30, 1997. The increase in net interest income was due primarily
to an increase in average  earning  assets and an increase in the  percentage of
average earning assets invested in loans, the Company's highest yielding assets.
Average earning assets increased $48.5 million,  or 8.1%,  primarily as a result
of growth in loans.

The Company's net interest  spread and net interest margin were 4.49% and 5.28%,
respectively, for the nine months ended September 30, 1998, as compared to 4.09%
and 4.75% for the nine months ended  September 30, 1997. The increase in the net
interest  spread and the net  interest  margin were  primarily  the result of an
increase in asset yields due to loan growth.

The  provision  for credit  losses was $1.4  million for the nine  months  ended
September 30, 1998, compared to $1.1 million for the nine months ended September
30, 1997. The increase in the provision was attributable to general loan growth.
The Company  experienced  net  charge-offs of $729,000 for the nine months ended
September 30, 1998  resulting in a ratio of net  charge-offs to average loans of
0.19%.

Noninterest  income  increased $1.8 million,  or 46.0%,  to $5.7 million for the
nine months ended September 30, 1998 from $3.9 million for the nine months ended
September 30, 1997, primarily attributable to operations of the January 16, 1998
purchase of Curtis Mortgage.


                                       11
<PAGE>

Loan  servicing  income  increased  to $1.7  million for the nine  months  ended
September 30, 1998, as compared to $185,000 for the nine months ended  September
30,  1997.  Net  losses on the sale of  mortgage  loans  increased  to  $597,000
compared to net gains of $140,000 for the same  periods.  The  mortgage  company
sells loans while retaining the servicing  rights,  which has the overall effect
of producing less immediate  gains at time of sale,  while  providing  long-term
income  streams from the  servicing  rights of those loans sold on the secondary
market.

Noninterest  expense increased $4.8 million,  or 29.7%, to $20.8 million for the
nine months ended  September  30, 1998,  from $16.0  million for the nine months
ended  September  30,  1997.  The primary  component of  noninterest  expense is
salaries and benefits,  which increased $2.6 million, or 31.5%, to $11.0 million
for the nine months ended  September  30,  1998,  from $8.4 million for the nine
months  ended  September  30,  1997.  Salaries  and  benefits  as well as  other
noninterest expense categories  increased primarily due to additional  employees
associated  with Curtis Mortgage and the opening of three  additional  branches.
Merger  expenses  were  $337,000 as of September  30, 1998.  Other  increases in
noninterest expense were due to a major computer system conversion in the second
quarter and Year 2000 costs. The Company's  efficiency ratio for the nine months
ended  September  30,  1998 was  73.24%,  compared to 66.03% for the nine months
ended September 30, 1997.

Net income  decreased  $403,000,  or 7.7%,  to $4.9  million for the nine months
ended  September 30, 1998 from $5.3 million for the nine months ended  September
30,  1997.  The  decrease  in net  income  was  primarily  due to  increases  in
noninterest expense associated with increases in salaries and benefits resulting
from both internal and external growth,  merger costs, costs associated with the
integration of Curtis Mortgage, the opening of three branches, a computer system
conversion cost, and Year 2000 costs.  This was partially offset by increases in
net interest income and noninterest income.

Liquidity and Capital Adequacy

Liquidity management is both a daily and long-term responsibility of management.
The Company  adjusts its  investments  in liquid  assets and long and short term
borrowings,  based upon  management's  consideration  of expected  loan  demand,
expected  deposit flows and securities  sold under  repurchase  agreements.  The
Company  believes it has the ability to raise deposits quickly within its market
area by slightly  raising interest rates, but has typically been able to achieve
deposit growth without paying above market interest rates.  The current strategy
calls for the  subsidiary  banks to be no higher  than  second  highest in their
pricing as compared to their primary competitors. Deposit growth has funded most
of the  significant  asset growth in the past several  years,  but has decreased
modestly as a percent of total funding.

The Company actively solicits customer cash management relationships which often
includes a securities  repurchase  agreement  feature.  Under these  agreements,
commercial  customers are able to generate  earnings on otherwise  idle funds on
deposits with the subsidiary banks. These accounts are considered volatile under
regulatory  requirements,  although  the  Company  has found them to be a steady
source of funding. The Company has been able to increase customer  relationships
because of its strong business lending  program.  While more costly than deposit
funding,  these deposit-related  accounts are typically the lowest cost borrowed
funds available to the Company.


                                       12

<PAGE>

The  Company  maintains   significant  lines  of  credit  with  other  financial
institutions,   totaling  more  than  $40  million  under  agreements  with  six
commercial banks. The subsidiary banks also have the capacity to borrow from the
FHLB without purchasing additional FHLB stock.

The primary source of capital for the Company is retained earnings.  The Company
paid cash  dividends of $227,000 for the first nine months of 1998.  The Company
retained $4.6 million of earnings for the first nine months of 1998.

The  Company  and its  bank  subsidiaries  are  subject  to  regulatory  capital
requirements  administered  by  federal  and  state  banking  agencies.  Capital
adequacy   guidelines  and  prompt   corrective   action   regulations   involve
quantitative  measures of assets,  liabilities,  and certain  off-balance  sheet
items calculated under regulatory  accounting  practices.  The prompt corrective
action  regulations  provide five  classifications,  including well capitalized,
adequately capitalized, under capitalized,  significantly under capitalized, and
critically  under  capitalized,  although  these terms are not used to represent
overall financial  condition.  If under capitalized,  capital  distributions are
limited, as is asset growth and expansion, and plans for capital restoration are
required.

Under  guidelines  issued  by  banking  regulators,  the  Company  and its  bank
subsidiaries are required to maintain a minimum Tier 1 risk-based  capital ratio
of 4% and a minimum total  risk-based  ratio of 8%.  Risk-based  capital  ratios
weight the relative risk factors of all assets and consider the risk  associated
with  off-balance  sheet  items.  The  Company's  Tier 1  risk-based  and  total
risk-based ratios were 10.44% and 15.17% respectively, as of September 30, 1998.
Both  bank   subsidiaries   also   individually  met  the  definition  of  "well
capitalized" as of September 30, 1998.

Market Risk

The  Company  uses an earnings  simulation  model (see below) to analyze the net
interest  income  sensitivity.  Potential  changes in market  interest rates and
their subsequent effect on interest income is then evaluated. The model projects
the  effect of  instantaneous  movements  in  interest  rates of 100 and 200 bp.
Assumptions based on the historical  behavior of the Company's deposit rates and
balances in relation to interest rates are also incorporated in the model. These
assumptions  are  inherently  uncertain  and,  as a  result,  the  model  cannot
precisely  measure  net  interest  income or  precisely  predict  the  impact of
fluctuations  in market  interest rates on net interest  income.  Actual results
will differ  from the model's  simulated  results due to timing,  magnitude  and
frequency of interest rate changes,  as well as changes in market conditions and
the application of various management strategies.

Even though the Company's  cumulative GAP at one year is negative,  the earnings
simulation  model indicates that an increase in interest rates of 100 bp and 200
bp would result in increased net interest income. This occurs because management
believes that if overall market  interest rates  increase  modestly,  the market
would not require an  immediate,  corresponding  repricing  of non-term  deposit
liabilities.


                                       13
<PAGE>

                               Decrease in Rates             Increase in Rates
                               200          100               100         200
                              Basis        Basis    Level    Basis      Basis
                              Points       Points   Rates    Points     Points
Projected Interest Income

Loans                         45,603       47,699   49,651   51,692     54,109
Investments                    7,541        7,611    7,698    7,755      7,859
Federal Funds Sold               261          309      322      388        403

Total Interest Income         53,405       55,619   57,671   59,835     62,371

Projected Interest Expense

Deposits                      21,330       22,437   23,691   24,171     26,648
FHLB Term Advances               -             -       -        -          -
Fed Funds Purchased            1,081        1,329    1,577    1,869      2,114
& Other Borrowings
Total Interest Expense        22,411       23,766   25,268   26,040     28,462

Net Interest Income           30,994       31,853   32,403   33,795     33,909
Change from Level Rates       (1,409)        (550)     --     1,392      1,506
% Change From Level Rates     (4.35%)      (1.70%)     --      4.30%     4.65%

Year 2000

The Company has  implemented  plans to address Year 2000  compliance.  The issue
arises from the fact that many existing  computer  programs use only a two digit
field to identify the year. These programs were designed without considering the
impact once the calendar  year rolls over to "00".  If not  corrected,  computer
applications could fail or create inaccurate results by or at the Year 2000. The
Company  must not only  evaluate and test its own Year 2000  readiness,  it must
also  coordinate  with other entities with which it routinely  interacts such as
suppliers,   creditors,   borrowers,  customers,  and  other  financial  service
organizations.  Regulations require the Company and the affiliates to accomplish
specific Year 2000 actions by specific dates.

The  Company  has  initiated  an  implementation  plan  providing  for Year 2000
readiness by the end of 1998. Management believes the plan is on target with the
goals established by its regulators. The affiliates have completed the awareness
and assessment phases and have substantially  completed the remediation phase of
the plan.  BankFirst's data processing  service bureau implemented new software,
which has been Year 2000  certified,  and BankFirst  completed its conversion to
this new software in April 1998.  Conversion to the new host system necessitated
an upgrade of BankFirst's  personal computer and their operating systems,  which
have been tested for Year 2000 compliance.  Prior to the merger, FNB implemented
its own Year 2000 Preparedness Plan. The Company has substantially completed the
testing phase of its implementation  plan, which is scheduled to be completed by
year-end  1998. A contingency  plan for Year 2000 has been  developed to address
mission  critical  systems.  This plan  consists of utilizing  an off-site  data
processing  system with a third-party  data processor.  This off-site system has
been Year 200  certified  and has been  tested  by the  Company  with  operating
systems using post-January, 2000 dates. Management believes that the Company and
the affiliates are currently in compliance with each applicable directive issued
by the Bank Regulation Authorities.


                                       14

<PAGE>

The  Company  has  determined  that the Year 2000 issue may be  critical  to its
operations;  however,  management does not believe customer readiness is or will
be material to its overall performance. Management believes that the total costs
of becoming Year 2000 compliant will not be material. Through 1997, expenditures
for Year 2000 were immaterial,  and Year 2000 related  expenditures for 1998 are
projected to be $295,700.

New Accounting and Reporting Requirements

SFAS  No.  131,  "Disclosures  About  Segments  of  an  Enterprise  and  Related
Information".  SFAS No. 131 is  effective  for  public  companies'  interim  and
year-end financial  statements for reporting period following the first required
full fiscal year disclosure. This Statement established new guidance for the way
that public business  enterprises report information about operating segments in
annual financial  statements and requires that those enterprises report selected
information  about reportable  operating  segments in interim  financial reports
issued to shareholders. SFAS No. 131 supersedes the industry approach to segment
disclosures  previously  required  by SFAS  No.  14,  "Financial  Reporting  for
Segments  of a  Business  Enterprise",  replacing  it with a method  of  segment
reporting  which  is  based  on  the  structure  of  an  enterprise's   internal
organization  reporting.  The Statement  also  established  standard for related
disclosures  about products and services,  geographic areas and major customers.
The Company plans to include  segment  reporting in the year-end 1999  financial
statements.

SFAS No. 133,  "Accounting  for  Derivative  Financial  Instruments  and Hedging
Activities". SFAS No. 133 requires companies to record derivative on the balance
sheet as  assets  or  liabilities  at fair  value.  Depending  on the use of the
derivative and whether it qualifies for hedge  accounting,  gains or losses from
changes in the value of those derivative would either be recorded as a component
of net income or as a change in stockholders'  equity.  BankFirst is required to
adopt the new standard  January 1, 2000.  Management  has not yet determined the
impact of this standard.

In October 1998, the Financial  Accounting  Standards  Board issued SFAS No. 134
"Accounting for Mortgage-Backed  Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise".  The standard is
effective for the first fiscal quarter  beginning  after December 15, 1998. This
statement  amends SFAS No. 65 on mortgage  banking,  which  required  that after
securitization  of mortgage  loans held for sale, all retained  mortgage  backed
securities   be  classified   as  trading.   This  new  standard   allows  after
securitization  of mortgage  loans held for sale, any retained  mortgage  backed
securities to be classified as described  under SFAS No. 115.  Current  mortgage
banking  activities  for  BankFirst  do not  include the  securitization  of any
mortgage loans held for sale.

FDIC   Improvement   Act   (FDICIA)  of  1991.   The  FDICIA   stipulates   many
responsibilities  of  financial  institutions,   its  boards  of  directors  and
accountants. Many of the provisions have already been effective for the Company;
however there are certain filing requirements which are only applicable to banks
with assets over $500 million.  This threshold is measured on an individual bank
basis, not on consolidated assets. BankFirst,  taken alone, has already exceeded
$500 million as of September,  1998. As a result,  BankFirst will be required to
comply  with the  FDICIA  reporting  requirements  during  1999.  FNB had  total
year-end  1997  assets of $182  million,  and will not be  subject of the FDICIA
reporting requirements for the foreseeable future.


                                       15

<PAGE>

Part I - Financial Information

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information is disclosed in Item 2. Management's  Discussion and Analysis of
Financial Condition and Results of Operations.

PART II. - OTHER INFORMATION

Item 1.  Legal Proceedings                         None

Item 2.  Changes in Securities                     None

Item 3.  Defaults Upon Senior Securities           None

Item 4.  Submission of Matters to a vote           None
             of Security Holders

Item 5.  Other Information                         None


Item 6.  Exhibits and Reports on Form 8-K

      a.    Exhibits

            Exhibit 27 - Financial Data Schedule

      b.    Reports on Form 8-K
          
            The  Company  filed no  reports  on Form 8-K for the  quarter  ended
            September 30, 1998.

                                   SIGNATURES

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


                                           BANKFIRST CORPORATION
                                           by


Date:  November 13, 1998                   /s/ C. David Allen
                                           -----------------------------
                                           C. David Allen
                                           Chief Financial Officer


                                       16