For Immediate Release
- ---------------------

For further information, contact:
Richard G. Harwood, President
(423) 623-6088


                UNITED TENNESSEE BANKSHARES, INC.
        RECEIVES FAVORABLE PRIVATE LETTER RULING REQUEST
           FOR POSSIBLE RETURN OF CAPITAL DISTRIBUTION;
   ANNOUNCES FILING OF APPLICATION FOR ADDITIONAL 5% REPURCHASE
                           PROGRAM


     United Tennessee Bankshares, Inc. (Nasdaq:UTBI), the
holding company for Newport Federal Bank, Newport, Tennessee,
today announced that the Internal Revenue Service had issued a
favorable private letter ruling regarding the tax-free nature of
a possible return of capital distribution to the Company's
shareholders.  The private letter ruling confirmed that a
distribution of cash by the Company to its shareholders on the
terms described would be treated as a tax-free return of capital
rather than as a taxable dividend.

     Richard G. Harwood, the Company's President, emphasized
that the Company was only considering this action at this time
and no firm decision, including the amount or timing of any such
distribution, has been made.  "Although the Board of Directors
has given consideration to a return of capital distribution in
the range of $2 to $4 per share, we do not expect to pay any
such distribution before the fourth quarter of this year." Mr.
Harwood stated.  He further cautioned that the payment of any
distribution would depend on a variety of factors including the
Company's liquidity and capital needs and the relative merits of
competing investment opportunities.  Accordingly, no assurance
could be given that any return of capital distribution would be
paid.

     The Company also announced that it had applied for a waiver
of the regulatory limits on stock repurchases in order to
repurchase another 5% of its outstanding stock during the
current year.  The Company completed a 5% open market repurchase
program in April.

     "OTS regulations generally limit stock repurchases to 5% of
shares outstanding during the second and third years following a
mutual to stock conversion." Mr. Harwood explained. "With our
stock currently trading at a significant discount to its book
value, however, we felt that it was in the best interests of
stockholders to seek a waiver of the repurchase limits."

     United Tennessee Bankshares, Inc. became the holding
company for Newport Federal Bank upon the completion of the
Bank's conversion to stock form on January 1, 1998.  Newport
Federal currently has $94 million in assets and three offices in
Newport, Tennessee.