Contact:  Richard G. Harwood, President
          (423) 623-6088

                              FOR IMMEDIATE RELEASE



                              Date: September  23, 1999


           UNITED TENNESSEE BANKSHARES, INC.
         AUTHORIZES SPECIAL CASH DISTRIBUTION


     United Tennessee Bankshares, Inc. (Nasdaq Smallcap: UTBI),
the holding company for Newport Federal Bank headquartered in
Newport, Tennessee announced today that its Board of Directors
has authorized the payment of a special distribution of $4.00
per share payable on November 30,  1999 to stockholders of
record as of November 1, 1999.  The special distribution is an
addition to its regular annual dividend which it expects to
maintain at 30 cents per share.  On the basis of a ruling received
from the Internal Revenue Service, the Company expects that the
distribution will not be considered a taxable dividend, but will
be applied against and will reduce the shareholders' adjusted
basis in the common stock.  The Company indicated that it would
promptly announce to its shareholders the precise percentage of
the distribution and dividends to be non-taxable as soon as it
arrives at a final computation following the Company's 1999
fiscal year.

     Richard G. Harwood, President of the Company, stated that
"The Board of Directors believes that this distribution
represents the most effective use of the Company's excess
capital that will benefit all of our shareholders."

     The Company's Employee Stock Ownership Plan ("ESOP"), a
qualified retirement benefit plan covering all full-time
employees, holds approximately 145,475 shares of Company stock.
The trustees of the ESOP expect to purchase additional shares in
open market transactions beginning November 30, 1999 with the
$581,900 it will receive from the distribution.  In addition,
the trustees of the Company's Stock Option Plan and Management
Recognition Plan Trusts are expected to use their portion of the
distribution (approximately $775,000) to purchase shares.

     The Company expects that it will be required to record a
charge to compensation expense related to payment of the
distribution on shares of stock in its restricted stock plan.
The amount of the charge is estimated to be approximately
$36,700 (after the related income tax benefits).



     United Tennessee Bankshares, Inc. is the holding company
for Newport Federal Bank, which conducts business through three
full-service banking offices located in Newport, Tennessee.  At
September 30, 1999, the Company had total assets of
approximately $96 million on a consolidated basis.

*           *            *         *

     This release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995.  Such statements can be identified through the use of the
words "expects," "anticipates," or "believes."  The Company
cautions readers not to place undue reliance on such forward-
looking statements which speak only as of the date made.
Various factors including the Company's future earnings, changes
in the interest rate environment, changes in law and competitive
and regulatory factors could cause outcomes to differ from those
currently expected.