COMMUNITY FINANCIAL GROUP INC, S-2, 1997-04-01

COMMUNITY FINANCIAL GROUP INC
S-2, 1997-04-01
STATE COMMERCIAL BANKS

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<PAGE> 1
As filed with the Securities and Exchange Commission on April 1, 1997

Registration No. 333-

==============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------

FORM S-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

COMMUNITY FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
----------------------------------

TENNESSEE 62-1626938
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

401 Church Street
Nashville, Tennessee 37219-2213
(615) 271-2000

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

(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)

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

Mack S. Linebaugh, Jr.
Chairman, President, and Chief Executive Officer
Community Financial Group, Inc.
401 Church Street
Nashville, Tennessee 37219-2213
(615) 271-2000
(615) 271-2149 (Facsimile)
-----------------------------------

(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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

Copy To:
J. Franklin McCreary, Esq.
Gerrish & McCreary, P.C.
222 Second Avenue North - Suite 424
Nashville, Tennessee 37201
(615) 251-0900
(615) 251-0975 (Facsimile)

Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ X ]

If the registrant elects to deliver its latest annual report to
security holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [ ]

<PAGE> 2

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
--------------------

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==========================================================================================================================
Proposed Proposed
Title of Maximum Maximum Amount of
Securities to Amount to be Offering Aggregate Registration
be Registered Registered Price Per Share Offering Price Fee

<S> <C> <C> <C> <C>
Common Stock 4,744,927 shares $12.50(1) $59,311,588 $17,973.21
Underlying
Warrants

Common Stock 75,000 shares $ 7.26(2) $ 544,500 $ 165.00
Underlying
Options

common Stock
Underlying Option
Plan 150,000 shares $12.25(3) $ 1,837,500 $ 556.82

Total: 4,969,927 shares $61,693,588 $18,695.03

==========================================================================================================================
</TABLE>

(1) Based upon the price at which the warrants may be exercised pursuant to
Rule 457(g).

(2) Based on the average price at which the options may be exercised
pursuant to Rule 457(g).

(3) Calculated pursuant to Rule 457(h)(1) and (c).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

<PAGE> 3

PROSPECTUS
4,969,927 Shares

COMMUNITY FINANCIAL GROUP, INC.

Common Stock

This Prospectus relates to 4,969,927 shares (the "Shares") of Common
Stock, par value $6.00 per share (the "Common Stock") of Community Financial
Group, Inc. (the "Company"), of which 4,744,927 shares (the "Warrant Shares")
are underlying Common Stock purchase warrants (the "Warrants"), 75,000 shares
(the "Option Shares") are underlying the Common Stock Purchase Options (the
"Options"), and of which 150,000 shares (the "Plan Option Shares") are
underlying the 1997 nonstatutory Stock Option Plan (the "Option Plan").

The Shares may be sold from time to time pursuant to the exercise of
the Warrants, Options or Plan Options. The Company will receive the gross
proceeds of any of the Warrants, Options, or Plan Options that are exercised to
acquire the Warrant Shares, Option Shares, or Plan Option Shares for cash at
their respective exercise prices.

The closing price for the Common Stock on March 27, 1997, as reported
on the National Association of Securities Dealers' automated quotation system
("NASDAQ"), was $12.25 per share.

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

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE
LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS".

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

No underwriting commissions or discounts will be paid by the
Company in connection with this offering. Estimated expenses
payable by the Company in connection with this offering
are approximately $36,000.
<TABLE>
<CAPTION>
=============================================================================
Underwriting
Price to the Discounts and Proceeds to
Public Commissions Issuer
- -----------------------------------------------------------------------------
<S> <C> <C>
Per warrant share $ 12.50 None $ 12.50
Per option share(1) $ 7.26 None $ 7.26
Per option plan(2) $ (2) None $ (2)
Total ................ $ None $
=============================================================================
</TABLE>
(1)Based on the average price at which the options may be exercised.
(2)To be determined pursuant to the Option Plan.

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

The date of this Prospectus is April 1, 1997.

1
<PAGE> 4

No dealer, salesperson, or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell or the solicitation of any offer to buy any
security other than the shares of Common Stock offered by this Prospectus, nor
does it constitute an offer to sell or a solicitation of any offer to buy the
shares of Common Stock by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that information contained herein is correct as of any time subsequent to the
date hereof.

AVAILABLE INFORMATION

The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the following regional offices: New York Regional Office, 7 World Trade Center,
Room 1400, New York, New York 10048, and Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission. The address of the web site is: http://www.sec.gov. The Common Stock
is quoted on the NASDAQ SmallCap Market and reports and other information
regarding the company may be inspected at the National Association of Securities
Dealers, Inc. at 1735 "K" Street, N.W., Washington, D.C. 20006.

The Company is the successor issuer to The Bank of Nashville (the
"Bank"), pursuant to Rule 12g-3 promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"). The Bank was subject to the informational
requirements of the Exchange Act and filed its periodic reports with the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"). Such
reports and other information filed by the Bank with the Board may be inspected
and copied at the Division of Banking Supervision and Regulation, Board of
Governors of the Federal Reserve System, 20th Street and Constitution Avenue,
N.W., Washington, D.C. 20551.

Additional information regarding the Company and the securities offered
hereby is contained in the Registration Statement on Form S-2 (Registration No.
333-____) of which this Prospectus forms a part, and the exhibits thereto filed
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). For further information pertaining to the Company and the
securities offered hereby, reference is made to the Registration Statement and
the exhibits thereto, which may be inspected without charge at, and copies may
be obtained at prescribed fees from, the office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549.

The Company furnishes its shareholders with annual reports containing
audited financial statements and other periodic reports as the Company may deem
to be appropriate or as required by law or the rules of the National Association
of Securities Dealers, Inc.

2
<PAGE> 5

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's Annual Report on Form 10-KSB for the year ended December
31, 1996 which has heretofore been filed by the Company with the Commission
pursuant to the Securities Exchange Act of 1934, as amended, is incorporated by
reference herein and shall be deemed to be a part hereof.

All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act, after the date of this Prospectus and prior to
the termination of this offering, shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

This Prospectus is accompanied by a copy of the Company's latest Annual
Report on Form 10-KSB and a copy of the Company's latest Quarterly Report on
Form 10-QSB, if any, filed after the latest Annual Report.

The Company will provide, without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference in this Prospectus (not including
exhibits and other information that is incorporated by reference, unless the
exhibits are themselves specifically incorporated by reference). Requests for
such documents should be directed to: Community Financial Group, Inc. located at
401 Church Street, Nashville, Tennessee 37219-2213, Attention: Joan B.
Marshall, Corporate Secretary and Vice President.

The Company's address is 401 Church Street, Nashville, Tennessee 37219-
2213, and its telephone number is: (615) 271-2000.

3
<PAGE> 6

THE COMPANY

Community Financial Group, Inc. (the "Company") is a Tennessee
corporation which is registered as a bank holding company under the federal Bank
Holding Company Act of 1956, as amended. The Company was incorporated on
December 13, 1995, and became a bank holding company on April 30, 1996, pursuant
to an Agreement and Plan of Exchange (the "Agreement") whereby the Company
acquired all of the outstanding stock of The Bank of Nashville (the "Bank"). In
addition, pursuant to the Agreement, each Warrant issued by the Bank and each
option to purchase capital stock of the Bank became Warrants and Options to
purchase an equivalent number of shares of the Company. The Board of Directors
of the Company adopted the Community Financial Group, Inc. 1997 Nonstatutory
Stock Option Plan on March 25, 1997.

As a result of the transaction described above, the Company is the
successor issuer to the Bank pursuant to Rule 12g-3 promulgated under the
Securities Exchange Act of 1934.

The Company's executive offices are located at 401 Church Street,
Nashville, Tennessee 37219-2213, and the telephone number is (615) 271-2000.

RISK FACTORS

Management has used the treasury stock method to compute earnings per
share since the Company and the Bank were incorporated. The Warrants and Options
are Common Stock equivalents. The Warrants have not been included in the
Company's computation of earnings per share because the market price of the
Company's (and previously the Bank's) Common Stock has not exceeded the
Warrants' exercise price for substantially all of any three-month reporting
period. If the market price of the Common Stock exceeds the Warrants' exercise
price for substantially all of any three-month reporting period, the Company
will reflect the impact of the Warrants in all future earnings per share
computations using the modified treasury stock method. The impact on earnings
per share of using the modified treasury stock method is disclosed in Note B
"Shareholders' Equity" to the notes to the Company's Consolidated Financial
Statements included in the Company's Annual Report on Form 10-KSB, delivered
herewith, to which reference is made for a full discussion.

USE OF PROCEEDS

The net proceeds from the sale of the Shares will be applied to the
Company's general funds to be used for such corporate purposes as may be
determined by management. See "Risk Factors".

DETERMINATION OF OFFERING PRICE

The Warrants were issued in connection with the initial public offering
when the Bank was organized and chartered in 1989. The Warrant Agreement, dated
August 1, 1989, pursuant to which the Warrants were issued, granted the holder
of each Warrant the right to purchase one (1) share of Common Stock of the Bank
at a price of $12.50 per share. Initially, the Warrants were to expire December
31, 1995. By action of the Bank's Board of Directors in early 1994, the original
termination date of the Warrants was extended from December 31, 1995 to December
31, 1998. In connection with the Agreement and Plan of Exchange pursuant to
which the Company became the parent bank holding company of the Bank, the
outstanding Warrants and Options of the Bank became Warrants and Options to
purchase the Common Stock of the Company on May 1, 1996.

The offering price of the Options was determined by the Board of
Directors of the Company (or Bank) based on the market price of the Common Stock
at the time each Option was granted.

4
<PAGE> 7

The offering price of the Plan Options will be determined by the
committee appointed by the Board of Directors of the Company to administer the
Option Plan. The Option Plan provides that the committee will determine the
exercise price on the date each option is granted and set forth said price in an
option agreement. No option shall have an option price less than the fair market
value of the common stock on the date of the grant.

PLAN OF DISTRIBUTION

The Common Stock will be issued only upon the valid exercise of the
Warrants, Options, or Plan Options.

The Warrant Agreement provides that a Warrant Certificate may be
exercised in whole or in part by surrendering it at the principal office of the
Warrant Agent with the Purchase Form duly executed and by paying in full, in
lawful money of the United States of America, by cash, check, or money order,
the Purchase Price for each share of Common Stock as to which the Warrant
Certificate is issued. Thereupon, as soon as practicable, the Company will cause
the Common Stock to be issued and delivered. The Warrants terminate at 5:00
p.m., local time, in the City of Nashville, Tennessee, on December 31, 1998, and
thereafter cannot be exercised.

The Options are subject to a vesting schedule as stated in the Option
Agreements. Vested options can be exercised at any time prior to the stated
expiration date while the Optionee is employed by the Company and in case of
death of the Optionee, until the stated expiration date. Options may be
exercised by giving notice to the Company and tendering the purchase price in
cash, check, bank draft, cashier's check, or postal money order. The Options
have expiration dates between 2002 and 2006.

The Plan Options, when issued, will be subject to a vesting schedule as
stated in the Option Plan and the option agreements issued thereunder. Vested
options will be exercisable at any time prior to the expiration date stated in
the option agreements, but not more than three (3) months after the optionee's
employment ceases. Options will be exercisable by giving notice to the committee
and by payment of the purchase price in such medium as the committee shall
approve.

DESCRIPTION OF COMMON STOCK

The following description of the Common Stock sets forth certain
general terms and provisions of the Common Stock and is in all respects subject
to and qualified in its entirety by reference to the applicable provisions of
the Company's Charter and By-Laws.

GENERAL

The Company is currently authorized to issue 50,000,000 shares of
Common Stock, with a par value of $6.00 per share. As of December 31, 1996,
there were 2,202,473 outstanding shares. At such date, there were an additional
4,744,927 shares reserved for issuance upon the exercise of the Warrants, 75,000
shares reserved for issuance upon the exercise of the Options, and 81,743
reserved for issuance pursuant to the Company's Associates' Stock Purchase Plan.
On March 25, 1997, the Company reserved an additional 150,000 shares for
issuance pursuant to the Option Plan.

The Common Stock has no conversion rights and is not subject to
redemption by the Company. There is no restriction on the repurchase by the
Company of shares of the Company's Common Stock except for certain regulatory
limits, and the Common Stock is not subject to further call or assessments by
the Company. There are no statutory preemptive rights with respect to the
issuance of shares of the Company's Common Stock.

5
<PAGE> 8

VOTING - GENERAL

Each outstanding share of the Common Stock is entitled to one (1) vote
on each matter submitted to a vote at a meeting of shareholders. The holders of
a majority of the issued and outstanding shares entitled to vote at a meeting of
shareholders constitutes a quorum. When a quorum is present at a meeting, the
vote of the holders of a majority of the shares having voting power shall decide
any questions brought before the meeting, unless the question is the election of
directors or one on which, by express provision of the statutes, the Charter or
the By-Laws, a higher vote is required. There is no cumulative voting by the
shareholders on any matters.

VOTING - SUPERMAJORITY VOTE REQUIREMENT

The Company's Charter contains a "fair price" provision designed to deter
coercive "two-tiered" tender offers in which the consideration given for the
Company's securities in the second step of such a takeover transaction can be,
and frequently is, in a different and less desirable form or amount than the
consideration given in the first step. The fair price provision prescribes a 70%
supermajority vote of shareholders required to approve certain business
transactions involving beneficial owners of 25% or more of the Common Stock,
except where certain minimum price and/or other criteria are met. The provision
is designed to achieve a measure of assurance that any multi-step attempt to
take over the Company without the approval of the Board of Directors would be
made only on terms which offer similar treatment to all shareholders for all of
their shares.

The fair price provision does not prevent tender offers or business
combinations where the offeror is prepared to pay the same price for all holders
of the Company's Common Stock; nor does it restrict a third party that merely
desires to exercise control over the Company and does not intend to effect a
second-step merger. To the extent that the fair price provision has the effect
of discouraging tender offers by persons who would otherwise initiate a
two-tiered transaction with the intention of eliminating minority shareholders
by means of a second-step merger, however, the provision might work to the
disadvantage of those shareholders who would want the opportunity to liquidate
at least a portion of their holdings in the initial tender offer.

DIVIDENDS

Dividends are determined by the Company's Board of Directors in light
of circumstances existing at the time, including earnings and the financial
condition of the Company, and there is no assurance that dividends will continue
to be paid at the current levels.

The ability of the Company to pay dividends will depend, to a large
extent, upon the amount of dividends paid by the Bank to the Company and the
level of debt service, if any, at the Company. The Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") generally restricts the
ability of a bank holding company with substantial debt to pay dividends until
the Company establishes a consistent pattern of reducing the level of its
outstanding indebtedness. If the Company incurs substantial debt, it will
probably be required to obtain prior approval from the Federal Reserve Board
before paying a dividend. There is no assurance that any such approval would be
forthcoming. Future dividends from the Bank to the Company may be restricted by
the Bank's need for capital to support its business, as well as restrictions
resulting from law and regulations. See Note N to the notes to the Company's
Consolidated Financial Statements included in the Company's Annual Report on
Form 10-KSB delivered herewith.

6
<PAGE> 9

LIQUIDATION RIGHTS

Upon the voluntary or involuntary dissolution, liquidation, or winding
up of the affairs of the Company, after the payment in full of its debts and
other liabilities, the remainder of its assets, if any, are to be distributed
pro rata among the holders of Common Stock. Subject to any required regulatory
approvals, the Directors of the Company, at their discretion, may authorize and
issue senior or subordinate debt obligations without prior approval of the
shareholders.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Tennessee law provides that a corporation's charter may contain a
provision eliminating or limiting the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director (A) for any breach of the director's duty of loyalty
to the corporation or its shareholders; (B) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law; or
(C) under ss. 48-18-304, Tennessee Code Annotated for unlawful distributions.

The Company's Charter provides that, to the fullest extent allowed by
law, no director of the Company shall be personally liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty as a director.

In addition, the Charter provides that the Company shall have the power
to indemnify any director, officer, employee, agent of the Company or others
serving at the request of the Company to the fullest extent permitted by
Tennessee law.

EXPERTS

The financial statements of the Company as of December 31, 1996 and
1995, and for each of the years in the three-year period ended December 31,
1996, included in the Annual Report on Form 10-KSB of the Company for the fiscal
year ended December 31, 1996, have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent auditors,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.

LEGAL OPINION

The legality of the shares of Common Stock of the Company to be offered
hereby will be passed upon for the Company by the law firm of Gerrish &
McCreary, P.C., Nashville/Memphis, Tennessee.

7
<PAGE> 10

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following data sets forth the costs and expenses payable by the
Company in connection with the issuance and distribution of the securities being
registered hereunder. All of the amounts shown are estimates (except for the SEC
registration fee).

<TABLE>

<S> <C>
SEC Registration Fee................................. $ 18,695.03

Printing fees and expenses .......................... $ 2,500.00

Legal fees and expenses ............................. $ 10,000.00

Blue Sky fees and expenses .......................... $ 2,500.00

Miscellaneous .......................... $ 2,304.97
------------

Total: .......................... $ 36,000.00
</TABLE>

ITEM 15. (NOT APPLICABLE)

ITEM 16. EXHIBITS.

The following exhibits are filed herewith:
<TABLE>
<CAPTION>

Exhibit
Number Description
- --------------------------------------------------------------------------------
<S> <C>
4.1 Warrant Agreement (Incorporated by reference to Exhibit 4.01 of
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996)

4.2 Form of specimen Certificate of Common Stock (Incorporated by
reference to Exhibit 4.02 of the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996)

4.3 Form of specimen Certificate of Common Stock Purchase Warrant
(Incorporated by reference to Exhibit 4.03 of the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1996)

5.1 Opinion of Gerrish & McCreary, P.C., counsel to the Registrant,
regarding the legality of the securities offered hereby.

10.1 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 of the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996)

10.2 Employment Agreement between The Bank of Nashville and Julian C.
Cornett dated October 13, 1996. (Incorporated by reference to
Exhibit 10.02 of the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996)
</TABLE>

II-1

<PAGE> 11

<TABLE>
<CAPTION>
Exhibit Number Description
- --------------------------------------------------------------------------------

<S> <C>
10.3 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 of the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996)

10.4 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 of the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996)

10.5 Lease Agreement dated July 19, 1989 between The Bank of Nashville
and Metropolitan Life Insurance Company. (Incorporated by
reference to Exhibit 10.05 of the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996)

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

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

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

10.9 Community Financial Group, Inc. 1997 Nonstatutory Stock Option
Plan.

11.1 Statement regarding computation of Earnings Per Share
(incorporated by reference to the Registrant's Annual Report
filed on Form 10-KSB for the year ended December 31, 1996, filed
with the Commission on March 25, 1997).

13.1 Community Financial Group, Inc. Annual Report on Form 10-KSB for
the year ended December 31, 1996 (incorporated by reference).

13.2 Community Financial Group, Inc. 1996 Annual Report to
Shareholders. (Incorporated by reference to Exhibit 13 of the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996)

23.1 Consent of KPMG Peat Marwick LLP

23.2 Consent of Gerrish & McCreary, P.C. (contained in Exhibit 5.1)

24.1 Powers of Attorney (contained in the signature page to this
Registration Statement, pages II-3 and II-4)
</TABLE>

II-2

<PAGE> 12

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
additional or changed material information with respect to the plan of
distribution.

(2) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer, or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer, or controlling person in connection with the
securities being registered, the Company will, unless, in the opinion of its
counsel, the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-3

<PAGE> 13

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-2 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Nashville, State of Tennessee, on April 1, 1997.

COMMUNITY FINANCIAL GROUP, INC.

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

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Mack S.
Linebaugh, Jr., and Julian C. Cornett, and each of them, attorneys-in-fact for
the undersigned, each with the power of substitution, for the undersigned in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming that each of
said attorneys-in-fact, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-2 has been signed by the following persons in
the capacities and on the dates indicated.

Dated: April 1, 1997 /s/ Mack S. Linebaugh, Jr.
-------------------------------------------
Mack S. Linebaugh, Jr., President, Chairman
of the Board of Directors, Chief Executive
Officer, Director (Principal Executive
Officer, Principal Financial Officer,
Principal Accounting Officer)

/s/ J.B. Baker
Dated: April 1, 1997 -------------------------------------------
J.B. Baker, Director

/s/ Jo D. Federspiel
Dated: April 1, 1997 -------------------------------------------
Jo D. Federspiel, Director

/s/ Richard H. Fulton
Dated: April 1, 1997 -------------------------------------------
Richard H. Fulton, Director

/s/ Louis A. McRedmond
Dated: April 1, 1997 -------------------------------------------
Louis A. McRedmond, Director

/s/ Leon Moore
Dated: April 1, 1997 -------------------------------------------
Leon Moore, Director

II-4

<PAGE> 14

/s/ Perry W. Moskovitz
Dated: April 1, 1997 -------------------------------------------
Perry W. Moskovitz, Director

/s/ C. Norris Nielsen
Dated: April 1, 1997 -------------------------------------------
C. Norris Nielsen, Director

/s/ G. Edgar Thornton
Dated: April 1, 1997 --------------------------------------------
G. Edgar Thornton, Director

II-5
<PAGE> 15

INDEX TO EXHIBITS

The following exhibits are filed herewith:

<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------------------------------------------------------------------------

<S> <C>
4.1 Warrant Agreement (Incorporated by reference to Exhibit 4.01 of
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996)

4.2 Form of specimen Certificate of Common Stock (Incorporated by
reference to Exhibit 4.02 of the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996)

4.3 Form of specimen Certificate of Common Stock Purchase Warrant
(Incorporated by reference to Exhibit 4.03 of the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1996)

5.1 Opinion of Gerrish & McCreary, P.C., counsel to the Registrant,
regarding the legality of the securities offered hereby.

10.3 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 of the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996)

<PAGE> 16

<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------------------------------------------------------------------------

<S> <C>
10.7 The Bank of Nashville Retirement Savings Plan. (Incorporated by
reference to Exhibit 10.07 of the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996)

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

10.9 Community Financial Group, Inc. 1997 Nonstatutory Stock Option
Plan.

11.1 Statement regarding computation of Earnings Per Share
(incorporated by reference to Exhibit 11 to the Registrant's
Annual Report filed on Form 10-KSB for the year ended December
31, 1996, filed with the Commission on March 25, 1997).

13.1 Community Financial Group, Inc. Annual Report on Form 10-KSB for
the year ended December 31, 1996 (incorporated by reference).

13.2 Community Financial Group, Inc. 1996 Annual Report to
Shareholders. (Incorporated by reference to Exhibit 13 of the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996)

23.1 Consent of KPMG Peat Marwick LLP

23.2 Consent of Gerrish & McCreary, P.C. (contained in Exhibit 5.1)

24.1 Powers of Attorney (contained in the signature page to this
Registration Statement, pages II-3 and II-4)
</TABLE>

<PAGE> 1

EXHIBIT 5

April 1, 1997

Board of Directors
Community Financial Group, Inc.
401 Church Street
Nashville, TN 37219

Re: Issuance of Shares of Common Stock of
Community Financial Group, Inc. in
Connection with the Exercise of Warrants
and Options

Ladies and Gentlemen:

We have represented Community Financial Group, Inc. (CFGI") as special counsel
in connection with the preparation and filing of a Registration Statement on
Form S-2 (the "Registration Statement") with the Securities and Exchange
Commission for the purpose of registering shares of CFGI's $6.00 par value
common stock under the Securities Act of 1933, as amended (the "Shares"). The
Shares are to be issued only upon the exercise of outstanding warrants and
options of CFGI.

It is our opinion that if and when outstanding warrants and options are properly
exercised in accordance with the terms of the Warrant Agreement and the Option
Agreements, the shares will be legally issued, fully paid, and nonassessable.
This opinion does not pass upon the matter of compliance with "Blue Sky" laws or
similar laws relating to the sale or distribution of the shares. This opinion is
limited to the matters stated herein and no opinion is to be implied or may be
inferred beyond the matters expressly stated.

This opinion is addressed to you and is solely for your use in connection with
the Registration Statement, and we assume no professional responsibility to any
other person whatsoever. Accordingly, the opinion expressed herein is not to be
relied upon, utilized, or quoted by, or delivered or disclosed to, in whole or
in part, any other person, corporation, entity, or governmental authority
without, in each instance, the prior written consent of this firm.

<PAGE> 2

Board of Directors
April 1, 1997
Page Two

We are members of the Tennessee Bar and do not hold ourselves out as experts on
the laws of any other state.

We hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference made to us in the Registration Statement and the
Prospectus forming a part thereof under the caption "Legal Opinions". In giving
this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder.

Yours very truly,

/s/ Gerrish & McCreary, P.C.

<PAGE> 1

EXHIBIT 10.9

COMMUNITY FINANCIAL GROUP, INC.
1997 NONSTATUTORY STOCK OPTION PLAN

1. Purpose. The purpose of this Community Financial Group, Inc. 1997
Statutory Nonstatutory Stock Option Plan (the "Plan") is to motivate
Participants (as defined herein), thereby benefiting the stockholders of
Community Financial Group, Inc., a Tennessee corporation ("Corporation"). In
furtherance of this purpose, the Plan is to advance the interests of Corporation
by stimulating the efforts of key employees, increasing their desire to continue
in their employment with Corporation, assisting Corporation in competing
effectively with other enterprises for the services of new employees and
directors necessary for the continued improvement of operations, and to attract
and retain the best possible personnel for service as employees, officers and
directors of Corporation. Accordingly, the Plan is designed to promote the
interests of Corporation and its stockholders, and, by facilitating stock
ownership on the part of such directors, officers and employees, to encourage
them to acquire a proprietary interest in Corporation and to remain in its
employ and service.

2. Definitions.

"Board" means the Board of Directors of Corporation.

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee" means the Compensation Committee chosen by the Board to
administer the Plan, as provided in Section 5(a) hereof.

"Fair Market Value of Stock" shall be determined under the Plan as
follows:

(a) If the Stock is principally traded on an exchange or market in
which prices are reported on a bid and asked basis, the average of the mean
between the bid and the asked price for the Stock at the close of trading for
the 10 consecutive trading days immediately preceding such given date;

(b) If the Stock is principally traded listed on a national securities
exchange, the average of the closing prices of the Stock for the 10 consecutive
trading days immediately preceding such given date; and

(c) If the Stock is neither traded on the over-the-counter market nor
listed on a national securities exchange, such value as the Board, in good
faith, shall determine.

"Option" means an award of a Stock Option pursuant to this Plan.

"Option Agreement" means the written instrument from the Committee to
Participant describing the terms of the Option.

1
<PAGE> 2

"Option Price" means the exercise price of an Option.

"Option Stock" or "Stock" means the common stock of Corporation.

"Participant" means a person to whom an Option has been granted.

3. Effective Date of Plan; Term. The Plan is effective March 25, 1997,
the date on which the Board of Corporation approved the Plan.

4. Shares Subject to the Plan. The aggregate number of shares of Stock
available for grant under the Plan is 150,000 (plus 10% of any additional shares
of Stock issued after the effective date of this Plan) subject to adjustments as
provided in Section 9 herein. Stock issued pursuant to the Plan may be either
authorized but unissued shares or shares held in the treasury of Corporation. In
the event that, prior to the end of the period during which Options may be
granted under the Plan, any Option under the Plan expires unexercised or is
terminated or surrendered without being exercised, in whole or in part, the
number of shares theretofore subject to such Option or the unexercised or
terminated portion thereof, shall be added to the remaining number of shares of
Stock available for grant as an Option under the Plan, including a grant to a
former holder of such Option, upon such terms and conditions as the Committee
shall determine, which terms may be more or less favorable than those applicable
to such former Option.

5. Administration of the Plan by the Committee.

(a) The Committee. The Plan shall be administered by the Committee,
whose members shall be appointed from time to time by, and shall serve at the
pleasure of, the Board. The members of the Committee need not be members of the
Board or employees of Corporation. No member of the Committee shall be liable
for any action taken, or determination made, hereunder in good faith. Service on
the Committee shall constitute service as a director of Corporation so that
members of the Committee shall be entitled to indemnification and reimbursement
as directors of Corporation pursuant to its Charter and Bylaws. The Committee
may take action only upon the agreement of a majority of the entire Committee.
Any action which the Committee takes through a written instrument signed by a
majority of its members shall be as effective as though taken at a meeting duly
called and held.

(b) Powers of the Committee. Subject to the express provisions of the
Plan, the Committee may interpret the Plan, prescribe, amend and rescind rules
and regulations relating to it and make all determinations it deems necessary or
advisable for the administration of the Plan. The powers of the Committee shall
include plenary authority to administer and interpret the Plan, and subject to
the provisions hereof, to determine the persons to whom Options shall be
granted, the number of shares subject to each Option, the terms and provisions
of each Option, and the date on which Options shall be granted. In making such
determinations, the Committee may take into account the nature of the services
rendered by such Participants, or classes of Participants, their present and
potential contributions to Corporation's success and

2
<PAGE> 3

such other factors as the Committee, in its discretion, shall deem relevant.
Accordingly, the Committee shall determine, as soon as practicable after the
effective date of the Plan and at any time and from time to time thereafter, (i)
the persons who are eligible, (ii) the number of shares of Stock which an
eligible person may purchase pursuant to an Option, (iii) the price of each
share of Stock subject to the Option and (iv) the terms on which each share of
Stock subject to the Option may be purchased.

(c) Conclusiveness of Determinations. Any action taken by the Committee
or by the Board with respect to the implementation, interpretation, or
administration of the Plan shall be final, conclusive and binding. The
Committee's determinations under the Plan, including, without limitation,
determinations as to the persons to receive awards, the terms and provisions of
such awards and the agreements evidencing the same, need not be uniform and may
be made by it selectively among persons who receive or are eligible to receive
awards under the Plan, whether or not such persons are similarly situated.

6. Options.

(a) Grant of Options. Options may be granted to Participants under the
Plan by the Committee from time to time. Options shall be subject to such terms
and conditions, shall be exercisable at such times, and shall be evidenced by
such form of written option agreement between Participant and Corporation, as
the Committee shall determine; provided, that such determinations are not
inconsistent with the other provisions of the Plan. The Committee shall have
authority to grant Options exercisable in whole or in part at any time during
their term. Option Agreements need not be identical, but generally shall be
similar to the form attached to this Plan.

(b) Persons Eligible to Receive Options. The persons who shall be
eligible to receive Options granted hereunder shall be employees, directors, and
officers of Corporation. A Participant may hold more than one Option. The
Committee shall determine the terms for payment by each Participant for his
shares of Option Stock. Such terms shall be set forth in the Option Agreement.
The terms for payment so set by the Committee may vary from one Participant to
another.

7. Terms and Exercise of Options.

(a) Option Price. The Option Price to be paid by Participant to
Corporation upon exercise of the Option shall be determined by the Committee on
the date of the grant of the Option and shall be set forth in the Option
Agreement. No Option shall have an Option Price less than the Fair Market Value
of the Stock on the date of the grant.

(b) Term. Each Option granted under the Plan shall be exercisable only
during a term commencing on the date when the Option was granted and ending
(unless the Option shall have terminated earlier under other provisions of the
Plan) on a date to be fixed by the Committee, subject to the limitation that any
Option may not be exercisable more than three (3)

3
<PAGE> 4

months after Participant ceases to be an employee of Corporation, except as set
forth in Section 7(c), and only to the extent that the Option would otherwise
have been exercisable by Participant upon the date of termination. At the time
of termination, the Committee may extend the exercise period for up to the
earlier of three (3) years after termination or the original termination date.

(c) Death or Disability. Upon the death or disability (within the
meaning of Section 22(e)(3) of the Code) of a Participant holding an Option, in
the absence of terms in the Option Agreement to the contrary, the Option may be
exercised, to the extent not previously exercised, by the Participant, the
Participant's legal representative, the legatees of the Option under
Participant's Will or the distributees of the Option under the applicable laws
of descent and distribution until the Termination Date, but only to the extent
that the Option would otherwise have been exercisable by Participant upon the
date of death or termination related to the disability.

(d) Vesting. The Committee may establish a vesting schedule for any
particular or all Options which may be different for different Participants
and/or different Options. The Committee may accelerate the vesting schedule in
its discretion.

(e) Exercise of Options. Options shall be exercised by delivering or
mailing to the Committee (i) a notice and "investment letter" in the form
prescribed by the Committee, specifying the number of shares to be purchased;
and (ii) a check payable to Corporation, shares of Common Stock of the
Corporation, or such other medium of payment as the Committee shall approve, in
an amount or with a fair market value (the average between the bid and asked
price) equal to the Option Price multiplied by the number of Option Shares being
purchased plus any withholding tax required by law as determined by Corporation.
Additionally, the Participant may choose a "dry option" whereby the Participant
receives a number of shares of Stock equal to the fair market value of the Stock
times the number of shares exercisable under the Option divided by the value of
the Option. The value of the Option is the difference between the fair market
value of the shares and the Option Price multiplied by the number of shares
exercisable under the Option. Upon receipt of each of the foregoing, Corporation
shall promptly deliver to Participant a certificate or certificates for the
Stock purchased, without charge to Participant for issue or transfer tax, but in
the event Participant has not made a cash payment sufficient to cover applicable
withholding taxes, the Corporation may retain, sufficient stock to liquidate and
pay such taxes. The stock certificate may, at the request of Participant, be
issued in Participant's name and the name of another person as joint tenants
with the right of survivorship, provided that any restrictions upon such Stock
shall apply equally to such joint tenant. In the event that such shares are not
registered under the Securities Act of 1933, such certificates shall bear the
following legend:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES ACT ("STATE ACTS"), AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS SUCH SHARES ARE REGISTERED UNDER SUCH ACT AND EACH
RELEVANT STATE

4
<PAGE> 5

ACT OR AN OPINION OF COUNSEL SATISFACTORY TO Corporation IS OBTAINED
TO THE EFFECT THAT SUCH REGISTRATION IS NOT NECESSARY.

(f) Transferability of Options. No Option may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except that
an Option may be transferred upon the death of a Participant as provided by
Participant's Will or the applicable laws of descent or distribution. No Option
shall be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of an Option,
or levy of attachment or similar process upon the Option not specifically
permitted herein shall be null and void and without effect. Notwithstanding the
provisions of this Section, a Participant, at any time prior to his death, may
assign all or any portion of an Option to (i) his spouse or lineal descendant,
(ii) the trustee of a trust for the primary benefit of his spouse and lineal
descendant, (iii) a partnership of which his spouse and lineal descendants are
the only partners, or (iv) a tax exempt organization as described in Section
501(c)(3) of the Code. In such event, the permitted transferee will be entitled
to all of the rights of Participant with respect to the assigned portion of such
Option, and such portion of the Option will continue to be subject to all of the
terms, conditions and restrictions applicable to the Option, as set forth herein
and in the related Option Agreement, immediately prior to the effective date of
the assignment. Any such assignment will be permitted only if (i) Participant
does not receive any consideration therefore, and (ii) the assignment is
expressly permitted by the applicable Option Agreement, as approved by the
Committee. Any such assignment shall be evidenced by a written document executed
by Participant, and a copy thereof shall be delivered to Corporation prior to
the assignment.

(g) Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon a Participant to exercise such Option.

8. Participant's Rights. No person shall have the rights of a
stockholder by virtue of an Option except with respect to Stock actually issued
to the stockholder, and issuance of Stock shall confer no retroactive rights to
dividends. Nothing in the Plan or any Option Agreement entered into pursuant to
the Plan shall confer upon any Participant the right to continue as a member of
the Board of Corporation or affect any right which Corporation may have to
remove such Participant as a director of Corporation. Nothing in this Plan or in
any Option Agreement shall confer upon any employee any right to continue in the
employ of Corporation or interfere in any way with the right of Corporation to
terminate his employment at any time.

9. Adjustments. In the event of the declaration of any stock dividend
on the Stock or in the event of any reorganization, merger, consolidation,
acquisition, separation, recapitalization, split-up, combination or exchange of
shares of Stock, or like adjustment, the number of shares of Stock and the class
of shares of Stock available pursuant to the Plan, and the Option Prices, shall
be adjusted by appropriate changes in the Plan and in any Option Agreement
outstanding pursuant to the Plan. Any such adjustment to the Plan or to Option
Agreements or Option Prices shall be made by action of the Committee, whose
determination

5
<PAGE> 6

shall be conclusive. Notwithstanding the foregoing, in the event of such a
reorganization, merger, consolidation, acquisition, separation,
recapitalization, split-up, combination or exchange of shares of stock, or like
adjustment which results in substantially all the shares of the Stock of
Corporation being exchanged for, or converted into cash or other property, the
Committee shall have the right to terminate the Plan as of the date of the
exchange or conversion in which case the Options shall convert into the right to
receive such cash or property net of the exercise price of the Options.

10. Termination, Suspension or Amendment of Plan. The Committee may at
any time terminate, suspend or amend the Plan.

11. Postponement of Exercise. The Committee may postpone any exercise
of a Option for such time as the Committee may deem necessary in order to permit
Corporation (i) to obtain any required approvals of the exercise from bank or
bank holding company regulators, (ii) to effect, amend or maintain any necessary
registration of the Plan or the shares of Stock issuable upon the exercise of an
Option under the Securities Act of 1933, as amended, or the securities laws of
any applicable jurisdiction, (iii) to permit any action to be taken in order to
(A) list such shares of Stock on a stock exchange if shares of Stock are then
listed on such exchange or (B) comply with restrictions or regulations incident
to the maintenance of a public market for its shares of Stock, including any
rules or regulations of any stock exchange on which the shares of Stock are
listed, or (iv) to determine that such shares of Stock and the Plan are exempt
from such registration or that no action of the kind referred to in (iii)(B)
above needs to be taken; and Corporation shall not be obligated by virtue of any
terms and conditions of any Option Agreement or any provision of the Plan to
recognize the exercise of an Option or to sell or issue shares of Stock in
violation of the Securities Act of 1933 or the law of any government having
jurisdiction thereof. Any such postponement may extend the terms of an Option if
necessary to permit the exercise of any Option.

12. Application of Proceeds. The proceeds received by Corporation from
the sale of its Stock under the Plan shall be used for general corporate
purposes.

13. Elimination of Fractional Shares. If under any provision of the
Plan that requires a computation of the number of shares of Stock subject to an
Option, the number so computed is not a whole number of shares of Stock, such
number of shares of Stock shall be rounded down to the next whole number.

14. Validity. In the event that any provision of the Plan or any
related agreement is held to be invalid, void or unenforceable, the Board shall
have the right to declare the entire Plan void and unenforceable, taking such
action as shall be deemed to be in the best interest of the stockholders of
Corporation.

6
<PAGE> 7

15. Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of the Plan.

16. Governing Law. All questions pertaining to the validity,
construction and administration of the Plan and Options granted hereunder shall
be determined in conformity with the laws of the State of Tennessee.

7
<PAGE> 8

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is made as
of the _____ day of ____________, 19____ (the "Date of Grant"), by and between
Community Financial Group, Inc., a Tennessee corporation ("Corporation"), and
_____________________________ ("Participant").

WHEREAS, Corporation has adopted its 1997 Nonstatutory Stock Option
Plan (the "Plan"); and

WHEREAS, the committee chosen by Corporation to administer the Plan
(the "Committee") has determined that Participant is eligible to receive an
option to purchase shares of common stock of Corporation ("Stock") under a
non-qualified stock option and has determined that it is in the best interest of
Corporation to grant the stock option documented herein to Participant.

NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:

I. Grant of Option. Corporation hereby grants to Participant the right
to purchase _______________________________ (__________) shares of Stock (the
"Option Shares") at a price of ($_____________) per Option Share (the "Option
Price"), in accordance with the terms of this Agreement and the Plan (the
"Option"). The Committee, exercising good faith, has determined that the Option
Price is equal to at least one hundred percent (100%) of the fair market value
of a share of Stock on the date hereof. The Option is not intended by the
parties hereto to be, and shall not be treated as, an incentive stock option (as
such term is defined under section 422 of the Internal Revenue Code of 1986 (the
"Code")).

II. Termination of Option.

(i) Termination Date. The Option and all rights hereunder with respect
thereto, to the extent such rights shall not have been previously exercised or
otherwise terminated, shall terminate and become null and void on
______________, _____ at 5:00 P.M. (the "Termination Date"), subject to the
limitation that any Option may not be exercisable more than three (3) months
after Participant ceases to be an employee, director, or officer of Corporation,
except as set forth in Section II (ii), and only to the extent that the Option
would otherwise have been exercisable by Participant upon the date of
termination..

(ii) Death or Disability. Upon Participant's death or disability
(within the meaning of Section 22(e)(3) of the Code), the Option may be
exercised, to the extent not previously exercised, by the Participant, the
Participant's legal representative, the legatees of the Option under
Participant's Will or the distributees of the Option under the applicable laws
of descent and distribution until the Termination Date, but only to the extent
that the Option would otherwise

1
<PAGE> 9

have been exercisable by Participant. At the time of termination, the Committee
may extend the exercise period for up to the earlier of three (3) years after
termination or the Termination Date.

III. Vesting. Subject to such further limitations as are provided
herein, the Option shall vest and become exercisable in five (5) installments,
Participant having the right hereunder to purchase from Corporation the
following number of Option Shares upon exercise of the Option, on and after the
following dates, in cumulative fashion:

(i) upon execution of this Agreement, up to one-fifth
(ignoring fractional shares) of the total number of Option Shares;

(ii) on and after the first anniversary of the Date of Grant,
up to an additional one-fifth (ignoring fractional shares) of the total
number of Option Shares;

(iii) on and after the second anniversary of the Date of
Grant, up to an additional one-fifth (ignoring fractional shares) of
the total number of Option Shares;

(iv) On and after the third anniversary of the Date of Grant,
up to an additional one-fifth (ignoring fractional shares) of the total
number of Option Shares; and

(v) on and after the fourth anniversary of the Date of Grant,
the remaining Option Shares.

Any portion of this Option that is not vested shall vest immediately upon any
one of the following events:

a. the participant's death or disability (within the meaning of Section
22(e)(3) of the Code); or

b. the closing of a transaction resulting in a majority change of
control of Corporation or The Bank of Nashville, including any merger, sale of
assets, transfer of stock, or any reorganization as defined in Section 368 of
the Code.

IV. Exercise of Option. The Option, or any portion of the Option
eligible to be exercised by the Participant and not previously exercised, may be
exercised at any time or times prior to the termination of the Option pursuant
to the provisions hereof. The Option may be exercised only if compliance with
all Federal and state securities and banking laws can be effected and only by
(i) Participant's completion, execution and delivery to Corporation of a notice
of exercise and "investment letter" in the form attached hereto as Exhibit A,
and (ii) Participant's payment to Corporation of an amount or with a fair market
value (the average between the bid and asked price) equal to the sum of the
amount obtained by multiplying the Option Price by the number of Option Shares
being purchased plus any withholding tax required by law as determined by
Corporation. Payment shall be made by check payable to Corporation, shares of
Common Stock of the Corporation, or such other medium of payment as the
Committee

2
<PAGE> 10

shall approve. Additionally, the Participant may choose a "dry option" whereby
the Participant receives a number of shares of Stock equal to the fair market
value of the Stock times the number of shares exercisable under the Option
divided by the value of the Option. The value of the Option is the difference
between the fair market value of the shares and the Option Price multiplied by
the number of shares exercisable under the Option. Upon the exercise of the
Option by Participant, or as soon thereafter as is practicable, Corporation
shall issue and deliver to Participant a certificate or certificates evidencing
such number of Option Shares as Participant has so elected to purchase, but in
the event Participant has not made a cash payment sufficient to cover applicable
withholding taxes, the Corporation may retain sufficient stock to liquidate and
pay such taxes. Such certificate or certificates shall be registered in the name
of Participant and shall bear any legend required by any Federal or state
securities law or agreement as Corporation shall determine.

V. Transferability of Option. The Option may not be transferred,
assigned, pledged or hypothecated (whether by operation of law or otherwise),
except that the Option may be transferred upon the death of Participant as
provided by Participant's Will or the applicable laws of descent or
distribution. The Option shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of the Option, or levy of attachment or similar process upon
the Option not specifically permitted herein shall be null and void and without
effect. Notwithstanding the provisions of this Section, Participant, at any time
prior to his death, may assign all or any portion of the Option to (i) his
spouse or lineal descendant, (ii) the trustee of a trust for the primary benefit
of his spouse and lineal descendant, (iii) a partnership of which his spouse and
lineal descendants are the only partners, or (iv) a tax exempt organization as
described in Section 501(c)(3) of the Code. Any such assignment will be
permitted only if (i) Participant does not receive any consideration therefore,
and (ii) the assignment is permitted by the Plan. Any such assignment shall be
evidenced by an appropriate written document executed by Participant, and a copy
thereof shall be delivered to Corporation prior to the effective date of the
assignment. Any permitted transferee will be entitled to all of the rights of
Participant with respect to the assigned portion of the Option, and such portion
of the Option will continue to be subject to all of the then existing terms,
conditions and restrictions applicable to the Option, as set forth herein and in
the Plan.

VI. Adjustments. In the event of the declaration of any stock dividend
on the Stock or in the event of any reorganization, merger, consolidation,
acquisition, separation, recapitalization, split-up, combination or exchange of
shares of Stock, or like adjustment, the number of shares of Stock and the class
of shares of Stock available pursuant to the Option, and the Option Price, shall
be adjusted proportionately as determined by the Committee, whose determination
shall be conclusive. Notwithstanding the foregoing, in the event of such a
reorganization, merger, consolidation, acquisition, separation,
recapitalization, split-up, combination or exchange of shares of stock, or like
adjustment which results in substantially all the shares of the Stock of
Corporation being exchanged for, or converted into cash or other property, the
Committee or Corporation shall have the right to terminate the Option as of the

3
<PAGE> 11

date of the exchange or conversion in which case the Option shall convert into
the right to receive such cash or property net of the Option Price of the
Options.

VII. Termination, Suspension or Amendment of Option. The Committee or
Corporation may at any time terminate, suspend or amend the Plan or this
Agreement.

VIII. Postponement of Exercise. The Committee or Corporation may
postpone any exercise of the Option for such time as it may deem necessary in
order to permit Corporation (i) to obtain any required approvals of the exercise
from bank or bank holding company regulators, (ii) to effect, amend or maintain
any necessary registration of the Plan or the shares of Stock issuable upon the
exercise of the Option under the Securities Act of 1933, as amended (the "Act"),
or the securities laws of any applicable jurisdiction, (iii) to permit any
action to be taken in order to (A) list such shares of Stock on a stock exchange
if shares of Stock are then listed on such exchange or (B) comply with
restrictions or regulations incident to the maintenance of a public market for
its shares of Stock, including any rules or regulations of any stock exchange on
which the shares of Stock are listed, or (iv) to determine that such shares of
Stock and the Plan are exempt from such registration or that no action of the
kind referred to in (iii)(B) above needs to be taken; and Corporation shall not
be obligated by virtue of any terms and conditions of this Agreement or any
provision of the Plan to recognize the exercise of the Option or to sell or
issue shares of Stock in violation of the Act or any state's securities laws.
Any such postponement may, upon determination of Corporation, extend the terms
of the Option but neither Corporation nor its directors or officers or the
Committee shall have any obligation or liability to Participant or to any other
person with respect to any shares of Stock as to which the Option shall lapse
because of such postponement.

IX. Participant's Rights. The granting of the Option shall impose no
obligation upon Participant to exercise such Option. Participant shall have no
equity interest in Corporation, nor shall Participant have any voting, dividend,
liquidation or dissolution rights with respect to any capital stock of
Corporation solely by reason of having the Option or having executed this
Agreement. Upon the issuance and delivery of a certificate for Option Shares
after exercise of the Option, Participant shall have the rights of a stockholder
with respect to such Option Shares and to receive all dividends or other
distributions paid or made with respect thereto. Nothing in this Agreement or
the Plan shall confer upon Participant the right to continue as an employee,
director, or officer or affect any right which Corporation may have to remove
such Participant as such.

X. Elimination of Fractional Shares. If this Agreement requires a
computation of the number of shares of Stock subject to the Option, and the
number so computed is not a whole number of shares of Stock, such number of
shares of Stock shall be rounded down to the next whole number.

XI. Incorporation of Plan by Reference. The Option is granted pursuant
to the terms of the Plan, a copy of which is attached hereto as Exhibit "B" and
the terms of which are incorporated herein by reference. The Option shall in all
respects be interpreted in accordance

4
<PAGE> 12

with the Plan. The Committee shall interpret and construe the Plan and this
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder. The
provisions of the Plan shall control in the event of any inconsistencies between
this Agreement and the Plan.

XII. Reservation of Stock. Corporation covenants that while the Option
is exercisable, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the delivery of Stock pursuant to the
exercise of this Option.

XIII. Entire Agreement. This Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties and representations between
the parties hereto with respect to the Option and the Shares. This Agreement is
an integration of any and all prior agreements or understandings, oral or
written, with respect to the Option and the Shares.

XIV. Notices. Any and all notices provided for herein shall be
sufficient if in writing, and sent by hand delivery or by certified or
registered mail (return receipt requested and first class postage prepaid), in
the case of Corporation, to its principal office, and, in the case of
Participant, to Participant's address as shown on Corporation's records.

XV. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Tennessee.

XVI. Modifications. Except as otherwise provided in Section V, VI and
VII herein, no change or modification of this Agreement shall be valid unless
the same is in writing and signed by the parties hereto.

XVII. Successors. This Agreement shall be binding on all permitted
successors and assigns of Participant including any estate, executors or
administrators, trustees, or personal or legal representatives, and, in such
event all references herein to Participant shall, to the extent applicable, be
deemed to refer to and include such estate, executors or administrators,
trustees or personal or legal representatives, as the case may be.

IN WITNESS WHEREOF, Corporation and Participant have executed this
Agreement as of the day and year first above written.

COMMUNITY FINANCIAL GROUP, INC.

By:
-------------------------------------
Title:
---------------------------------

PARTICIPANT:
---------------------------

5
<PAGE> 13

EXHIBIT A

NOTICE AND REQUEST OF EXERCISE
OF OPTION TO PURCHASE SHARES OF STOCK
OF COMMUNITY FINANCIAL GROUP, INC.

The undersigned Participant in the 1997 Nonstatutory Stock Option Plan
(the "Plan") of Community Financial Group, Inc., a Tennessee corporation
("Corporation"), does by this notice request that Corporation issue to the
undersigned that number of shares of Stock specified below (the "Shares") at the
price per Share specified below pursuant to the exercise of Participant's Option
under the Plan and the Non-Qualified Stock Option Agreement (the "Agreement")
between the undersigned and Corporation. Simultaneously herewith, the
undersigned delivers to Corporation the purchase price for the Shares [i.e.,
that amount which is obtained by multiplying the number of the Shares by the
price specified], by good check or shares of Common Stock of the Corporation, in
accordance with the Agreement. Alternatively, the Participant may, by his
selection below, choose to exercise a "dry option" as defined in the Agreement.

The undersigned hereby represents and warrants that the undersigned has
read and understands the Plan and the Agreement and the terms and conditions set
forth therein under which the Shares are acquired, shall be held and may be
disposed, and hereby ratifies and confirms such terms and conditions. The
undersigned hereby represents and warrants that the undersigned is acquiring the
Shares for the undersigned's own account (and not on behalf of any other
persons) and without any present view to making a public offering or
distribution of same and without any present intention of selling or otherwise
transferring same at any particular time or at any particular price or upon the
occurrence of any particular event or circumstances (except as set forth in the
Plan and the Agreement).

The undersigned acknowledges and understands that in connection with
the acquisition of the Shares by the undersigned:

1. Corporation has informed the undersigned if the Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"), or any
applicable state Blue Sky law or laws and whether or not the Shares may be
transferred or otherwise disposed of unless the Shares are subsequently
registered under the Act and the applicable state Blue Sky law or laws or an
exemption from such registration requirements is made available.

2. The undersigned has been informed that a legend referring to the
restrictions indicated herein on transferability and sale may be placed upon the
certificate(s) evidencing the Shares, in addition to the legend referred to in
the Agreement.

3. The undersigned has received all information requested or otherwise
deemed necessary by the undersigned to make an informed decision as to the
investment in Corporation, and has had the opportunity to ask questions of and
receive answers from officers of Corporation.

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<PAGE> 14

If the undersigned is required to file a Form 144 with the Securities
and Exchange Commission in connection with sales of the Shares pursuant to Rule
144 under the Act, the undersigned will mail a copy of such Form to Corporation
at the same time and each time the undersigned mails a copy to the Securities
and Exchange Commission.

Very truly yours,

A. Date of Grant:

------------------------
----------------------------------
Signature
B. Number of Shares covered
by Agreement:
------------
Printed Name of Participant
C. Number of Shares of
Stock which may be RESIDENCE:
purchased at this time:

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

Street
D. Number of Shares of
Stock actually to be ----------------------------------

purchased at this time: City, State, Zip Code

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

E. Option Price per Share: Dated:__________________, ________

$----------------------

F. Aggregate price to be paid
for Shares actually
purchased (D multiplied
by E): $
-----------------
G. Method of payment (Check one)
Cash
------------
Shares of Corporation
------------
Dry Option (Less shares issued)
------------

ACCEPTED:

COMMUNITY FINANCIAL GROUP, INC.

By:
-----------------------------
Its:
----------------------------

2
<PAGE> 15

EXHIBIT B

PLAN

<PAGE> 1

EXHIBIT 23.1

PEAT MARWICK LLP LOGO
1900 Nashville City Center
Nashville, TN 37219-1735

ACCOUNTANT'S CONSENT

The Board of Directors
Community Financial Group, Inc.

We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus statement.

/s/ KPMG Peat Marwick LLP

Nashville, Tennessee
March 25, 1997