page 4

PART I - FINANCIAL INFORMATION
____________________________________________

Item 1. Financial Statements. (Continued)

page 5

       The interim financial statements furnished under this item reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, as allowed under rules and regulations of the Securities and Exchange Commission for interim period presentation. The results for interim periods are not necessarily indicative of results to be expected for the complete fiscal year. Certain prior period amounts have been reclassified to conform to the current period classifications.

       The allowance for loan losses is maintained at a level that is considered to be adequate to reflect estimated credit losses for specifically identified loans as well as estimated probable credit losses inherent in the remainder of the loan portfolio at the balance sheet date. The allowance is increased by the provision for loan losses, which is charged against current period operating results and decreased by the amount of charge-offs, net of recoveries. A formal review of the allowance for loan losses is prepared quarterly to assess the risk in the portfolio and to determine the adequacy of the allowance for loan losses. Our methodology of assessing the appropriateness of the allowance consists of several elements, which include the formula allowance, as well as specific allowances.
       The formula allowance is calculated by applying loss factors to outstanding loans and certain unused commitments. For purposes of the quarterly review, the loan portfolio is separated by loan type, and each type is treated as a homogeneous pool. Each loan is assigned a risk rating by loan officers using established credit policy guidelines. These risk ratings are periodically reviewed and all risk ratings are subject to review by an independent Credit Review Department. Each risk rating is assigned an allocation percentage which, when multiplied times the dollar value of loans in that risk category, results in the amount of the allowance for loan losses allocated to these loans. Allocation percentages are based on our historical loss experience and may be adjusted for significant factors that, in management's judgement, affect the collectibility of the portfolio as of the evaluation date.
       Specific allowances are established in cases where management has identified significant conditions or circumstances related to a credit that management believes indicates the probability that a loss has been incurred in excess of the amount determined by the application of the above formula. Every substandard or worse loan in excess of $25,000 and all loans criticized as "Special Mention" over $100,000 are reviewed quarterly by the Executive and Loan Committee of the registrant's bank subsidiary Board of Directors for the level of loan losses required to be specifically allocated.

       Net income of the registrant was $1,204,145 for the first three months of 2003. This amounted to an increase of $289,039, or 31.6 percent, compared to the first three months of 2002.  Net interest income increased $372,729 during the first quarter of 2003 as compared to the first quarter of 2002. However, this increase was partially offset by a $112,973 increase in the provision for loan losses during the first quarter of 2003 as compared to the first quarter of 2002.
       Net interest income, the largest component of net income for the registrant, is the difference between income earned on loans and investments and interest paid on deposits and other sources of funds. Net interest income increased $372,729, or 10.3 percent during the first quarter of 2003 as compared to the first quarter of 2002.  Total interest income decreased $459,851, or 7.4 percent for the first three months of 2003 as compared to the first three months of 2002. The decrease in total interest income was primarily due to the lower interest rate environment that began to take effect during the first quarter of 2001 and has continued into 2003. However, the decrease in total interest income was offset by a decrease in total interest expense of $832,580, or 32.1 percent for the first quarter of 2003 as compared to the same period in 2002. The decrease in total interest expense was again primarily due to the lower interest rate environment that began in 2001. The percentage change was greater for the total interest expense than the total interest income primarily due to the general decline in the level of interest rates that occurred in 2001 and continued through the first quarter of 2002. Interest rates continued a slight decline through the second and third

       The provision for possible credit losses is based on past loan experience and other factors that, in management's judgement, deserve current recognition in estimating possible credit losses. Such factors include past loan loss experience, growth and composition of the loan portfolio, review of specific problem loans, the relationship of the allowance for credit losses to outstanding loans and current economic conditions that may affect the borrower's ability to repay. A more detailed description of the allowance for loan losses can be found under the section titled "Critical Accounting Policies."
       For the three-month period ended March 31, 2003, income before taxes increased $377,109, or 28.3 percent, as compared to the three-month period ended March 31, 2002. Applicable income taxes increased $88,070, or 21.2 percent for the three months ended March 31, 2003 as compared to the three months ended March 31, 2002.
       On a basic, weighted average per share basis, net income was $0.73 per share based on 1,642,956 shares for the first three months of 2003 as compared to $0.56 per share based on 1,630,430 shares for the first three months of 2002. On a fully diluted basis, net income per share was $0.73 for the first three months of 2003 on 1,655,325 shares as compared to $0.56 on 1,640,868 shares for the first three months of 2002.
       The following table shows the return on assets (net income divided by average total assets) and return on equity (net income divided by average stockholders' equity (net of unrealized gain or loss on securities) for the three months ended March 31, 2003 (annualized) and for the year ended December 31, 2002.

       The registrant's total assets increased 5.0 percent to $400,806,643 during the three months ended March 31, 2003, from $381,669,730 at December 31, 2002. Loans and leases, net of allowance for credit losses, totaled $231,924,155 at March 31, 2003, a 1.1 percent increase compared to $229,445,808 at December 31, 2002. The registrant's bank subsidiary originated certain real estate mortgages that it sold in the secondary market. These loans totaled $7,165,077 for the three months ended March 31, 2003 as compared to $5,284,590 for the three months ended March 31, 2002. Investment securities increased $12,837,408, or 11.2 percent, to $126,998,716 at March 31, 2003, from $114,161,308 at December 31, 2002. The unrealized gain on securities, net of tax, was $2,115,065 at March 31, 2003 as compared to $2,232,258 at December 31, 2002.  Federal funds sold increased $4,813,000, or 92.2 percent to $10,033,000 at March 31, 2003, from $5,220,000 at December 31, 2002. The increase in investment securities and federal funds sold was primarily the result of deposits growing more quickly than loans during the first three months of 2003.
       Total liabilities increased by 5.6 percent to $356,373,169 for the three-months ended March 31, 2003, compared to $337,667,481 at December 31, 2002. This increase was primarily due to a $19,835,332 or 6.9 percent increase in interest bearing deposits.  Much of the increase in deposits during the first quarter of 2003 occurred in money market accounts.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

       
       Non-performing assets decreased to approximately $7,887,200 at March 31, 2003 compared to approximately $8,760,700 at December 31, 2002.  Non-performing assets at March 31, 2003 included $1,069,575 in other real estate owned, $6,351,305 in non-accrual loans, and $466,279 in loans past due ninety days or more as to interest or principal payment. Additionally, there was approximately $456,000 in restructured loans at March 31, 2003.  At December 31, 2002, the corresponding figures were $1,129,191 in other real estate owned, $7,236,654 in non-accrual loans, $394,898 in loans past due ninety days or more, and $464,000 loans restructured. The allowance for loan losses was 0.48 times the balance of nonaccrual loans at March 31, 2003 as compared to 0.53 at December 31, 2002. The large volume in the registrant's n on-accrual loans at March 31, 2003 was principally related to two credit lines of the registrant's subsidiary bank. The largest line placed on nonaccrual status was a large United States Department of Agriculture guaranteed loan that was placed on a nonaccrual status during the second quarter of 2002. Eighty percent of the principal and accrued interest of the loan is guaranteed by the United States Department of Agriculture. The remaining twenty percent credit exposure on the loan is secured by the underlying collateral on the loan. Management no longer believes that the underlying collateral is sufficient to secure the entire unguaranteed portion of the loan. Management has estimated the credit exposure on the loan and included the exposure in its allowance for loan losses calculation for March 31, 2003. If the guaranteed portion of this loan was excluded from nonaccrual status, then the allowance for loan losses would have been 1.06 times the balance of nonaccrual loans as of March 31, 2003. The se cond large line was placed on nonaccrual status during the fourth quarter of 2002. This line consists primarily of commercial real estate and land development loans and resulted in most of the net charged-off loans during the first quarter of 2003.
      Nonaccrual loans are those for which management has discontinued accrual of interest because there exists significant uncertainty as to the full and timely collection of either principal or interest or such loans have become contractually past due 90 days with respect to principal or interest unless such loans are well secured and in the process of collection. The additional amount of interest that would have been recorded during the quarter ended March 31, 2003 if the above nonaccrual loans had been current in accordance with their original terms was approximately $119,000.
       Credit risk represents the maximum accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted and any collateral or security proved to be of no value. Concentrations of credit risk or types of collateral arising from financial instruments exist in relation to certain groups of customers. A group concentration arises when a number of counterparties have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The registrant does not have a significant concentration to any individual customer or counterparty. The major concentrations of credit risk for the registrant arise by collateral type in relation to loans and credit commitments. The only significant concentration that exists is in loans secured by real estate and agricultural related loans. Although the registrant has a loan portfolio divers ified by type of risk, the ability of its customers to honor their contracts is to some extent dependent upon their regional economic condition. A geographic concentration arises because the registrant grants commercial, real estate and consumer loans primarily to customers in Giles, Marshall and Lincoln Counties, Tennessee. In order to mitigate the impact of credit risk, management strives to identify loans experiencing difficulty early enough to correct the problems and to maintain an allowance for loan losses at a level management believes is sufficient to cover inherent losses in the loan portfolio.
       Net charge-offs for the three months ended March 31, 2003 were approximately $1,083,800 for a net charge-off to total loans ratio of 0.46 percent. This compares to net charge-offs of approximately

page 11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

       Liquidity is the ability to fund increases in loan demand or to compensate for decreases in deposits and other sources of funds, or both. Maintenance of adequate liquidity is an essential component of the financial planning process. The objective of asset/liability management is to provide an optimum balance of liquidity and earnings. The registrant seeks to generate adequate cash flows to meet its needs without sacrificing income or taking undue risks. Cash and cash equivalents increased $3,472,045 between December 31, 2002 and March 31, 2003.  This increase was primarily the result of deposits increasing faster than loans.
       Marketable investment securities, particularly those of short maturities, are the principal source of asset liquidity. Securities maturing in one year or less amounted to $17,527,920 at March 31, 2003, representing 13.8 percent of the registrant's investment portfolio as compared to 10.5 percent one year earlier. These securities may be sold in response to changes in interest rates, changes in prepayment risk, the need to increase regulatory capital, or asset/liability strategy. Management classifies the registrant's entire investment portfolio in the available-for-sale category and reports these securities at fair value. Management does not anticipate the sale of a material amount of investment securities in the foreseeable future.
       Other sources of liquidity include maturing loans and federal funds sold. As mentioned previously, federal funds sold increased by $4,813,000, or 92.2 percent from December 31, 2002 to March 31, 2003.
       At March 31, 2003, the registrant had unfunded loan commitments outstanding of approximately $27,822,000 and outstanding standby letters of credit of approximately $810,000. Since these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to fund these commitments, the registrant's subsidiary bank has the ability to liquidate federal funds sold or securities available-for-sale, or on a short-term basis to borrow and purchase federal funds from other financial institutions.
       As discussed above, the registrant's bank subsidiary originates residential mortgage loans for sale in the secondary market which it may be required to repurchase if a default occurs with respect to the payment of any of the first four installments of principal and interest after a loan is sold and the default continues for a period of 90 days. These loans are considered in the computation of the allowance for loan losses to cover future defaults. The total mortgage loans sold with repurchase requirements outstanding as of March 31, 2003 was approximately $9,615,000.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

       The registrant's primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the registrant's assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity. Based upon the nature of the registrant's operations, the registrant is not subject to foreign currency exchange or commodity price risk.
       Interest rate risk management focuses on the earnings risk associated with changing interest rates, as well as the risk to the present value of the registrant's equity. Management seeks to maintain profitability in both immediate and long-term earnings through funds management and interest rate risk management. The registrant's rate sensitive position has an important impact on earnings and the present value of the registrant's equity. Management of the registrant meets regularly to analyze the rate sensitivity position, focusing on the spread between the cost of funds and interest yields generated primarily through loans and investments. Management also seeks to maintain stability in the net interest margin under varying interest rate environment. These goals are accomplished through the development and implementation of lending, funding and pricing strategies designed to maximize net interest income under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.
       Analysis of rate sensitivity and rate gap analysis are the primary tools used to assess the direction and magnitude of changes in net interest income resulting from changes in interest rates. Included in the analysis are cash flows and maturities of financial instruments, changes in market conditions, and pricing and deposit volume and mix. Since these assumptions are inherently uncertain, net interest income can not be precisely estimated nor can the impact changes in interest rates be precisely predicted. Actual results will differ due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management's strategies, among other factors.
       There have been no material changes in reported market risks during the three months ended March 31, 2003.

       The Company maintains disclosure controls and procedures, as defined in Rule 13a-14 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the desi gn and operation of its disclosure controls and procedures. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.
       There were no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of such evaluation.

            Exhibit 99.1  Certification of Mark A. Hayes, pursuant to 18 U.S.C. Section 1350 - the Sarbanes-Oxley
                                Act of 2002.

            Exhibit 99.2  Certification of Tracy Porterfield, pursuant to 18 U.S.C. Section 1350 - the Sarbanes-Oxley
                                Act of 2002.