SECURITIES AND EXCHANGE COMMISSION
                         Washington, D. C. 20549

                               FORM 10-K
             Annual Report Pursuant to Section 13 or 15(d) of
                   the Securities Exchange Act of 1934

              For the fiscal year ended December 31, 1996  
                       Commission file number 0-10972

                First Farmers and Merchants Corporation              
       (Exact name of registrant as specified in its charter)

   Tennessee                                           62-1148660     
(State or other jurisdiction of 
 incorporation or organization)        (I.R.S. Employer Identification No.)

  816 South Garden Street
   Columbia, Tennessee                           38402-1148
(Address of principal executive offices)				     (Zip Code)
   (615) 388-3145                                               
           
                             (615) 388-3145
            (Registrant's telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:
   	Title of each class			       Name of each exchange on which registered
           None       

                                                                
Securities registered pursuant to Section 12(g) of the Act:

                  Common Stock, par value $10.00 per share
                             (Title of Class)

	Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  	Yes   X     No      

Indicate by check mark if the disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.	  X  

The aggregate market value of the voting stock held by
non-affiliates of First Farmers and Merchants Corporation at
March 1, 1997, was none.


              APPLICABLE ONLY TO CORPORATE REGISTRANTS


	Indicate the number of shares outstanding of each of the
issuer's common stock, as of  March 1, 1997.   1,400,000  shares

                   This filing contains   62    pages.


<PAGE>


                    DOCUMENTS INCORPORATED BY REFERENCE

(1)	Proxy Statement for 1996 Annual Stockholders Meeting of
    April 15, 1997. -- Parts I and III

(2)	Annual Report to Stockholders for Year Ended December 31,
    1996. -- Parts I and II



                                               KRAFTCPAs   

                                               Kraft Bros., Esstman
                                               Patton & Harrell, PLLC
                                               Certified Public Accountants
                                               Member of BKR International


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors 
First Farmers and Merchants Corporation 
Columbia, Tennessee


            We have audited the accompanying consolidated
balance sheets of First Farmers and Merchants Corporation (the
"Corporation") and its wholly-owned subsidiary, First Farmers
and Merchants National Bank (the "Bank"), as of December 31,
1996 and 1995, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the
Corporation's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.

            We conducted our audits in accordance with generally
accepted auditing standards.  Those standards require that we
plan and perform the audit to obtain reasonable  assurance about
whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements.  An audit also  includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.


              In our opinion, the financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of First Farmers and Merchants Corporation
and Subsidiary as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows
for each of the three years  in the period ended December 31,
1996, in conformity with generally accepted accounting
principles.

                          /s/ Kraft Bros., Esstman, Patton & Harrell, PLLC
                          Kraft Bros., Esstman, Patton & Harrell, PLLC
     

Nashville, Tennessee
February 7, 1997



                                        610 N. Garden Street, Suite 200
                                        Columbia, TN 38401-3250
                                        (615) 388-3711 * FAX 242-4152
                                         Also in Nashville, Tennessee





<PAGE>


                                PART I

Item 1.  Business.

A discussion of the general development of the business is
incorporated herein by reference to Notes to Consolidated
Financial Statements which are attached to and made a part of
Annual Report to Stockholders which is attached hereto as
Exhibit 13.


<TABLE>
       FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY          
                      CONSOLIDATED BALANCE SHEETS                             
                      DECEMBER 31, 1996 and 1995                           
<CAPTION>
ASSETS 		                                           1996  		        1995  
<S>                                              <C>             <C>
Cash and due from banks         	                $ 	27,916,507	  $ 	31,281,706 
Securities 				
 Available for sale (amortized cost 
  $55,898,299 and $10,875,527 respectively)   		    56,141,535 		   11,269,006 
 Held to maturity (fair value $119,226,021 
  and $128,829,961 respectively) 		                118,541,750 		  127,662,682 
      Total securities - Note 2 		                 174,683,285		   138,931,688 
Loans, net of unearned income - Note 3 		          303,732,044		   291,930,311 
 Allowance for possible loan losses - Note 4   		   (2,926,063)		   (2,678,386) 
      Net loans 		                                 300,805,981 		  289,251,925 
Bank premises and equipment, at cost less
 allowance for depreciation and 
 amortization - Note 5   		                          6,829,475 		    6,397,936 
Other assets 		                                     15,094,426 		   11,171,993 

      TOTAL ASSETS 	                             $	525,329,674 	 $	477,035,248 

LIABILITIES 				
Deposits 				
 Noninterest-bearing 	                           $ 	75,589,511 	 $ 	67,420,536 
 Interest-bearing (including certificates 
  of deposit over $100,000: 
   1996 - $39,129,547; 1995 - $30,593,803)       		384,983,050 		  343,357,525 
       Total deposits 		                           460,572,561 		  410,778,061 
Federal funds purchased 		                           5,000,000 		   10,000,000 
Dividends payable 		                                   714,000 		      630,000 
Other short term liabilities 		                        522,928 		    1,955,000 
Accounts payable and accrued liabilities 		          4,119,059 		    4,675,712 
				
      TOTAL LIABILITIES 		                         470,928,548 		  428,038,773 
				
COMMITMENTS AND CONTINGENCIES - Notes 7 and 9 				
				
STOCKHOLDERS' EQUITY 				
Common stock - $10 par value, authorized 
 4,000,000 shares; 1,400,000 shares issued 
 and outstanding - Note 1 		                        14,000,000 		   14,000,000 
Retained earnings - Note 6 		                       40,255,185 		   34,760,389 
Net unrealized loss on available-for-sale
 securities, net of tax                              		145,941 		      236,086 
     TOTAL STOCKHOLDERS' EQUITY 		                  54,401,126 		   48,996,475 

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $	525,329,674 	 $	477,035,248 

</TABLE>

<TABLE>
                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
                     YEARS ENDED DECEMBER 31, 1996, 1995, and 1994 
<CAPTION>
                                                		 				           Net Unrealized 		
				                                                 	            	Gain (Loss) On 		
                                                   		Common       		Retained    	  	Available-for-sale 		
                                                    		Stock   	    	Earnings 	        	Securities 		           Total 
          
<S>                                              <C>            <C>                <C>                      <C>
BALANCE AT JANUARY 1, 1994 	                     $ 	7,000,000 	 $ 32,407,573 	     $     	- 	               $	39,407,573 
Cumulative effect of change in 
  accounting principle (net of
  deferred income taxes of $171,405) - Note 1 		        - 		          27,684		           229,424 		              257,108 
Two-for-one stock split - Note 1 		                 7,000,000 		  (7,000,000) 		           -		                     - 
Net income for the year 		                              - 		       5,561,426 		            - 		                5,561,426 
Cash dividends declared, $.80 per share 		              - 		      (1,120,000) 		           -		                (1,120,000) 
Net unrealized loss on available-for-sale 
  securities, net of tax		                              - 		           - 		             (277,981) 		            (277,981) 

BALANCE AT DECEMBER 31, 1994 		                    14,000,000     29,876,683		           (48,557) 		          43,828,126 
Net income for the year 		                              - 		       6,115,706 		            - 		                6,115,706 
Cash dividends declared, $.88 per share 		              - 		      (1,232,000) 		           -		                (1,232,000) 
Net unrealized gain on available-for-sale
  securities, net of tax 		                             - 		           - 		              284,643 		              284,643 

BALANCE AT DECEMBER 31, 1995 		                    14,000,000 		  34,760,389 		          236,086		            48,996,475 
Net income for the year 		                              - 		       6,866,796 		            - 		                6,866,796 
Cash dividends declared, $.98 per share 		              - 		      (1,372,000) 		           -		                (1,372,000) 
Net unrealized loss on available-for-sale
  securities, net of tax 		                             - 		           - 		              (90,145) 		             (90,145) 

BALANCE AT DECEMBER 31, 1996 	                   $	14,000,000 	 $	40,255,185 	     $   	 145,941 	          $	54,401,126 
<FN>
<F1>
The accompanying notes are an integral part of the consolidated
financial statements. 								
</FN>
</TABLE>


<PAGE>

<TABLE>
              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME                      
                  YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994        
<CAPTION>
                                      		    1996  		       1995  	   	    1994  
INTEREST INCOME 						
<S>                                   <C>            <C>            <C>
 Interest and fees on loans 	         $ 	27,343,817 	$ 	25,857,982 	$ 	21,130,914 
						
 Interest on investment securities 						
   Taxable interest 		                    6,892,118 		   6,179,492 		   7,185,169 
   Exempt from federal income tax 		      2,366,764 		   2,156,813    		2,184,666 
   Dividends 		                             256,951 		     177,790 		     204,948 
                                        		9,515,833 		   8,514,095 		   9,574,783 
   Other interest income 		                 223,019 		     121,492 		     111,841 
						
     TOTAL INTEREST INCOME 		            37,082,669 		  34,493,569   		30,817,538 

INTEREST EXPENSE  						
  Interest on deposits 		                16,617,525 		  15,247,875 		  12,770,618 
  Interest on other short term  
    borrowings 		                            94,232 		     174,370		       93,286 
						
     TOTAL INTEREST EXPENSE 		           16,711,757 		  15,422,245   		12,863,904 

     NET INTEREST INCOME 		              20,370,912 		  19,071,324		   17,953,634 
PROVISION FOR POSSIBLE LOAN 
  LOSSES - Note 4 		                      1,300,000		      670,000 		     660,000 

     NET INTEREST INCOME AFTER 						
       PROVISION FOR LOAN LOSSES 		      19,070,912		   18,401,324 		  17,293,634 

NONINTEREST  INCOME 						
  Trust department income 		              1,323,525 		   1,251,642 		   1,249,359 
  Service fees on deposit accounts 		     3,373,805 		   2,697,332	    	2,317,992 
  Other service fees, commissions, 
    and fees 		                             745,523		      300,407 		     336,758 
  Other operating income 		                 363,430 		     322,634 		     319,466 
  Available for sale securities 
    gains (losses) 		                         -		            1,182 		    (243,690) 
						
     TOTAL NONINTEREST INCOME 		          5,806,283 		   4,573,197		    3,979,885 

NONINTEREST  EXPENSES 						
  Salaries and employee benefits 		       7,030,588 		   6,620,827		    6,247,706 
  Net occupancy expense 		                1,211,067 		   1,279,434 		   1,190,678 
  Furniture and equipment expense 		      1,580,753 		   1,382,769	    	1,069,856 
  Deposit insurance 		                        6,549 		     499,709 		     890,646 
  Loss on other real estate 		                - 		          50,724 		       4,000 
  Other operating expenses 		             5,292,103 		   4,506,583    		4,105,461 
						
     TOTAL NONINTEREST EXPENSES 		       15,121,060		   14,340,046 		  13,508,347 

       INCOME BEFORE PROVISION FOR 						
         INCOME TAXES 		                  9,756,135 		   8,634,475		    7,765,172 
						
PROVISION FOR INCOME TAXES - Note 8 		    2,889,339 		   2,518,769		    2,203,746 
						
         NET INCOME  	                $  	6,866,796 	$  	6,115,706 	$  	5,561,426 

EARNINGS PER COMMON SHARE - Note 1 						
  (1,400,000 outstanding shares) 	    $ 	      4.90 	$       	4.37 	$       	3.97 
<FN>
<F2>
The accompanying notes are an integral part of the consolidated
financial statements. 						
</FN>
</TABLE>

<PAGE>

<TABLE>
                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY 
                          CONSOLIDATED STATEMENTS OF CASH FLOWS        
                      YEARS ENDED DECEMBER 31, 1996, 1995, and 1994      
<CAPTION>
                                          		1996        		1995        		1994  
OPERATING ACTIVITIES 						
<S>                                      <C>           <C>           <C>
  Net income 	                           $ 	6,866,796 	$ 	6,115,706 	$ 	5,561,426 
  Adjustments to reconcile net income
   to net cash provided by operating
   activities 						  
    Excess of provision for possible   
     loan losses over net charge offs   		    247,677 		    336,096 		    318,639 
    Provision for depreciation and   
     amortization of premises and   
     equipment 		                             685,005 		    645,816 		    589,045 
    Provision for depreciation of  
     leased equipment 		                      521,500		       - 	 	         - 
    Amortization of deposit base  
     intangibles 		                           224,212		     168,020 		    168,020 
    Amortization of investment    
     security premiums, net of   
     accretion of discounts 		                553,355 		    641,104		     678,968 
    Increase in cash surrender value
     of life insurance contracts 		          (111,685) 		   (65,936) 		   (75,287) 
    Deferred income taxes 		                 (161,999) 		  (233,403) 		  (163,907) 
   (Increase) decrease in 						  
     Interest receivable 		                  (125,119) 		  (255,109)		   (992,872) 
     Other assets 		                          307,844 		    912,162 		    344,572 
    Increase (decrease) in   						
     Interest payable 		                     (494,950) 		   577,137 		    222,605 
     Other liabilities   		                   (61,704) 	   	458,939 		    287,975 
						
       TOTAL ADJUSTMENTS 	  	               1,584,136 		  3,184,826		   1,377,758 
						
       NET CASH PROVIDED BY OPERATING
         ACTIVITIES                       		8,450,932 	  	9,300,532 		  6,939,184 

INVESTING ACTIVITIES 						
  Proceeds from maturities, calls, and
   sales of available-for-sale securities	  3,020,054 		  7,306,453  		25,152,051 
  Proceeds from maturities and calls of
   held-to-maturity securities 		          56,112,000 		 18,848,992 		  5,092,000 
  Purchases of investment securities 						
   Available-for-sale 		                  (48,222,295) 	 (3,168,200)		(16,942,994) 
   Held-to-maturity 		                    (47,364,954) 		(6,459,372)		(19,495,987) 
  Net increase in loans 		                (11,801,733)  (29,236,191)		(18,778,658) 
  Purchases of premises and equipment    		(1,116,543) 	  	(850,672)   		(418,586) 
  Purchase of equipment leased 		          (2,607,500) 		     - 	 	         - 
  Purchase of deposit base intangibles   		(1,124,258)  		    - 	      	    - 
  Purchase of single premium life 
   insurance contract                      		(785,330) 	   	  -      	 	    - 
						
       NET CASH USED BY INVESTING
        ACTIVITIES                      		(53,890,559) 	(13,558,990)		(25,392,174) 

FINANCING ACTIVITIES 						
 Net increase in noninterest-bearing
  and interest-bearing deposits 		         29,930,577 	  	5,625,638	  	16,217,348 
 Assumption of deposit liabilities
  - Note 12 		                             19,863,923 		      - 	 	         - 
 Net increase (decrease) in short
  term borrowings                        		(6,432,072)  		4,355,000 	  	7,000,000 
 Cash dividends 		                         (1,288,000) 		(1,176,000) 		(1,071,000) 
						
       NET CASH PROVIDED BY FINANCING
        ACTIVITIES                       		42,074,428   		8,804,638  		22,146,348 

       INCREASE (DECREASE) IN CASH AND
        CASH EQUIVALENTS                 		(3,365,199) 	 	4,546,180 		  3,693,358 

CASH AND CASH EQUIVALENTS AT BEGINNING
 OF YEAR 		                                31,281,706		  26,735,526 		 23,042,168 
						
CASH AND CASH EQUIVALENTS AT END OF 
 YEAR 	                                  $	27,916,507 	$	31,281,706 	$	26,735,526 
<FN>
<F3>
The accompanying notes are an integral part of the consolidated
financial statements.
</FN>
</TABLE>

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

		First Farmers and Merchants Corporation (the Corporation) was
incorporated on March 31, 1982, as a Tennessee corporation.  On 
April 13, 1982, the Board of Directors of the Corporation
adopted a resolution to execute and deliver to the Board of
Governors of the Federal Reserve System an application pursuant
to Section 3(a)(1) of the Bank Holding Company Act of 1956, as
amended, for prior approval by the Board of action to be taken
by the Corporation which would result in its becoming a bank
holding company. 

		As of December 31, 1996, the only subsidiary of the
Corporation was the Bank.  The Bank is a national banking
association which was organized in 1954 as a successor to a
state bank organized in 1909.  The Bank  conducts a full-service
commercial banking business at its principal office at 816 South
Garden Street, Columbia, Tennessee and at fourteen (14)
branches:  High Street Branch, Northside Branch, Shady Brook
Mall Branch, Hatcher Lane Branch, and Campbell Plaza Branch in
Columbia; Mt. Pleasant Branch in Mt. Pleasant; Spring Hill
Branch in Spring Hill; Lawrenceburg Branch in Lawrenceburg;
Leoma Branch in Leoma; Loretto Branch in Loretto; Lewisburg
Branch and Lewisburg West Branch in Lewisburg; Chapel Hill
Branch in Chapel Hill; and Centerville Branch in Centerville. 
The Bank provides automatic teller machine services in the
Northfield Complex at the Saturn location near Spring Hill, and
in Columbia at the Tennessee Farm Bureau, Columbia State
Community College, and Maury Regional Hospital.

		The community service area of the Bank is comprised of Maury,
Lawrence, Marshall, Hickman, and adjacent counties.  Commercial
banking in the marketing area served by the Bank is highly
competitive.  Although the Bank is ranked as the largest bank in
the area, in terms of total deposits, the Bank faces substantial
competition from fourteen (14) other banks, two (2) savings and
loan associations, and several credit unions located in the
marketing area.


Accounting Policies

		The accounting principles followed and the methods of applying
those principles conform with generally accepted accounting
principles and to general practices in the banking industry. 
The significant policies are summarized as follows.


Principles of Consolidation

		The accompanying consolidated financial statements present the
accounts of the Corporation and its wholly-owned subsidiary, the
Bank.  Material intercompany accounts and transactions have been
eliminated in consolidation.


Use of Estimates in the Preparation of Financial Statements

		The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.


Cash and Due From Banks

		Included in cash and due from banks are legally reserved
amounts which are required to be maintained on an average basis
in the form of cash and balances due from the Federal Reserve
Bank and other banks.  Average reserve requirements for the year
ended December 31, 1996, amounted to approximately $8.9 million.


Cash Equivalents

		Cash equivalents include cash on hand, cash due from banks,
and federal funds sold.  Federal funds are sold for one-day
periods.


Securities

		 Investments are classified in three categories and accounted
for as follows: 

		Debt securities that the Bank has the positive intent and
ability to hold to maturity are classified as held-to-maturity
and reported at amortized cost with premiums and discounts
recognized in interest income using the interest method over the
period to maturity.

<PAGE>

             FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities (Continued)

		Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are
classified as trading securities and reported at fair value,
with  unrealized gains and losses included in earnings.

		Debt and equity securities that may be sold prior to maturity
for asset/liability management purposes, or that may be sold in
response to changes in interest rates, changes in prepayment
risk, to increase regulatory capital or other similar factors,
are classified as available-for-sale securities and reported at
fair value, with unrealized gains and losses, net of tax, 
excluded from earnings and reported as a separate component of
stockholders' equity.  Gains and losses realized on the sale of
available-for-sale securities are determined using the specific
identification method.

		Declines in the fair value of individual available-for-sale
and held-to-maturity securities below their cost that are other
than temporary are included in earnings as realized losses.


Loans

		Loans that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off generally
are stated at their outstanding unpaid principal balances net of
any deferred fees or costs on originated loans, or unamortized
premiums or discounts on purchased loans.  A loan is considered
impaired when it is probable that an institution will be unable
to collect all amounts due (principal and interest) according to
the contractual terms of the loan agreement.  The Bank evaluates
smaller balance homogeneous loans collectively for impairment. 
Loans secured by one to four family residential properties,
consumer installment loans, and line of credit loans are
considered smaller-balance homogeneous loans.

		Interest on loans is computed daily based on the principal
amount outstanding.  Loan origination fees and related direct
costs are deferred and recognized as an adjustment of yield on
the interest method.  Interest accruals are discontinued when
loans are ninety days past-due or when a loan is considered
impaired.  All loans in non-accrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
non-accrual status is recognized only to the extent of the
excess of cash payments received over principal payments due.

		When a loan is collateral dependent, impairment is measured
based on the observable market price or the fair value of the
collateral.  For other loans, the amount of impairment is
measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. 
Positive changes in the net present value of an impaired loan
will in no event be used to increase the value of a loan above
the amount of the loan.


	Other Real Estate

		Other real estate, which is included in other assets,
represents real estate acquired through foreclosure and is
stated at the lower of fair value, net of estimated selling
costs, or cost, at the date of foreclosure.  If, at the time of
foreclosure, the fair value of the real estate is less than the
Bank's carrying value of the related loan, a write-down is
recognized through a charge to the allowance for possible loan
losses, and the fair value becomes the new cost for subsequent
accounting.  If the Bank later determines that the cost of the
property cannot be recovered through sale or use, a write-down
is recognized by a  charge to operations.  When the property is
not in a condition suitable for sale or use at the time of
foreclosure, completion and holding costs, including such items
as real estate taxes, maintenance and insurance, are capitalized
up to the estimated net realizable value of the property. 
However, when the property is in a condition for sale or use at
the time of foreclosure, or the property is already carried at
its estimated net realizable value, any subsequent holding costs
are expensed.  Legal fees and any other direct costs relating to
foreclosures are charged to operations when incurred.

		The Bank's recorded value for other real estate was
approximately $450 thousand at December 31, 1996, and $483
thousand at December 31, 1995.  


Allowance for Possible Loan Losses

	The allowance for possible loan losses is maintained at a level
believed adequate by management to absorb estimated probable
inherent loan losses.  Loan quality is monitored by Loan 


<PAGE>



            FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Possible Loan Losses (Continued)

Review, the Special Assets Committee, and the Credit
Administrator.  The amount by which a loan is determined to be
impaired is added to the allowance account in the period such
determination is made.  Recoveries on loans previously charged
off are credited to the allowance account in the period
received.  The adequacy of the allowance for possible loan
losses is evaluated quarterly in conjunction with loan review
reports and evaluations that are discussed in a meeting with
loan officers and loan administration.  The Bank's past loan
loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan
portfolio, current economic conditions, and other relevant
factors are considered in this evaluation.  This process is
inherently subjective as it requires material estimates that are
susceptible to significant change including the amounts and
timing of future cash flows expected to be received on impaired
loans.


Premises and Equipment

		Premises and equipment are stated at cost, less accumulated
depreciation and amortization.  The provision for depreciation
is computed principally on an accelerated cost recovery method
over the estimated useful lives of the assets, which range as
follows:  buildings - 15 to 50 years and equipment - 3 to 33
years.  Costs of major additions and improvements are
capitalized.  Expenditures for maintenance and repairs are
charged to operations as incurred.  Gains or losses from the
disposition of property are reflected in operations, and the
asset accounts and related allowances for depreciation are
reduced. 

		Certain other equipment purchased for lease to an outside
party under a five year operating lease is included in other
assets at cost less accumulated depreciation.  The equipment is
being depreciated on an accelerated basis over seven years.  


Trust Department Income

		Trust department income is recognized on the accrual basis in
the applicable period earned.


Stock Split

		During 1994, the Corporation amended its corporate charter to
increase the number of authorized shares of its common stock
from 2,000,000 to 4,000,000 shares and on April 12, 1994, the
Corporation's stockholders approved a two-for-one split effected
in the form of a 100% stock dividend distributed May 30, 1994,
to shareholders of record on April 12, 1994.  In accordance with
State corporate legal requirements, the transaction was recorded
by a transfer from retained earnings to common stock in the
amount of $7,000,000 ($10 for each additional share issued). 
All per share and share data in the accompanying consolidated
financial statements and footnotes have been restated to give
retroactive effect to the transaction.


Income Taxes

		The companies file a consolidated federal income tax return. 
Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income.

		Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. 
Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred
tax assets and liabilities.


Intangible Assets

	Deposit base intangibles identified in merger transactions are
amortized over 42 to 180 months on the straight-line method. 
Total amortization expense charged to operations amounted to: 
1996 - $224,212; 1995 - $168,020;  and  1994 - $168,020.



<PAGE>


           FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES 

Securities with an amortized cost of $103,540,673 and
$93,101,954 at December 31, 1996 and 1995, respectively (fair
value: 1996 - $104,061,311;  1995 - $93,937,766), were pledged
to secure deposits and for other purposes as required or
permitted by law.  The fair value is established by an
independent pricing service as of the approximate dates
indicated.  The differences between the amortized cost and fair
value reflect current interest rates and represent the potential
gain (or loss) had the portfolio been liquidated on that date. 
Security gains (or losses) are realized only in the event of
dispositions prior to maturity.  The fair values of all
securities at December 31, 1996, either equaled or exceeded the
cost of those securities, or the decline in fair value is
considered temporary.

<TABLE>
<CAPTION>
                                      Amortized                Gross Unrealized                Fair
		                                       Cost 	            	  Gain       	 	Loss 	        	    Value 

December 31, 1996 								
Available-for-sale securities 								
<S>                                <C>                    <C>             <C>              <C>
  U.S. Treasury 	                  $ 	26,412,520 	        $  	162,913 	   $ 	  63,634 	    $ 	26,511,799 
  U.S. Government agencies   		       26,850,441 		            45,866 		      318,203   		    26,578,104 
  Other securities   		                2,635,338 		           565,044 		      148,750 		       3,051,632 
                                  	$ 	55,898,299 	        $  	773,823 	   $  	530,587 	    $ 	56,141,535 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	30,504,935 	        $ 	 106,345 	   $   	22,080 	    $ 	30,589,200 
  U.S. Government agencies   		       39,679,582 	           	245,034 		       87,434		       39,837,182 
  States and political subdivisions 		47,538,074 		           700,948		       283,420 		      47,955,602 
  Other securities 		                    819,159 		            24,878 		        - 	 	            844,037 
                                  	$	118,541,750 	        $	1,077,205 	   $  	392,934 	    $	119,226,021 

December 31, 1995 								
Available-for-sale securities 								
  U.S. Treasury 	                  $  	5,064,421 	        $   	72,679    	$ 	   - 	        $  	5,137,100 
  U.S. Government agencies 		          3,279,968 		            72,268 		        2,570		        3,349,666 
  Other securities 		                  2,531,138 		           254,102 		        3,000 		       2,782,240 
	                                  $ 	10,875,527 	        $ 	 399,049 	   $ 	   5,570 	    $ 	11,269,006 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	61,426,813 	        $  	295,846 	   $ 	  59,359 	    $ 	61,663,300 
  U.S. Government agencies 		         23,498,204 		           267,237 		       48,041		       23,717,400 
  States and political subdivisions 		42,415,025 		           934,439		       241,048 		      43,108,416 
  Other securities 		                    322,640 		            18,205 		       - 		              340,845 
                                 	 $	127,662,682 	        $	1,515,727 	   $ 	 348,448 	    $	128,829,961 

<FN>
<F4>
Table I - Amortized Cost and Fair Value of Investment Securities.
</FN>
</TABLE>


<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES  (Continued)

		At December 31, 1996, the Corporation did not hold investment
securities of any single issuer, other than obligations of the
U.S. Treasury and other U.S. Government agencies, whose
aggregate book value exceeded ten percent of stockholders'
equity.

		Table II shows the amortized cost, fair value, and weighted
yields (for tax-exempt obligations on a fully taxable basis
assuming a 34% tax rate) of investment securities at December
31, 1996, by contractual maturity.  Expected maturities may
differ from contractual maturities because issuers may have the
right to call or prepay obligations.

		Proceeds from the maturity, call, or sale of
available-for-sale securities were $3,020,054, $7,306,453, and
$25,152,051 during 1996, 1995, and 1994 respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$56,112,000, $18,848,992, and $5,092,000 during 1996, 1995, and
1994 respectively.  There were no gains or losses in 1996. 
Gross gains of $1,182 and gross losses of $-0- were realized on
the dispositions in 1995.   Gross gains of $-0- and gross losses
of $243,690 were realized on the dispositions in 1994. 

<TABLE>
<CAPTION>
                            		        Amortized 	       	 Fair 		         Yield 	
                                       		Cost 		          Value 		     (Unaudited) 	

Available-for-sale securities 							
U.S. Treasury 							
<S>                                 <C>              <C>                  <C>
  Within one year 	                 $ 	16,189,997 	  $ 	16,176,499 		     5.6% 	
  After one but within five years 	    	9,171,798 		     9,274,000		      6.3% 	
  After five but within ten years 		    1,050,725 		     1,061,300      		6.4% 	
U.S. Government agencies 							
  Within one year 		                    1,000,000 		     1,021,300 		     8.0% 	
  After one but within five years 		   24,543,375 		    24,255,710      		5.9% 	
  After five but within ten years 	    	1,043,738 	     	1,038,400      		6.2% 	
  After ten years 		                      263,328 		       262,694 		     6.1% 	
  Other securities 		                   2,635,338 		     3,051,632 		     8.9% 	
	                                   $ 	55,898,299 	  $ 	56,141,535 			

Held-to-maturity securities 							
U.S. Treasury 							
  Within one year 	                 $ 	22,067,254 		 $  22,103,400 		     5.6% 	
  After one but within five years 		    5,238,326 		     5,301,900      		6.4% 	
  After five but within ten years 		    3,199,355 		     3,183,900		      6.0% 	
U.S. Government agencies 							
  Within one year 		                    4,504,421 		     4,512,100 		     6.1% 	
  After one but within five years 		   17,076,622 		    17,210,700      		6.4% 	
  After five but within ten years 		   18,098,539 		    18,114,382      		6.4% 	
States and political subdivisions 							
  Within one year 		                    3,015,087 		     3,061,625 		    10.0% 	
  After one but within five years 		   12,976,264 		    13,229,979      		8.1% 	
  After five but within ten years 		   20,837,173 		    20,940,923       	7.4% 	
  After ten years 		                   10,709,550 		    10,723,075 		     7.8% 	
Other securities 							
  After one but within five years 		      319,159 		       330,087 		     8.0% 	
  After five but within ten years 		      500,000 		       513,950 		     7.3% 	
 	                                  $	118,541,750 	  $ 119,226,021 			
<FN>
<F5>
Table II - Contractual Maturity of Investment Securities and
Weighted Tax Equivalent Yields
</FN>
</TABLE>

<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS

<TABLE>
<CAPTION>
                                                 		    1996  		                1995  	
Loans secured by real estate 					
<S>                                               <C>                    <C>
   Construction  and  land development 	          $ 	 8,751,021 	        $  	7,399,095 	
   Farmland 		                                        6,923,739 		           7,849,137 	
   Lines of credit 		                                   192,010 		             339,108 	
   1-4 family residential property - first lien 	  	116,905,803 		         111,016,393 	
   1-4 family residential property - junior lien 		   6,461,497            		7,177,285 	
   Multifamily residential property 		                2,487,453 		           3,729,687 	
   Non farm, non residential property 		             46,114,930 		          44,224,353 	
					
      Subtotal 		                                   187,836,453 		         181,735,058 	

Commercial and  industrial loans 					
   Commercial  and  industrial 		                    53,577,210 		          51,758,675 	
   Taxable municipal loans 		                           240,000 	 	            270,000 	
   All other loans 		                                   748,125 		              88,239 	
					
      Subtotal 		                                    54,565,335 		          52,116,914 	

Tax exempt municipal loans 		                           605,933 		           1,485,071 	
					
Loans to individuals 					
   Agricultural production 		                         2,894,845 		           3,659,215 	
   Lines of credit 		                                   200,903 		             135,230 	
   Individuals for personal expenditures 		          57,897,835           		53,026,209 	
					
      Subtotal 		                                    60,993,583 		          56,820,654 	

                                                  		304,001,304 		         292,157,697 	

Less: 					
   Net unamortized loan origination fees 		            (269,260) 		           (225,368)
   Unearned interest income 		                            - 		                  (2,018) 	
   Allowance for possible loan losses 		             (2,926,063)      		    (2,678,386) 	
					
	                                                 $ 300,805,981 	        $ 289,251,925 	
<FN>
<F6>
Table III - Loans Outstanding by Category at December 31, 1996
and 1995
</FN>
</TABLE>

<TABLE>
<CAPTION>
		 	 	                                         (In Thousands of Dollars) 	 	 	 	 
                            		Within 		        One to 		          After  		
                           		One Year 		     Five Years 		     Five Years 		   Total 

<S>                         <C>               <C>               <C>         <C>
Fixed rate loans 	          $ 	66,689 	       $ 	51,604 	       $ 	25,824 	 $	144,117 
Variable rate loans 		         99,680 		         32,963 		         27,241 		  159,884 

	                           $	166,369 	       $ 	84,567 	       $ 	53,065 	 $ 304,001 
<FN>
<F7>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1996
</FN>
</TABLE>




<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS (Continued)

		Loans having recorded investments of $5,136,286 at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  The total allowance for possible
loan losses related to these loans was $1,146,000.  Interest
received on these loans during 1996 was $504,840.  Impaired
loans had recorded investments of approximately  $5,856,000 at
December 31, 1995.

		Certain parties (principally directors and senior officers of
the Corporation or the Bank, including their affiliates,
families, and companies in which they hold ten percent or more
ownership) were customers of, and had loans and other
transactions with, the Bank in the ordinary course of business. 
An analysis of  activity with respect to such loans for the
years ended December 31, 1996 and 1995, is shown in Table V that
follows.

		These totals exclude loans made in the ordinary course of
business to other companies with which neither the Corporation
nor the Bank has a relationship other than the association of
one of its directors in the capacity of officer or director. 
These loan transactions were made on substantially the same
terms as those prevailing at the time for comparable loans to
other persons.  They did not involve more than the normal risk
of collectiblity or present other unfavorable features.  No
related party loans were charged off in 1996 or 1995.
<TABLE>
<CAPTION>
                                        		Balance at 							
                                        		Beginning  				               Amount 		    Balance at 	
                                        		 of Year 		   Additions   		Collected 		  End of Year 	

            1996  									
<S>                                      <C>           <C>           <C>            <C>
Aggregate of certain party loans 	       $	7,706,004 	 $ 8,454,247 	 $	7,937,989 	  $ 8,222,262 	
									
            1995  									
Aggregate of certain party loans 	       $	6,494,271 	 $ 7,020,665   $	5,808,932 	  $ 7,706,004 	

<FN>
<F8>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>

NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES

<TABLE>
<CAPTION>
      		                                       1996  		        1995  		       1994  
<S>                                        <C>             <C>            <C>
Balance at beginning of year 	             $	2,678,386 	   $ 2,342,290 	  $	2,023,651
Provision charged to operating expenses    		1,300,000 		      670,000      		660,000 
Loan losses: 						
  Loans charged off 		                      (1,388,422) 		    (555,957) 		   (422,831) 
  Recoveries on loans previously  						
    charged off 		                             336,099 		      222,053 		      81,470 

Balance at end of year 	                   $	2,926,063 	   $	2,678,386 	  $	2,342,290 
<FN>
<F9>
Table VI - Changes in the Allowance for Possible Loan Losses 
</FN>
</TABLE>


		In the opinion of management, based on conditions reasonably
known, the allowance was adequate at December 31, 1996. 
However, the allowance may be increased or decreased based on
loan growth, changes in credit quality, and changes in general
economic conditions.

		For federal income tax purposes, the allowance for possible
loan losses is maintained at the maximum allowable by the
Internal Revenue Code.



<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
		                                                    1996          		1995  	
<S>                                              <C>             <C>
Land 	                                           $ 	1,348,288 	  $ 	1,204,288 	
Premises 		                                         7,013,942 		    6,648,329 	
Furniture and equipment 		                          4,068,373 		    3,949,617 	
Leasehold improvements 		                           1,149,732 		      879,695 	
                                                 		13,580,335 		   12,681,929 	
Less allowance for depreciation and amortization 		(6,750,860)		   (6,283,993) 	
	                                                $ 	6,829,475 	  $ 	6,397,936 	
</TABLE>
	Annual provisions for depreciation and amortization of bank
premises and equipment total $685,005 for 1996, $645,816 for
1995, and $589,045 for 1994.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling $2,590,066 at December 31,
1996.                   


NOTE 6 - LIMITATION ON SUBSIDIARY DIVIDENDS

 The approval of the Comptroller of the Currency is required
before the Bank's dividends in a given year may exceed the total
of its net profit (as defined) for the year combined with
retained net profits of the preceding two years.  As of December
31, 1996, additional dividends of approximately $14,800,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for four of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2013.  In most cases,
the leases provide for one or more renewal options of five to
ten years under the same or similar terms.  In addition, various
items of teller and office equipment are leased under cancelable
and noncancelable operating leases.  Total rental expense
incurred under all operating leases, including short-term leases
with terms of less than one month, amounted to $726,337,
$660,121, and $409,764 for equipment leases, and $112,384,
$111,649, and $97,966 for building leases, in 1996, 1995, and
1994, respectively.  Future minimum lease commitments as of
December 31, 1996, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>

<S>                                    <S>    <C>
                                     		1997  	$  	784,704 
                                       1998    	 	714,848 
                        		             1999    		 383,334 
                                     		2000    		 123,758 
                                     		2001    		 123,758 

Total future minimum lease payments 			       $	2,130,402 

<FN>
<F9>
Table VIII - Future Minimum Lease Commitments
</FN>
</TABLE>


<PAGE>



                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES
<TABLE>
<CAPTION>
                                           		1996       		1995      	  1994  

<S>                                     <C>           <C>          <C>
Current: 						
  Federal 	                             $ 2,422,550 	 $	2,166,566 	$	1,831,848 
  State 		                                  628,788 		    585,606 		   503,433 
						
      Total current 		                    3,051,338 		  2,752,172 		 2,335,281 
Deferred: 						
  Federal 		                               (137,700) 		  (198,393) 		 (111,805) 
  State 		                                  (24,299) 		   (35,010) 		  (19,730) 

      Total deferred 		                    (161,999) 		  (233,403)  		(131,535) 
      Total provision for income taxes 	$	2,889,339   $	2,518,769  $ 2,203,746 
<FN>
<F10>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                           		1996  		      1995  		      1994  
<S>                                     <C>           <C>            <C>
Allowance for possible loan losses 	    $ 	 914,386   $  	815,315 	  $ 	682,877 
Write-down of other real estate 		          177,120 		    177,120 		    159,120 
Deferred compensation 		                    336,255 		    256,139 		    156,227 
Direct lease financing 		                     - 		          - 		         36,452 
Unrealized loss on AFS securities 		          - 		          -          		32,372 
Deferred loan fees 		                        26,863 		     44,051 		     24,546 

  Deferred tax asset 		                   1,454,624 		  1,292,625 		  1,091,594 

Unrealized gain on AFS securities 		        (97,294) 		  (157,392) 		     - 

  Deferred tax liability 		                 (97,294) 	  	(157,392) 		     - 

     Net deferred tax asset 	           $ 1,357,330 	 $	1,135,233	  $	1,091,594 
<FN>
<F11>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
	     	                                             1996  		      1995       		1994  
<S>                                             <C>           <C>           <C>
Tax expense at statutory rate 	                 $	3,317,086 	 $	2,935,722 	 $	2,640,158 
Increase (decrease) in taxes resulting from: 						
  Tax-exempt interest 		                           (859,383) 	  	(783,011) 		  (780,946) 
  Nondeductible interest expense 		                 101,534 		     89,491 		     75,019 
  Other nondeductible expenses 						
    (nontaxable income) - net 		                    (21,170) 		   (28,114)		     (6,458) 
  State income taxes, net of federal 						
    tax benefit 		                                  398,963 	    	363,393 	    	319,244 
  Dividend income exclusion 		                      (34,855) 		   (18,324) 		   (29,571) 
  Other 		                                          (12,836) 		   (40,388) 		   (13,700) 
Total provision for income taxes 	              $	2,889,339 	 $ 2,518,769 	 $	2,203,746 

Effective tax rate 		                                 29.6% 		      29.2% 		      28.4% 
<FN>
<F12>
Table XI - Reconciliation of Total Income Taxes Reported with
the Amount of Income Taxes Computed                   at the
Federal Statutory Rate (34% Each Year)
</FN>
</TABLE>
<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES (Continued)

		Total income taxes paid in 1996, 1995, and 1994 amounted to
$3,140,000, $2,756,442 and $2,431,332, respectively.

		A net deferred tax asset was included in other assets in the
accompanying consolidated balance sheet.  


NOTE 9 - COMMITMENTS

		The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers.  These financial
instruments include commitments to extend credit and standby
letters of credit.  Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.  The contract or notional
amounts of those instruments reflect the extent of involvement
the Bank has in those particular financial instruments.		

		The total outstanding loan commitments and stand-by letters of
credit in the normal course of business at December 31, 1996,
were $25,605,000 and $2,283,000, respectively.  Loan commitments
are agreements to lend to a customer as long as there is not a
violation of any condition established in the contract.  Standby
letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. 
Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond
financing, and similar transactions.  The credit risk involved
in issuing letters of credit is essentially the same as that
involved in making a loan.

		The loan portfolio is well diversified with loans generally
secured by tangible personal property, real property, or stock. 
The loans are expected to be repaid from cash flow or proceeds
from the sale of selected assets of the borrowers.  Collateral
requirements for the loan portfolio are based on credit
evaluation of the customer.  It is management's opinion that
there is not a concentration of credit risk in the portfolio.


NOTE 10 - SUPPLEMENTARY CASH FLOW

		 Interest paid on deposits and other borrowings during 1996,
1995, and 1994 amounted to $17,206,708, $14,845,107, and
$12,641,299, respectively.


NOTE 11 - SHAREHOLDERS'  EQUITY

		The Corporation and the Bank are subject to federal regulatory
risk-adjusted capital adequacy standards.  Failure to meet
capital adequacy requirements can initiate certain mandatory,
and possibly additional discretionary, actions by regulators
that could have a direct material effect on the consolidated
financial statements of the Corporation and its subsidiary, the
Bank.  The regulations require the Bank to meet specific capital
adequacy guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices.  The capital
classification is also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. 

		Quantitative measures established by regulation to ensure
capital adequacy require the Corporation and the Bank to
maintain minimum amounts and ratios of Total Capital and Tier I
Capital to risk-weighted assets and of Tier I Capital to average
assets.  Management believes, as of December 31, 1996 and 1995,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		As of June 30, 1996, the Bank's calculated risk-adjusted
capital ratios exceeded the minimum standard for a "well
capitalized" bank and this classification is confirmed by the
most recent notification from the Office of the Comptroller of
the Currency.  There are no conditions or events since that
notification that management believes have changed the
institution's category.  Actual capital amounts and ratios are
presented in Table XII.


<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - SHAREHOLDERS'  EQUITY (Continued)
<TABLE>
<CAPTION>
                                                                                				      To Be Well 
                                                                               				      Capitalized Under 
                                                              		For Capital 	   	      Prompt Corrective 
                                            Actual          	Adequacy Purposes 	   	    Action Provisions 
As of December 31, 1996 		            Amount    		Ratio 		  Amount  		 Ratio > or = 	 Amount 		  Ratio > or = 
<s >                                 <C>          <C>      <C>           <C>         <C>            <C>
Total Capital (to Risk Weighted
      Assets)   Consolidated 	     	 56,004,592 		18.69% 		23,972,003	 	 8.00% 		    29,965,004 	  	10.00% 
                Bank 		              55,472,014 		18.55% 		23,923,241		  8.00% 		    29,904,051 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      53,078,528 		17.71% 		11,986,300  		4.00% 		    17,979,450 		   6.00% 
                Bank 		              52,545,950 		17.57% 		11,962,652		  4.00% 		    17,943,978 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      52,066,624 		10.36% 		20,107,993		  4.00% 		    25,134,992 		   5.00% 
                Bank 		              50,574,336 		10.07% 		20,089,111		  4.00% 		    25,111,388 		   5.00% 

As of December 31, 1995 												
Total Capital (to Risk Weighted 												
      Assets)   Consolidated 		      51,162,164 		17.87% 		22,901,838 	 	8.00% 	    	28,627,297 		  10.00% 
                Bank 		              50,682,365 		17.74% 		22,855,632	  	8.00% 		    28,569,541 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      48,483,778 		16.94% 		11,450,919		  4.00% 		    17,176,378 		   6.00% 
                Bank 		              48,003,979 		16.80% 		11,429,519	  	4.00% 		    17,144,278 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      46,754,542 		10.08% 		18,549,574		  4.00% 		    23,186,967 		   5.00% 
                Bank 		              45,891,248 	 	9.91% 		18,523,208	  	4.00% 		    23,154,010 		   5.00% 

<FN>
<F13>
Table XII - Capital Amounts and Capital Adequacy
</FN>
</TABLE>


NOTE 12 - ACQUISITIONS

		On April 1, 1996, the Bank purchased certain assets and
assumed certain deposit liabilities of the Mt. Pleasant, Maury
County, Tennessee, and Lewisburg, Marshall County, Tennessee,
branches of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee.  The Office of the
Comptroller of the Currency granted approval of this
acquisition.  Deposit liabilities totaling $19.9 million were
assumed in the transaction in exchange for other assets acquired
totaling $1.6 million and cash for the balance.  The Mt.
Pleasant branch was combined with the Bank's office there and
the building was donated to the Mt. Pleasant-Maury Phosphate
Museum, a non-profit organization dedicated to preserving the
rich history of the phosphate industry in this area and actively
promoting tourism and economic development.  The Lewisburg
branch gave the Bank a second location in Lewisburg
complementing the market penetration in Marshall County.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - EMPLOYEE BENEFIT PLANS

		The Bank contributes to a defined contribution, profit-sharing
plan covering employees who meet participation requirements. 
The amount of the contribution is discretionary as determined by
the Board of Directors up to the maximum deduction allowed for
federal income tax purposes.  Contributions to the plan, that
amounted to $661,307, $633,459 and $602,010, in 1996, 1995, and
1994, respectively, are included in salaries and employee
benefits expense. 

		In 1992, the Bank formalized a nonqualified salary
continuation plan for certain key officers.  In connection with
this plan, the value of the single premium universal life
insurance policies (1996 - $620,657; 1995 - $594,221) purchased
in 1993 to fund the plan and the related liability (1996 -
$513,792; 1995 - $482,272) were included in other assets and
other liabilities, respectively.  Net non-cash income recognized
on these policies of $26,436 in 1996 and  $14,133 in 1995 is
included in the above asset values.  The principal cost of the
plan is being accrued over the anticipated remaining period of
active employment, based on the present value of the expected
retirement benefit.  Expense related to this plan was $64,024 in
1996, $106,066 in 1995, and $98,925 in 1994.

		The Bank also implemented a deferred compensation plan which
permitted directors, beginning in 1993, to defer their
director's fees and earn interest on the deferred amount.  A
liability increase and expense of $172,871 for 1996, $176,727
for 1995, and $126,262 for 1994 are recognized in the
accompanying financial statements.  In connection with this
plan, a single premium universal life insurance policy was
purchased on the life of each director who elected to
participate.  Net non-cash income recognized on these policies
of $85,249 in 1996 and $51,803 in 1995 is included in the cash
surrender values of  $1,887,171 and $1,801,922 reported in other
assets at December 31, 1996 and 1995, respectively.

		In 1996, the Bank established an officer group term
replacement/split dollar plan to provide life insurance benefits
that would continue after retirement.  A single premium
universal life insurance policy was purchased to fund the plan
and a split dollar agreement was made with an irrevocable trust
that specified the portion of the insurance proceeds that would 
become part of the trust.  An insurance premium of $795,000 was
paid in November, 1996, of which $785,330 is the cash surrender
value at December 31, 1996, and is included in other assets, and
net expense of $9,670 is included in other operating expense.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replace- ment/split dollar plan.  These
policies have an aggregate face amount of $2,875,000.



<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
 	                                      December 31, 1996 		       December 31, 1995 
                                      	Amortized    		Fair 	     	Amortized 		   Fair 
                                         	Cost 		     Value 		       Cost 		     Value 
                                                    (Dollars in Thousands)
Financial assets 					 			
<S>                                   <C>          <C>            <C>          <C>
  Cash and cash equivalents 	         $ 	27,917 	  $ 	27,917 	    $ 	31,282	   $ 	31,282 
  Securities held to maturity 		        118,542 		   119,226 		     127,663		    128,830 
  Securities available for sale 		       55,898 		    56,142 		      10,876		     11,269 
  Loans, net 		                         300,806 		   309,401 		     289,252 		   298,076 
  Accrued interest receivable 		          5,549 		     5,549 		       5,424		      5,424 

Financial liabilities 								
  Deposits 		                           460,573 		   449,129 		     410,778 		   398,296 
  Federal funds purchased 		              5,000 		     5,000 		      10,000 		    10,000 
  Short term borrowings 		                  523 		       523 		       1,955 		     1,955 
  Accrued interest payable 		             2,539 		     2,539 		       3,034 		     3,034 

<FN>
<F14>
Table XIII - Summary of Fair Values of Financial Instruments
</FN>
</TABLE>

		Estimated fair values have been determined by the Bank using
the best available data.  Many of the Bank's financial
instruments, however, lack an available trading market as
characterized by a willing buyer and willing seller engaging in
an unforced, unforeclosed transaction.  Therefore, significant
estimations and present value calculations were used by the Bank
for the purposes of this disclosure.  Changes in assumptions or
the estimation methodologies used may have a material effect on
the estimated fair values included in this note.

		Financial assets - Cash and cash equivalents are considered to
be carried at their fair value and have not been valued
differently than has been customary with historical cost
accounting.  Securities available-for-sale and securities
held-to-maturity are valued by an independent rating service and
are disclosed in detail in Note 2 above.  A present value
discounted cash flow methodology was used to value the net loan
portfolio.  The discount rate used in these calculations was the
current rate at which new loans in the same classification for
regulatory reporting purposes would be made.  This rate was
adjusted for credit loss and assumed prepayment risk.   For
loans with floating interest rates it is presumed that estimated
fair values generally approximate the recorded book balances.

		Financial liabilities - Deposits with stated maturities have
been valued using a present value discounted cash flow with a
discount rate approximating the current market for similar
liabilities.  Financial instrument liabilities with no stated
maturities have an  estimated fair value equal to both the
amount payable on demand and the recorded book balance.  For
deposits with floating interest rates it is presumed that
estimated fair values generally approximate the recorded book
balances.  The carrying amounts of federal funds purchased and
other short term borrowings are considered to approximate their
fair values.

		  The Bank's remaining assets and liabilities which are not
considered financial instruments have not been valued
differently than has been customary with historical cost
accounting.  Management is concerned that reasonable
comparability between financial institutions may be distorted
due to the wide range of permitted valuation techniques and
numerous estimates which must be made given the absence of
active secondary markets for many of the financial instruments. 
This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values. 

		At December 31, 1996, the Bank had outstanding standby letters
of credit and commitments to extend credit.  These
off-balance-sheet financial instruments are generally
exercisable at the market rate prevailing at the date the
underlying transaction will be completed and, therefore, are
deemed to have no current fair value.  Please refer to Note 9.  
 





<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                                		First 		      Second 		     Third 	     	Fourth 		
                               		Quarter 	     	Quarter   	 	Quarter 	 	   Quarter 		       Total 
     1996  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	9,052,224 	   $	9,280,303 	 $	9,249,133  	$	9,501,009 	 $37,082,669 
Interest expense 		             3,989,386 		    4,153,059 		  4,260,324 		  4,308,988		  16,711,757 
										
Net interest income 		          5,062,838 		    5,127,244 		  4,988,809		   5,192,021 		 20,370,912 
Provision for possible loan   										
  losses 		                       250,000 		      300,000 		    200,000 		    550,000 		  1,300,000 
Noninterest expenses, net of 										
  noninterest income 		         2,327,604 		    2,234,505 		  2,335,349		   2,417,319 		  9,314,777 
										
Income before income taxes 		   2,485,234 		    2,592,739 		  2,453,460		   2,224,702 		  9,756,135 
Income taxes 		                   777,319 		      776,659 	    	694,636 		    640,725 	  	2,889,339 

Net income 	                  $ 1,707,915 	   $	1,816,080 	 $	1,758,824 	 $	1,583,977 	 $	6,866,796 

Earnings per common share 										
    (1,400,000 shares) 	      $ 	    1.22 	   $  	   1.30   $ 	    1.25 	 $ 	    1.13	  $ 	    4.90  
</TABLE>
<TABLE>
<CAPTION>
                                  	First 		     Second 		     Third 	     Fourth 		
                               		Quarter 		     Quarter 		   Quarter 		   Quarter 		       Total 
     1995  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	8,244,228 	   $ 8,640,769 	 $	8,720,212   $	8,888,360 	 $34,493,569 
Interest expense 		             3,654,485 		    3,856,594 		  3,938,600 		  3,972,566		  15,422,245 
										
Net interest income 		          4,589,743 		    4,784,175 		  4,781,612		   4,915,794 		 19,071,324 
Provision for possible loan  										
  losses 		                       145,000 		      140,000 		    180,000 		    205,000 		    670,000 
Noninterest expenses, net of 										
  noninterest income 		         2,492,505 		    2,547,595 		  2,430,466		   2,296,283 		  9,766,849 
										
Income before income taxes 		   1,952,238 		    2,096,580 		  2,171,146		   2,414,511 		  8,634,475 
Income taxes 		                   512,448 		      589,977 		    680,609 		    735,735 		  2,518,769 

Net income 	                  $ 1,439,790 	   $	1,506,603 	 $	1,490,537 	 $	1,678,776 	 $	6,115,706 

Earnings per common share 										
  (1,400,000 shares) 	        $ 	    1.03 	   $  	   1.08 	 $ 	    1.06 	 $ 	    1.20 	 $ 	    4.37 

<FN>
<F15>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


NOTE 16 - DEPOSITS

		The Bank does not have any foreign offices and all deposits
are serviced in its fifteen domestic offices.  The average
amounts of deposits and the average rates paid are summarized in
Table XV.  Maturities  of  time deposits of $100,000 or more at
December 31 are indicated in Table XVI.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - DEPOSITS  (Continued)

<TABLE>
<CAPTION>
                                            	1996  	 	             1995  	 	          1994  
                                                 (Dollars in Thousands) 					
<S>                                  <C>          <C>     <C>          <C>    <C>           <C>
Demand deposits 	                    $ 	61,509 		  - 	% 	 $ 	56,730 		  - 	% 	$ 	55,557 	   	- 	% 
NOW and money market accounts 		       158,450 		 3.37 			  149,016 		 3.51			  161,244 	   3.25 	 
Savings deposits 		                     37,421 		 3.22 			   34,629 		 3.00  			 35,036 		  2.87 	 
Time deposits of less than $100,000 		 151,952 		 5.40  			 136,568		  5.30  			126,523 	 	 4.27 	 
Time deposits of $100,000 or more 		    34,539 		 5.41 			   32,524		  5.35 			  26,053 	 	 4.32 	 
													 	 	 
Total In Domestic Offices 	          $	443,871 		 3.74% 	 $	409,467		  3.72% 	$	404,413 	 	 3.66% 

<FN>
<F16>
Table XV - Average Amounts of Deposits and Average Rates Paid by
Deposit Type at December 31
</FN>
</TABLE>
<TABLE>
	                                     1996       		1995  		     1994  
                           							       (Dollars In Thousands)
<S>                                <C>          <C>          <C>
Under 3 months 	                   $	11,680 	   $ 	7,877 	   $ 	3,117 
3 to 12 months 		                    22,638 		    18,407 		    18,250 
Over 12 months 		                     4,812 		     4,310 		     4,803 
						
	                                  $	39,130 	   $	30,594 	   $	26,170 
<FN>
<F17>
Table XVI - Maturities of Time Deposits of $100,00 or More at
December 31
</FN>
</TABLE>


NOTE 17- CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
<CAPTION>
                             December 31, 1996 and 1995                                      
                             (In Thousands of Dollars)                                       
             Assets 		                                    1996  		  1995  
<S>                                                     <C>        <C>     
Cash 	                                                  $  	 142 	 $    	70 
Investment in bank subsidiary - at equity        		       53,870 	   48,517 
Investment in credit life insurance company - at cost       		50 	      	50 
Investment in other securities 		                             22 	       22 
Dividends receivable from bank subsidiary 		                 714 	      630 
Cash surrender value - life insurance 		                     489 		     466 
Other assets 		                                                1 		       1 
				
      Total assets 	                                    $	55,288 	 $	49,756 

       Liabilities and Stockholders' Equity 				
Liabilities 				
  Payable to directors 	                                $ 	  173 	 $ 	  129 
  Dividends payable 		                                       714 		     630 

      Total liabilities 		                                   887 		     759 
Stockholders' equity 				
  Common stock - $10 par value, authorized 4,000,000 				
    shares; 1,400,000 shares issued and outstanding 		    14,000		   14,000 
  Retained earnings 		                                    40,255 		  34,761 
  Net unrealized gain (loss) on available-for-sale  				
    securities, net of tax 		                                146 		     236 
      Total stockholders' equity 	                       	54,401 		  48,997 
				
      Total liabilities and stockholders' equity 	      $	55,288 	 $	49,756 
<FN>
<F18>
Table XVII - Condensed Balance Sheets of Parent
</FN>
</TABLE>


<PAGE>

                   FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION (Continued)

<TABLE>
<CAPTION>
          
                      Years Ended December 31, 1996 and 1995       
                            (In Thousands of Dollars)              

                                               		1996  	      	1995  
Operating income 				
<S>                                            <C>           <C>
  Dividends from bank subsidiary 	             $	1,372 	     $	1,232 
  Other dividend income 		                          85 		         22 
  Interest income 		                                 6 		          2 
  Other 		                                          28 		         27 

Operating expenses 		                               68 		         87 
				
    Income before equity in undistributed net 				
      income of bank subsidiary 		               1,423 		      1,196 

Equity in undistributed net income of bank
  subsidiary 		                                  5,444		       4,920 

    Net Income 	                               $	6,867 	     $	6,116 
<FN>
<F19>
Table XVIII - Condensed Statements of Income of Parent
</FN>
</TABLE>


<TABLE>
<CAPTION>
                         Years Ended December 31, 1996 and 1995         
                               (In Thousands of Dollars)          
              
                                                   	     	 1996  	      	1995  
Operating activities 	  			
<S>                                                      <C>           <C>
  Net income for the year  	                             $	6,867 	     $	6,116 
  Adjustments to reconcile net income to net cash 				
    provided by operating activities 				
  Equity in undistributed net income of bank 
    subsidiary                                          		(5,444) 		    (4,920) 
  Increase in other assets   		                             (111) 		       (69) 
  Increase in payables 		                                     44 	         	54 
				
     Total adjustments                                    (5,511)       (4,935)

  Net cash provided by operating activities 		             1,356		       1,181 
				
Net cash provided by (used in) investing activities 				
    Purchases of investment securities 	     	              (133) 		        - 
    Proceeds from maturities of investment securities 		     137 		         - 
     Net cash provided by (used in) investing activities		     4 		         - 

Net cash used in financing activities 				
  Cash dividends paid 		                                  (1,288) 		    (1,176) 
				
    Increase (decrease) in cash 		                            72 		          5 
				
Cash at beginning of year 		                                  70 		         65 

Cash at end of year 	                                    $  	142 	     $   	70 
<FN>
<F20>
Table XIX - Condensed Statements of Cash Flows of Parent
</FN>
</TABLE>





              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS 

GENERAL

	First Farmers and Merchants Corporation, a one-bank holding
company, was formed during 1982.  Its only subsidiary, First
Farmers and Merchants National Bank, is a community bank that
was established in 1909.  The resulting financial condition of
the Corporation should be evaluated in terms of the Bank's
operations within its service area.

	During 1996, First Farmers and Merchants National Bank
strengthened its presence in the four counties in middle
Tennessee that it serves.  Deposits and loans in each of the
four counties increased.  Internal growth was the challenge for
the year to all directors, officers, and employees who were
reminded that the bank was large enough to perform yet small
enough to care about customer needs.  The Bank is positioned to
provide quality services in diverse markets and a dynamic
interest rate environment.  Our customers are enjoying the
quality service of a community bank and the safety and strength
of a regional bank.

	These tables plus the following discussion and financial
information is presented to aid in understanding First Farmers
and Merchants' current financial position and results of
operations.  The emphasis of this discussion will be on the
years 1996, 1995, and 1994; however, financial information for
prior years will also be presented when appropriate.  This
discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes to Consolidated Financial
Statements included elsewhere in this material.


FINANCIAL CONDITION 

	First Farmers and Merchants National Bank's financial condition
depends on the quality and nature of its assets, its liability
and capital structure, the market and economic conditions, and
the quality of its personnel.  The following paragraphs provide
a unique perspective on the internal structures of the
Corporation and the Bank that provide the strength in our
organization.


Summary

	The Bank reported net income of $6.9 million for 1996 compared
to $6.1 million in 1995 and $5.6 million in 1994.  On a per
common share basis, net income was $4.90 for 1996 versus $4.37
for 1995 and $3.97 for 1994.  The improvement in 1996's earnings
resulted from a wider gross margin, an increase in noninterest
income sufficient to cover a smaller increase in noninterest
expenses, and the increase in taxes.  The smaller increase in
noninterest expenses is due in part to the significant decrease
in deposit insurance.  These improve- ments were partially
offset by higher additions to the allowance for loan losses.

	The return on average equity for 1996 was 13.23% compared to
13.08% for 1995 and 13.30% for 1994.   The return on average
assets was 1.37% for 1996 versus 1.32% for 1995 and 1.23% for
1994.


Gross Interest Margin

	The gross interest margin is defined as the difference between
the revenue from earning assets, primarily interest income, and
interest expense related to interest-bearing liabilities.  The
maintenance of the gross interest margin at a level which, when
coupled with noninterest revenues, is sufficient to cover
additions to the allowance for loan losses, noninterest expenses
and income taxes, and yield an acceptable profit is critical for
success in the banking industry.  The gross interest margin is a
function of the average balances of earning assets and
interest-bearing liabilities and the yields earned and rates
paid on those balances. 

	Management activities are planned to maintain a satisfactory
spread between the yields on earning assets and the related cost
of interest-bearing funds.  The gross interest spread is
determined by comparing the taxable equivalent gross interest
margin to average earning assets before deducting the allowance
for loan losses.  This ratio reflects the overall profitability
of earning assets, including both those funded by
interest-bearing sources and those which incur no interest cost
(primarily noninterest-bearing demand deposits).  This ratio is
most often used when analyzing a banking institution's overall
gross margin profitability compared to that of other financial
institutions.  The incremental interest spread compares the
difference between the yields on earning assets and the cost of
interest-bearing funds.  This calculation and similar ratios are
used to assist in pricing decisions for interest related
products. 

	Table A entitled DISTRIBUTION OF ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY, INTEREST RATES AND INTEREST DIFFERENTIAL
presents for each of the last three years by major categories of
assets and liabilities, the average daily balances, the
components of the gross interest margin (on a taxable equivalent
basis), the yield or  rate, and the incremental and gross
interest spread.  

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

TABLE A - Distribution of Assets, Liabilities, and Stockholders'
Equity, Interest Rates 			and Interest Differential

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31, 
                              	            1996        		              1995  		                     1994  
                              	  Average  	Rate/ 	          		Average  Rate/ 				         Average 		Rate/ 		
                              	  Balance 	 Yield   Interest 		Balance 	Yield 		Interest   Balance 	 Yield 		 Interest 
ASSETS 	                                                    (Dollars In Thousands) 
Interest earning assets 																								
<S>                             <C>         <C>    <C>        <C>       <C>    <C>        <C>        <C>    <C>
 Loans, net 	                   $290,413 		 9.43% 	$	27,373* 	$276,166 	9.38% 	$	25,892* 	$247,791 		8.54% 	$	21,156* 
 Bank time deposits 		                 1 		   - 			     - 			        2    -			      - 			      - 		    - 			     - 	
 Taxable securities 		           118,030 		 6.15 			  7,256 			104,220		6.20 			  6,457 			119,960 		6.25 			  7,497 	
 Tax exempt securities 		         44,158 		 7.10 			  3,134*  		39,139 	8.06  		  3,156* 		 38,545 		8.49 			  3,274* 
 Federal funds sold 		             4,198  		5.31     			223 		  	2,076		5.83 			    121 			  2,998 		3.73 			    112 	
																								
 TOTAL EARNING ASSETS 		         456,800 		 8.32 		$	37,986			 421,603		8.45 		$	35,626 			409,294 		7.83 		$	32,039 	
Noninterest earning assets 																								
 Cash and due from banks 		       25,760 								               24,829								              25,945 						
 Bank premises and equipment 	  	  6,708 								                6,246								               6,350 						
 Other assets 		                  13,432 							 	              11,061 								             10,364

 TOTAL ASSETS 	                 $502,700 							              $463,739 					 		           $451,953 						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY 																								
Interest bearing liabilities 																								
 Time and savings deposits: 																								
 NOW and money market accounts	$158,438 	   3.37% 	$ 	5,338 		$148,993  3.51% 	$ 	5,223 		$161,244 		3.25%	 $ 	5,239 	
 Savings 		                      37,428 		  3.22 			  1,204 	 		34,627  3.00 			  1,040			  35,036 		2.87 			  1,006 	
 Time  		                       151,973		   5.40 		  	8,210 			136,605  5.30 			  7,245			 126,523 		4.27 			  5,400 	
 Time over $100,000 		           34,554 		  5.40 	  		1,866 	 		32,522		5.35 			  1,740 			 26,053 		4.32 			  1,126 	
																								
 TOTAL INTEREST BEARING 
  DEPOSITS 		                   382,393 		  4.35			  16,618 			352,747 	4.32 			 15,248 		 348,856 		3.66			  12,771 	
 Federal funds purchased 		       1,043 		  5.56 			     58 			  2,415		5.92 			    143 			  1,462 		4.86 			     71 	
 Other short-term debt 		           622 		  5.79      			36 	    		565 	5.49			      31 			    568 		3.92 			     22 	
																								
 TOTAL INTEREST BEARING 
  LIABILITIES 		                384,058 		  4.35 		$	16,712 			355,727 	4.34 		$ 15,422 			350,886 		3.67 		$	12,864 	
Noninterest bearing liabilities 																								
 Demand deposits 		              61,509 								                56,742 								             55,557
 Other liabilities 		             5,066 								                 4,515 								              3,690						

 TOTAL LIABILITIES 		           450,633 								               416,984								             410,133 						
Stockholders' equity 		          52,067 								                46,755 								             41,820
						
 TOTAL LIABILITIES AND 																								
  STOCKHOLDER'S EQUITY 	       $502,700 							               $463,739 							            $451,953 						

 Spread between combined 
   rates earned and combined 
    rates paid* 				                        3.97% 	               						4.11%							                 4.16% 			

 Net yield on interest-
  earning assets* 				                      4.66% 							               4.79% 							                4.68% 			
<FN>
<F21>
* Taxable equivalent basis
</FN>
</TABLE>

Notes:
1.	U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.
2.	The taxable equivalent adjustment has been computed based on
a 34% federal income tax rate and has given effect to the
disallowance of interest expense, for federal income tax
purposes, related to certain tax-free assets.  Loans include
nonaccrual loans for all years presented.
3.	The average balances of the fair values of available-for-sale
securities were used in the calculations in this table.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 

TABLE B - Distribution of Assets, Liabilities, and Stockholders'
          Equity, Interest Rates and Interest Differential     (Continued)

	Table B sets forth, for the periods indicated, a summary of
changes in interest earned and interest paid separated into the
amount generated by volume changes and the amount generated by
changes in the yield or rate. 

<TABLE>
<CAPTION>
                                             	  1996 Compared to 1995          	 	1995 Compared to 1994
Volume and Yield/Rate Variances 				                  Yield/ 		Net Increase       				  Yield/ 		 Net Increase 
(Taxable Equivalent Basis - In Thousands) 	 	Volume 		Rate   		(Decrease) 		   Volume 		Rate 		   (Decrease) 
Revenue earned on 												
<S>                                         <C>       <C>       <C>           <C>       <C>        <C>
  Net loans 	                               $ 1,336 	 $  	145 	 $	1,481 	     $	2,423 	 $	2,313 	  $	4,736 
  Investment securities 												
    Taxable securities 		                       856 		    (57) 		   799 		       (984) 		   (56)		  (1,040) 
    Tax-free securities 		                      405 		   (427) 		   (22) 		        50 		   (168)		    (118) 
  Federal funds sold 		                         124 		    (22) 		   102 		        (34) 		    43 		       9 

     Total interest earning assets 		         2,721 		   (361)		  2,360 		      1,455 		  2,132 		   3,587 
Interest paid on 												
  NOW and money market accounts 		              331 		   (216) 		   115 		       (398)		    382 		     (16) 
  Savings deposits 		                            84 		     80 		    164 		        (12) 		    46 		      34 
  Time deposits 		                              815 		    150 		    965 		        430 		  1,415 		   1,845 
  Time over $100,000    		                      109 		     17 		    126 		        279 		    335 		     614 
  Federal funds purchased 		                    (81) 		    (4) 		   (85) 		        46 		     26 		      72 
  Short term debt 		                              3 		      2 		      5 		        - 		        9 		       9 
												
      Total interest-bearing funds 		         1,261 		     29 		  1,290		         345 		  2,213 		   2,558 
												
Net interest earnings 	                     $	1,460 	 $ 	(390) 	$	1,070 	     $	1,110 	 $  	(81)   $	1,029 
</TABLE>
Notes:

1.	The change in interest resulting from both volume and
yield/rate has been allocated to change due to volume and change
due to yield/rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
2.	The computation of the taxable equivalent adjustment has
given effect to the disallowance of interest expense, for
federal income tax purposes, related to certain tax-free assets.
3. U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.





<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 


		Two graphs are included at this point in the material mailed to our stock-
holders.  The first graph illustrates the categories of average earning
assets and the portion each category is of the total for the
last three years.  The following table is the data illustrated
by this graph.
<TABLE>
<CAPTION>
					                 Loans        	Investment Securities	    Other
   <S>              <C>                   <C>                <C>
			1996	           	$290,413	             $162,188           $4,199
			1995		            276,166	 	            143,358 	          2,078
			1994		            247,791	 	            158,505	           2,998

</TABLE>

The second graph illustrates the average balances by category of
liabilities that fund earning assets.  The following table is
the data illustrated by this graph in thousands of dollars.

<TABLE>
<CAPTION>
		         Interest-Bearing Deposits		   Noninterest-Bearing Deposits	   Other
 <S>               <C>                           <C>                    <C>
	1996		            $382,393			                   $61,509			             $1,043
	1995		             352,747				                   56,742			              2,415
	1994		             348,856				                   55,557			              1,462
</TABLE>


		Average earning assets increased 8.4% in 1996 compared to an
3.0% increase in 1995 and a 7.6% increase in 1994.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1996, average net loans represented 
63.6% of  average earning assets.  Total average net loans
increased during the last three years showing an 5.2% growth
from 1995 to 1996, an 11.5% growth from 1994 to 1995, and a 6.1%
growth from 1993 to 1994.  Average investments represented 36.4%
of average earning assets at December 31, 1996, and increased
14.5% in 1996.  The Bank purchased certain assets and assumed
certain deposit liabilities of the Mt. Pleasant, Maury County,
Tennessee, and Lewisburg, Marshall County, Tennessee, branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  The assets purchased were buildings and equipment and not
earning assets.  Most of the increase in investments can be
attributed to the assumption of  those deposit liabilities that
were not used for the increasing loan growth.  Investments 
decreased 9.6% in 1995, and increased 11.6% in 1994.  Average
total assets increased during the last three years as evidenced
by an 8.4% growth from 1995 to 1996, a 2.6% growth from 1994 to
1995, and a 7.4% growth from 1993 to 1994.  Please refer to the
color graphs at the end of this document that illustrate this
growth.

	The bank's average deposits grew during the last three years
reflecting an 8.4% growth from 1995 to 1996, a 1.3% growth from
1994 to 1995, and a 6.8% growth from 1993 to 1994. 
Approximately half of the increase in average deposits can be
attributed to the acquisition discussed earlier in this section.
 Short and medium term rates were more competitive compared to
longer term rates during the first half of 1996 and some
depositors moved money back into interest-bearing transaction
accounts, which increased 6.3% during 1996 but had declined in
1995 as investors took advantage of higher certificate of
deposit rates.  Over half of the increase during 1996 was
attributable to the acquisition.  Average interest-bearing
checking accounts decreased 7.6 % in 1995 compared to a  9.5%
increase in 1994.  Average savings deposits increased 8.1%
during 1996, over 54% from the acquisition.  Savings deposits
have been strong historically providing a core, low cost, source
of funding.  Average savings deposits declined 1.2% in 1995
compared to a 12.2% increase in 1994.  Average certificates of
deposit under $100,000 increased 11.3% during 1996, 60.0% from
the acquisition, increased 8.0% in 1995, and declined 1.2.%  in
1994.  Certificates of deposit over $100,000 increased 6.3% in
1996, 87.8% from the acquisition,  compared to a 24.8% increase
in 1995 and a 10.4% increase in 1994.  



<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND RESULTS OF OPERATIONS 


LIQUIDITY AND INTEREST  RATE  SENSITIVITY

	The Bank maintains a formal asset and liability management
process to control interest rate risk and assist management in
maintaining reasonable stability in the gross interest margin as
a result of changes in the level of interest rates and/or the
spread relationships among interest rates.  The Bank uses an
earnings simulation model to evaluate the impact of different
interest rate scenarios on the gross margin.  Each month, the
Asset/Liability Committee monitors the relationship of rate
sensitive earning assets to rate sensitive interest bearing
liabilities (interest rate sensitivity) which is the principal
factor in determining the effect that fluctuating interest rates
will have on future net interest income.  Rate sensitive earning
assets and interest bearing liabilities are those which can be
repriced to current market rates within a defined time period. 

	Another tool used to monitor the Bank's overall interest rate
sensitivity is a gap analysis.  Table C, Rate Sensitivity of
Earning Assets and Interest-Bearing Liabilities, shows the
Bank's rate sensitive position at December 31, 1996, as measured
by gap analysis (the difference between the earning asset and
interest-bearing liability amounts scheduled to be repriced to
current market rates in subsequent periods).

	As a policy, budgeted financial goals are monitored on a
monthly basis by the Asset/Liability Committee where the actual
dollar change in net interest income given different interest
rate movements is reviewed.  A negative dollar change in net
interest income for a twelve month period of less than 3% of net
interest income given a three hundred basis point shift in
interest rates is considered an acceptable rate risk position. 
The net interest margin, on a tax equivalent basis, at December
31, 1996,  1995, and 1994 was 4.66%, 4.79%,  and 4.68%
respectively.

<TABLE>

TABLE C - Rate Sensitivity of Earning Assets and Interest-Bearing Liabilities
          (Dollars in Thousands) 
<CAPTION>
  		                                       3 Months 		 3-6 	    	6-12   		Over 1 		
As of December 31, 1996 		                 or Less 		 Months 		 Months 	 	Year		       Total 
Earning assets 										
<S>                                      <C>        <C>        <C>        <C>        <C>
  Loans and leases, net of unearned     	$ 	58,045 	$ 	42,594 	$ 	65,730 	$	137,632 	$	304,001 
  Taxable investment securities 		          13,855 	  	10,000 	  	13,500	  	 90,061 		 127,416 
  Tax-exempt investment securities 		        1,000 		   1,100 		     900		   44,271 		  47,271 
										
     Total earning assets 		                72,900 	  	53,694 		  80,130 		 271,964 	$	478,688 

Interest-bearing liabilities 										
  NOW and money market accounts 		          45,590 		     - 		    64,588		   43,136 	$ 153,314 
  Savings 		                                   - 	 	      - 		    41,594 		     - 	 	   41,594 
  Time 		                                   41,547 		  33,805 		  50,657 		  25,077 		 151,086 
  Time over $100,000 		                     11,680 		   9,813 		  12,825 		   4,812		   39,130 
  Other short-term debt 		                   5,523 		     - 	 	      - 	 	      - 		     5,523 
										
Total interest bearing liabilities 		      104,340 		  43,618 		 169,664		   73,025 	$	390,647 

Noninterest-bearing, net                                 								(88,041) 		

Net asset/liability funding gap 		         (31,440) 		 10,076 		 (89,534)		 110,898 		

Cumulative net asset/liability 
 funding gap 	                           $ (31,440) $	(21,364) $(110,898) 	$ 	  - 	 	 
<FN>
<F22>
Available-for-sale and held-to-maturity securities were combined
in the taxable investment securities category for purposes of
this table.
</FN>
</TABLE>




<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                AND RESULTS OF OPERATIONS 


LOANS AND LOAN QUALITY

	As with most commercial banking institutions, the loan
portfolio is the largest component of earning assets and
consequently provides the highest amount of revenues.  The loan
portfolio also contains, as a result of credit quality, the
highest exposure to risk.  When analyzing potential loans,
management assesses both interest rate objectives and credit
quality objectives in determining whether to make a given loan
and the appropriate pricing for that loan.  The Bank maintains a
diversified portfolio in order to spread its risk and reduce its
exposure to economic downturns which may occur in different
segments of the economy or in particular industries.    The
composition of the loan portfolio is disclosed in detail in Note
3 in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the
accompanying financial statements.

	The Bank follows written loan policies which include loan
review procedures and approvals.  Depending primarily on the
amount of the loan, there are various approval levels including
an Executive Committee of the Board of Directors that meets
weekly.

	The Bank has a Loan Review Department which performs ongoing,
independent reviews of specific loans for credit quality and
proper documentation.  This department is centralized and
independent of the lending function.  Regular reports are made
to senior management and the Executive Committee of the Board of
Directors regarding the credit quality of the loan portfolio, as
well as trends.  Every loan is assigned a risk rating by the
loan officer subject to review by Loan Review.  The Bank also
has a Credit Administrator who is responsible for assisting loan
officers in structuring new loans, reviewing problem loans,
monitoring their status from period to period, and assisting in
their resolution.  This analysis and review also includes a
formal review that is prepared quarterly to assess the risk in
the loan portfolio and to determine the adequacy of the
allowance for loans losses.  This review supported management's
assertion that the allowance was adequate at December 31, 1996.  

	Table D, RISK ELEMENTS IN THE LOAN PORTFOLIO, includes all
loans management considers to be potential problem loans,
summarizes average loan balances, and reconciles the allowance
for loan losses for each year.  Additions to the allowance,
which have been charged to operating expenses, are also
disclosed.  Management does not believe that there is a
concentration of loans to a multiple number of borrowers engaged
in similar activities. 

	Loans having recorded investments of $5.1 million at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent 1.7% of gross loans.
 Commercial loans comprised $.384 million of the total, with
loans secured by real estate accounting for $3.6 million, and
installment loans $1.1 million.  The gross interest income that
would have been recorded during 1996 if the loans had been
current in accordance with their original terms and had been
outstanding throughout the period or since origination, if held
for part of the period, was $374, $365, and $193 thousand for
the years ended December 31, 1996, 1995, and 1994 respectively. 
Please refer to Note 1 and Note 3 in the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS that are included elsewhere in this
material for more information on the Bank's policy regarding
loan impairment.

	A graph on the bottom of this page is included in the materials
sent to the stockholders that illustrates the increase in
average net loans and the ratio of net loan charge offs to
average loans for the last eight years.  The ratio at December
31, 1996 was .36%.  This ratio, although higher than 1994 and
1995 ratios, is well below industry levels.   The following
table is the data illustrated by this graph.

<TABLE>
<CAPTION>
				                                   Avg Loans       	Ratio  Net
                                  				Outstanding	       CO/Avg Ln
                      <S>              <C>                <C>
                    		1989		           $163,003	          0.0032%
                    		1990		            172,749	          0.0030
                    		1991		            182,561	          0.0037
                    		1992		            215,158	          0.0023
                    		1993		            233,608	          0.0030
                    		1994		            247,791          	0.0014
                    		1995		            276,166	          0.0012
                   			1996		            290,413	          0.0036


<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO


</TABLE>
<TABLE>
<CAPTION>
	                      								                                   December 31
                                              	1996      		1995     	 	1994     	 	1993     	 	1992  
                                                  									(Dollars  In Thousands)
<S>                                         <C>         <C>         <C>         <C>         <C>
Average amount of loans outstanding       	 $ 290,413 	 $ 276,166 	 $	247,791 	 $	233,608 	 $ 215,158 
										
Balance of allowance for possible loan 										
  losses at beginning of year 	             $  	2,678 	 $  	2,342 	 $  	2,024	  $  	2,254 	 $ 	 1,917 
Loans charged-off: 										
  Loans secured by real estate    		              368 		       15 		      135 		      396		       245 
  Commercial and industrial loans    		           141 		      170 		       42 		      222		       124 
  Individuals 		                                  879 		      371 		      246 		      230 		      249 
     TOTAL  LOANS CHARGED OFF 		                1,388 		      556 		      423 		      848		       618 
Recoveries of loans previously charged off: 										
  Loans secured by real estate 		                 111 		       97 		        9 		       56 		        3 
  Commercial and industrial loans 		               42 		       14 		       36 		       52 		       80 
  Individuals 		                                  183 		      111 		       36 		       40 		       32 
     TOTAL RECOVERIES 		                          336 		      222 		       81 		      148 		      115 
       NET  LOANS CHARGED-OFF 		                1,052 		      334 		      342		       700 		      503 
Provision charged to operating expenses 		      1,300 		      670 		      660		       470 		      840 
     BALANCE OF ALLOWANCE FOR 										
      POSSIBLE LOAN LOSSES AT 										
       END OF YEAR 	                        $ 	 2,926 	 $ 	 2,678 	 $ 	 2,342 	 $ 	 2,024 	 $ 	 2,254 

Ratio of net charge-offs during the 										
    period to average loans outstanding 		      0.36% 		    0.12% 		    0.14%		     0.30% 		    0.23% 
</TABLE>


CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1996, the Corporation had a ratio of
average capital to average assets of 10.36%.  This compares to a
ratio of average capital to average assets of 10.08% at December
31, 1995, and 9.25% at December 31, 1994.

	Cash dividends declared in 1996 were 11.4% more than those paid
in 1995.  The dividend to net income ratio was 20%.  Additional
dividends of approximately $14.8 million to the Corporation
could have been declared by the subsidiary bank without
regulatory agency approval.  The Corporation plans to maintain
or increase the payout ratio while continuing to maintain a
capital to asset ratio reflecting financial strength and
adherence to regulatory guidelines.

	As of December 31, 1996, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 17.7% and 18.7% respectively.  One
year earlier, the comparable ratios were 16.9% and 17.9%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital strength of the
Corporation and the Bank. 

		A bar graph at the bottom of this page, in the materials sent to
our stockholders, illustrates the average equity of the Corporation 
for the last six years.	The following table is the data illustrated 
by this graph in thousands of dollars.

<TABLE>
                          <S>              <C>
                      				1990		           $27,358
                      				1991		            30,194
                      				1992		            33,414
                      				1993		            37,454
                      				1994		            41,820
                      				1995		            46,755
                      				1996		            52,067
</TABLE>

<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS

Interest Income

	Total interest income increased 7.5% in 1996 due to a wider
gross margin that was enhanced by loan growth in all the market
areas the Bank serves.  Interest and fees earned on loans
increased 5.8% in 1996 accounting for 73.7% of gross interest
income.  Interest earned on investment securities and other
investments increased 12.8% in 1996 rounding out gross interest
income contributing 26.3%.  Total interest income increased
11.9% in 1995 and 7.3% in 1994.


Interest Expense

	Total interest expense increased 8.4% in 1996 due mostly to the
increase in interest-bearing deposits, about half of which can
be attributed to the acquisition indicated earlier.  This
increase compares favorably to a 19.9% increase in 1995 and a
6.9% increase in 1994.  The cost of interest-bearing deposits
remained steady all year under monthly monitoring by the
Asset/Liability Committee.  This contributed to the wider gross
margin achieved during 1996.   The net interest margin (tax
equivalent net interest income divided by average earning
assets) was 4.7% at the end of 1996 compared to 4.8% in 1995 and
4.7% in 1994.

 	Net interest income on a fully taxable equivalent basis is
influenced primarily by changes in:  (1) the volume and mix of
earning assets and sources of funding; (2) market rates of
interest, and (3) income tax rates.  The impact of some of these
factors can be controlled by management policies and actions. 
External factors also can have a significant impact on changes
in net interest income from one period to another.  Some
examples of such factors are: (1) the strength of credit demands
by customers; (2) Federal Reserve Board monetary policy, and (3)
fiscal and debt management policies of the federal government,
including changes in tax laws. 


Noninterest Income and Expense

		Noninterest income increased 28.4% during 1996 led by the
increase in service charges from new and acquired customers. 
This compares to a 14.9% increase in 1995 and a 1.6% increase in
1994.  Use of the Bank's check card generates fee income from
the clearing agent for the electronic transaction even though no
service fee is charged to Bank customers for its use.  Income
from fiduciary services provided in the Bank's Trust Department
remained strong. 

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1996 and the percentage each category is of the total.
The following table is the data illustrated by this graph in
thousands of dollars.

<TABLE>
<CAPTION>
			             Income Category        		Income $	       % of Total
         <S>                              <C>               <C>
       		Income from trust services		     $1,324			         22.8%
       		Service fees on deposits		        3,374			         58.1%
       		Other service fees		                746			         12.8%
       		Other				                           363			          6.3%
</TABLE>


		Noninterest expenses, excluding the provision for possible
loan losses, increased 5.8% in  1996 which is a much smaller
increase than the 6.2% increase in 1995.  The increase in 1994
was 5.4% for a smaller corporation.  Increased productivity
fostered by our technology improvements as the learning curve
diminished and cost control efforts contributed to this
improvement.  Included in this category is Federal Deposit
Insurance Corporation (FDIC) insurance premiums at the rate
established for "well capitalized" institutions.  This expense
was $6 thousand in 1996 compared to $500 thousand in 1995 and
$891 thousand in 1994.  Please refer to the discussion in the
CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS section above for more
information concerning the bank's capitalization.

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
expense in 1996 and the percentage each category is of the
total.  The following table is the data illustrated by this
graph in thousands of dollars.

<TABLE>
<CAPTION>
		                Expense Category	           Expense $		       % of Total
                  <S>                          <C>                  <C>
                		Personnel			                 $7,031			            46.5%
                		Occupancy			                  1,211			             8.0%
                		Furniture and equipment 		    1,581			            10.5%
                		FDIC insurance		   	              7			               0%
                		Other				                     5,292			            35.0%
</TABLE>


<PAGE>



                      FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE E - FIVE YEAR COMPARISON

<TABLE>
<CAPTION>
		                                        1996  	  	  1995      		 1994     		  1993  		     1992  
INTEREST INCOME 										
<S>                                   <C>          <C>          <C>          <C>          <C>
 Interest and fees on loans          	$27,343,817 	$25,857,982 	$21,130,914 	$19,518,742 	$19,791,548 
										
 Income on investment securities 										
   Taxable interest 		                  6,892,118 		 6,179,492 	 	7,012,626		  6,925,404 		 6,898,114 
   Exempt from federal income tax 		    2,366,764 		 2,156,813		  2,184,666 		 1,857,168 		 1,825,869 
   Dividends 		                           256,951 		   177,790 		   204,948 		    72,054		    110,874 
										
                                      		9,515,833 		 8,514,095 		 9,402,240 		 8,854,626 		 8,834,857 

 Other interest income 		                 223,019 		   121,492 		   284,384		    347,287 		   195,744 
										
    TOTAL INTEREST INCOME 		           37,082,669 		34,493,569		 30,817,538 		28,720,655 	 28,822,149 

INTEREST EXPENSE  										
  Interest on deposits 		              16,617,525 		15,247,875 		12,770,618		 11,998,235 		13,329,557 
  Interest on other short term 
   borrowings 		                           94,232 		   174,370		     93,286 		    38,339 		    47,449 
										
    TOTAL INTEREST EXPENSE 		          16,711,757 		15,422,245		 12,863,904 		12,036,574 		13,377,006 

    NET INTEREST INCOME 		             20,370,912 		19,071,324		 17,953,634 		16,684,081 		15,445,143 

PROVISION FOR POSSIBLE LOAN LOSSES  	   1,300,000 		   670,000		    660,000 		   470,000 		   840,000 
    NET INTEREST INCOME AFTER 										
      PROVISION FOR LOAN LOSSES 		     19,070,912		 18,401,324 		17,293,634 		16,214,081 		14,605,143 

NONINTEREST  INCOME 										
  Trust department income 		            1,323,525 		 1,251,642 		 1,249,359		    863,952 		   753,239 
  Service fees on deposit accounts 		   3,373,805 		 2,697,332		  2,317,992 		 2,206,026 		 2,123,096 
  Other service fees, commissions, 										
    and fees 		                           745,523 		   300,407 		   336,758 		   509,009		    401,618 
  Other operating income 		               363,430 		   322,634 		   319,466		    315,108 		   191,363 
  Available for sale securities 										
   gains (losses) 		                        - 		         1,182 		  (243,690)		    23,896 		    28,434 
										
    TOTAL NONINTEREST  INCOME 		        5,806,283 		 4,573,197		  3,979,885 		 3,917,991 		 3,497,750 

NONINTEREST  EXPENSES 										
  Salaries and employee benefits 		     7,030,588 		 6,620,827		  6,247,706 		 5,686,965 		 5,283,086 
  Net occupancy expense 		              1,211,067 		 1,279,434 		 1,190,678		  1,070,971 		   984,650 
  Furniture and equipment expense 		    1,580,753  		1,382,769  		1,069,856 		   889,848 		   801,453 
  Loss on other real estate 		              - 		        50,724 		     4,000		    103,122 		   312,064 
  Other operating expenses 		           5,298,652 		 5,006,292		  4,996,107 		 4,903,949 		 4,460,696 
										
    TOTAL NONINTEREST EXPENSES 		      15,121,060	  14,340,046 		13,508,347 		12,654,855 		11,841,949 

      INCOME BEFORE PROVISION 										
       FOR INCOME TAXES 		              9,756,135		  8,634,475 		 7,765,172 		 7,477,217 		 6,260,944 

PROVISION FOR INCOME TAXES 		           2,889,339 		 2,518,769 		 2,203,746		  2,220,965 		 1,768,840 

       NET INCOME  	                  $	6,866,796 	$ 6,115,706 	$	5,561,426  $	5,256,252 	$	4,492,104 

EARNINGS PER COMMON SHARE  										
  (1,400,000 outstanding shares) 	    $ 	    4.90  $ 	    4.37 	$ 	    3.97	 $ 	    3.75 	$ 	    3.21 
</TABLE>

<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 


Net Income

	Net income was 12.3% higher in 1996 than in 1995.  As indicated
earlier, the improvement in 1996's earnings resulted from a
wider gross margin, an increase in noninterest income sufficient
to cover a smaller increase in noninterest expenses, and the
increase in taxes.  The smaller increase in noninterest expenses
is due in part to the significant decrease in deposit insurance.
These improvements were partially offset by higher additions to
the allowance for loan losses.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ON THE FINANCIAL
STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD

	The Financial Accounting Standards Board has issued one
standard that has not been adopted by the Bank but is required
to adopted after December 31, 1996.  The Statement of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" establishes guidance on when to recognize and
how to measure these financial assets and liabilities.  The
statement is effective prospectively for transfers and servicing
of financial assets and extinguishment of liabilities occurring
after December 31, 1996.  It supersedes Statement No. 122,
"Accounting for Mortgage Servicing Rights", which was effective
for fiscal years beginning after December 15, 1995.  Management
does not believe this statement will have any material effect on
future issues.


SHAREHOLDER INFORMATION

	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1996, had a
market value of $91 million and were held by 1,525 identifiable
individuals located mostly in the market area.  A small number
of additional shareholders are not identified individually since
some bank nominees, including the bank's Trust Department, are
listed as single owners when, in fact, these holdings represent
large numbers of shareholders.  No single shareholder's
ownership exceeded five percent at year end.

	There is no established public trading market for the stock. 
The table on the right lists the high and low price of the
Corporation's common stock, as well as the semiannual dividend
paid per share, in each of the last three years.

<TABLE>
<CAPTION>
		                                Price Range of 			       Dividend 
                                	 	Common Stock 	 		         Paid 
                               	High 		     Low 		        Per Share 
 <S>    <S>                    <C>         <C>             <C>
		      First quarter          $	40.00  		 $	36.00  	      $ 	
      		Second quarter           42.00  			  37.00  		        0.39 
	1994  	Third quarter 		         43.00    			37.00  		
      		Fourth quarter 		        45.00  			  38.00  		        0.41 
                                                   								$ 	0.80  

        First quarter          $ 45.00     $ 45.00         $
      		Second quarter 		        48.00  			  45.00  		        0.43 
	1995  	Third quarter 		         50.00  			  48.00  		
      		Fourth quarter 		        54.00  			  50.00  		        0.45 
                                                   								$ 	0.88 

      		First quarter 	        $	56.00  		 $	56.00  	      $ 	
      		Second quarter 		        58.00  			  56.00  		        0.47 
	1996  	Third quarter 		         63.00  			  60.00  		
      		Fourth quarter 		        65.00  			  63.00  		        0.51 
                                                 							  	$ 	0.98 
</TABLE>


<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

<TABLE>
                                 	COMPARATIVE DATA 
                               	(In Thousands of Dollars) 
<CAPTION>
		                               1996  	 	  1995  		   1994  		   1993  		   1992  
<S>                          <C>        <C>        <C>        <C>        <C>
AVERAGE ASSETS 	             $ 502,700 	$	463,739 	$	451,953 	$	420,760 	$	381,379 

AVERAGE LOANS (NET) 	        $	290,413 	$	276,166 	$	247,791 	$ 233,609 	$	215,158 

AVERAGE DEPOSITS 	           $	443,902 	$	409,489 	$	404,412 	$	378,782	 $	343,128 

RETURN ON EQUITY AND ASSETS 										
  Return on average assets 		    1.37% 		   1.32% 		   1.23% 		   1.25%		    1.18% 

  Return on beginning equity 		 14.06% 		  13.95% 		  14.11%		   14.93% 		  14.21% 
  Average equity to  										
    average assets 		           10.36% 		  10.08% 		   9.25% 		   8.90%		    8.76% 

COMMON DIVIDEND PAYOUT RATIO 										
  Earnings per share 	       $ 	  4.90  	$  	4.37 	 $  	3.97 	 $ 	 3.75 	$	   3.21 

  Cash dividends per share 	 $ 	  0.98 	 $ 	 0.88 	 $ 	 0.80 	 $ 	 0.73	 $ 	  0.64 										

  Ratio 		                         20% 		     20% 		     20% 		     19% 		     20% 
</TABLE>

<TABLE>
                                           	NET INTEREST MARGIN 
                                         	(In Thousands of Dollars) 
<CAPTION>
                                  		1996     		1995     		1994     		1993    		1992  
INTEREST INCOME 										

<S>                              <C>        <C>        <C>        <C>       <C>
 (TAX EQUIVALENT) 	              $ 37,985 	 $	35,626 	 $	32,039 	 $	29,465  $ 29,564 

INTEREST EXPENSE 		                16,712 		  15,422 		  12,864 		  12,037 		 13,377 

	                                $	21,273  	$	20,204 	 $	19,175 	 $	17,428 	$	16,187 
NET INTEREST MARGIN* 		             4.66% 		   4.79% 		   4.68% 		   4.58% 		  4.67% 

<FN>
<F23>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets. 										
</FN>
</TABLE>

<PAGE>



Nine color graphs are included on the following page in the
materials sent to our stockholders.  The first one illustrates
net income for the last five years using information taken from
the "FIVE YEAR COMPARISON" table included above.  The second one
illustrates return on average assets for the last five years
using information from the "COMPARATIVE DATA" table on the
previous page.  The third, fourth and fifth graphs illustrate
return on stockholders' equity, earnings per share with cash
dividends and stockholder's equity  for the last five years. 
The sixth graph illustrates average net loans for the last five
years.  The seventh and eighth graphs illustrate deposits and
assets for the last five years.  The information for these
graphs was taken from the "COMPARATIVE DATA" table on the
previous page.  The final graph which illustrates  net interest
income for the last five years was taken from the net interest
margin section in the  "COMPARATIVE DATA" table on the previous
page.






Employees

FFMC has no employees.  Its subsidiary, the Bank had
approximately two hundred and four (204) full time employees and
fifty-five (55) part time employees.  Six of the Bank's officers
also were officers of FFMC.  Employee benefit programs provided
by the Bank include a deferred profit sharing plan, an annual
profit sharing plan, a salary continuation plan, a deferred
compensation plan, training programs, group life and health
insurance and paid vacations.


Item 2.  Properties.

A discussion of the properties owned by the company is
incorporated herein by reference to Notes to Consolidated
Financial Statements which are attached to and made a part of
Annual Report to Stockholders which is attached hereto as
Exhibit 13.  Other real estate owned by the Bank as of December
31, 1996, included:  (1) a 16.88 acre truck stop located at the
Bucksnort exit of I-40 and (2) a one-tenth interest in
approximately one hundred acres known as Town Center, located in
the southern part of the town of Spring Hill, in northern Maury
County, Tennessee on US 31 Highway.  The properties are not
depreciated.



<TABLE>
       FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY          
                      CONSOLIDATED BALANCE SHEETS                             
                      DECEMBER 31, 1996 and 1995                           
<CAPTION>
ASSETS 		                                           1996  		        1995  
<S>                                              <C>             <C>
Cash and due from banks         	                $ 	27,916,507	  $ 	31,281,706 
Securities 				
 Available for sale (amortized cost 
  $55,898,299 and $10,875,527 respectively)   		    56,141,535 		   11,269,006 
 Held to maturity (fair value $119,226,021 
  and $128,829,961 respectively) 		                118,541,750 		  127,662,682 
      Total securities - Note 2 		                 174,683,285		   138,931,688 
Loans, net of unearned income - Note 3 		          303,732,044		   291,930,311 
 Allowance for possible loan losses - Note 4   		   (2,926,063)		   (2,678,386) 
      Net loans 		                                 300,805,981 		  289,251,925 
Bank premises and equipment, at cost less
 allowance for depreciation and 
 amortization - Note 5   		                          6,829,475 		    6,397,936 
Other assets 		                                     15,094,426 		   11,171,993 

      TOTAL ASSETS 	                             $	525,329,674 	 $	477,035,248 

LIABILITIES 				
Deposits 				
 Noninterest-bearing 	                           $ 	75,589,511 	 $ 	67,420,536 
 Interest-bearing (including certificates 
  of deposit over $100,000: 
   1996 - $39,129,547; 1995 - $30,593,803)       		384,983,050 		  343,357,525 
       Total deposits 		                           460,572,561 		  410,778,061 
Federal funds purchased 		                           5,000,000 		   10,000,000 
Dividends payable 		                                   714,000 		      630,000 
Other short term liabilities 		                        522,928 		    1,955,000 
Accounts payable and accrued liabilities 		          4,119,059 		    4,675,712 
				
      TOTAL LIABILITIES 		                         470,928,548 		  428,038,773 
				
COMMITMENTS AND CONTINGENCIES - Notes 7 and 9 				
				
STOCKHOLDERS' EQUITY 				
Common stock - $10 par value, authorized 
 4,000,000 shares; 1,400,000 shares issued 
 and outstanding - Note 1 		                        14,000,000 		   14,000,000 
Retained earnings - Note 6 		                       40,255,185 		   34,760,389 
Net unrealized loss on available-for-sale
 securities, net of tax                              		145,941 		      236,086 
     TOTAL STOCKHOLDERS' EQUITY 		                  54,401,126 		   48,996,475 

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $	525,329,674 	 $	477,035,248 

</TABLE>

<TABLE>
                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
                     YEARS ENDED DECEMBER 31, 1996, 1995, and 1994 
<CAPTION>
                                                		 				           Net Unrealized 		
				                                                 	            	Gain (Loss) On 		
                                                   		Common       		Retained    	  	Available-for-sale 		
                                                    		Stock   	    	Earnings 	        	Securities 		           Total 
          
<S>                                              <C>            <C>                <C>                      <C>
BALANCE AT JANUARY 1, 1994 	                     $ 	7,000,000 	 $ 32,407,573 	     $     	- 	               $	39,407,573 
Cumulative effect of change in 
  accounting principle (net of
  deferred income taxes of $171,405) - Note 1 		        - 		          27,684		           229,424 		              257,108 
Two-for-one stock split - Note 1 		                 7,000,000 		  (7,000,000) 		           -		                     - 
Net income for the year 		                              - 		       5,561,426 		            - 		                5,561,426 
Cash dividends declared, $.80 per share 		              - 		      (1,120,000) 		           -		                (1,120,000) 
Net unrealized loss on available-for-sale 
  securities, net of tax		                              - 		           - 		             (277,981) 		            (277,981) 

BALANCE AT DECEMBER 31, 1994 		                    14,000,000     29,876,683		           (48,557) 		          43,828,126 
Net income for the year 		                              - 		       6,115,706 		            - 		                6,115,706 
Cash dividends declared, $.88 per share 		              - 		      (1,232,000) 		           -		                (1,232,000) 
Net unrealized gain on available-for-sale
  securities, net of tax 		                             - 		           - 		              284,643 		              284,643 

BALANCE AT DECEMBER 31, 1995 		                    14,000,000 		  34,760,389 		          236,086		            48,996,475 
Net income for the year 		                              - 		       6,866,796 		            - 		                6,866,796 
Cash dividends declared, $.98 per share 		              - 		      (1,372,000) 		           -		                (1,372,000) 
Net unrealized loss on available-for-sale
  securities, net of tax 		                             - 		           - 		              (90,145) 		             (90,145) 

BALANCE AT DECEMBER 31, 1996 	                   $	14,000,000 	 $	40,255,185 	     $   	 145,941 	          $	54,401,126 
<FN>
<F1>
The accompanying notes are an integral part of the consolidated
financial statements. 								
</FN>
</TABLE>


<PAGE>

<TABLE>
              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME                      
                  YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994        
<CAPTION>
                                      		    1996  		       1995  	   	    1994  
INTEREST INCOME 						
<S>                                   <C>            <C>            <C>
 Interest and fees on loans 	         $ 	27,343,817 	$ 	25,857,982 	$ 	21,130,914 
						
 Interest on investment securities 						
   Taxable interest 		                    6,892,118 		   6,179,492 		   7,185,169 
   Exempt from federal income tax 		      2,366,764 		   2,156,813    		2,184,666 
   Dividends 		                             256,951 		     177,790 		     204,948 
                                        		9,515,833 		   8,514,095 		   9,574,783 
   Other interest income 		                 223,019 		     121,492 		     111,841 
						
     TOTAL INTEREST INCOME 		            37,082,669 		  34,493,569   		30,817,538 

INTEREST EXPENSE  						
  Interest on deposits 		                16,617,525 		  15,247,875 		  12,770,618 
  Interest on other short term  
    borrowings 		                            94,232 		     174,370		       93,286 
						
     TOTAL INTEREST EXPENSE 		           16,711,757 		  15,422,245   		12,863,904 

     NET INTEREST INCOME 		              20,370,912 		  19,071,324		   17,953,634 
PROVISION FOR POSSIBLE LOAN 
  LOSSES - Note 4 		                      1,300,000		      670,000 		     660,000 

     NET INTEREST INCOME AFTER 						
       PROVISION FOR LOAN LOSSES 		      19,070,912		   18,401,324 		  17,293,634 

NONINTEREST  INCOME 						
  Trust department income 		              1,323,525 		   1,251,642 		   1,249,359 
  Service fees on deposit accounts 		     3,373,805 		   2,697,332	    	2,317,992 
  Other service fees, commissions, 
    and fees 		                             745,523		      300,407 		     336,758 
  Other operating income 		                 363,430 		     322,634 		     319,466 
  Available for sale securities 
    gains (losses) 		                         -		            1,182 		    (243,690) 
						
     TOTAL NONINTEREST INCOME 		          5,806,283 		   4,573,197		    3,979,885 

NONINTEREST  EXPENSES 						
  Salaries and employee benefits 		       7,030,588 		   6,620,827		    6,247,706 
  Net occupancy expense 		                1,211,067 		   1,279,434 		   1,190,678 
  Furniture and equipment expense 		      1,580,753 		   1,382,769	    	1,069,856 
  Deposit insurance 		                        6,549 		     499,709 		     890,646 
  Loss on other real estate 		                - 		          50,724 		       4,000 
  Other operating expenses 		             5,292,103 		   4,506,583    		4,105,461 
						
     TOTAL NONINTEREST EXPENSES 		       15,121,060		   14,340,046 		  13,508,347 

       INCOME BEFORE PROVISION FOR 						
         INCOME TAXES 		                  9,756,135 		   8,634,475		    7,765,172 
						
PROVISION FOR INCOME TAXES - Note 8 		    2,889,339 		   2,518,769		    2,203,746 
						
         NET INCOME  	                $  	6,866,796 	$  	6,115,706 	$  	5,561,426 

EARNINGS PER COMMON SHARE - Note 1 						
  (1,400,000 outstanding shares) 	    $ 	      4.90 	$       	4.37 	$       	3.97 
<FN>
<F2>
The accompanying notes are an integral part of the consolidated
financial statements. 						
</FN>
</TABLE>

<PAGE>

<TABLE>
                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY 
                          CONSOLIDATED STATEMENTS OF CASH FLOWS        
                      YEARS ENDED DECEMBER 31, 1996, 1995, and 1994      
<CAPTION>
                                          		1996        		1995        		1994  
OPERATING ACTIVITIES 						
<S>                                      <C>           <C>           <C>
  Net income 	                           $ 	6,866,796 	$ 	6,115,706 	$ 	5,561,426 
  Adjustments to reconcile net income
   to net cash provided by operating
   activities 						  
    Excess of provision for possible   
     loan losses over net charge offs   		    247,677 		    336,096 		    318,639 
    Provision for depreciation and   
     amortization of premises and   
     equipment 		                             685,005 		    645,816 		    589,045 
    Provision for depreciation of  
     leased equipment 		                      521,500		       - 	 	         - 
    Amortization of deposit base  
     intangibles 		                           224,212		     168,020 		    168,020 
    Amortization of investment    
     security premiums, net of   
     accretion of discounts 		                553,355 		    641,104		     678,968 
    Increase in cash surrender value
     of life insurance contracts 		          (111,685) 		   (65,936) 		   (75,287) 
    Deferred income taxes 		                 (161,999) 		  (233,403) 		  (163,907) 
   (Increase) decrease in 						  
     Interest receivable 		                  (125,119) 		  (255,109)		   (992,872) 
     Other assets 		                          307,844 		    912,162 		    344,572 
    Increase (decrease) in   						
     Interest payable 		                     (494,950) 		   577,137 		    222,605 
     Other liabilities   		                   (61,704) 	   	458,939 		    287,975 
						
       TOTAL ADJUSTMENTS 	  	               1,584,136 		  3,184,826		   1,377,758 
						
       NET CASH PROVIDED BY OPERATING
         ACTIVITIES                       		8,450,932 	  	9,300,532 		  6,939,184 

INVESTING ACTIVITIES 						
  Proceeds from maturities, calls, and
   sales of available-for-sale securities	  3,020,054 		  7,306,453  		25,152,051 
  Proceeds from maturities and calls of
   held-to-maturity securities 		          56,112,000 		 18,848,992 		  5,092,000 
  Purchases of investment securities 						
   Available-for-sale 		                  (48,222,295) 	 (3,168,200)		(16,942,994) 
   Held-to-maturity 		                    (47,364,954) 		(6,459,372)		(19,495,987) 
  Net increase in loans 		                (11,801,733)  (29,236,191)		(18,778,658) 
  Purchases of premises and equipment    		(1,116,543) 	  	(850,672)   		(418,586) 
  Purchase of equipment leased 		          (2,607,500) 		     - 	 	         - 
  Purchase of deposit base intangibles   		(1,124,258)  		    - 	      	    - 
  Purchase of single premium life 
   insurance contract                      		(785,330) 	   	  -      	 	    - 
						
       NET CASH USED BY INVESTING
        ACTIVITIES                      		(53,890,559) 	(13,558,990)		(25,392,174) 

FINANCING ACTIVITIES 						
 Net increase in noninterest-bearing
  and interest-bearing deposits 		         29,930,577 	  	5,625,638	  	16,217,348 
 Assumption of deposit liabilities
  - Note 12 		                             19,863,923 		      - 	 	         - 
 Net increase (decrease) in short
  term borrowings                        		(6,432,072)  		4,355,000 	  	7,000,000 
 Cash dividends 		                         (1,288,000) 		(1,176,000) 		(1,071,000) 
						
       NET CASH PROVIDED BY FINANCING
        ACTIVITIES                       		42,074,428   		8,804,638  		22,146,348 

       INCREASE (DECREASE) IN CASH AND
        CASH EQUIVALENTS                 		(3,365,199) 	 	4,546,180 		  3,693,358 

CASH AND CASH EQUIVALENTS AT BEGINNING
 OF YEAR 		                                31,281,706		  26,735,526 		 23,042,168 
						
CASH AND CASH EQUIVALENTS AT END OF 
 YEAR 	                                  $	27,916,507 	$	31,281,706 	$	26,735,526 
<FN>
<F3>
The accompanying notes are an integral part of the consolidated
financial statements.
</FN>
</TABLE>

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

		First Farmers and Merchants Corporation (the Corporation) was
incorporated on March 31, 1982, as a Tennessee corporation.  On 
April 13, 1982, the Board of Directors of the Corporation
adopted a resolution to execute and deliver to the Board of
Governors of the Federal Reserve System an application pursuant
to Section 3(a)(1) of the Bank Holding Company Act of 1956, as
amended, for prior approval by the Board of action to be taken
by the Corporation which would result in its becoming a bank
holding company. 

		As of December 31, 1996, the only subsidiary of the
Corporation was the Bank.  The Bank is a national banking
association which was organized in 1954 as a successor to a
state bank organized in 1909.  The Bank  conducts a full-service
commercial banking business at its principal office at 816 South
Garden Street, Columbia, Tennessee and at fourteen (14)
branches:  High Street Branch, Northside Branch, Shady Brook
Mall Branch, Hatcher Lane Branch, and Campbell Plaza Branch in
Columbia; Mt. Pleasant Branch in Mt. Pleasant; Spring Hill
Branch in Spring Hill; Lawrenceburg Branch in Lawrenceburg;
Leoma Branch in Leoma; Loretto Branch in Loretto; Lewisburg
Branch and Lewisburg West Branch in Lewisburg; Chapel Hill
Branch in Chapel Hill; and Centerville Branch in Centerville. 
The Bank provides automatic teller machine services in the
Northfield Complex at the Saturn location near Spring Hill, and
in Columbia at the Tennessee Farm Bureau, Columbia State
Community College, and Maury Regional Hospital.

		The community service area of the Bank is comprised of Maury,
Lawrence, Marshall, Hickman, and adjacent counties.  Commercial
banking in the marketing area served by the Bank is highly
competitive.  Although the Bank is ranked as the largest bank in
the area, in terms of total deposits, the Bank faces substantial
competition from fourteen (14) other banks, two (2) savings and
loan associations, and several credit unions located in the
marketing area.


Accounting Policies

		The accounting principles followed and the methods of applying
those principles conform with generally accepted accounting
principles and to general practices in the banking industry. 
The significant policies are summarized as follows.


Principles of Consolidation

		The accompanying consolidated financial statements present the
accounts of the Corporation and its wholly-owned subsidiary, the
Bank.  Material intercompany accounts and transactions have been
eliminated in consolidation.


Use of Estimates in the Preparation of Financial Statements

		The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.


Cash and Due From Banks

		Included in cash and due from banks are legally reserved
amounts which are required to be maintained on an average basis
in the form of cash and balances due from the Federal Reserve
Bank and other banks.  Average reserve requirements for the year
ended December 31, 1996, amounted to approximately $8.9 million.


Cash Equivalents

		Cash equivalents include cash on hand, cash due from banks,
and federal funds sold.  Federal funds are sold for one-day
periods.


Securities

		 Investments are classified in three categories and accounted
for as follows: 

		Debt securities that the Bank has the positive intent and
ability to hold to maturity are classified as held-to-maturity
and reported at amortized cost with premiums and discounts
recognized in interest income using the interest method over the
period to maturity.

<PAGE>

             FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities (Continued)

		Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are
classified as trading securities and reported at fair value,
with  unrealized gains and losses included in earnings.

		Debt and equity securities that may be sold prior to maturity
for asset/liability management purposes, or that may be sold in
response to changes in interest rates, changes in prepayment
risk, to increase regulatory capital or other similar factors,
are classified as available-for-sale securities and reported at
fair value, with unrealized gains and losses, net of tax, 
excluded from earnings and reported as a separate component of
stockholders' equity.  Gains and losses realized on the sale of
available-for-sale securities are determined using the specific
identification method.

		Declines in the fair value of individual available-for-sale
and held-to-maturity securities below their cost that are other
than temporary are included in earnings as realized losses.


Loans

		Loans that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off generally
are stated at their outstanding unpaid principal balances net of
any deferred fees or costs on originated loans, or unamortized
premiums or discounts on purchased loans.  A loan is considered
impaired when it is probable that an institution will be unable
to collect all amounts due (principal and interest) according to
the contractual terms of the loan agreement.  The Bank evaluates
smaller balance homogeneous loans collectively for impairment. 
Loans secured by one to four family residential properties,
consumer installment loans, and line of credit loans are
considered smaller-balance homogeneous loans.

		Interest on loans is computed daily based on the principal
amount outstanding.  Loan origination fees and related direct
costs are deferred and recognized as an adjustment of yield on
the interest method.  Interest accruals are discontinued when
loans are ninety days past-due or when a loan is considered
impaired.  All loans in non-accrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
non-accrual status is recognized only to the extent of the
excess of cash payments received over principal payments due.

		When a loan is collateral dependent, impairment is measured
based on the observable market price or the fair value of the
collateral.  For other loans, the amount of impairment is
measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. 
Positive changes in the net present value of an impaired loan
will in no event be used to increase the value of a loan above
the amount of the loan.


	Other Real Estate

		Other real estate, which is included in other assets,
represents real estate acquired through foreclosure and is
stated at the lower of fair value, net of estimated selling
costs, or cost, at the date of foreclosure.  If, at the time of
foreclosure, the fair value of the real estate is less than the
Bank's carrying value of the related loan, a write-down is
recognized through a charge to the allowance for possible loan
losses, and the fair value becomes the new cost for subsequent
accounting.  If the Bank later determines that the cost of the
property cannot be recovered through sale or use, a write-down
is recognized by a  charge to operations.  When the property is
not in a condition suitable for sale or use at the time of
foreclosure, completion and holding costs, including such items
as real estate taxes, maintenance and insurance, are capitalized
up to the estimated net realizable value of the property. 
However, when the property is in a condition for sale or use at
the time of foreclosure, or the property is already carried at
its estimated net realizable value, any subsequent holding costs
are expensed.  Legal fees and any other direct costs relating to
foreclosures are charged to operations when incurred.

		The Bank's recorded value for other real estate was
approximately $450 thousand at December 31, 1996, and $483
thousand at December 31, 1995.  


Allowance for Possible Loan Losses

	The allowance for possible loan losses is maintained at a level
believed adequate by management to absorb estimated probable
inherent loan losses.  Loan quality is monitored by Loan 


<PAGE>



            FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Possible Loan Losses (Continued)

Review, the Special Assets Committee, and the Credit
Administrator.  The amount by which a loan is determined to be
impaired is added to the allowance account in the period such
determination is made.  Recoveries on loans previously charged
off are credited to the allowance account in the period
received.  The adequacy of the allowance for possible loan
losses is evaluated quarterly in conjunction with loan review
reports and evaluations that are discussed in a meeting with
loan officers and loan administration.  The Bank's past loan
loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan
portfolio, current economic conditions, and other relevant
factors are considered in this evaluation.  This process is
inherently subjective as it requires material estimates that are
susceptible to significant change including the amounts and
timing of future cash flows expected to be received on impaired
loans.


Premises and Equipment

		Premises and equipment are stated at cost, less accumulated
depreciation and amortization.  The provision for depreciation
is computed principally on an accelerated cost recovery method
over the estimated useful lives of the assets, which range as
follows:  buildings - 15 to 50 years and equipment - 3 to 33
years.  Costs of major additions and improvements are
capitalized.  Expenditures for maintenance and repairs are
charged to operations as incurred.  Gains or losses from the
disposition of property are reflected in operations, and the
asset accounts and related allowances for depreciation are
reduced. 

		Certain other equipment purchased for lease to an outside
party under a five year operating lease is included in other
assets at cost less accumulated depreciation.  The equipment is
being depreciated on an accelerated basis over seven years.  


Trust Department Income

		Trust department income is recognized on the accrual basis in
the applicable period earned.


Stock Split

		During 1994, the Corporation amended its corporate charter to
increase the number of authorized shares of its common stock
from 2,000,000 to 4,000,000 shares and on April 12, 1994, the
Corporation's stockholders approved a two-for-one split effected
in the form of a 100% stock dividend distributed May 30, 1994,
to shareholders of record on April 12, 1994.  In accordance with
State corporate legal requirements, the transaction was recorded
by a transfer from retained earnings to common stock in the
amount of $7,000,000 ($10 for each additional share issued). 
All per share and share data in the accompanying consolidated
financial statements and footnotes have been restated to give
retroactive effect to the transaction.


Income Taxes

		The companies file a consolidated federal income tax return. 
Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income.

		Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. 
Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred
tax assets and liabilities.


Intangible Assets

	Deposit base intangibles identified in merger transactions are
amortized over 42 to 180 months on the straight-line method. 
Total amortization expense charged to operations amounted to: 
1996 - $224,212; 1995 - $168,020;  and  1994 - $168,020.



<PAGE>


           FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES 

Securities with an amortized cost of $103,540,673 and
$93,101,954 at December 31, 1996 and 1995, respectively (fair
value: 1996 - $104,061,311;  1995 - $93,937,766), were pledged
to secure deposits and for other purposes as required or
permitted by law.  The fair value is established by an
independent pricing service as of the approximate dates
indicated.  The differences between the amortized cost and fair
value reflect current interest rates and represent the potential
gain (or loss) had the portfolio been liquidated on that date. 
Security gains (or losses) are realized only in the event of
dispositions prior to maturity.  The fair values of all
securities at December 31, 1996, either equaled or exceeded the
cost of those securities, or the decline in fair value is
considered temporary.

<TABLE>
<CAPTION>
                                      Amortized                Gross Unrealized                Fair
		                                       Cost 	            	  Gain       	 	Loss 	        	    Value 

December 31, 1996 								
Available-for-sale securities 								
<S>                                <C>                    <C>             <C>              <C>
  U.S. Treasury 	                  $ 	26,412,520 	        $  	162,913 	   $ 	  63,634 	    $ 	26,511,799 
  U.S. Government agencies   		       26,850,441 		            45,866 		      318,203   		    26,578,104 
  Other securities   		                2,635,338 		           565,044 		      148,750 		       3,051,632 
                                  	$ 	55,898,299 	        $  	773,823 	   $  	530,587 	    $ 	56,141,535 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	30,504,935 	        $ 	 106,345 	   $   	22,080 	    $ 	30,589,200 
  U.S. Government agencies   		       39,679,582 	           	245,034 		       87,434		       39,837,182 
  States and political subdivisions 		47,538,074 		           700,948		       283,420 		      47,955,602 
  Other securities 		                    819,159 		            24,878 		        - 	 	            844,037 
                                  	$	118,541,750 	        $	1,077,205 	   $  	392,934 	    $	119,226,021 

December 31, 1995 								
Available-for-sale securities 								
  U.S. Treasury 	                  $  	5,064,421 	        $   	72,679    	$ 	   - 	        $  	5,137,100 
  U.S. Government agencies 		          3,279,968 		            72,268 		        2,570		        3,349,666 
  Other securities 		                  2,531,138 		           254,102 		        3,000 		       2,782,240 
	                                  $ 	10,875,527 	        $ 	 399,049 	   $ 	   5,570 	    $ 	11,269,006 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	61,426,813 	        $  	295,846 	   $ 	  59,359 	    $ 	61,663,300 
  U.S. Government agencies 		         23,498,204 		           267,237 		       48,041		       23,717,400 
  States and political subdivisions 		42,415,025 		           934,439		       241,048 		      43,108,416 
  Other securities 		                    322,640 		            18,205 		       - 		              340,845 
                                 	 $	127,662,682 	        $	1,515,727 	   $ 	 348,448 	    $	128,829,961 

<FN>
<F4>
Table I - Amortized Cost and Fair Value of Investment Securities.
</FN>
</TABLE>


<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES  (Continued)

		At December 31, 1996, the Corporation did not hold investment
securities of any single issuer, other than obligations of the
U.S. Treasury and other U.S. Government agencies, whose
aggregate book value exceeded ten percent of stockholders'
equity.

		Table II shows the amortized cost, fair value, and weighted
yields (for tax-exempt obligations on a fully taxable basis
assuming a 34% tax rate) of investment securities at December
31, 1996, by contractual maturity.  Expected maturities may
differ from contractual maturities because issuers may have the
right to call or prepay obligations.

		Proceeds from the maturity, call, or sale of
available-for-sale securities were $3,020,054, $7,306,453, and
$25,152,051 during 1996, 1995, and 1994 respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$56,112,000, $18,848,992, and $5,092,000 during 1996, 1995, and
1994 respectively.  There were no gains or losses in 1996. 
Gross gains of $1,182 and gross losses of $-0- were realized on
the dispositions in 1995.   Gross gains of $-0- and gross losses
of $243,690 were realized on the dispositions in 1994. 

<TABLE>
<CAPTION>
                            		        Amortized 	       	 Fair 		         Yield 	
                                       		Cost 		          Value 		     (Unaudited) 	

Available-for-sale securities 							
U.S. Treasury 							
<S>                                 <C>              <C>                  <C>
  Within one year 	                 $ 	16,189,997 	  $ 	16,176,499 		     5.6% 	
  After one but within five years 	    	9,171,798 		     9,274,000		      6.3% 	
  After five but within ten years 		    1,050,725 		     1,061,300      		6.4% 	
U.S. Government agencies 							
  Within one year 		                    1,000,000 		     1,021,300 		     8.0% 	
  After one but within five years 		   24,543,375 		    24,255,710      		5.9% 	
  After five but within ten years 	    	1,043,738 	     	1,038,400      		6.2% 	
  After ten years 		                      263,328 		       262,694 		     6.1% 	
  Other securities 		                   2,635,338 		     3,051,632 		     8.9% 	
	                                   $ 	55,898,299 	  $ 	56,141,535 			

Held-to-maturity securities 							
U.S. Treasury 							
  Within one year 	                 $ 	22,067,254 		 $  22,103,400 		     5.6% 	
  After one but within five years 		    5,238,326 		     5,301,900      		6.4% 	
  After five but within ten years 		    3,199,355 		     3,183,900		      6.0% 	
U.S. Government agencies 							
  Within one year 		                    4,504,421 		     4,512,100 		     6.1% 	
  After one but within five years 		   17,076,622 		    17,210,700      		6.4% 	
  After five but within ten years 		   18,098,539 		    18,114,382      		6.4% 	
States and political subdivisions 							
  Within one year 		                    3,015,087 		     3,061,625 		    10.0% 	
  After one but within five years 		   12,976,264 		    13,229,979      		8.1% 	
  After five but within ten years 		   20,837,173 		    20,940,923       	7.4% 	
  After ten years 		                   10,709,550 		    10,723,075 		     7.8% 	
Other securities 							
  After one but within five years 		      319,159 		       330,087 		     8.0% 	
  After five but within ten years 		      500,000 		       513,950 		     7.3% 	
 	                                  $	118,541,750 	  $ 119,226,021 			
<FN>
<F5>
Table II - Contractual Maturity of Investment Securities and
Weighted Tax Equivalent Yields
</FN>
</TABLE>

<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS

<TABLE>
<CAPTION>
                                                 		    1996  		                1995  	
Loans secured by real estate 					
<S>                                               <C>                    <C>
   Construction  and  land development 	          $ 	 8,751,021 	        $  	7,399,095 	
   Farmland 		                                        6,923,739 		           7,849,137 	
   Lines of credit 		                                   192,010 		             339,108 	
   1-4 family residential property - first lien 	  	116,905,803 		         111,016,393 	
   1-4 family residential property - junior lien 		   6,461,497            		7,177,285 	
   Multifamily residential property 		                2,487,453 		           3,729,687 	
   Non farm, non residential property 		             46,114,930 		          44,224,353 	
					
      Subtotal 		                                   187,836,453 		         181,735,058 	

Commercial and  industrial loans 					
   Commercial  and  industrial 		                    53,577,210 		          51,758,675 	
   Taxable municipal loans 		                           240,000 	 	            270,000 	
   All other loans 		                                   748,125 		              88,239 	
					
      Subtotal 		                                    54,565,335 		          52,116,914 	

Tax exempt municipal loans 		                           605,933 		           1,485,071 	
					
Loans to individuals 					
   Agricultural production 		                         2,894,845 		           3,659,215 	
   Lines of credit 		                                   200,903 		             135,230 	
   Individuals for personal expenditures 		          57,897,835           		53,026,209 	
					
      Subtotal 		                                    60,993,583 		          56,820,654 	

                                                  		304,001,304 		         292,157,697 	

Less: 					
   Net unamortized loan origination fees 		            (269,260) 		           (225,368)
   Unearned interest income 		                            - 		                  (2,018) 	
   Allowance for possible loan losses 		             (2,926,063)      		    (2,678,386) 	
					
	                                                 $ 300,805,981 	        $ 289,251,925 	
<FN>
<F6>
Table III - Loans Outstanding by Category at December 31, 1996
and 1995
</FN>
</TABLE>

<TABLE>
<CAPTION>
		 	 	                                         (In Thousands of Dollars) 	 	 	 	 
                            		Within 		        One to 		          After  		
                           		One Year 		     Five Years 		     Five Years 		   Total 

<S>                         <C>               <C>               <C>         <C>
Fixed rate loans 	          $ 	66,689 	       $ 	51,604 	       $ 	25,824 	 $	144,117 
Variable rate loans 		         99,680 		         32,963 		         27,241 		  159,884 

	                           $	166,369 	       $ 	84,567 	       $ 	53,065 	 $ 304,001 
<FN>
<F7>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1996
</FN>
</TABLE>




<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS (Continued)

		Loans having recorded investments of $5,136,286 at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  The total allowance for possible
loan losses related to these loans was $1,146,000.  Interest
received on these loans during 1996 was $504,840.  Impaired
loans had recorded investments of approximately  $5,856,000 at
December 31, 1995.

		Certain parties (principally directors and senior officers of
the Corporation or the Bank, including their affiliates,
families, and companies in which they hold ten percent or more
ownership) were customers of, and had loans and other
transactions with, the Bank in the ordinary course of business. 
An analysis of  activity with respect to such loans for the
years ended December 31, 1996 and 1995, is shown in Table V that
follows.

		These totals exclude loans made in the ordinary course of
business to other companies with which neither the Corporation
nor the Bank has a relationship other than the association of
one of its directors in the capacity of officer or director. 
These loan transactions were made on substantially the same
terms as those prevailing at the time for comparable loans to
other persons.  They did not involve more than the normal risk
of collectiblity or present other unfavorable features.  No
related party loans were charged off in 1996 or 1995.
<TABLE>
<CAPTION>
                                        		Balance at 							
                                        		Beginning  				               Amount 		    Balance at 	
                                        		 of Year 		   Additions   		Collected 		  End of Year 	

            1996  									
<S>                                      <C>           <C>           <C>            <C>
Aggregate of certain party loans 	       $	7,706,004 	 $ 8,454,247 	 $	7,937,989 	  $ 8,222,262 	
									
            1995  									
Aggregate of certain party loans 	       $	6,494,271 	 $ 7,020,665   $	5,808,932 	  $ 7,706,004 	

<FN>
<F8>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>

NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES

<TABLE>
<CAPTION>
      		                                       1996  		        1995  		       1994  
<S>                                        <C>             <C>            <C>
Balance at beginning of year 	             $	2,678,386 	   $ 2,342,290 	  $	2,023,651
Provision charged to operating expenses    		1,300,000 		      670,000      		660,000 
Loan losses: 						
  Loans charged off 		                      (1,388,422) 		    (555,957) 		   (422,831) 
  Recoveries on loans previously  						
    charged off 		                             336,099 		      222,053 		      81,470 

Balance at end of year 	                   $	2,926,063 	   $	2,678,386 	  $	2,342,290 
<FN>
<F9>
Table VI - Changes in the Allowance for Possible Loan Losses 
</FN>
</TABLE>


		In the opinion of management, based on conditions reasonably
known, the allowance was adequate at December 31, 1996. 
However, the allowance may be increased or decreased based on
loan growth, changes in credit quality, and changes in general
economic conditions.

		For federal income tax purposes, the allowance for possible
loan losses is maintained at the maximum allowable by the
Internal Revenue Code.



<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
		                                                    1996          		1995  	
<S>                                              <C>             <C>
Land 	                                           $ 	1,348,288 	  $ 	1,204,288 	
Premises 		                                         7,013,942 		    6,648,329 	
Furniture and equipment 		                          4,068,373 		    3,949,617 	
Leasehold improvements 		                           1,149,732 		      879,695 	
                                                 		13,580,335 		   12,681,929 	
Less allowance for depreciation and amortization 		(6,750,860)		   (6,283,993) 	
	                                                $ 	6,829,475 	  $ 	6,397,936 	
</TABLE>
	Annual provisions for depreciation and amortization of bank
premises and equipment total $685,005 for 1996, $645,816 for
1995, and $589,045 for 1994.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling $2,590,066 at December 31,
1996.                   


NOTE 6 - LIMITATION ON SUBSIDIARY DIVIDENDS

 The approval of the Comptroller of the Currency is required
before the Bank's dividends in a given year may exceed the total
of its net profit (as defined) for the year combined with
retained net profits of the preceding two years.  As of December
31, 1996, additional dividends of approximately $14,800,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for four of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2013.  In most cases,
the leases provide for one or more renewal options of five to
ten years under the same or similar terms.  In addition, various
items of teller and office equipment are leased under cancelable
and noncancelable operating leases.  Total rental expense
incurred under all operating leases, including short-term leases
with terms of less than one month, amounted to $726,337,
$660,121, and $409,764 for equipment leases, and $112,384,
$111,649, and $97,966 for building leases, in 1996, 1995, and
1994, respectively.  Future minimum lease commitments as of
December 31, 1996, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>

<S>                                    <S>    <C>
                                     		1997  	$  	784,704 
                                       1998    	 	714,848 
                        		             1999    		 383,334 
                                     		2000    		 123,758 
                                     		2001    		 123,758 

Total future minimum lease payments 			       $	2,130,402 

<FN>
<F9>
Table VIII - Future Minimum Lease Commitments
</FN>
</TABLE>


<PAGE>



                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES
<TABLE>
<CAPTION>
                                           		1996       		1995      	  1994  

<S>                                     <C>           <C>          <C>
Current: 						
  Federal 	                             $ 2,422,550 	 $	2,166,566 	$	1,831,848 
  State 		                                  628,788 		    585,606 		   503,433 
						
      Total current 		                    3,051,338 		  2,752,172 		 2,335,281 
Deferred: 						
  Federal 		                               (137,700) 		  (198,393) 		 (111,805) 
  State 		                                  (24,299) 		   (35,010) 		  (19,730) 

      Total deferred 		                    (161,999) 		  (233,403)  		(131,535) 
      Total provision for income taxes 	$	2,889,339   $	2,518,769  $ 2,203,746 
<FN>
<F10>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                           		1996  		      1995  		      1994  
<S>                                     <C>           <C>            <C>
Allowance for possible loan losses 	    $ 	 914,386   $  	815,315 	  $ 	682,877 
Write-down of other real estate 		          177,120 		    177,120 		    159,120 
Deferred compensation 		                    336,255 		    256,139 		    156,227 
Direct lease financing 		                     - 		          - 		         36,452 
Unrealized loss on AFS securities 		          - 		          -          		32,372 
Deferred loan fees 		                        26,863 		     44,051 		     24,546 

  Deferred tax asset 		                   1,454,624 		  1,292,625 		  1,091,594 

Unrealized gain on AFS securities 		        (97,294) 		  (157,392) 		     - 

  Deferred tax liability 		                 (97,294) 	  	(157,392) 		     - 

     Net deferred tax asset 	           $ 1,357,330 	 $	1,135,233	  $	1,091,594 
<FN>
<F11>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
	     	                                             1996  		      1995       		1994  
<S>                                             <C>           <C>           <C>
Tax expense at statutory rate 	                 $	3,317,086 	 $	2,935,722 	 $	2,640,158 
Increase (decrease) in taxes resulting from: 						
  Tax-exempt interest 		                           (859,383) 	  	(783,011) 		  (780,946) 
  Nondeductible interest expense 		                 101,534 		     89,491 		     75,019 
  Other nondeductible expenses 						
    (nontaxable income) - net 		                    (21,170) 		   (28,114)		     (6,458) 
  State income taxes, net of federal 						
    tax benefit 		                                  398,963 	    	363,393 	    	319,244 
  Dividend income exclusion 		                      (34,855) 		   (18,324) 		   (29,571) 
  Other 		                                          (12,836) 		   (40,388) 		   (13,700) 
Total provision for income taxes 	              $	2,889,339 	 $ 2,518,769 	 $	2,203,746 

Effective tax rate 		                                 29.6% 		      29.2% 		      28.4% 
<FN>
<F12>
Table XI - Reconciliation of Total Income Taxes Reported with
the Amount of Income Taxes Computed                   at the
Federal Statutory Rate (34% Each Year)
</FN>
</TABLE>
<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES (Continued)

		Total income taxes paid in 1996, 1995, and 1994 amounted to
$3,140,000, $2,756,442 and $2,431,332, respectively.

		A net deferred tax asset was included in other assets in the
accompanying consolidated balance sheet.  


NOTE 9 - COMMITMENTS

		The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers.  These financial
instruments include commitments to extend credit and standby
letters of credit.  Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.  The contract or notional
amounts of those instruments reflect the extent of involvement
the Bank has in those particular financial instruments.		

		The total outstanding loan commitments and stand-by letters of
credit in the normal course of business at December 31, 1996,
were $25,605,000 and $2,283,000, respectively.  Loan commitments
are agreements to lend to a customer as long as there is not a
violation of any condition established in the contract.  Standby
letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. 
Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond
financing, and similar transactions.  The credit risk involved
in issuing letters of credit is essentially the same as that
involved in making a loan.

		The loan portfolio is well diversified with loans generally
secured by tangible personal property, real property, or stock. 
The loans are expected to be repaid from cash flow or proceeds
from the sale of selected assets of the borrowers.  Collateral
requirements for the loan portfolio are based on credit
evaluation of the customer.  It is management's opinion that
there is not a concentration of credit risk in the portfolio.


NOTE 10 - SUPPLEMENTARY CASH FLOW

		 Interest paid on deposits and other borrowings during 1996,
1995, and 1994 amounted to $17,206,708, $14,845,107, and
$12,641,299, respectively.


NOTE 11 - SHAREHOLDERS'  EQUITY

		The Corporation and the Bank are subject to federal regulatory
risk-adjusted capital adequacy standards.  Failure to meet
capital adequacy requirements can initiate certain mandatory,
and possibly additional discretionary, actions by regulators
that could have a direct material effect on the consolidated
financial statements of the Corporation and its subsidiary, the
Bank.  The regulations require the Bank to meet specific capital
adequacy guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices.  The capital
classification is also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. 

		Quantitative measures established by regulation to ensure
capital adequacy require the Corporation and the Bank to
maintain minimum amounts and ratios of Total Capital and Tier I
Capital to risk-weighted assets and of Tier I Capital to average
assets.  Management believes, as of December 31, 1996 and 1995,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		As of June 30, 1996, the Bank's calculated risk-adjusted
capital ratios exceeded the minimum standard for a "well
capitalized" bank and this classification is confirmed by the
most recent notification from the Office of the Comptroller of
the Currency.  There are no conditions or events since that
notification that management believes have changed the
institution's category.  Actual capital amounts and ratios are
presented in Table XII.


<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - SHAREHOLDERS'  EQUITY (Continued)
<TABLE>
<CAPTION>
                                                                                				      To Be Well 
                                                                               				      Capitalized Under 
                                                              		For Capital 	   	      Prompt Corrective 
                                            Actual          	Adequacy Purposes 	   	    Action Provisions 
As of December 31, 1996 		            Amount    		Ratio 		  Amount  		 Ratio > or = 	 Amount 		  Ratio > or = 
<s >                                 <C>          <C>      <C>           <C>         <C>            <C>
Total Capital (to Risk Weighted
      Assets)   Consolidated 	     	 56,004,592 		18.69% 		23,972,003	 	 8.00% 		    29,965,004 	  	10.00% 
                Bank 		              55,472,014 		18.55% 		23,923,241		  8.00% 		    29,904,051 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      53,078,528 		17.71% 		11,986,300  		4.00% 		    17,979,450 		   6.00% 
                Bank 		              52,545,950 		17.57% 		11,962,652		  4.00% 		    17,943,978 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      52,066,624 		10.36% 		20,107,993		  4.00% 		    25,134,992 		   5.00% 
                Bank 		              50,574,336 		10.07% 		20,089,111		  4.00% 		    25,111,388 		   5.00% 

As of December 31, 1995 												
Total Capital (to Risk Weighted 												
      Assets)   Consolidated 		      51,162,164 		17.87% 		22,901,838 	 	8.00% 	    	28,627,297 		  10.00% 
                Bank 		              50,682,365 		17.74% 		22,855,632	  	8.00% 		    28,569,541 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      48,483,778 		16.94% 		11,450,919		  4.00% 		    17,176,378 		   6.00% 
                Bank 		              48,003,979 		16.80% 		11,429,519	  	4.00% 		    17,144,278 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      46,754,542 		10.08% 		18,549,574		  4.00% 		    23,186,967 		   5.00% 
                Bank 		              45,891,248 	 	9.91% 		18,523,208	  	4.00% 		    23,154,010 		   5.00% 

<FN>
<F13>
Table XII - Capital Amounts and Capital Adequacy
</FN>
</TABLE>


NOTE 12 - ACQUISITIONS

		On April 1, 1996, the Bank purchased certain assets and
assumed certain deposit liabilities of the Mt. Pleasant, Maury
County, Tennessee, and Lewisburg, Marshall County, Tennessee,
branches of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee.  The Office of the
Comptroller of the Currency granted approval of this
acquisition.  Deposit liabilities totaling $19.9 million were
assumed in the transaction in exchange for other assets acquired
totaling $1.6 million and cash for the balance.  The Mt.
Pleasant branch was combined with the Bank's office there and
the building was donated to the Mt. Pleasant-Maury Phosphate
Museum, a non-profit organization dedicated to preserving the
rich history of the phosphate industry in this area and actively
promoting tourism and economic development.  The Lewisburg
branch gave the Bank a second location in Lewisburg
complementing the market penetration in Marshall County.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - EMPLOYEE BENEFIT PLANS

		The Bank contributes to a defined contribution, profit-sharing
plan covering employees who meet participation requirements. 
The amount of the contribution is discretionary as determined by
the Board of Directors up to the maximum deduction allowed for
federal income tax purposes.  Contributions to the plan, that
amounted to $661,307, $633,459 and $602,010, in 1996, 1995, and
1994, respectively, are included in salaries and employee
benefits expense. 

		In 1992, the Bank formalized a nonqualified salary
continuation plan for certain key officers.  In connection with
this plan, the value of the single premium universal life
insurance policies (1996 - $620,657; 1995 - $594,221) purchased
in 1993 to fund the plan and the related liability (1996 -
$513,792; 1995 - $482,272) were included in other assets and
other liabilities, respectively.  Net non-cash income recognized
on these policies of $26,436 in 1996 and  $14,133 in 1995 is
included in the above asset values.  The principal cost of the
plan is being accrued over the anticipated remaining period of
active employment, based on the present value of the expected
retirement benefit.  Expense related to this plan was $64,024 in
1996, $106,066 in 1995, and $98,925 in 1994.

		The Bank also implemented a deferred compensation plan which
permitted directors, beginning in 1993, to defer their
director's fees and earn interest on the deferred amount.  A
liability increase and expense of $172,871 for 1996, $176,727
for 1995, and $126,262 for 1994 are recognized in the
accompanying financial statements.  In connection with this
plan, a single premium universal life insurance policy was
purchased on the life of each director who elected to
participate.  Net non-cash income recognized on these policies
of $85,249 in 1996 and $51,803 in 1995 is included in the cash
surrender values of  $1,887,171 and $1,801,922 reported in other
assets at December 31, 1996 and 1995, respectively.

		In 1996, the Bank established an officer group term
replacement/split dollar plan to provide life insurance benefits
that would continue after retirement.  A single premium
universal life insurance policy was purchased to fund the plan
and a split dollar agreement was made with an irrevocable trust
that specified the portion of the insurance proceeds that would 
become part of the trust.  An insurance premium of $795,000 was
paid in November, 1996, of which $785,330 is the cash surrender
value at December 31, 1996, and is included in other assets, and
net expense of $9,670 is included in other operating expense.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replace- ment/split dollar plan.  These
policies have an aggregate face amount of $2,875,000.



<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
 	                                      December 31, 1996 		       December 31, 1995 
                                      	Amortized    		Fair 	     	Amortized 		   Fair 
                                         	Cost 		     Value 		       Cost 		     Value 
                                                    (Dollars in Thousands)
Financial assets 					 			
<S>                                   <C>          <C>            <C>          <C>
  Cash and cash equivalents 	         $ 	27,917 	  $ 	27,917 	    $ 	31,282	   $ 	31,282 
  Securities held to maturity 		        118,542 		   119,226 		     127,663		    128,830 
  Securities available for sale 		       55,898 		    56,142 		      10,876		     11,269 
  Loans, net 		                         300,806 		   309,401 		     289,252 		   298,076 
  Accrued interest receivable 		          5,549 		     5,549 		       5,424		      5,424 

Financial liabilities 								
  Deposits 		                           460,573 		   449,129 		     410,778 		   398,296 
  Federal funds purchased 		              5,000 		     5,000 		      10,000 		    10,000 
  Short term borrowings 		                  523 		       523 		       1,955 		     1,955 
  Accrued interest payable 		             2,539 		     2,539 		       3,034 		     3,034 

<FN>
<F14>
Table XIII - Summary of Fair Values of Financial Instruments
</FN>
</TABLE>

		Estimated fair values have been determined by the Bank using
the best available data.  Many of the Bank's financial
instruments, however, lack an available trading market as
characterized by a willing buyer and willing seller engaging in
an unforced, unforeclosed transaction.  Therefore, significant
estimations and present value calculations were used by the Bank
for the purposes of this disclosure.  Changes in assumptions or
the estimation methodologies used may have a material effect on
the estimated fair values included in this note.

		Financial assets - Cash and cash equivalents are considered to
be carried at their fair value and have not been valued
differently than has been customary with historical cost
accounting.  Securities available-for-sale and securities
held-to-maturity are valued by an independent rating service and
are disclosed in detail in Note 2 above.  A present value
discounted cash flow methodology was used to value the net loan
portfolio.  The discount rate used in these calculations was the
current rate at which new loans in the same classification for
regulatory reporting purposes would be made.  This rate was
adjusted for credit loss and assumed prepayment risk.   For
loans with floating interest rates it is presumed that estimated
fair values generally approximate the recorded book balances.

		Financial liabilities - Deposits with stated maturities have
been valued using a present value discounted cash flow with a
discount rate approximating the current market for similar
liabilities.  Financial instrument liabilities with no stated
maturities have an  estimated fair value equal to both the
amount payable on demand and the recorded book balance.  For
deposits with floating interest rates it is presumed that
estimated fair values generally approximate the recorded book
balances.  The carrying amounts of federal funds purchased and
other short term borrowings are considered to approximate their
fair values.

		  The Bank's remaining assets and liabilities which are not
considered financial instruments have not been valued
differently than has been customary with historical cost
accounting.  Management is concerned that reasonable
comparability between financial institutions may be distorted
due to the wide range of permitted valuation techniques and
numerous estimates which must be made given the absence of
active secondary markets for many of the financial instruments. 
This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values. 

		At December 31, 1996, the Bank had outstanding standby letters
of credit and commitments to extend credit.  These
off-balance-sheet financial instruments are generally
exercisable at the market rate prevailing at the date the
underlying transaction will be completed and, therefore, are
deemed to have no current fair value.  Please refer to Note 9.  
 





<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                                		First 		      Second 		     Third 	     	Fourth 		
                               		Quarter 	     	Quarter   	 	Quarter 	 	   Quarter 		       Total 
     1996  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	9,052,224 	   $	9,280,303 	 $	9,249,133  	$	9,501,009 	 $37,082,669 
Interest expense 		             3,989,386 		    4,153,059 		  4,260,324 		  4,308,988		  16,711,757 
										
Net interest income 		          5,062,838 		    5,127,244 		  4,988,809		   5,192,021 		 20,370,912 
Provision for possible loan   										
  losses 		                       250,000 		      300,000 		    200,000 		    550,000 		  1,300,000 
Noninterest expenses, net of 										
  noninterest income 		         2,327,604 		    2,234,505 		  2,335,349		   2,417,319 		  9,314,777 
										
Income before income taxes 		   2,485,234 		    2,592,739 		  2,453,460		   2,224,702 		  9,756,135 
Income taxes 		                   777,319 		      776,659 	    	694,636 		    640,725 	  	2,889,339 

Net income 	                  $ 1,707,915 	   $	1,816,080 	 $	1,758,824 	 $	1,583,977 	 $	6,866,796 

Earnings per common share 										
    (1,400,000 shares) 	      $ 	    1.22 	   $  	   1.30   $ 	    1.25 	 $ 	    1.13	  $ 	    4.90  
</TABLE>
<TABLE>
<CAPTION>
                                  	First 		     Second 		     Third 	     Fourth 		
                               		Quarter 		     Quarter 		   Quarter 		   Quarter 		       Total 
     1995  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	8,244,228 	   $ 8,640,769 	 $	8,720,212   $	8,888,360 	 $34,493,569 
Interest expense 		             3,654,485 		    3,856,594 		  3,938,600 		  3,972,566		  15,422,245 
										
Net interest income 		          4,589,743 		    4,784,175 		  4,781,612		   4,915,794 		 19,071,324 
Provision for possible loan  										
  losses 		                       145,000 		      140,000 		    180,000 		    205,000 		    670,000 
Noninterest expenses, net of 										
  noninterest income 		         2,492,505 		    2,547,595 		  2,430,466		   2,296,283 		  9,766,849 
										
Income before income taxes 		   1,952,238 		    2,096,580 		  2,171,146		   2,414,511 		  8,634,475 
Income taxes 		                   512,448 		      589,977 		    680,609 		    735,735 		  2,518,769 

Net income 	                  $ 1,439,790 	   $	1,506,603 	 $	1,490,537 	 $	1,678,776 	 $	6,115,706 

Earnings per common share 										
  (1,400,000 shares) 	        $ 	    1.03 	   $  	   1.08 	 $ 	    1.06 	 $ 	    1.20 	 $ 	    4.37 

<FN>
<F15>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


NOTE 16 - DEPOSITS

		The Bank does not have any foreign offices and all deposits
are serviced in its fifteen domestic offices.  The average
amounts of deposits and the average rates paid are summarized in
Table XV.  Maturities  of  time deposits of $100,000 or more at
December 31 are indicated in Table XVI.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - DEPOSITS  (Continued)

<TABLE>
<CAPTION>
                                            	1996  	 	             1995  	 	          1994  
                                                 (Dollars in Thousands) 					
<S>                                  <C>          <C>     <C>          <C>    <C>           <C>
Demand deposits 	                    $ 	61,509 		  - 	% 	 $ 	56,730 		  - 	% 	$ 	55,557 	   	- 	% 
NOW and money market accounts 		       158,450 		 3.37 			  149,016 		 3.51			  161,244 	   3.25 	 
Savings deposits 		                     37,421 		 3.22 			   34,629 		 3.00  			 35,036 		  2.87 	 
Time deposits of less than $100,000 		 151,952 		 5.40  			 136,568		  5.30  			126,523 	 	 4.27 	 
Time deposits of $100,000 or more 		    34,539 		 5.41 			   32,524		  5.35 			  26,053 	 	 4.32 	 
													 	 	 
Total In Domestic Offices 	          $	443,871 		 3.74% 	 $	409,467		  3.72% 	$	404,413 	 	 3.66% 

<FN>
<F16>
Table XV - Average Amounts of Deposits and Average Rates Paid by
Deposit Type at December 31
</FN>
</TABLE>
<TABLE>
	                                     1996       		1995  		     1994  
                           							       (Dollars In Thousands)
<S>                                <C>          <C>          <C>
Under 3 months 	                   $	11,680 	   $ 	7,877 	   $ 	3,117 
3 to 12 months 		                    22,638 		    18,407 		    18,250 
Over 12 months 		                     4,812 		     4,310 		     4,803 
						
	                                  $	39,130 	   $	30,594 	   $	26,170 
<FN>
<F17>
Table XVI - Maturities of Time Deposits of $100,00 or More at
December 31
</FN>
</TABLE>


NOTE 17- CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
<CAPTION>
                             December 31, 1996 and 1995                                      
                             (In Thousands of Dollars)                                       
             Assets 		                                    1996  		  1995  
<S>                                                     <C>        <C>     
Cash 	                                                  $  	 142 	 $    	70 
Investment in bank subsidiary - at equity        		       53,870 	   48,517 
Investment in credit life insurance company - at cost       		50 	      	50 
Investment in other securities 		                             22 	       22 
Dividends receivable from bank subsidiary 		                 714 	      630 
Cash surrender value - life insurance 		                     489 		     466 
Other assets 		                                                1 		       1 
				
      Total assets 	                                    $	55,288 	 $	49,756 

       Liabilities and Stockholders' Equity 				
Liabilities 				
  Payable to directors 	                                $ 	  173 	 $ 	  129 
  Dividends payable 		                                       714 		     630 

      Total liabilities 		                                   887 		     759 
Stockholders' equity 				
  Common stock - $10 par value, authorized 4,000,000 				
    shares; 1,400,000 shares issued and outstanding 		    14,000		   14,000 
  Retained earnings 		                                    40,255 		  34,761 
  Net unrealized gain (loss) on available-for-sale  				
    securities, net of tax 		                                146 		     236 
      Total stockholders' equity 	                       	54,401 		  48,997 
				
      Total liabilities and stockholders' equity 	      $	55,288 	 $	49,756 
<FN>
<F18>
Table XVII - Condensed Balance Sheets of Parent
</FN>
</TABLE>


<PAGE>

                   FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION (Continued)

<TABLE>
<CAPTION>
          
                      Years Ended December 31, 1996 and 1995       
                            (In Thousands of Dollars)              

                                               		1996  	      	1995  
Operating income 				
<S>                                            <C>           <C>
  Dividends from bank subsidiary 	             $	1,372 	     $	1,232 
  Other dividend income 		                          85 		         22 
  Interest income 		                                 6 		          2 
  Other 		                                          28 		         27 

Operating expenses 		                               68 		         87 
				
    Income before equity in undistributed net 				
      income of bank subsidiary 		               1,423 		      1,196 

Equity in undistributed net income of bank
  subsidiary 		                                  5,444		       4,920 

    Net Income 	                               $	6,867 	     $	6,116 
<FN>
<F19>
Table XVIII - Condensed Statements of Income of Parent
</FN>
</TABLE>


<TABLE>
<CAPTION>
                         Years Ended December 31, 1996 and 1995         
                               (In Thousands of Dollars)          
              
                                                   	     	 1996  	      	1995  
Operating activities 	  			
<S>                                                      <C>           <C>
  Net income for the year  	                             $	6,867 	     $	6,116 
  Adjustments to reconcile net income to net cash 				
    provided by operating activities 				
  Equity in undistributed net income of bank 
    subsidiary                                          		(5,444) 		    (4,920) 
  Increase in other assets   		                             (111) 		       (69) 
  Increase in payables 		                                     44 	         	54 
				
     Total adjustments                                    (5,511)       (4,935)

  Net cash provided by operating activities 		             1,356		       1,181 
				
Net cash provided by (used in) investing activities 				
    Purchases of investment securities 	     	              (133) 		        - 
    Proceeds from maturities of investment securities 		     137 		         - 
     Net cash provided by (used in) investing activities		     4 		         - 

Net cash used in financing activities 				
  Cash dividends paid 		                                  (1,288) 		    (1,176) 
				
    Increase (decrease) in cash 		                            72 		          5 
				
Cash at beginning of year 		                                  70 		         65 

Cash at end of year 	                                    $  	142 	     $   	70 
<FN>
<F20>
Table XIX - Condensed Statements of Cash Flows of Parent
</FN>
</TABLE>




Item 3.  Legal Proceedings.

There are no material pending legal proceedings known to the
Board of Directors in which any director or executive officer or
principal shareholder of the Corporation and its subsidiary or
any business in which such persons are participants as a
material interest adverse to the Corporation and its subsidiary.


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

No matter was submitted to the security holders during the
fourth quarter of the fiscal year ended December 31, 1996.

<PAGE>

                              PART II


Item 5.  Market for the Registrant's Common Stock and Related
Security Holder Matters.

A discussion of the registrant's common stock and related
security holder matters is incorporated herein by reference to
Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of
Operations which are attached to and made a part of Annual
Report to Stockholders which is attached hereto as Exhibit 13.


<TABLE>
       FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY          
                      CONSOLIDATED BALANCE SHEETS                             
                      DECEMBER 31, 1996 and 1995                           
<CAPTION>
ASSETS 		                                           1996  		        1995  
<S>                                              <C>             <C>
Cash and due from banks         	                $ 	27,916,507	  $ 	31,281,706 
Securities 				
 Available for sale (amortized cost 
  $55,898,299 and $10,875,527 respectively)   		    56,141,535 		   11,269,006 
 Held to maturity (fair value $119,226,021 
  and $128,829,961 respectively) 		                118,541,750 		  127,662,682 
      Total securities - Note 2 		                 174,683,285		   138,931,688 
Loans, net of unearned income - Note 3 		          303,732,044		   291,930,311 
 Allowance for possible loan losses - Note 4   		   (2,926,063)		   (2,678,386) 
      Net loans 		                                 300,805,981 		  289,251,925 
Bank premises and equipment, at cost less
 allowance for depreciation and 
 amortization - Note 5   		                          6,829,475 		    6,397,936 
Other assets 		                                     15,094,426 		   11,171,993 

      TOTAL ASSETS 	                             $	525,329,674 	 $	477,035,248 

LIABILITIES 				
Deposits 				
 Noninterest-bearing 	                           $ 	75,589,511 	 $ 	67,420,536 
 Interest-bearing (including certificates 
  of deposit over $100,000: 
   1996 - $39,129,547; 1995 - $30,593,803)       		384,983,050 		  343,357,525 
       Total deposits 		                           460,572,561 		  410,778,061 
Federal funds purchased 		                           5,000,000 		   10,000,000 
Dividends payable 		                                   714,000 		      630,000 
Other short term liabilities 		                        522,928 		    1,955,000 
Accounts payable and accrued liabilities 		          4,119,059 		    4,675,712 
				
      TOTAL LIABILITIES 		                         470,928,548 		  428,038,773 
				
COMMITMENTS AND CONTINGENCIES - Notes 7 and 9 				
				
STOCKHOLDERS' EQUITY 				
Common stock - $10 par value, authorized 
 4,000,000 shares; 1,400,000 shares issued 
 and outstanding - Note 1 		                        14,000,000 		   14,000,000 
Retained earnings - Note 6 		                       40,255,185 		   34,760,389 
Net unrealized loss on available-for-sale
 securities, net of tax                              		145,941 		      236,086 
     TOTAL STOCKHOLDERS' EQUITY 		                  54,401,126 		   48,996,475 

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $	525,329,674 	 $	477,035,248 

</TABLE>

<TABLE>
                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
                     YEARS ENDED DECEMBER 31, 1996, 1995, and 1994 
<CAPTION>
                                                		 				           Net Unrealized 		
				                                                 	            	Gain (Loss) On 		
                                                   		Common       		Retained    	  	Available-for-sale 		
                                                    		Stock   	    	Earnings 	        	Securities 		           Total 
          
<S>                                              <C>            <C>                <C>                      <C>
BALANCE AT JANUARY 1, 1994 	                     $ 	7,000,000 	 $ 32,407,573 	     $     	- 	               $	39,407,573 
Cumulative effect of change in 
  accounting principle (net of
  deferred income taxes of $171,405) - Note 1 		        - 		          27,684		           229,424 		              257,108 
Two-for-one stock split - Note 1 		                 7,000,000 		  (7,000,000) 		           -		                     - 
Net income for the year 		                              - 		       5,561,426 		            - 		                5,561,426 
Cash dividends declared, $.80 per share 		              - 		      (1,120,000) 		           -		                (1,120,000) 
Net unrealized loss on available-for-sale 
  securities, net of tax		                              - 		           - 		             (277,981) 		            (277,981) 

BALANCE AT DECEMBER 31, 1994 		                    14,000,000     29,876,683		           (48,557) 		          43,828,126 
Net income for the year 		                              - 		       6,115,706 		            - 		                6,115,706 
Cash dividends declared, $.88 per share 		              - 		      (1,232,000) 		           -		                (1,232,000) 
Net unrealized gain on available-for-sale
  securities, net of tax 		                             - 		           - 		              284,643 		              284,643 

BALANCE AT DECEMBER 31, 1995 		                    14,000,000 		  34,760,389 		          236,086		            48,996,475 
Net income for the year 		                              - 		       6,866,796 		            - 		                6,866,796 
Cash dividends declared, $.98 per share 		              - 		      (1,372,000) 		           -		                (1,372,000) 
Net unrealized loss on available-for-sale
  securities, net of tax 		                             - 		           - 		              (90,145) 		             (90,145) 

BALANCE AT DECEMBER 31, 1996 	                   $	14,000,000 	 $	40,255,185 	     $   	 145,941 	          $	54,401,126 
<FN>
<F1>
The accompanying notes are an integral part of the consolidated
financial statements. 								
</FN>
</TABLE>


<PAGE>

<TABLE>
              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME                      
                  YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994        
<CAPTION>
                                      		    1996  		       1995  	   	    1994  
INTEREST INCOME 						
<S>                                   <C>            <C>            <C>
 Interest and fees on loans 	         $ 	27,343,817 	$ 	25,857,982 	$ 	21,130,914 
						
 Interest on investment securities 						
   Taxable interest 		                    6,892,118 		   6,179,492 		   7,185,169 
   Exempt from federal income tax 		      2,366,764 		   2,156,813    		2,184,666 
   Dividends 		                             256,951 		     177,790 		     204,948 
                                        		9,515,833 		   8,514,095 		   9,574,783 
   Other interest income 		                 223,019 		     121,492 		     111,841 
						
     TOTAL INTEREST INCOME 		            37,082,669 		  34,493,569   		30,817,538 

INTEREST EXPENSE  						
  Interest on deposits 		                16,617,525 		  15,247,875 		  12,770,618 
  Interest on other short term  
    borrowings 		                            94,232 		     174,370		       93,286 
						
     TOTAL INTEREST EXPENSE 		           16,711,757 		  15,422,245   		12,863,904 

     NET INTEREST INCOME 		              20,370,912 		  19,071,324		   17,953,634 
PROVISION FOR POSSIBLE LOAN 
  LOSSES - Note 4 		                      1,300,000		      670,000 		     660,000 

     NET INTEREST INCOME AFTER 						
       PROVISION FOR LOAN LOSSES 		      19,070,912		   18,401,324 		  17,293,634 

NONINTEREST  INCOME 						
  Trust department income 		              1,323,525 		   1,251,642 		   1,249,359 
  Service fees on deposit accounts 		     3,373,805 		   2,697,332	    	2,317,992 
  Other service fees, commissions, 
    and fees 		                             745,523		      300,407 		     336,758 
  Other operating income 		                 363,430 		     322,634 		     319,466 
  Available for sale securities 
    gains (losses) 		                         -		            1,182 		    (243,690) 
						
     TOTAL NONINTEREST INCOME 		          5,806,283 		   4,573,197		    3,979,885 

NONINTEREST  EXPENSES 						
  Salaries and employee benefits 		       7,030,588 		   6,620,827		    6,247,706 
  Net occupancy expense 		                1,211,067 		   1,279,434 		   1,190,678 
  Furniture and equipment expense 		      1,580,753 		   1,382,769	    	1,069,856 
  Deposit insurance 		                        6,549 		     499,709 		     890,646 
  Loss on other real estate 		                - 		          50,724 		       4,000 
  Other operating expenses 		             5,292,103 		   4,506,583    		4,105,461 
						
     TOTAL NONINTEREST EXPENSES 		       15,121,060		   14,340,046 		  13,508,347 

       INCOME BEFORE PROVISION FOR 						
         INCOME TAXES 		                  9,756,135 		   8,634,475		    7,765,172 
						
PROVISION FOR INCOME TAXES - Note 8 		    2,889,339 		   2,518,769		    2,203,746 
						
         NET INCOME  	                $  	6,866,796 	$  	6,115,706 	$  	5,561,426 

EARNINGS PER COMMON SHARE - Note 1 						
  (1,400,000 outstanding shares) 	    $ 	      4.90 	$       	4.37 	$       	3.97 
<FN>
<F2>
The accompanying notes are an integral part of the consolidated
financial statements. 						
</FN>
</TABLE>

<PAGE>

<TABLE>
                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY 
                          CONSOLIDATED STATEMENTS OF CASH FLOWS        
                      YEARS ENDED DECEMBER 31, 1996, 1995, and 1994      
<CAPTION>
                                          		1996        		1995        		1994  
OPERATING ACTIVITIES 						
<S>                                      <C>           <C>           <C>
  Net income 	                           $ 	6,866,796 	$ 	6,115,706 	$ 	5,561,426 
  Adjustments to reconcile net income
   to net cash provided by operating
   activities 						  
    Excess of provision for possible   
     loan losses over net charge offs   		    247,677 		    336,096 		    318,639 
    Provision for depreciation and   
     amortization of premises and   
     equipment 		                             685,005 		    645,816 		    589,045 
    Provision for depreciation of  
     leased equipment 		                      521,500		       - 	 	         - 
    Amortization of deposit base  
     intangibles 		                           224,212		     168,020 		    168,020 
    Amortization of investment    
     security premiums, net of   
     accretion of discounts 		                553,355 		    641,104		     678,968 
    Increase in cash surrender value
     of life insurance contracts 		          (111,685) 		   (65,936) 		   (75,287) 
    Deferred income taxes 		                 (161,999) 		  (233,403) 		  (163,907) 
   (Increase) decrease in 						  
     Interest receivable 		                  (125,119) 		  (255,109)		   (992,872) 
     Other assets 		                          307,844 		    912,162 		    344,572 
    Increase (decrease) in   						
     Interest payable 		                     (494,950) 		   577,137 		    222,605 
     Other liabilities   		                   (61,704) 	   	458,939 		    287,975 
						
       TOTAL ADJUSTMENTS 	  	               1,584,136 		  3,184,826		   1,377,758 
						
       NET CASH PROVIDED BY OPERATING
         ACTIVITIES                       		8,450,932 	  	9,300,532 		  6,939,184 

INVESTING ACTIVITIES 						
  Proceeds from maturities, calls, and
   sales of available-for-sale securities	  3,020,054 		  7,306,453  		25,152,051 
  Proceeds from maturities and calls of
   held-to-maturity securities 		          56,112,000 		 18,848,992 		  5,092,000 
  Purchases of investment securities 						
   Available-for-sale 		                  (48,222,295) 	 (3,168,200)		(16,942,994) 
   Held-to-maturity 		                    (47,364,954) 		(6,459,372)		(19,495,987) 
  Net increase in loans 		                (11,801,733)  (29,236,191)		(18,778,658) 
  Purchases of premises and equipment    		(1,116,543) 	  	(850,672)   		(418,586) 
  Purchase of equipment leased 		          (2,607,500) 		     - 	 	         - 
  Purchase of deposit base intangibles   		(1,124,258)  		    - 	      	    - 
  Purchase of single premium life 
   insurance contract                      		(785,330) 	   	  -      	 	    - 
						
       NET CASH USED BY INVESTING
        ACTIVITIES                      		(53,890,559) 	(13,558,990)		(25,392,174) 

FINANCING ACTIVITIES 						
 Net increase in noninterest-bearing
  and interest-bearing deposits 		         29,930,577 	  	5,625,638	  	16,217,348 
 Assumption of deposit liabilities
  - Note 12 		                             19,863,923 		      - 	 	         - 
 Net increase (decrease) in short
  term borrowings                        		(6,432,072)  		4,355,000 	  	7,000,000 
 Cash dividends 		                         (1,288,000) 		(1,176,000) 		(1,071,000) 
						
       NET CASH PROVIDED BY FINANCING
        ACTIVITIES                       		42,074,428   		8,804,638  		22,146,348 

       INCREASE (DECREASE) IN CASH AND
        CASH EQUIVALENTS                 		(3,365,199) 	 	4,546,180 		  3,693,358 

CASH AND CASH EQUIVALENTS AT BEGINNING
 OF YEAR 		                                31,281,706		  26,735,526 		 23,042,168 
						
CASH AND CASH EQUIVALENTS AT END OF 
 YEAR 	                                  $	27,916,507 	$	31,281,706 	$	26,735,526 
<FN>
<F3>
The accompanying notes are an integral part of the consolidated
financial statements.
</FN>
</TABLE>

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

		First Farmers and Merchants Corporation (the Corporation) was
incorporated on March 31, 1982, as a Tennessee corporation.  On 
April 13, 1982, the Board of Directors of the Corporation
adopted a resolution to execute and deliver to the Board of
Governors of the Federal Reserve System an application pursuant
to Section 3(a)(1) of the Bank Holding Company Act of 1956, as
amended, for prior approval by the Board of action to be taken
by the Corporation which would result in its becoming a bank
holding company. 

		As of December 31, 1996, the only subsidiary of the
Corporation was the Bank.  The Bank is a national banking
association which was organized in 1954 as a successor to a
state bank organized in 1909.  The Bank  conducts a full-service
commercial banking business at its principal office at 816 South
Garden Street, Columbia, Tennessee and at fourteen (14)
branches:  High Street Branch, Northside Branch, Shady Brook
Mall Branch, Hatcher Lane Branch, and Campbell Plaza Branch in
Columbia; Mt. Pleasant Branch in Mt. Pleasant; Spring Hill
Branch in Spring Hill; Lawrenceburg Branch in Lawrenceburg;
Leoma Branch in Leoma; Loretto Branch in Loretto; Lewisburg
Branch and Lewisburg West Branch in Lewisburg; Chapel Hill
Branch in Chapel Hill; and Centerville Branch in Centerville. 
The Bank provides automatic teller machine services in the
Northfield Complex at the Saturn location near Spring Hill, and
in Columbia at the Tennessee Farm Bureau, Columbia State
Community College, and Maury Regional Hospital.

		The community service area of the Bank is comprised of Maury,
Lawrence, Marshall, Hickman, and adjacent counties.  Commercial
banking in the marketing area served by the Bank is highly
competitive.  Although the Bank is ranked as the largest bank in
the area, in terms of total deposits, the Bank faces substantial
competition from fourteen (14) other banks, two (2) savings and
loan associations, and several credit unions located in the
marketing area.


Accounting Policies

		The accounting principles followed and the methods of applying
those principles conform with generally accepted accounting
principles and to general practices in the banking industry. 
The significant policies are summarized as follows.


Principles of Consolidation

		The accompanying consolidated financial statements present the
accounts of the Corporation and its wholly-owned subsidiary, the
Bank.  Material intercompany accounts and transactions have been
eliminated in consolidation.


Use of Estimates in the Preparation of Financial Statements

		The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.


Cash and Due From Banks

		Included in cash and due from banks are legally reserved
amounts which are required to be maintained on an average basis
in the form of cash and balances due from the Federal Reserve
Bank and other banks.  Average reserve requirements for the year
ended December 31, 1996, amounted to approximately $8.9 million.


Cash Equivalents

		Cash equivalents include cash on hand, cash due from banks,
and federal funds sold.  Federal funds are sold for one-day
periods.


Securities

		 Investments are classified in three categories and accounted
for as follows: 

		Debt securities that the Bank has the positive intent and
ability to hold to maturity are classified as held-to-maturity
and reported at amortized cost with premiums and discounts
recognized in interest income using the interest method over the
period to maturity.

<PAGE>

             FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities (Continued)

		Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are
classified as trading securities and reported at fair value,
with  unrealized gains and losses included in earnings.

		Debt and equity securities that may be sold prior to maturity
for asset/liability management purposes, or that may be sold in
response to changes in interest rates, changes in prepayment
risk, to increase regulatory capital or other similar factors,
are classified as available-for-sale securities and reported at
fair value, with unrealized gains and losses, net of tax, 
excluded from earnings and reported as a separate component of
stockholders' equity.  Gains and losses realized on the sale of
available-for-sale securities are determined using the specific
identification method.

		Declines in the fair value of individual available-for-sale
and held-to-maturity securities below their cost that are other
than temporary are included in earnings as realized losses.


Loans

		Loans that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off generally
are stated at their outstanding unpaid principal balances net of
any deferred fees or costs on originated loans, or unamortized
premiums or discounts on purchased loans.  A loan is considered
impaired when it is probable that an institution will be unable
to collect all amounts due (principal and interest) according to
the contractual terms of the loan agreement.  The Bank evaluates
smaller balance homogeneous loans collectively for impairment. 
Loans secured by one to four family residential properties,
consumer installment loans, and line of credit loans are
considered smaller-balance homogeneous loans.

		Interest on loans is computed daily based on the principal
amount outstanding.  Loan origination fees and related direct
costs are deferred and recognized as an adjustment of yield on
the interest method.  Interest accruals are discontinued when
loans are ninety days past-due or when a loan is considered
impaired.  All loans in non-accrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
non-accrual status is recognized only to the extent of the
excess of cash payments received over principal payments due.

		When a loan is collateral dependent, impairment is measured
based on the observable market price or the fair value of the
collateral.  For other loans, the amount of impairment is
measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. 
Positive changes in the net present value of an impaired loan
will in no event be used to increase the value of a loan above
the amount of the loan.


	Other Real Estate

		Other real estate, which is included in other assets,
represents real estate acquired through foreclosure and is
stated at the lower of fair value, net of estimated selling
costs, or cost, at the date of foreclosure.  If, at the time of
foreclosure, the fair value of the real estate is less than the
Bank's carrying value of the related loan, a write-down is
recognized through a charge to the allowance for possible loan
losses, and the fair value becomes the new cost for subsequent
accounting.  If the Bank later determines that the cost of the
property cannot be recovered through sale or use, a write-down
is recognized by a  charge to operations.  When the property is
not in a condition suitable for sale or use at the time of
foreclosure, completion and holding costs, including such items
as real estate taxes, maintenance and insurance, are capitalized
up to the estimated net realizable value of the property. 
However, when the property is in a condition for sale or use at
the time of foreclosure, or the property is already carried at
its estimated net realizable value, any subsequent holding costs
are expensed.  Legal fees and any other direct costs relating to
foreclosures are charged to operations when incurred.

		The Bank's recorded value for other real estate was
approximately $450 thousand at December 31, 1996, and $483
thousand at December 31, 1995.  


Allowance for Possible Loan Losses

	The allowance for possible loan losses is maintained at a level
believed adequate by management to absorb estimated probable
inherent loan losses.  Loan quality is monitored by Loan 


<PAGE>



            FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Possible Loan Losses (Continued)

Review, the Special Assets Committee, and the Credit
Administrator.  The amount by which a loan is determined to be
impaired is added to the allowance account in the period such
determination is made.  Recoveries on loans previously charged
off are credited to the allowance account in the period
received.  The adequacy of the allowance for possible loan
losses is evaluated quarterly in conjunction with loan review
reports and evaluations that are discussed in a meeting with
loan officers and loan administration.  The Bank's past loan
loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan
portfolio, current economic conditions, and other relevant
factors are considered in this evaluation.  This process is
inherently subjective as it requires material estimates that are
susceptible to significant change including the amounts and
timing of future cash flows expected to be received on impaired
loans.


Premises and Equipment

		Premises and equipment are stated at cost, less accumulated
depreciation and amortization.  The provision for depreciation
is computed principally on an accelerated cost recovery method
over the estimated useful lives of the assets, which range as
follows:  buildings - 15 to 50 years and equipment - 3 to 33
years.  Costs of major additions and improvements are
capitalized.  Expenditures for maintenance and repairs are
charged to operations as incurred.  Gains or losses from the
disposition of property are reflected in operations, and the
asset accounts and related allowances for depreciation are
reduced. 

		Certain other equipment purchased for lease to an outside
party under a five year operating lease is included in other
assets at cost less accumulated depreciation.  The equipment is
being depreciated on an accelerated basis over seven years.  


Trust Department Income

		Trust department income is recognized on the accrual basis in
the applicable period earned.


Stock Split

		During 1994, the Corporation amended its corporate charter to
increase the number of authorized shares of its common stock
from 2,000,000 to 4,000,000 shares and on April 12, 1994, the
Corporation's stockholders approved a two-for-one split effected
in the form of a 100% stock dividend distributed May 30, 1994,
to shareholders of record on April 12, 1994.  In accordance with
State corporate legal requirements, the transaction was recorded
by a transfer from retained earnings to common stock in the
amount of $7,000,000 ($10 for each additional share issued). 
All per share and share data in the accompanying consolidated
financial statements and footnotes have been restated to give
retroactive effect to the transaction.


Income Taxes

		The companies file a consolidated federal income tax return. 
Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income.

		Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. 
Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred
tax assets and liabilities.


Intangible Assets

	Deposit base intangibles identified in merger transactions are
amortized over 42 to 180 months on the straight-line method. 
Total amortization expense charged to operations amounted to: 
1996 - $224,212; 1995 - $168,020;  and  1994 - $168,020.



<PAGE>


           FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES 

Securities with an amortized cost of $103,540,673 and
$93,101,954 at December 31, 1996 and 1995, respectively (fair
value: 1996 - $104,061,311;  1995 - $93,937,766), were pledged
to secure deposits and for other purposes as required or
permitted by law.  The fair value is established by an
independent pricing service as of the approximate dates
indicated.  The differences between the amortized cost and fair
value reflect current interest rates and represent the potential
gain (or loss) had the portfolio been liquidated on that date. 
Security gains (or losses) are realized only in the event of
dispositions prior to maturity.  The fair values of all
securities at December 31, 1996, either equaled or exceeded the
cost of those securities, or the decline in fair value is
considered temporary.

<TABLE>
<CAPTION>
                                      Amortized                Gross Unrealized                Fair
		                                       Cost 	            	  Gain       	 	Loss 	        	    Value 

December 31, 1996 								
Available-for-sale securities 								
<S>                                <C>                    <C>             <C>              <C>
  U.S. Treasury 	                  $ 	26,412,520 	        $  	162,913 	   $ 	  63,634 	    $ 	26,511,799 
  U.S. Government agencies   		       26,850,441 		            45,866 		      318,203   		    26,578,104 
  Other securities   		                2,635,338 		           565,044 		      148,750 		       3,051,632 
                                  	$ 	55,898,299 	        $  	773,823 	   $  	530,587 	    $ 	56,141,535 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	30,504,935 	        $ 	 106,345 	   $   	22,080 	    $ 	30,589,200 
  U.S. Government agencies   		       39,679,582 	           	245,034 		       87,434		       39,837,182 
  States and political subdivisions 		47,538,074 		           700,948		       283,420 		      47,955,602 
  Other securities 		                    819,159 		            24,878 		        - 	 	            844,037 
                                  	$	118,541,750 	        $	1,077,205 	   $  	392,934 	    $	119,226,021 

December 31, 1995 								
Available-for-sale securities 								
  U.S. Treasury 	                  $  	5,064,421 	        $   	72,679    	$ 	   - 	        $  	5,137,100 
  U.S. Government agencies 		          3,279,968 		            72,268 		        2,570		        3,349,666 
  Other securities 		                  2,531,138 		           254,102 		        3,000 		       2,782,240 
	                                  $ 	10,875,527 	        $ 	 399,049 	   $ 	   5,570 	    $ 	11,269,006 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	61,426,813 	        $  	295,846 	   $ 	  59,359 	    $ 	61,663,300 
  U.S. Government agencies 		         23,498,204 		           267,237 		       48,041		       23,717,400 
  States and political subdivisions 		42,415,025 		           934,439		       241,048 		      43,108,416 
  Other securities 		                    322,640 		            18,205 		       - 		              340,845 
                                 	 $	127,662,682 	        $	1,515,727 	   $ 	 348,448 	    $	128,829,961 

<FN>
<F4>
Table I - Amortized Cost and Fair Value of Investment Securities.
</FN>
</TABLE>


<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES  (Continued)

		At December 31, 1996, the Corporation did not hold investment
securities of any single issuer, other than obligations of the
U.S. Treasury and other U.S. Government agencies, whose
aggregate book value exceeded ten percent of stockholders'
equity.

		Table II shows the amortized cost, fair value, and weighted
yields (for tax-exempt obligations on a fully taxable basis
assuming a 34% tax rate) of investment securities at December
31, 1996, by contractual maturity.  Expected maturities may
differ from contractual maturities because issuers may have the
right to call or prepay obligations.

		Proceeds from the maturity, call, or sale of
available-for-sale securities were $3,020,054, $7,306,453, and
$25,152,051 during 1996, 1995, and 1994 respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$56,112,000, $18,848,992, and $5,092,000 during 1996, 1995, and
1994 respectively.  There were no gains or losses in 1996. 
Gross gains of $1,182 and gross losses of $-0- were realized on
the dispositions in 1995.   Gross gains of $-0- and gross losses
of $243,690 were realized on the dispositions in 1994. 

<TABLE>
<CAPTION>
                            		        Amortized 	       	 Fair 		         Yield 	
                                       		Cost 		          Value 		     (Unaudited) 	

Available-for-sale securities 							
U.S. Treasury 							
<S>                                 <C>              <C>                  <C>
  Within one year 	                 $ 	16,189,997 	  $ 	16,176,499 		     5.6% 	
  After one but within five years 	    	9,171,798 		     9,274,000		      6.3% 	
  After five but within ten years 		    1,050,725 		     1,061,300      		6.4% 	
U.S. Government agencies 							
  Within one year 		                    1,000,000 		     1,021,300 		     8.0% 	
  After one but within five years 		   24,543,375 		    24,255,710      		5.9% 	
  After five but within ten years 	    	1,043,738 	     	1,038,400      		6.2% 	
  After ten years 		                      263,328 		       262,694 		     6.1% 	
  Other securities 		                   2,635,338 		     3,051,632 		     8.9% 	
	                                   $ 	55,898,299 	  $ 	56,141,535 			

Held-to-maturity securities 							
U.S. Treasury 							
  Within one year 	                 $ 	22,067,254 		 $  22,103,400 		     5.6% 	
  After one but within five years 		    5,238,326 		     5,301,900      		6.4% 	
  After five but within ten years 		    3,199,355 		     3,183,900		      6.0% 	
U.S. Government agencies 							
  Within one year 		                    4,504,421 		     4,512,100 		     6.1% 	
  After one but within five years 		   17,076,622 		    17,210,700      		6.4% 	
  After five but within ten years 		   18,098,539 		    18,114,382      		6.4% 	
States and political subdivisions 							
  Within one year 		                    3,015,087 		     3,061,625 		    10.0% 	
  After one but within five years 		   12,976,264 		    13,229,979      		8.1% 	
  After five but within ten years 		   20,837,173 		    20,940,923       	7.4% 	
  After ten years 		                   10,709,550 		    10,723,075 		     7.8% 	
Other securities 							
  After one but within five years 		      319,159 		       330,087 		     8.0% 	
  After five but within ten years 		      500,000 		       513,950 		     7.3% 	
 	                                  $	118,541,750 	  $ 119,226,021 			
<FN>
<F5>
Table II - Contractual Maturity of Investment Securities and
Weighted Tax Equivalent Yields
</FN>
</TABLE>

<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS

<TABLE>
<CAPTION>
                                                 		    1996  		                1995  	
Loans secured by real estate 					
<S>                                               <C>                    <C>
   Construction  and  land development 	          $ 	 8,751,021 	        $  	7,399,095 	
   Farmland 		                                        6,923,739 		           7,849,137 	
   Lines of credit 		                                   192,010 		             339,108 	
   1-4 family residential property - first lien 	  	116,905,803 		         111,016,393 	
   1-4 family residential property - junior lien 		   6,461,497            		7,177,285 	
   Multifamily residential property 		                2,487,453 		           3,729,687 	
   Non farm, non residential property 		             46,114,930 		          44,224,353 	
					
      Subtotal 		                                   187,836,453 		         181,735,058 	

Commercial and  industrial loans 					
   Commercial  and  industrial 		                    53,577,210 		          51,758,675 	
   Taxable municipal loans 		                           240,000 	 	            270,000 	
   All other loans 		                                   748,125 		              88,239 	
					
      Subtotal 		                                    54,565,335 		          52,116,914 	

Tax exempt municipal loans 		                           605,933 		           1,485,071 	
					
Loans to individuals 					
   Agricultural production 		                         2,894,845 		           3,659,215 	
   Lines of credit 		                                   200,903 		             135,230 	
   Individuals for personal expenditures 		          57,897,835           		53,026,209 	
					
      Subtotal 		                                    60,993,583 		          56,820,654 	

                                                  		304,001,304 		         292,157,697 	

Less: 					
   Net unamortized loan origination fees 		            (269,260) 		           (225,368)
   Unearned interest income 		                            - 		                  (2,018) 	
   Allowance for possible loan losses 		             (2,926,063)      		    (2,678,386) 	
					
	                                                 $ 300,805,981 	        $ 289,251,925 	
<FN>
<F6>
Table III - Loans Outstanding by Category at December 31, 1996
and 1995
</FN>
</TABLE>

<TABLE>
<CAPTION>
		 	 	                                         (In Thousands of Dollars) 	 	 	 	 
                            		Within 		        One to 		          After  		
                           		One Year 		     Five Years 		     Five Years 		   Total 

<S>                         <C>               <C>               <C>         <C>
Fixed rate loans 	          $ 	66,689 	       $ 	51,604 	       $ 	25,824 	 $	144,117 
Variable rate loans 		         99,680 		         32,963 		         27,241 		  159,884 

	                           $	166,369 	       $ 	84,567 	       $ 	53,065 	 $ 304,001 
<FN>
<F7>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1996
</FN>
</TABLE>




<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS (Continued)

		Loans having recorded investments of $5,136,286 at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  The total allowance for possible
loan losses related to these loans was $1,146,000.  Interest
received on these loans during 1996 was $504,840.  Impaired
loans had recorded investments of approximately  $5,856,000 at
December 31, 1995.

		Certain parties (principally directors and senior officers of
the Corporation or the Bank, including their affiliates,
families, and companies in which they hold ten percent or more
ownership) were customers of, and had loans and other
transactions with, the Bank in the ordinary course of business. 
An analysis of  activity with respect to such loans for the
years ended December 31, 1996 and 1995, is shown in Table V that
follows.

		These totals exclude loans made in the ordinary course of
business to other companies with which neither the Corporation
nor the Bank has a relationship other than the association of
one of its directors in the capacity of officer or director. 
These loan transactions were made on substantially the same
terms as those prevailing at the time for comparable loans to
other persons.  They did not involve more than the normal risk
of collectiblity or present other unfavorable features.  No
related party loans were charged off in 1996 or 1995.
<TABLE>
<CAPTION>
                                        		Balance at 							
                                        		Beginning  				               Amount 		    Balance at 	
                                        		 of Year 		   Additions   		Collected 		  End of Year 	

            1996  									
<S>                                      <C>           <C>           <C>            <C>
Aggregate of certain party loans 	       $	7,706,004 	 $ 8,454,247 	 $	7,937,989 	  $ 8,222,262 	
									
            1995  									
Aggregate of certain party loans 	       $	6,494,271 	 $ 7,020,665   $	5,808,932 	  $ 7,706,004 	

<FN>
<F8>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>

NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES

<TABLE>
<CAPTION>
      		                                       1996  		        1995  		       1994  
<S>                                        <C>             <C>            <C>
Balance at beginning of year 	             $	2,678,386 	   $ 2,342,290 	  $	2,023,651
Provision charged to operating expenses    		1,300,000 		      670,000      		660,000 
Loan losses: 						
  Loans charged off 		                      (1,388,422) 		    (555,957) 		   (422,831) 
  Recoveries on loans previously  						
    charged off 		                             336,099 		      222,053 		      81,470 

Balance at end of year 	                   $	2,926,063 	   $	2,678,386 	  $	2,342,290 
<FN>
<F9>
Table VI - Changes in the Allowance for Possible Loan Losses 
</FN>
</TABLE>


		In the opinion of management, based on conditions reasonably
known, the allowance was adequate at December 31, 1996. 
However, the allowance may be increased or decreased based on
loan growth, changes in credit quality, and changes in general
economic conditions.

		For federal income tax purposes, the allowance for possible
loan losses is maintained at the maximum allowable by the
Internal Revenue Code.



<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
		                                                    1996          		1995  	
<S>                                              <C>             <C>
Land 	                                           $ 	1,348,288 	  $ 	1,204,288 	
Premises 		                                         7,013,942 		    6,648,329 	
Furniture and equipment 		                          4,068,373 		    3,949,617 	
Leasehold improvements 		                           1,149,732 		      879,695 	
                                                 		13,580,335 		   12,681,929 	
Less allowance for depreciation and amortization 		(6,750,860)		   (6,283,993) 	
	                                                $ 	6,829,475 	  $ 	6,397,936 	
</TABLE>
	Annual provisions for depreciation and amortization of bank
premises and equipment total $685,005 for 1996, $645,816 for
1995, and $589,045 for 1994.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling $2,590,066 at December 31,
1996.                   


NOTE 6 - LIMITATION ON SUBSIDIARY DIVIDENDS

 The approval of the Comptroller of the Currency is required
before the Bank's dividends in a given year may exceed the total
of its net profit (as defined) for the year combined with
retained net profits of the preceding two years.  As of December
31, 1996, additional dividends of approximately $14,800,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for four of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2013.  In most cases,
the leases provide for one or more renewal options of five to
ten years under the same or similar terms.  In addition, various
items of teller and office equipment are leased under cancelable
and noncancelable operating leases.  Total rental expense
incurred under all operating leases, including short-term leases
with terms of less than one month, amounted to $726,337,
$660,121, and $409,764 for equipment leases, and $112,384,
$111,649, and $97,966 for building leases, in 1996, 1995, and
1994, respectively.  Future minimum lease commitments as of
December 31, 1996, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>

<S>                                    <S>    <C>
                                     		1997  	$  	784,704 
                                       1998    	 	714,848 
                        		             1999    		 383,334 
                                     		2000    		 123,758 
                                     		2001    		 123,758 

Total future minimum lease payments 			       $	2,130,402 

<FN>
<F9>
Table VIII - Future Minimum Lease Commitments
</FN>
</TABLE>


<PAGE>



                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES
<TABLE>
<CAPTION>
                                           		1996       		1995      	  1994  

<S>                                     <C>           <C>          <C>
Current: 						
  Federal 	                             $ 2,422,550 	 $	2,166,566 	$	1,831,848 
  State 		                                  628,788 		    585,606 		   503,433 
						
      Total current 		                    3,051,338 		  2,752,172 		 2,335,281 
Deferred: 						
  Federal 		                               (137,700) 		  (198,393) 		 (111,805) 
  State 		                                  (24,299) 		   (35,010) 		  (19,730) 

      Total deferred 		                    (161,999) 		  (233,403)  		(131,535) 
      Total provision for income taxes 	$	2,889,339   $	2,518,769  $ 2,203,746 
<FN>
<F10>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                           		1996  		      1995  		      1994  
<S>                                     <C>           <C>            <C>
Allowance for possible loan losses 	    $ 	 914,386   $  	815,315 	  $ 	682,877 
Write-down of other real estate 		          177,120 		    177,120 		    159,120 
Deferred compensation 		                    336,255 		    256,139 		    156,227 
Direct lease financing 		                     - 		          - 		         36,452 
Unrealized loss on AFS securities 		          - 		          -          		32,372 
Deferred loan fees 		                        26,863 		     44,051 		     24,546 

  Deferred tax asset 		                   1,454,624 		  1,292,625 		  1,091,594 

Unrealized gain on AFS securities 		        (97,294) 		  (157,392) 		     - 

  Deferred tax liability 		                 (97,294) 	  	(157,392) 		     - 

     Net deferred tax asset 	           $ 1,357,330 	 $	1,135,233	  $	1,091,594 
<FN>
<F11>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
	     	                                             1996  		      1995       		1994  
<S>                                             <C>           <C>           <C>
Tax expense at statutory rate 	                 $	3,317,086 	 $	2,935,722 	 $	2,640,158 
Increase (decrease) in taxes resulting from: 						
  Tax-exempt interest 		                           (859,383) 	  	(783,011) 		  (780,946) 
  Nondeductible interest expense 		                 101,534 		     89,491 		     75,019 
  Other nondeductible expenses 						
    (nontaxable income) - net 		                    (21,170) 		   (28,114)		     (6,458) 
  State income taxes, net of federal 						
    tax benefit 		                                  398,963 	    	363,393 	    	319,244 
  Dividend income exclusion 		                      (34,855) 		   (18,324) 		   (29,571) 
  Other 		                                          (12,836) 		   (40,388) 		   (13,700) 
Total provision for income taxes 	              $	2,889,339 	 $ 2,518,769 	 $	2,203,746 

Effective tax rate 		                                 29.6% 		      29.2% 		      28.4% 
<FN>
<F12>
Table XI - Reconciliation of Total Income Taxes Reported with
the Amount of Income Taxes Computed                   at the
Federal Statutory Rate (34% Each Year)
</FN>
</TABLE>
<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES (Continued)

		Total income taxes paid in 1996, 1995, and 1994 amounted to
$3,140,000, $2,756,442 and $2,431,332, respectively.

		A net deferred tax asset was included in other assets in the
accompanying consolidated balance sheet.  


NOTE 9 - COMMITMENTS

		The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers.  These financial
instruments include commitments to extend credit and standby
letters of credit.  Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.  The contract or notional
amounts of those instruments reflect the extent of involvement
the Bank has in those particular financial instruments.		

		The total outstanding loan commitments and stand-by letters of
credit in the normal course of business at December 31, 1996,
were $25,605,000 and $2,283,000, respectively.  Loan commitments
are agreements to lend to a customer as long as there is not a
violation of any condition established in the contract.  Standby
letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. 
Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond
financing, and similar transactions.  The credit risk involved
in issuing letters of credit is essentially the same as that
involved in making a loan.

		The loan portfolio is well diversified with loans generally
secured by tangible personal property, real property, or stock. 
The loans are expected to be repaid from cash flow or proceeds
from the sale of selected assets of the borrowers.  Collateral
requirements for the loan portfolio are based on credit
evaluation of the customer.  It is management's opinion that
there is not a concentration of credit risk in the portfolio.


NOTE 10 - SUPPLEMENTARY CASH FLOW

		 Interest paid on deposits and other borrowings during 1996,
1995, and 1994 amounted to $17,206,708, $14,845,107, and
$12,641,299, respectively.


NOTE 11 - SHAREHOLDERS'  EQUITY

		The Corporation and the Bank are subject to federal regulatory
risk-adjusted capital adequacy standards.  Failure to meet
capital adequacy requirements can initiate certain mandatory,
and possibly additional discretionary, actions by regulators
that could have a direct material effect on the consolidated
financial statements of the Corporation and its subsidiary, the
Bank.  The regulations require the Bank to meet specific capital
adequacy guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices.  The capital
classification is also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. 

		Quantitative measures established by regulation to ensure
capital adequacy require the Corporation and the Bank to
maintain minimum amounts and ratios of Total Capital and Tier I
Capital to risk-weighted assets and of Tier I Capital to average
assets.  Management believes, as of December 31, 1996 and 1995,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		As of June 30, 1996, the Bank's calculated risk-adjusted
capital ratios exceeded the minimum standard for a "well
capitalized" bank and this classification is confirmed by the
most recent notification from the Office of the Comptroller of
the Currency.  There are no conditions or events since that
notification that management believes have changed the
institution's category.  Actual capital amounts and ratios are
presented in Table XII.


<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - SHAREHOLDERS'  EQUITY (Continued)
<TABLE>
<CAPTION>
                                                                                				      To Be Well 
                                                                               				      Capitalized Under 
                                                              		For Capital 	   	      Prompt Corrective 
                                            Actual          	Adequacy Purposes 	   	    Action Provisions 
As of December 31, 1996 		            Amount    		Ratio 		  Amount  		 Ratio > or = 	 Amount 		  Ratio > or = 
<s >                                 <C>          <C>      <C>           <C>         <C>            <C>
Total Capital (to Risk Weighted
      Assets)   Consolidated 	     	 56,004,592 		18.69% 		23,972,003	 	 8.00% 		    29,965,004 	  	10.00% 
                Bank 		              55,472,014 		18.55% 		23,923,241		  8.00% 		    29,904,051 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      53,078,528 		17.71% 		11,986,300  		4.00% 		    17,979,450 		   6.00% 
                Bank 		              52,545,950 		17.57% 		11,962,652		  4.00% 		    17,943,978 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      52,066,624 		10.36% 		20,107,993		  4.00% 		    25,134,992 		   5.00% 
                Bank 		              50,574,336 		10.07% 		20,089,111		  4.00% 		    25,111,388 		   5.00% 

As of December 31, 1995 												
Total Capital (to Risk Weighted 												
      Assets)   Consolidated 		      51,162,164 		17.87% 		22,901,838 	 	8.00% 	    	28,627,297 		  10.00% 
                Bank 		              50,682,365 		17.74% 		22,855,632	  	8.00% 		    28,569,541 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      48,483,778 		16.94% 		11,450,919		  4.00% 		    17,176,378 		   6.00% 
                Bank 		              48,003,979 		16.80% 		11,429,519	  	4.00% 		    17,144,278 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      46,754,542 		10.08% 		18,549,574		  4.00% 		    23,186,967 		   5.00% 
                Bank 		              45,891,248 	 	9.91% 		18,523,208	  	4.00% 		    23,154,010 		   5.00% 

<FN>
<F13>
Table XII - Capital Amounts and Capital Adequacy
</FN>
</TABLE>


NOTE 12 - ACQUISITIONS

		On April 1, 1996, the Bank purchased certain assets and
assumed certain deposit liabilities of the Mt. Pleasant, Maury
County, Tennessee, and Lewisburg, Marshall County, Tennessee,
branches of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee.  The Office of the
Comptroller of the Currency granted approval of this
acquisition.  Deposit liabilities totaling $19.9 million were
assumed in the transaction in exchange for other assets acquired
totaling $1.6 million and cash for the balance.  The Mt.
Pleasant branch was combined with the Bank's office there and
the building was donated to the Mt. Pleasant-Maury Phosphate
Museum, a non-profit organization dedicated to preserving the
rich history of the phosphate industry in this area and actively
promoting tourism and economic development.  The Lewisburg
branch gave the Bank a second location in Lewisburg
complementing the market penetration in Marshall County.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - EMPLOYEE BENEFIT PLANS

		The Bank contributes to a defined contribution, profit-sharing
plan covering employees who meet participation requirements. 
The amount of the contribution is discretionary as determined by
the Board of Directors up to the maximum deduction allowed for
federal income tax purposes.  Contributions to the plan, that
amounted to $661,307, $633,459 and $602,010, in 1996, 1995, and
1994, respectively, are included in salaries and employee
benefits expense. 

		In 1992, the Bank formalized a nonqualified salary
continuation plan for certain key officers.  In connection with
this plan, the value of the single premium universal life
insurance policies (1996 - $620,657; 1995 - $594,221) purchased
in 1993 to fund the plan and the related liability (1996 -
$513,792; 1995 - $482,272) were included in other assets and
other liabilities, respectively.  Net non-cash income recognized
on these policies of $26,436 in 1996 and  $14,133 in 1995 is
included in the above asset values.  The principal cost of the
plan is being accrued over the anticipated remaining period of
active employment, based on the present value of the expected
retirement benefit.  Expense related to this plan was $64,024 in
1996, $106,066 in 1995, and $98,925 in 1994.

		The Bank also implemented a deferred compensation plan which
permitted directors, beginning in 1993, to defer their
director's fees and earn interest on the deferred amount.  A
liability increase and expense of $172,871 for 1996, $176,727
for 1995, and $126,262 for 1994 are recognized in the
accompanying financial statements.  In connection with this
plan, a single premium universal life insurance policy was
purchased on the life of each director who elected to
participate.  Net non-cash income recognized on these policies
of $85,249 in 1996 and $51,803 in 1995 is included in the cash
surrender values of  $1,887,171 and $1,801,922 reported in other
assets at December 31, 1996 and 1995, respectively.

		In 1996, the Bank established an officer group term
replacement/split dollar plan to provide life insurance benefits
that would continue after retirement.  A single premium
universal life insurance policy was purchased to fund the plan
and a split dollar agreement was made with an irrevocable trust
that specified the portion of the insurance proceeds that would 
become part of the trust.  An insurance premium of $795,000 was
paid in November, 1996, of which $785,330 is the cash surrender
value at December 31, 1996, and is included in other assets, and
net expense of $9,670 is included in other operating expense.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replace- ment/split dollar plan.  These
policies have an aggregate face amount of $2,875,000.



<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
 	                                      December 31, 1996 		       December 31, 1995 
                                      	Amortized    		Fair 	     	Amortized 		   Fair 
                                         	Cost 		     Value 		       Cost 		     Value 
                                                    (Dollars in Thousands)
Financial assets 					 			
<S>                                   <C>          <C>            <C>          <C>
  Cash and cash equivalents 	         $ 	27,917 	  $ 	27,917 	    $ 	31,282	   $ 	31,282 
  Securities held to maturity 		        118,542 		   119,226 		     127,663		    128,830 
  Securities available for sale 		       55,898 		    56,142 		      10,876		     11,269 
  Loans, net 		                         300,806 		   309,401 		     289,252 		   298,076 
  Accrued interest receivable 		          5,549 		     5,549 		       5,424		      5,424 

Financial liabilities 								
  Deposits 		                           460,573 		   449,129 		     410,778 		   398,296 
  Federal funds purchased 		              5,000 		     5,000 		      10,000 		    10,000 
  Short term borrowings 		                  523 		       523 		       1,955 		     1,955 
  Accrued interest payable 		             2,539 		     2,539 		       3,034 		     3,034 

<FN>
<F14>
Table XIII - Summary of Fair Values of Financial Instruments
</FN>
</TABLE>

		Estimated fair values have been determined by the Bank using
the best available data.  Many of the Bank's financial
instruments, however, lack an available trading market as
characterized by a willing buyer and willing seller engaging in
an unforced, unforeclosed transaction.  Therefore, significant
estimations and present value calculations were used by the Bank
for the purposes of this disclosure.  Changes in assumptions or
the estimation methodologies used may have a material effect on
the estimated fair values included in this note.

		Financial assets - Cash and cash equivalents are considered to
be carried at their fair value and have not been valued
differently than has been customary with historical cost
accounting.  Securities available-for-sale and securities
held-to-maturity are valued by an independent rating service and
are disclosed in detail in Note 2 above.  A present value
discounted cash flow methodology was used to value the net loan
portfolio.  The discount rate used in these calculations was the
current rate at which new loans in the same classification for
regulatory reporting purposes would be made.  This rate was
adjusted for credit loss and assumed prepayment risk.   For
loans with floating interest rates it is presumed that estimated
fair values generally approximate the recorded book balances.

		Financial liabilities - Deposits with stated maturities have
been valued using a present value discounted cash flow with a
discount rate approximating the current market for similar
liabilities.  Financial instrument liabilities with no stated
maturities have an  estimated fair value equal to both the
amount payable on demand and the recorded book balance.  For
deposits with floating interest rates it is presumed that
estimated fair values generally approximate the recorded book
balances.  The carrying amounts of federal funds purchased and
other short term borrowings are considered to approximate their
fair values.

		  The Bank's remaining assets and liabilities which are not
considered financial instruments have not been valued
differently than has been customary with historical cost
accounting.  Management is concerned that reasonable
comparability between financial institutions may be distorted
due to the wide range of permitted valuation techniques and
numerous estimates which must be made given the absence of
active secondary markets for many of the financial instruments. 
This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values. 

		At December 31, 1996, the Bank had outstanding standby letters
of credit and commitments to extend credit.  These
off-balance-sheet financial instruments are generally
exercisable at the market rate prevailing at the date the
underlying transaction will be completed and, therefore, are
deemed to have no current fair value.  Please refer to Note 9.  
 





<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                                		First 		      Second 		     Third 	     	Fourth 		
                               		Quarter 	     	Quarter   	 	Quarter 	 	   Quarter 		       Total 
     1996  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	9,052,224 	   $	9,280,303 	 $	9,249,133  	$	9,501,009 	 $37,082,669 
Interest expense 		             3,989,386 		    4,153,059 		  4,260,324 		  4,308,988		  16,711,757 
										
Net interest income 		          5,062,838 		    5,127,244 		  4,988,809		   5,192,021 		 20,370,912 
Provision for possible loan   										
  losses 		                       250,000 		      300,000 		    200,000 		    550,000 		  1,300,000 
Noninterest expenses, net of 										
  noninterest income 		         2,327,604 		    2,234,505 		  2,335,349		   2,417,319 		  9,314,777 
										
Income before income taxes 		   2,485,234 		    2,592,739 		  2,453,460		   2,224,702 		  9,756,135 
Income taxes 		                   777,319 		      776,659 	    	694,636 		    640,725 	  	2,889,339 

Net income 	                  $ 1,707,915 	   $	1,816,080 	 $	1,758,824 	 $	1,583,977 	 $	6,866,796 

Earnings per common share 										
    (1,400,000 shares) 	      $ 	    1.22 	   $  	   1.30   $ 	    1.25 	 $ 	    1.13	  $ 	    4.90  
</TABLE>
<TABLE>
<CAPTION>
                                  	First 		     Second 		     Third 	     Fourth 		
                               		Quarter 		     Quarter 		   Quarter 		   Quarter 		       Total 
     1995  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	8,244,228 	   $ 8,640,769 	 $	8,720,212   $	8,888,360 	 $34,493,569 
Interest expense 		             3,654,485 		    3,856,594 		  3,938,600 		  3,972,566		  15,422,245 
										
Net interest income 		          4,589,743 		    4,784,175 		  4,781,612		   4,915,794 		 19,071,324 
Provision for possible loan  										
  losses 		                       145,000 		      140,000 		    180,000 		    205,000 		    670,000 
Noninterest expenses, net of 										
  noninterest income 		         2,492,505 		    2,547,595 		  2,430,466		   2,296,283 		  9,766,849 
										
Income before income taxes 		   1,952,238 		    2,096,580 		  2,171,146		   2,414,511 		  8,634,475 
Income taxes 		                   512,448 		      589,977 		    680,609 		    735,735 		  2,518,769 

Net income 	                  $ 1,439,790 	   $	1,506,603 	 $	1,490,537 	 $	1,678,776 	 $	6,115,706 

Earnings per common share 										
  (1,400,000 shares) 	        $ 	    1.03 	   $  	   1.08 	 $ 	    1.06 	 $ 	    1.20 	 $ 	    4.37 

<FN>
<F15>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


NOTE 16 - DEPOSITS

		The Bank does not have any foreign offices and all deposits
are serviced in its fifteen domestic offices.  The average
amounts of deposits and the average rates paid are summarized in
Table XV.  Maturities  of  time deposits of $100,000 or more at
December 31 are indicated in Table XVI.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - DEPOSITS  (Continued)

<TABLE>
<CAPTION>
                                            	1996  	 	             1995  	 	          1994  
                                                 (Dollars in Thousands) 					
<S>                                  <C>          <C>     <C>          <C>    <C>           <C>
Demand deposits 	                    $ 	61,509 		  - 	% 	 $ 	56,730 		  - 	% 	$ 	55,557 	   	- 	% 
NOW and money market accounts 		       158,450 		 3.37 			  149,016 		 3.51			  161,244 	   3.25 	 
Savings deposits 		                     37,421 		 3.22 			   34,629 		 3.00  			 35,036 		  2.87 	 
Time deposits of less than $100,000 		 151,952 		 5.40  			 136,568		  5.30  			126,523 	 	 4.27 	 
Time deposits of $100,000 or more 		    34,539 		 5.41 			   32,524		  5.35 			  26,053 	 	 4.32 	 
													 	 	 
Total In Domestic Offices 	          $	443,871 		 3.74% 	 $	409,467		  3.72% 	$	404,413 	 	 3.66% 

<FN>
<F16>
Table XV - Average Amounts of Deposits and Average Rates Paid by
Deposit Type at December 31
</FN>
</TABLE>
<TABLE>
	                                     1996       		1995  		     1994  
                           							       (Dollars In Thousands)
<S>                                <C>          <C>          <C>
Under 3 months 	                   $	11,680 	   $ 	7,877 	   $ 	3,117 
3 to 12 months 		                    22,638 		    18,407 		    18,250 
Over 12 months 		                     4,812 		     4,310 		     4,803 
						
	                                  $	39,130 	   $	30,594 	   $	26,170 
<FN>
<F17>
Table XVI - Maturities of Time Deposits of $100,00 or More at
December 31
</FN>
</TABLE>


NOTE 17- CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
<CAPTION>
                             December 31, 1996 and 1995                                      
                             (In Thousands of Dollars)                                       
             Assets 		                                    1996  		  1995  
<S>                                                     <C>        <C>     
Cash 	                                                  $  	 142 	 $    	70 
Investment in bank subsidiary - at equity        		       53,870 	   48,517 
Investment in credit life insurance company - at cost       		50 	      	50 
Investment in other securities 		                             22 	       22 
Dividends receivable from bank subsidiary 		                 714 	      630 
Cash surrender value - life insurance 		                     489 		     466 
Other assets 		                                                1 		       1 
				
      Total assets 	                                    $	55,288 	 $	49,756 

       Liabilities and Stockholders' Equity 				
Liabilities 				
  Payable to directors 	                                $ 	  173 	 $ 	  129 
  Dividends payable 		                                       714 		     630 

      Total liabilities 		                                   887 		     759 
Stockholders' equity 				
  Common stock - $10 par value, authorized 4,000,000 				
    shares; 1,400,000 shares issued and outstanding 		    14,000		   14,000 
  Retained earnings 		                                    40,255 		  34,761 
  Net unrealized gain (loss) on available-for-sale  				
    securities, net of tax 		                                146 		     236 
      Total stockholders' equity 	                       	54,401 		  48,997 
				
      Total liabilities and stockholders' equity 	      $	55,288 	 $	49,756 
<FN>
<F18>
Table XVII - Condensed Balance Sheets of Parent
</FN>
</TABLE>


<PAGE>

                   FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION (Continued)

<TABLE>
<CAPTION>
          
                      Years Ended December 31, 1996 and 1995       
                            (In Thousands of Dollars)              

                                               		1996  	      	1995  
Operating income 				
<S>                                            <C>           <C>
  Dividends from bank subsidiary 	             $	1,372 	     $	1,232 
  Other dividend income 		                          85 		         22 
  Interest income 		                                 6 		          2 
  Other 		                                          28 		         27 

Operating expenses 		                               68 		         87 
				
    Income before equity in undistributed net 				
      income of bank subsidiary 		               1,423 		      1,196 

Equity in undistributed net income of bank
  subsidiary 		                                  5,444		       4,920 

    Net Income 	                               $	6,867 	     $	6,116 
<FN>
<F19>
Table XVIII - Condensed Statements of Income of Parent
</FN>
</TABLE>


<TABLE>
<CAPTION>
                         Years Ended December 31, 1996 and 1995         
                               (In Thousands of Dollars)          
              
                                                   	     	 1996  	      	1995  
Operating activities 	  			
<S>                                                      <C>           <C>
  Net income for the year  	                             $	6,867 	     $	6,116 
  Adjustments to reconcile net income to net cash 				
    provided by operating activities 				
  Equity in undistributed net income of bank 
    subsidiary                                          		(5,444) 		    (4,920) 
  Increase in other assets   		                             (111) 		       (69) 
  Increase in payables 		                                     44 	         	54 
				
     Total adjustments                                    (5,511)       (4,935)

  Net cash provided by operating activities 		             1,356		       1,181 
				
Net cash provided by (used in) investing activities 				
    Purchases of investment securities 	     	              (133) 		        - 
    Proceeds from maturities of investment securities 		     137 		         - 
     Net cash provided by (used in) investing activities		     4 		         - 

Net cash used in financing activities 				
  Cash dividends paid 		                                  (1,288) 		    (1,176) 
				
    Increase (decrease) in cash 		                            72 		          5 
				
Cash at beginning of year 		                                  70 		         65 

Cash at end of year 	                                    $  	142 	     $   	70 
<FN>
<F20>
Table XIX - Condensed Statements of Cash Flows of Parent
</FN>
</TABLE>





              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS 

GENERAL

	First Farmers and Merchants Corporation, a one-bank holding
company, was formed during 1982.  Its only subsidiary, First
Farmers and Merchants National Bank, is a community bank that
was established in 1909.  The resulting financial condition of
the Corporation should be evaluated in terms of the Bank's
operations within its service area.

	During 1996, First Farmers and Merchants National Bank
strengthened its presence in the four counties in middle
Tennessee that it serves.  Deposits and loans in each of the
four counties increased.  Internal growth was the challenge for
the year to all directors, officers, and employees who were
reminded that the bank was large enough to perform yet small
enough to care about customer needs.  The Bank is positioned to
provide quality services in diverse markets and a dynamic
interest rate environment.  Our customers are enjoying the
quality service of a community bank and the safety and strength
of a regional bank.

	These tables plus the following discussion and financial
information is presented to aid in understanding First Farmers
and Merchants' current financial position and results of
operations.  The emphasis of this discussion will be on the
years 1996, 1995, and 1994; however, financial information for
prior years will also be presented when appropriate.  This
discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes to Consolidated Financial
Statements included elsewhere in this material.


FINANCIAL CONDITION 

	First Farmers and Merchants National Bank's financial condition
depends on the quality and nature of its assets, its liability
and capital structure, the market and economic conditions, and
the quality of its personnel.  The following paragraphs provide
a unique perspective on the internal structures of the
Corporation and the Bank that provide the strength in our
organization.


Summary

	The Bank reported net income of $6.9 million for 1996 compared
to $6.1 million in 1995 and $5.6 million in 1994.  On a per
common share basis, net income was $4.90 for 1996 versus $4.37
for 1995 and $3.97 for 1994.  The improvement in 1996's earnings
resulted from a wider gross margin, an increase in noninterest
income sufficient to cover a smaller increase in noninterest
expenses, and the increase in taxes.  The smaller increase in
noninterest expenses is due in part to the significant decrease
in deposit insurance.  These improve- ments were partially
offset by higher additions to the allowance for loan losses.

	The return on average equity for 1996 was 13.23% compared to
13.08% for 1995 and 13.30% for 1994.   The return on average
assets was 1.37% for 1996 versus 1.32% for 1995 and 1.23% for
1994.


Gross Interest Margin

	The gross interest margin is defined as the difference between
the revenue from earning assets, primarily interest income, and
interest expense related to interest-bearing liabilities.  The
maintenance of the gross interest margin at a level which, when
coupled with noninterest revenues, is sufficient to cover
additions to the allowance for loan losses, noninterest expenses
and income taxes, and yield an acceptable profit is critical for
success in the banking industry.  The gross interest margin is a
function of the average balances of earning assets and
interest-bearing liabilities and the yields earned and rates
paid on those balances. 

	Management activities are planned to maintain a satisfactory
spread between the yields on earning assets and the related cost
of interest-bearing funds.  The gross interest spread is
determined by comparing the taxable equivalent gross interest
margin to average earning assets before deducting the allowance
for loan losses.  This ratio reflects the overall profitability
of earning assets, including both those funded by
interest-bearing sources and those which incur no interest cost
(primarily noninterest-bearing demand deposits).  This ratio is
most often used when analyzing a banking institution's overall
gross margin profitability compared to that of other financial
institutions.  The incremental interest spread compares the
difference between the yields on earning assets and the cost of
interest-bearing funds.  This calculation and similar ratios are
used to assist in pricing decisions for interest related
products. 

	Table A entitled DISTRIBUTION OF ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY, INTEREST RATES AND INTEREST DIFFERENTIAL
presents for each of the last three years by major categories of
assets and liabilities, the average daily balances, the
components of the gross interest margin (on a taxable equivalent
basis), the yield or  rate, and the incremental and gross
interest spread.  

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

TABLE A - Distribution of Assets, Liabilities, and Stockholders'
Equity, Interest Rates 			and Interest Differential

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31, 
                              	            1996        		              1995  		                     1994  
                              	  Average  	Rate/ 	          		Average  Rate/ 				         Average 		Rate/ 		
                              	  Balance 	 Yield   Interest 		Balance 	Yield 		Interest   Balance 	 Yield 		 Interest 
ASSETS 	                                                    (Dollars In Thousands) 
Interest earning assets 																								
<S>                             <C>         <C>    <C>        <C>       <C>    <C>        <C>        <C>    <C>
 Loans, net 	                   $290,413 		 9.43% 	$	27,373* 	$276,166 	9.38% 	$	25,892* 	$247,791 		8.54% 	$	21,156* 
 Bank time deposits 		                 1 		   - 			     - 			        2    -			      - 			      - 		    - 			     - 	
 Taxable securities 		           118,030 		 6.15 			  7,256 			104,220		6.20 			  6,457 			119,960 		6.25 			  7,497 	
 Tax exempt securities 		         44,158 		 7.10 			  3,134*  		39,139 	8.06  		  3,156* 		 38,545 		8.49 			  3,274* 
 Federal funds sold 		             4,198  		5.31     			223 		  	2,076		5.83 			    121 			  2,998 		3.73 			    112 	
																								
 TOTAL EARNING ASSETS 		         456,800 		 8.32 		$	37,986			 421,603		8.45 		$	35,626 			409,294 		7.83 		$	32,039 	
Noninterest earning assets 																								
 Cash and due from banks 		       25,760 								               24,829								              25,945 						
 Bank premises and equipment 	  	  6,708 								                6,246								               6,350 						
 Other assets 		                  13,432 							 	              11,061 								             10,364

 TOTAL ASSETS 	                 $502,700 							              $463,739 					 		           $451,953 						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY 																								
Interest bearing liabilities 																								
 Time and savings deposits: 																								
 NOW and money market accounts	$158,438 	   3.37% 	$ 	5,338 		$148,993  3.51% 	$ 	5,223 		$161,244 		3.25%	 $ 	5,239 	
 Savings 		                      37,428 		  3.22 			  1,204 	 		34,627  3.00 			  1,040			  35,036 		2.87 			  1,006 	
 Time  		                       151,973		   5.40 		  	8,210 			136,605  5.30 			  7,245			 126,523 		4.27 			  5,400 	
 Time over $100,000 		           34,554 		  5.40 	  		1,866 	 		32,522		5.35 			  1,740 			 26,053 		4.32 			  1,126 	
																								
 TOTAL INTEREST BEARING 
  DEPOSITS 		                   382,393 		  4.35			  16,618 			352,747 	4.32 			 15,248 		 348,856 		3.66			  12,771 	
 Federal funds purchased 		       1,043 		  5.56 			     58 			  2,415		5.92 			    143 			  1,462 		4.86 			     71 	
 Other short-term debt 		           622 		  5.79      			36 	    		565 	5.49			      31 			    568 		3.92 			     22 	
																								
 TOTAL INTEREST BEARING 
  LIABILITIES 		                384,058 		  4.35 		$	16,712 			355,727 	4.34 		$ 15,422 			350,886 		3.67 		$	12,864 	
Noninterest bearing liabilities 																								
 Demand deposits 		              61,509 								                56,742 								             55,557
 Other liabilities 		             5,066 								                 4,515 								              3,690						

 TOTAL LIABILITIES 		           450,633 								               416,984								             410,133 						
Stockholders' equity 		          52,067 								                46,755 								             41,820
						
 TOTAL LIABILITIES AND 																								
  STOCKHOLDER'S EQUITY 	       $502,700 							               $463,739 							            $451,953 						

 Spread between combined 
   rates earned and combined 
    rates paid* 				                        3.97% 	               						4.11%							                 4.16% 			

 Net yield on interest-
  earning assets* 				                      4.66% 							               4.79% 							                4.68% 			
<FN>
<F21>
* Taxable equivalent basis
</FN>
</TABLE>

Notes:
1.	U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.
2.	The taxable equivalent adjustment has been computed based on
a 34% federal income tax rate and has given effect to the
disallowance of interest expense, for federal income tax
purposes, related to certain tax-free assets.  Loans include
nonaccrual loans for all years presented.
3.	The average balances of the fair values of available-for-sale
securities were used in the calculations in this table.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 

TABLE B - Distribution of Assets, Liabilities, and Stockholders'
          Equity, Interest Rates and Interest Differential     (Continued)

	Table B sets forth, for the periods indicated, a summary of
changes in interest earned and interest paid separated into the
amount generated by volume changes and the amount generated by
changes in the yield or rate. 

<TABLE>
<CAPTION>
                                             	  1996 Compared to 1995          	 	1995 Compared to 1994
Volume and Yield/Rate Variances 				                  Yield/ 		Net Increase       				  Yield/ 		 Net Increase 
(Taxable Equivalent Basis - In Thousands) 	 	Volume 		Rate   		(Decrease) 		   Volume 		Rate 		   (Decrease) 
Revenue earned on 												
<S>                                         <C>       <C>       <C>           <C>       <C>        <C>
  Net loans 	                               $ 1,336 	 $  	145 	 $	1,481 	     $	2,423 	 $	2,313 	  $	4,736 
  Investment securities 												
    Taxable securities 		                       856 		    (57) 		   799 		       (984) 		   (56)		  (1,040) 
    Tax-free securities 		                      405 		   (427) 		   (22) 		        50 		   (168)		    (118) 
  Federal funds sold 		                         124 		    (22) 		   102 		        (34) 		    43 		       9 

     Total interest earning assets 		         2,721 		   (361)		  2,360 		      1,455 		  2,132 		   3,587 
Interest paid on 												
  NOW and money market accounts 		              331 		   (216) 		   115 		       (398)		    382 		     (16) 
  Savings deposits 		                            84 		     80 		    164 		        (12) 		    46 		      34 
  Time deposits 		                              815 		    150 		    965 		        430 		  1,415 		   1,845 
  Time over $100,000    		                      109 		     17 		    126 		        279 		    335 		     614 
  Federal funds purchased 		                    (81) 		    (4) 		   (85) 		        46 		     26 		      72 
  Short term debt 		                              3 		      2 		      5 		        - 		        9 		       9 
												
      Total interest-bearing funds 		         1,261 		     29 		  1,290		         345 		  2,213 		   2,558 
												
Net interest earnings 	                     $	1,460 	 $ 	(390) 	$	1,070 	     $	1,110 	 $  	(81)   $	1,029 
</TABLE>
Notes:

1.	The change in interest resulting from both volume and
yield/rate has been allocated to change due to volume and change
due to yield/rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
2.	The computation of the taxable equivalent adjustment has
given effect to the disallowance of interest expense, for
federal income tax purposes, related to certain tax-free assets.
3. U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.





<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 


		Two graphs are included at this point in the material mailed to our stock-
holders.  The first graph illustrates the categories of average earning
assets and the portion each category is of the total for the
last three years.  The following table is the data illustrated
by this graph.
<TABLE>
<CAPTION>
					                 Loans        	Investment Securities	    Other
   <S>              <C>                   <C>                <C>
			1996	           	$290,413	             $162,188           $4,199
			1995		            276,166	 	            143,358 	          2,078
			1994		            247,791	 	            158,505	           2,998

</TABLE>

The second graph illustrates the average balances by category of
liabilities that fund earning assets.  The following table is
the data illustrated by this graph in thousands of dollars.

<TABLE>
<CAPTION>
		         Interest-Bearing Deposits		   Noninterest-Bearing Deposits	   Other
 <S>               <C>                           <C>                    <C>
	1996		            $382,393			                   $61,509			             $1,043
	1995		             352,747				                   56,742			              2,415
	1994		             348,856				                   55,557			              1,462
</TABLE>


		Average earning assets increased 8.4% in 1996 compared to an
3.0% increase in 1995 and a 7.6% increase in 1994.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1996, average net loans represented 
63.6% of  average earning assets.  Total average net loans
increased during the last three years showing an 5.2% growth
from 1995 to 1996, an 11.5% growth from 1994 to 1995, and a 6.1%
growth from 1993 to 1994.  Average investments represented 36.4%
of average earning assets at December 31, 1996, and increased
14.5% in 1996.  The Bank purchased certain assets and assumed
certain deposit liabilities of the Mt. Pleasant, Maury County,
Tennessee, and Lewisburg, Marshall County, Tennessee, branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  The assets purchased were buildings and equipment and not
earning assets.  Most of the increase in investments can be
attributed to the assumption of  those deposit liabilities that
were not used for the increasing loan growth.  Investments 
decreased 9.6% in 1995, and increased 11.6% in 1994.  Average
total assets increased during the last three years as evidenced
by an 8.4% growth from 1995 to 1996, a 2.6% growth from 1994 to
1995, and a 7.4% growth from 1993 to 1994.  Please refer to the
color graphs at the end of this document that illustrate this
growth.

	The bank's average deposits grew during the last three years
reflecting an 8.4% growth from 1995 to 1996, a 1.3% growth from
1994 to 1995, and a 6.8% growth from 1993 to 1994. 
Approximately half of the increase in average deposits can be
attributed to the acquisition discussed earlier in this section.
 Short and medium term rates were more competitive compared to
longer term rates during the first half of 1996 and some
depositors moved money back into interest-bearing transaction
accounts, which increased 6.3% during 1996 but had declined in
1995 as investors took advantage of higher certificate of
deposit rates.  Over half of the increase during 1996 was
attributable to the acquisition.  Average interest-bearing
checking accounts decreased 7.6 % in 1995 compared to a  9.5%
increase in 1994.  Average savings deposits increased 8.1%
during 1996, over 54% from the acquisition.  Savings deposits
have been strong historically providing a core, low cost, source
of funding.  Average savings deposits declined 1.2% in 1995
compared to a 12.2% increase in 1994.  Average certificates of
deposit under $100,000 increased 11.3% during 1996, 60.0% from
the acquisition, increased 8.0% in 1995, and declined 1.2.%  in
1994.  Certificates of deposit over $100,000 increased 6.3% in
1996, 87.8% from the acquisition,  compared to a 24.8% increase
in 1995 and a 10.4% increase in 1994.  



<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND RESULTS OF OPERATIONS 


LIQUIDITY AND INTEREST  RATE  SENSITIVITY

	The Bank maintains a formal asset and liability management
process to control interest rate risk and assist management in
maintaining reasonable stability in the gross interest margin as
a result of changes in the level of interest rates and/or the
spread relationships among interest rates.  The Bank uses an
earnings simulation model to evaluate the impact of different
interest rate scenarios on the gross margin.  Each month, the
Asset/Liability Committee monitors the relationship of rate
sensitive earning assets to rate sensitive interest bearing
liabilities (interest rate sensitivity) which is the principal
factor in determining the effect that fluctuating interest rates
will have on future net interest income.  Rate sensitive earning
assets and interest bearing liabilities are those which can be
repriced to current market rates within a defined time period. 

	Another tool used to monitor the Bank's overall interest rate
sensitivity is a gap analysis.  Table C, Rate Sensitivity of
Earning Assets and Interest-Bearing Liabilities, shows the
Bank's rate sensitive position at December 31, 1996, as measured
by gap analysis (the difference between the earning asset and
interest-bearing liability amounts scheduled to be repriced to
current market rates in subsequent periods).

	As a policy, budgeted financial goals are monitored on a
monthly basis by the Asset/Liability Committee where the actual
dollar change in net interest income given different interest
rate movements is reviewed.  A negative dollar change in net
interest income for a twelve month period of less than 3% of net
interest income given a three hundred basis point shift in
interest rates is considered an acceptable rate risk position. 
The net interest margin, on a tax equivalent basis, at December
31, 1996,  1995, and 1994 was 4.66%, 4.79%,  and 4.68%
respectively.

<TABLE>

TABLE C - Rate Sensitivity of Earning Assets and Interest-Bearing Liabilities
          (Dollars in Thousands) 
<CAPTION>
  		                                       3 Months 		 3-6 	    	6-12   		Over 1 		
As of December 31, 1996 		                 or Less 		 Months 		 Months 	 	Year		       Total 
Earning assets 										
<S>                                      <C>        <C>        <C>        <C>        <C>
  Loans and leases, net of unearned     	$ 	58,045 	$ 	42,594 	$ 	65,730 	$	137,632 	$	304,001 
  Taxable investment securities 		          13,855 	  	10,000 	  	13,500	  	 90,061 		 127,416 
  Tax-exempt investment securities 		        1,000 		   1,100 		     900		   44,271 		  47,271 
										
     Total earning assets 		                72,900 	  	53,694 		  80,130 		 271,964 	$	478,688 

Interest-bearing liabilities 										
  NOW and money market accounts 		          45,590 		     - 		    64,588		   43,136 	$ 153,314 
  Savings 		                                   - 	 	      - 		    41,594 		     - 	 	   41,594 
  Time 		                                   41,547 		  33,805 		  50,657 		  25,077 		 151,086 
  Time over $100,000 		                     11,680 		   9,813 		  12,825 		   4,812		   39,130 
  Other short-term debt 		                   5,523 		     - 	 	      - 	 	      - 		     5,523 
										
Total interest bearing liabilities 		      104,340 		  43,618 		 169,664		   73,025 	$	390,647 

Noninterest-bearing, net                                 								(88,041) 		

Net asset/liability funding gap 		         (31,440) 		 10,076 		 (89,534)		 110,898 		

Cumulative net asset/liability 
 funding gap 	                           $ (31,440) $	(21,364) $(110,898) 	$ 	  - 	 	 
<FN>
<F22>
Available-for-sale and held-to-maturity securities were combined
in the taxable investment securities category for purposes of
this table.
</FN>
</TABLE>




<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                AND RESULTS OF OPERATIONS 


LOANS AND LOAN QUALITY

	As with most commercial banking institutions, the loan
portfolio is the largest component of earning assets and
consequently provides the highest amount of revenues.  The loan
portfolio also contains, as a result of credit quality, the
highest exposure to risk.  When analyzing potential loans,
management assesses both interest rate objectives and credit
quality objectives in determining whether to make a given loan
and the appropriate pricing for that loan.  The Bank maintains a
diversified portfolio in order to spread its risk and reduce its
exposure to economic downturns which may occur in different
segments of the economy or in particular industries.    The
composition of the loan portfolio is disclosed in detail in Note
3 in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the
accompanying financial statements.

	The Bank follows written loan policies which include loan
review procedures and approvals.  Depending primarily on the
amount of the loan, there are various approval levels including
an Executive Committee of the Board of Directors that meets
weekly.

	The Bank has a Loan Review Department which performs ongoing,
independent reviews of specific loans for credit quality and
proper documentation.  This department is centralized and
independent of the lending function.  Regular reports are made
to senior management and the Executive Committee of the Board of
Directors regarding the credit quality of the loan portfolio, as
well as trends.  Every loan is assigned a risk rating by the
loan officer subject to review by Loan Review.  The Bank also
has a Credit Administrator who is responsible for assisting loan
officers in structuring new loans, reviewing problem loans,
monitoring their status from period to period, and assisting in
their resolution.  This analysis and review also includes a
formal review that is prepared quarterly to assess the risk in
the loan portfolio and to determine the adequacy of the
allowance for loans losses.  This review supported management's
assertion that the allowance was adequate at December 31, 1996.  

	Table D, RISK ELEMENTS IN THE LOAN PORTFOLIO, includes all
loans management considers to be potential problem loans,
summarizes average loan balances, and reconciles the allowance
for loan losses for each year.  Additions to the allowance,
which have been charged to operating expenses, are also
disclosed.  Management does not believe that there is a
concentration of loans to a multiple number of borrowers engaged
in similar activities. 

	Loans having recorded investments of $5.1 million at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent 1.7% of gross loans.
 Commercial loans comprised $.384 million of the total, with
loans secured by real estate accounting for $3.6 million, and
installment loans $1.1 million.  The gross interest income that
would have been recorded during 1996 if the loans had been
current in accordance with their original terms and had been
outstanding throughout the period or since origination, if held
for part of the period, was $374, $365, and $193 thousand for
the years ended December 31, 1996, 1995, and 1994 respectively. 
Please refer to Note 1 and Note 3 in the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS that are included elsewhere in this
material for more information on the Bank's policy regarding
loan impairment.

	A graph on the bottom of this page is included in the materials
sent to the stockholders that illustrates the increase in
average net loans and the ratio of net loan charge offs to
average loans for the last eight years.  The ratio at December
31, 1996 was .36%.  This ratio, although higher than 1994 and
1995 ratios, is well below industry levels.   The following
table is the data illustrated by this graph.

<TABLE>
<CAPTION>
				                                   Avg Loans       	Ratio  Net
                                  				Outstanding	       CO/Avg Ln
                      <S>              <C>                <C>
                    		1989		           $163,003	          0.0032%
                    		1990		            172,749	          0.0030
                    		1991		            182,561	          0.0037
                    		1992		            215,158	          0.0023
                    		1993		            233,608	          0.0030
                    		1994		            247,791          	0.0014
                    		1995		            276,166	          0.0012
                   			1996		            290,413	          0.0036


<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO


</TABLE>
<TABLE>
<CAPTION>
	                      								                                   December 31
                                              	1996      		1995     	 	1994     	 	1993     	 	1992  
                                                  									(Dollars  In Thousands)
<S>                                         <C>         <C>         <C>         <C>         <C>
Average amount of loans outstanding       	 $ 290,413 	 $ 276,166 	 $	247,791 	 $	233,608 	 $ 215,158 
										
Balance of allowance for possible loan 										
  losses at beginning of year 	             $  	2,678 	 $  	2,342 	 $  	2,024	  $  	2,254 	 $ 	 1,917 
Loans charged-off: 										
  Loans secured by real estate    		              368 		       15 		      135 		      396		       245 
  Commercial and industrial loans    		           141 		      170 		       42 		      222		       124 
  Individuals 		                                  879 		      371 		      246 		      230 		      249 
     TOTAL  LOANS CHARGED OFF 		                1,388 		      556 		      423 		      848		       618 
Recoveries of loans previously charged off: 										
  Loans secured by real estate 		                 111 		       97 		        9 		       56 		        3 
  Commercial and industrial loans 		               42 		       14 		       36 		       52 		       80 
  Individuals 		                                  183 		      111 		       36 		       40 		       32 
     TOTAL RECOVERIES 		                          336 		      222 		       81 		      148 		      115 
       NET  LOANS CHARGED-OFF 		                1,052 		      334 		      342		       700 		      503 
Provision charged to operating expenses 		      1,300 		      670 		      660		       470 		      840 
     BALANCE OF ALLOWANCE FOR 										
      POSSIBLE LOAN LOSSES AT 										
       END OF YEAR 	                        $ 	 2,926 	 $ 	 2,678 	 $ 	 2,342 	 $ 	 2,024 	 $ 	 2,254 

Ratio of net charge-offs during the 										
    period to average loans outstanding 		      0.36% 		    0.12% 		    0.14%		     0.30% 		    0.23% 
</TABLE>


CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1996, the Corporation had a ratio of
average capital to average assets of 10.36%.  This compares to a
ratio of average capital to average assets of 10.08% at December
31, 1995, and 9.25% at December 31, 1994.

	Cash dividends declared in 1996 were 11.4% more than those paid
in 1995.  The dividend to net income ratio was 20%.  Additional
dividends of approximately $14.8 million to the Corporation
could have been declared by the subsidiary bank without
regulatory agency approval.  The Corporation plans to maintain
or increase the payout ratio while continuing to maintain a
capital to asset ratio reflecting financial strength and
adherence to regulatory guidelines.

	As of December 31, 1996, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 17.7% and 18.7% respectively.  One
year earlier, the comparable ratios were 16.9% and 17.9%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital strength of the
Corporation and the Bank. 

		A bar graph at the bottom of this page, in the materials sent to
our stockholders, illustrates the average equity of the Corporation 
for the last six years.	The following table is the data illustrated 
by this graph in thousands of dollars.

<TABLE>
                          <S>              <C>
                      				1990		           $27,358
                      				1991		            30,194
                      				1992		            33,414
                      				1993		            37,454
                      				1994		            41,820
                      				1995		            46,755
                      				1996		            52,067
</TABLE>

<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS

Interest Income

	Total interest income increased 7.5% in 1996 due to a wider
gross margin that was enhanced by loan growth in all the market
areas the Bank serves.  Interest and fees earned on loans
increased 5.8% in 1996 accounting for 73.7% of gross interest
income.  Interest earned on investment securities and other
investments increased 12.8% in 1996 rounding out gross interest
income contributing 26.3%.  Total interest income increased
11.9% in 1995 and 7.3% in 1994.


Interest Expense

	Total interest expense increased 8.4% in 1996 due mostly to the
increase in interest-bearing deposits, about half of which can
be attributed to the acquisition indicated earlier.  This
increase compares favorably to a 19.9% increase in 1995 and a
6.9% increase in 1994.  The cost of interest-bearing deposits
remained steady all year under monthly monitoring by the
Asset/Liability Committee.  This contributed to the wider gross
margin achieved during 1996.   The net interest margin (tax
equivalent net interest income divided by average earning
assets) was 4.7% at the end of 1996 compared to 4.8% in 1995 and
4.7% in 1994.

 	Net interest income on a fully taxable equivalent basis is
influenced primarily by changes in:  (1) the volume and mix of
earning assets and sources of funding; (2) market rates of
interest, and (3) income tax rates.  The impact of some of these
factors can be controlled by management policies and actions. 
External factors also can have a significant impact on changes
in net interest income from one period to another.  Some
examples of such factors are: (1) the strength of credit demands
by customers; (2) Federal Reserve Board monetary policy, and (3)
fiscal and debt management policies of the federal government,
including changes in tax laws. 


Noninterest Income and Expense

		Noninterest income increased 28.4% during 1996 led by the
increase in service charges from new and acquired customers. 
This compares to a 14.9% increase in 1995 and a 1.6% increase in
1994.  Use of the Bank's check card generates fee income from
the clearing agent for the electronic transaction even though no
service fee is charged to Bank customers for its use.  Income
from fiduciary services provided in the Bank's Trust Department
remained strong. 

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1996 and the percentage each category is of the total.
The following table is the data illustrated by this graph in
thousands of dollars.

<TABLE>
<CAPTION>
			             Income Category        		Income $	       % of Total
         <S>                              <C>               <C>
       		Income from trust services		     $1,324			         22.8%
       		Service fees on deposits		        3,374			         58.1%
       		Other service fees		                746			         12.8%
       		Other				                           363			          6.3%
</TABLE>


		Noninterest expenses, excluding the provision for possible
loan losses, increased 5.8% in  1996 which is a much smaller
increase than the 6.2% increase in 1995.  The increase in 1994
was 5.4% for a smaller corporation.  Increased productivity
fostered by our technology improvements as the learning curve
diminished and cost control efforts contributed to this
improvement.  Included in this category is Federal Deposit
Insurance Corporation (FDIC) insurance premiums at the rate
established for "well capitalized" institutions.  This expense
was $6 thousand in 1996 compared to $500 thousand in 1995 and
$891 thousand in 1994.  Please refer to the discussion in the
CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS section above for more
information concerning the bank's capitalization.

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
expense in 1996 and the percentage each category is of the
total.  The following table is the data illustrated by this
graph in thousands of dollars.

<TABLE>
<CAPTION>
		                Expense Category	           Expense $		       % of Total
                  <S>                          <C>                  <C>
                		Personnel			                 $7,031			            46.5%
                		Occupancy			                  1,211			             8.0%
                		Furniture and equipment 		    1,581			            10.5%
                		FDIC insurance		   	              7			               0%
                		Other				                     5,292			            35.0%
</TABLE>


<PAGE>



                      FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE E - FIVE YEAR COMPARISON

<TABLE>
<CAPTION>
		                                        1996  	  	  1995      		 1994     		  1993  		     1992  
INTEREST INCOME 										
<S>                                   <C>          <C>          <C>          <C>          <C>
 Interest and fees on loans          	$27,343,817 	$25,857,982 	$21,130,914 	$19,518,742 	$19,791,548 
										
 Income on investment securities 										
   Taxable interest 		                  6,892,118 		 6,179,492 	 	7,012,626		  6,925,404 		 6,898,114 
   Exempt from federal income tax 		    2,366,764 		 2,156,813		  2,184,666 		 1,857,168 		 1,825,869 
   Dividends 		                           256,951 		   177,790 		   204,948 		    72,054		    110,874 
										
                                      		9,515,833 		 8,514,095 		 9,402,240 		 8,854,626 		 8,834,857 

 Other interest income 		                 223,019 		   121,492 		   284,384		    347,287 		   195,744 
										
    TOTAL INTEREST INCOME 		           37,082,669 		34,493,569		 30,817,538 		28,720,655 	 28,822,149 

INTEREST EXPENSE  										
  Interest on deposits 		              16,617,525 		15,247,875 		12,770,618		 11,998,235 		13,329,557 
  Interest on other short term 
   borrowings 		                           94,232 		   174,370		     93,286 		    38,339 		    47,449 
										
    TOTAL INTEREST EXPENSE 		          16,711,757 		15,422,245		 12,863,904 		12,036,574 		13,377,006 

    NET INTEREST INCOME 		             20,370,912 		19,071,324		 17,953,634 		16,684,081 		15,445,143 

PROVISION FOR POSSIBLE LOAN LOSSES  	   1,300,000 		   670,000		    660,000 		   470,000 		   840,000 
    NET INTEREST INCOME AFTER 										
      PROVISION FOR LOAN LOSSES 		     19,070,912		 18,401,324 		17,293,634 		16,214,081 		14,605,143 

NONINTEREST  INCOME 										
  Trust department income 		            1,323,525 		 1,251,642 		 1,249,359		    863,952 		   753,239 
  Service fees on deposit accounts 		   3,373,805 		 2,697,332		  2,317,992 		 2,206,026 		 2,123,096 
  Other service fees, commissions, 										
    and fees 		                           745,523 		   300,407 		   336,758 		   509,009		    401,618 
  Other operating income 		               363,430 		   322,634 		   319,466		    315,108 		   191,363 
  Available for sale securities 										
   gains (losses) 		                        - 		         1,182 		  (243,690)		    23,896 		    28,434 
										
    TOTAL NONINTEREST  INCOME 		        5,806,283 		 4,573,197		  3,979,885 		 3,917,991 		 3,497,750 

NONINTEREST  EXPENSES 										
  Salaries and employee benefits 		     7,030,588 		 6,620,827		  6,247,706 		 5,686,965 		 5,283,086 
  Net occupancy expense 		              1,211,067 		 1,279,434 		 1,190,678		  1,070,971 		   984,650 
  Furniture and equipment expense 		    1,580,753  		1,382,769  		1,069,856 		   889,848 		   801,453 
  Loss on other real estate 		              - 		        50,724 		     4,000		    103,122 		   312,064 
  Other operating expenses 		           5,298,652 		 5,006,292		  4,996,107 		 4,903,949 		 4,460,696 
										
    TOTAL NONINTEREST EXPENSES 		      15,121,060	  14,340,046 		13,508,347 		12,654,855 		11,841,949 

      INCOME BEFORE PROVISION 										
       FOR INCOME TAXES 		              9,756,135		  8,634,475 		 7,765,172 		 7,477,217 		 6,260,944 

PROVISION FOR INCOME TAXES 		           2,889,339 		 2,518,769 		 2,203,746		  2,220,965 		 1,768,840 

       NET INCOME  	                  $	6,866,796 	$ 6,115,706 	$	5,561,426  $	5,256,252 	$	4,492,104 

EARNINGS PER COMMON SHARE  										
  (1,400,000 outstanding shares) 	    $ 	    4.90  $ 	    4.37 	$ 	    3.97	 $ 	    3.75 	$ 	    3.21 
</TABLE>

<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 


Net Income

	Net income was 12.3% higher in 1996 than in 1995.  As indicated
earlier, the improvement in 1996's earnings resulted from a
wider gross margin, an increase in noninterest income sufficient
to cover a smaller increase in noninterest expenses, and the
increase in taxes.  The smaller increase in noninterest expenses
is due in part to the significant decrease in deposit insurance.
These improvements were partially offset by higher additions to
the allowance for loan losses.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ON THE FINANCIAL
STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD

	The Financial Accounting Standards Board has issued one
standard that has not been adopted by the Bank but is required
to adopted after December 31, 1996.  The Statement of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" establishes guidance on when to recognize and
how to measure these financial assets and liabilities.  The
statement is effective prospectively for transfers and servicing
of financial assets and extinguishment of liabilities occurring
after December 31, 1996.  It supersedes Statement No. 122,
"Accounting for Mortgage Servicing Rights", which was effective
for fiscal years beginning after December 15, 1995.  Management
does not believe this statement will have any material effect on
future issues.


SHAREHOLDER INFORMATION

	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1996, had a
market value of $91 million and were held by 1,525 identifiable
individuals located mostly in the market area.  A small number
of additional shareholders are not identified individually since
some bank nominees, including the bank's Trust Department, are
listed as single owners when, in fact, these holdings represent
large numbers of shareholders.  No single shareholder's
ownership exceeded five percent at year end.

	There is no established public trading market for the stock. 
The table on the right lists the high and low price of the
Corporation's common stock, as well as the semiannual dividend
paid per share, in each of the last three years.

<TABLE>
<CAPTION>
		                                Price Range of 			       Dividend 
                                	 	Common Stock 	 		         Paid 
                               	High 		     Low 		        Per Share 
 <S>    <S>                    <C>         <C>             <C>
		      First quarter          $	40.00  		 $	36.00  	      $ 	
      		Second quarter           42.00  			  37.00  		        0.39 
	1994  	Third quarter 		         43.00    			37.00  		
      		Fourth quarter 		        45.00  			  38.00  		        0.41 
                                                   								$ 	0.80  

        First quarter          $ 45.00     $ 45.00         $
      		Second quarter 		        48.00  			  45.00  		        0.43 
	1995  	Third quarter 		         50.00  			  48.00  		
      		Fourth quarter 		        54.00  			  50.00  		        0.45 
                                                   								$ 	0.88 

      		First quarter 	        $	56.00  		 $	56.00  	      $ 	
      		Second quarter 		        58.00  			  56.00  		        0.47 
	1996  	Third quarter 		         63.00  			  60.00  		
      		Fourth quarter 		        65.00  			  63.00  		        0.51 
                                                 							  	$ 	0.98 
</TABLE>


<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

<TABLE>
                                 	COMPARATIVE DATA 
                               	(In Thousands of Dollars) 
<CAPTION>
		                               1996  	 	  1995  		   1994  		   1993  		   1992  
<S>                          <C>        <C>        <C>        <C>        <C>
AVERAGE ASSETS 	             $ 502,700 	$	463,739 	$	451,953 	$	420,760 	$	381,379 

AVERAGE LOANS (NET) 	        $	290,413 	$	276,166 	$	247,791 	$ 233,609 	$	215,158 

AVERAGE DEPOSITS 	           $	443,902 	$	409,489 	$	404,412 	$	378,782	 $	343,128 

RETURN ON EQUITY AND ASSETS 										
  Return on average assets 		    1.37% 		   1.32% 		   1.23% 		   1.25%		    1.18% 

  Return on beginning equity 		 14.06% 		  13.95% 		  14.11%		   14.93% 		  14.21% 
  Average equity to  										
    average assets 		           10.36% 		  10.08% 		   9.25% 		   8.90%		    8.76% 

COMMON DIVIDEND PAYOUT RATIO 										
  Earnings per share 	       $ 	  4.90  	$  	4.37 	 $  	3.97 	 $ 	 3.75 	$	   3.21 

  Cash dividends per share 	 $ 	  0.98 	 $ 	 0.88 	 $ 	 0.80 	 $ 	 0.73	 $ 	  0.64 										

  Ratio 		                         20% 		     20% 		     20% 		     19% 		     20% 
</TABLE>

<TABLE>
                                           	NET INTEREST MARGIN 
                                         	(In Thousands of Dollars) 
<CAPTION>
                                  		1996     		1995     		1994     		1993    		1992  
INTEREST INCOME 										

<S>                              <C>        <C>        <C>        <C>       <C>
 (TAX EQUIVALENT) 	              $ 37,985 	 $	35,626 	 $	32,039 	 $	29,465  $ 29,564 

INTEREST EXPENSE 		                16,712 		  15,422 		  12,864 		  12,037 		 13,377 

	                                $	21,273  	$	20,204 	 $	19,175 	 $	17,428 	$	16,187 
NET INTEREST MARGIN* 		             4.66% 		   4.79% 		   4.68% 		   4.58% 		  4.67% 

<FN>
<F23>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets. 										
</FN>
</TABLE>

<PAGE>



Nine color graphs are included on the following page in the
materials sent to our stockholders.  The first one illustrates
net income for the last five years using information taken from
the "FIVE YEAR COMPARISON" table included above.  The second one
illustrates return on average assets for the last five years
using information from the "COMPARATIVE DATA" table on the
previous page.  The third, fourth and fifth graphs illustrate
return on stockholders' equity, earnings per share with cash
dividends and stockholder's equity  for the last five years. 
The sixth graph illustrates average net loans for the last five
years.  The seventh and eighth graphs illustrate deposits and
assets for the last five years.  The information for these
graphs was taken from the "COMPARATIVE DATA" table on the
previous page.  The final graph which illustrates  net interest
income for the last five years was taken from the net interest
margin section in the  "COMPARATIVE DATA" table on the previous
page.




Item 6.  Selected Financial Data.

The selected financial data is incorporated herein by reference
to Consolidated Financial Statements, Notes to Consolidated
Financial Statements, and Management's Discussion and Analysis
of Financial Condition and Results of Operation which are
attached hereto as Exhibit 13.


<TABLE>
       FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY          
                      CONSOLIDATED BALANCE SHEETS                             
                      DECEMBER 31, 1996 and 1995                           
<CAPTION>
ASSETS 		                                           1996  		        1995  
<S>                                              <C>             <C>
Cash and due from banks         	                $ 	27,916,507	  $ 	31,281,706 
Securities 				
 Available for sale (amortized cost 
  $55,898,299 and $10,875,527 respectively)   		    56,141,535 		   11,269,006 
 Held to maturity (fair value $119,226,021 
  and $128,829,961 respectively) 		                118,541,750 		  127,662,682 
      Total securities - Note 2 		                 174,683,285		   138,931,688 
Loans, net of unearned income - Note 3 		          303,732,044		   291,930,311 
 Allowance for possible loan losses - Note 4   		   (2,926,063)		   (2,678,386) 
      Net loans 		                                 300,805,981 		  289,251,925 
Bank premises and equipment, at cost less
 allowance for depreciation and 
 amortization - Note 5   		                          6,829,475 		    6,397,936 
Other assets 		                                     15,094,426 		   11,171,993 

      TOTAL ASSETS 	                             $	525,329,674 	 $	477,035,248 

LIABILITIES 				
Deposits 				
 Noninterest-bearing 	                           $ 	75,589,511 	 $ 	67,420,536 
 Interest-bearing (including certificates 
  of deposit over $100,000: 
   1996 - $39,129,547; 1995 - $30,593,803)       		384,983,050 		  343,357,525 
       Total deposits 		                           460,572,561 		  410,778,061 
Federal funds purchased 		                           5,000,000 		   10,000,000 
Dividends payable 		                                   714,000 		      630,000 
Other short term liabilities 		                        522,928 		    1,955,000 
Accounts payable and accrued liabilities 		          4,119,059 		    4,675,712 
				
      TOTAL LIABILITIES 		                         470,928,548 		  428,038,773 
				
COMMITMENTS AND CONTINGENCIES - Notes 7 and 9 				
				
STOCKHOLDERS' EQUITY 				
Common stock - $10 par value, authorized 
 4,000,000 shares; 1,400,000 shares issued 
 and outstanding - Note 1 		                        14,000,000 		   14,000,000 
Retained earnings - Note 6 		                       40,255,185 		   34,760,389 
Net unrealized loss on available-for-sale
 securities, net of tax                              		145,941 		      236,086 
     TOTAL STOCKHOLDERS' EQUITY 		                  54,401,126 		   48,996,475 

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $	525,329,674 	 $	477,035,248 

</TABLE>

<TABLE>
                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
                     YEARS ENDED DECEMBER 31, 1996, 1995, and 1994 
<CAPTION>
                                                		 				           Net Unrealized 		
				                                                 	            	Gain (Loss) On 		
                                                   		Common       		Retained    	  	Available-for-sale 		
                                                    		Stock   	    	Earnings 	        	Securities 		           Total 
          
<S>                                              <C>            <C>                <C>                      <C>
BALANCE AT JANUARY 1, 1994 	                     $ 	7,000,000 	 $ 32,407,573 	     $     	- 	               $	39,407,573 
Cumulative effect of change in 
  accounting principle (net of
  deferred income taxes of $171,405) - Note 1 		        - 		          27,684		           229,424 		              257,108 
Two-for-one stock split - Note 1 		                 7,000,000 		  (7,000,000) 		           -		                     - 
Net income for the year 		                              - 		       5,561,426 		            - 		                5,561,426 
Cash dividends declared, $.80 per share 		              - 		      (1,120,000) 		           -		                (1,120,000) 
Net unrealized loss on available-for-sale 
  securities, net of tax		                              - 		           - 		             (277,981) 		            (277,981) 

BALANCE AT DECEMBER 31, 1994 		                    14,000,000     29,876,683		           (48,557) 		          43,828,126 
Net income for the year 		                              - 		       6,115,706 		            - 		                6,115,706 
Cash dividends declared, $.88 per share 		              - 		      (1,232,000) 		           -		                (1,232,000) 
Net unrealized gain on available-for-sale
  securities, net of tax 		                             - 		           - 		              284,643 		              284,643 

BALANCE AT DECEMBER 31, 1995 		                    14,000,000 		  34,760,389 		          236,086		            48,996,475 
Net income for the year 		                              - 		       6,866,796 		            - 		                6,866,796 
Cash dividends declared, $.98 per share 		              - 		      (1,372,000) 		           -		                (1,372,000) 
Net unrealized loss on available-for-sale
  securities, net of tax 		                             - 		           - 		              (90,145) 		             (90,145) 

BALANCE AT DECEMBER 31, 1996 	                   $	14,000,000 	 $	40,255,185 	     $   	 145,941 	          $	54,401,126 
<FN>
<F1>
The accompanying notes are an integral part of the consolidated
financial statements. 								
</FN>
</TABLE>


<PAGE>

<TABLE>
              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME                      
                  YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994        
<CAPTION>
                                      		    1996  		       1995  	   	    1994  
INTEREST INCOME 						
<S>                                   <C>            <C>            <C>
 Interest and fees on loans 	         $ 	27,343,817 	$ 	25,857,982 	$ 	21,130,914 
						
 Interest on investment securities 						
   Taxable interest 		                    6,892,118 		   6,179,492 		   7,185,169 
   Exempt from federal income tax 		      2,366,764 		   2,156,813    		2,184,666 
   Dividends 		                             256,951 		     177,790 		     204,948 
                                        		9,515,833 		   8,514,095 		   9,574,783 
   Other interest income 		                 223,019 		     121,492 		     111,841 
						
     TOTAL INTEREST INCOME 		            37,082,669 		  34,493,569   		30,817,538 

INTEREST EXPENSE  						
  Interest on deposits 		                16,617,525 		  15,247,875 		  12,770,618 
  Interest on other short term  
    borrowings 		                            94,232 		     174,370		       93,286 
						
     TOTAL INTEREST EXPENSE 		           16,711,757 		  15,422,245   		12,863,904 

     NET INTEREST INCOME 		              20,370,912 		  19,071,324		   17,953,634 
PROVISION FOR POSSIBLE LOAN 
  LOSSES - Note 4 		                      1,300,000		      670,000 		     660,000 

     NET INTEREST INCOME AFTER 						
       PROVISION FOR LOAN LOSSES 		      19,070,912		   18,401,324 		  17,293,634 

NONINTEREST  INCOME 						
  Trust department income 		              1,323,525 		   1,251,642 		   1,249,359 
  Service fees on deposit accounts 		     3,373,805 		   2,697,332	    	2,317,992 
  Other service fees, commissions, 
    and fees 		                             745,523		      300,407 		     336,758 
  Other operating income 		                 363,430 		     322,634 		     319,466 
  Available for sale securities 
    gains (losses) 		                         -		            1,182 		    (243,690) 
						
     TOTAL NONINTEREST INCOME 		          5,806,283 		   4,573,197		    3,979,885 

NONINTEREST  EXPENSES 						
  Salaries and employee benefits 		       7,030,588 		   6,620,827		    6,247,706 
  Net occupancy expense 		                1,211,067 		   1,279,434 		   1,190,678 
  Furniture and equipment expense 		      1,580,753 		   1,382,769	    	1,069,856 
  Deposit insurance 		                        6,549 		     499,709 		     890,646 
  Loss on other real estate 		                - 		          50,724 		       4,000 
  Other operating expenses 		             5,292,103 		   4,506,583    		4,105,461 
						
     TOTAL NONINTEREST EXPENSES 		       15,121,060		   14,340,046 		  13,508,347 

       INCOME BEFORE PROVISION FOR 						
         INCOME TAXES 		                  9,756,135 		   8,634,475		    7,765,172 
						
PROVISION FOR INCOME TAXES - Note 8 		    2,889,339 		   2,518,769		    2,203,746 
						
         NET INCOME  	                $  	6,866,796 	$  	6,115,706 	$  	5,561,426 

EARNINGS PER COMMON SHARE - Note 1 						
  (1,400,000 outstanding shares) 	    $ 	      4.90 	$       	4.37 	$       	3.97 
<FN>
<F2>
The accompanying notes are an integral part of the consolidated
financial statements. 						
</FN>
</TABLE>

<PAGE>

<TABLE>
                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY 
                          CONSOLIDATED STATEMENTS OF CASH FLOWS        
                      YEARS ENDED DECEMBER 31, 1996, 1995, and 1994      
<CAPTION>
                                          		1996        		1995        		1994  
OPERATING ACTIVITIES 						
<S>                                      <C>           <C>           <C>
  Net income 	                           $ 	6,866,796 	$ 	6,115,706 	$ 	5,561,426 
  Adjustments to reconcile net income
   to net cash provided by operating
   activities 						  
    Excess of provision for possible   
     loan losses over net charge offs   		    247,677 		    336,096 		    318,639 
    Provision for depreciation and   
     amortization of premises and   
     equipment 		                             685,005 		    645,816 		    589,045 
    Provision for depreciation of  
     leased equipment 		                      521,500		       - 	 	         - 
    Amortization of deposit base  
     intangibles 		                           224,212		     168,020 		    168,020 
    Amortization of investment    
     security premiums, net of   
     accretion of discounts 		                553,355 		    641,104		     678,968 
    Increase in cash surrender value
     of life insurance contracts 		          (111,685) 		   (65,936) 		   (75,287) 
    Deferred income taxes 		                 (161,999) 		  (233,403) 		  (163,907) 
   (Increase) decrease in 						  
     Interest receivable 		                  (125,119) 		  (255,109)		   (992,872) 
     Other assets 		                          307,844 		    912,162 		    344,572 
    Increase (decrease) in   						
     Interest payable 		                     (494,950) 		   577,137 		    222,605 
     Other liabilities   		                   (61,704) 	   	458,939 		    287,975 
						
       TOTAL ADJUSTMENTS 	  	               1,584,136 		  3,184,826		   1,377,758 
						
       NET CASH PROVIDED BY OPERATING
         ACTIVITIES                       		8,450,932 	  	9,300,532 		  6,939,184 

INVESTING ACTIVITIES 						
  Proceeds from maturities, calls, and
   sales of available-for-sale securities	  3,020,054 		  7,306,453  		25,152,051 
  Proceeds from maturities and calls of
   held-to-maturity securities 		          56,112,000 		 18,848,992 		  5,092,000 
  Purchases of investment securities 						
   Available-for-sale 		                  (48,222,295) 	 (3,168,200)		(16,942,994) 
   Held-to-maturity 		                    (47,364,954) 		(6,459,372)		(19,495,987) 
  Net increase in loans 		                (11,801,733)  (29,236,191)		(18,778,658) 
  Purchases of premises and equipment    		(1,116,543) 	  	(850,672)   		(418,586) 
  Purchase of equipment leased 		          (2,607,500) 		     - 	 	         - 
  Purchase of deposit base intangibles   		(1,124,258)  		    - 	      	    - 
  Purchase of single premium life 
   insurance contract                      		(785,330) 	   	  -      	 	    - 
						
       NET CASH USED BY INVESTING
        ACTIVITIES                      		(53,890,559) 	(13,558,990)		(25,392,174) 

FINANCING ACTIVITIES 						
 Net increase in noninterest-bearing
  and interest-bearing deposits 		         29,930,577 	  	5,625,638	  	16,217,348 
 Assumption of deposit liabilities
  - Note 12 		                             19,863,923 		      - 	 	         - 
 Net increase (decrease) in short
  term borrowings                        		(6,432,072)  		4,355,000 	  	7,000,000 
 Cash dividends 		                         (1,288,000) 		(1,176,000) 		(1,071,000) 
						
       NET CASH PROVIDED BY FINANCING
        ACTIVITIES                       		42,074,428   		8,804,638  		22,146,348 

       INCREASE (DECREASE) IN CASH AND
        CASH EQUIVALENTS                 		(3,365,199) 	 	4,546,180 		  3,693,358 

CASH AND CASH EQUIVALENTS AT BEGINNING
 OF YEAR 		                                31,281,706		  26,735,526 		 23,042,168 
						
CASH AND CASH EQUIVALENTS AT END OF 
 YEAR 	                                  $	27,916,507 	$	31,281,706 	$	26,735,526 
<FN>
<F3>
The accompanying notes are an integral part of the consolidated
financial statements.
</FN>
</TABLE>

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

		First Farmers and Merchants Corporation (the Corporation) was
incorporated on March 31, 1982, as a Tennessee corporation.  On 
April 13, 1982, the Board of Directors of the Corporation
adopted a resolution to execute and deliver to the Board of
Governors of the Federal Reserve System an application pursuant
to Section 3(a)(1) of the Bank Holding Company Act of 1956, as
amended, for prior approval by the Board of action to be taken
by the Corporation which would result in its becoming a bank
holding company. 

		As of December 31, 1996, the only subsidiary of the
Corporation was the Bank.  The Bank is a national banking
association which was organized in 1954 as a successor to a
state bank organized in 1909.  The Bank  conducts a full-service
commercial banking business at its principal office at 816 South
Garden Street, Columbia, Tennessee and at fourteen (14)
branches:  High Street Branch, Northside Branch, Shady Brook
Mall Branch, Hatcher Lane Branch, and Campbell Plaza Branch in
Columbia; Mt. Pleasant Branch in Mt. Pleasant; Spring Hill
Branch in Spring Hill; Lawrenceburg Branch in Lawrenceburg;
Leoma Branch in Leoma; Loretto Branch in Loretto; Lewisburg
Branch and Lewisburg West Branch in Lewisburg; Chapel Hill
Branch in Chapel Hill; and Centerville Branch in Centerville. 
The Bank provides automatic teller machine services in the
Northfield Complex at the Saturn location near Spring Hill, and
in Columbia at the Tennessee Farm Bureau, Columbia State
Community College, and Maury Regional Hospital.

		The community service area of the Bank is comprised of Maury,
Lawrence, Marshall, Hickman, and adjacent counties.  Commercial
banking in the marketing area served by the Bank is highly
competitive.  Although the Bank is ranked as the largest bank in
the area, in terms of total deposits, the Bank faces substantial
competition from fourteen (14) other banks, two (2) savings and
loan associations, and several credit unions located in the
marketing area.


Accounting Policies

		The accounting principles followed and the methods of applying
those principles conform with generally accepted accounting
principles and to general practices in the banking industry. 
The significant policies are summarized as follows.


Principles of Consolidation

		The accompanying consolidated financial statements present the
accounts of the Corporation and its wholly-owned subsidiary, the
Bank.  Material intercompany accounts and transactions have been
eliminated in consolidation.


Use of Estimates in the Preparation of Financial Statements

		The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.


Cash and Due From Banks

		Included in cash and due from banks are legally reserved
amounts which are required to be maintained on an average basis
in the form of cash and balances due from the Federal Reserve
Bank and other banks.  Average reserve requirements for the year
ended December 31, 1996, amounted to approximately $8.9 million.


Cash Equivalents

		Cash equivalents include cash on hand, cash due from banks,
and federal funds sold.  Federal funds are sold for one-day
periods.


Securities

		 Investments are classified in three categories and accounted
for as follows: 

		Debt securities that the Bank has the positive intent and
ability to hold to maturity are classified as held-to-maturity
and reported at amortized cost with premiums and discounts
recognized in interest income using the interest method over the
period to maturity.

<PAGE>

             FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities (Continued)

		Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are
classified as trading securities and reported at fair value,
with  unrealized gains and losses included in earnings.

		Debt and equity securities that may be sold prior to maturity
for asset/liability management purposes, or that may be sold in
response to changes in interest rates, changes in prepayment
risk, to increase regulatory capital or other similar factors,
are classified as available-for-sale securities and reported at
fair value, with unrealized gains and losses, net of tax, 
excluded from earnings and reported as a separate component of
stockholders' equity.  Gains and losses realized on the sale of
available-for-sale securities are determined using the specific
identification method.

		Declines in the fair value of individual available-for-sale
and held-to-maturity securities below their cost that are other
than temporary are included in earnings as realized losses.


Loans

		Loans that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off generally
are stated at their outstanding unpaid principal balances net of
any deferred fees or costs on originated loans, or unamortized
premiums or discounts on purchased loans.  A loan is considered
impaired when it is probable that an institution will be unable
to collect all amounts due (principal and interest) according to
the contractual terms of the loan agreement.  The Bank evaluates
smaller balance homogeneous loans collectively for impairment. 
Loans secured by one to four family residential properties,
consumer installment loans, and line of credit loans are
considered smaller-balance homogeneous loans.

		Interest on loans is computed daily based on the principal
amount outstanding.  Loan origination fees and related direct
costs are deferred and recognized as an adjustment of yield on
the interest method.  Interest accruals are discontinued when
loans are ninety days past-due or when a loan is considered
impaired.  All loans in non-accrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
non-accrual status is recognized only to the extent of the
excess of cash payments received over principal payments due.

		When a loan is collateral dependent, impairment is measured
based on the observable market price or the fair value of the
collateral.  For other loans, the amount of impairment is
measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. 
Positive changes in the net present value of an impaired loan
will in no event be used to increase the value of a loan above
the amount of the loan.


	Other Real Estate

		Other real estate, which is included in other assets,
represents real estate acquired through foreclosure and is
stated at the lower of fair value, net of estimated selling
costs, or cost, at the date of foreclosure.  If, at the time of
foreclosure, the fair value of the real estate is less than the
Bank's carrying value of the related loan, a write-down is
recognized through a charge to the allowance for possible loan
losses, and the fair value becomes the new cost for subsequent
accounting.  If the Bank later determines that the cost of the
property cannot be recovered through sale or use, a write-down
is recognized by a  charge to operations.  When the property is
not in a condition suitable for sale or use at the time of
foreclosure, completion and holding costs, including such items
as real estate taxes, maintenance and insurance, are capitalized
up to the estimated net realizable value of the property. 
However, when the property is in a condition for sale or use at
the time of foreclosure, or the property is already carried at
its estimated net realizable value, any subsequent holding costs
are expensed.  Legal fees and any other direct costs relating to
foreclosures are charged to operations when incurred.

		The Bank's recorded value for other real estate was
approximately $450 thousand at December 31, 1996, and $483
thousand at December 31, 1995.  


Allowance for Possible Loan Losses

	The allowance for possible loan losses is maintained at a level
believed adequate by management to absorb estimated probable
inherent loan losses.  Loan quality is monitored by Loan 


<PAGE>



            FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Possible Loan Losses (Continued)

Review, the Special Assets Committee, and the Credit
Administrator.  The amount by which a loan is determined to be
impaired is added to the allowance account in the period such
determination is made.  Recoveries on loans previously charged
off are credited to the allowance account in the period
received.  The adequacy of the allowance for possible loan
losses is evaluated quarterly in conjunction with loan review
reports and evaluations that are discussed in a meeting with
loan officers and loan administration.  The Bank's past loan
loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan
portfolio, current economic conditions, and other relevant
factors are considered in this evaluation.  This process is
inherently subjective as it requires material estimates that are
susceptible to significant change including the amounts and
timing of future cash flows expected to be received on impaired
loans.


Premises and Equipment

		Premises and equipment are stated at cost, less accumulated
depreciation and amortization.  The provision for depreciation
is computed principally on an accelerated cost recovery method
over the estimated useful lives of the assets, which range as
follows:  buildings - 15 to 50 years and equipment - 3 to 33
years.  Costs of major additions and improvements are
capitalized.  Expenditures for maintenance and repairs are
charged to operations as incurred.  Gains or losses from the
disposition of property are reflected in operations, and the
asset accounts and related allowances for depreciation are
reduced. 

		Certain other equipment purchased for lease to an outside
party under a five year operating lease is included in other
assets at cost less accumulated depreciation.  The equipment is
being depreciated on an accelerated basis over seven years.  


Trust Department Income

		Trust department income is recognized on the accrual basis in
the applicable period earned.


Stock Split

		During 1994, the Corporation amended its corporate charter to
increase the number of authorized shares of its common stock
from 2,000,000 to 4,000,000 shares and on April 12, 1994, the
Corporation's stockholders approved a two-for-one split effected
in the form of a 100% stock dividend distributed May 30, 1994,
to shareholders of record on April 12, 1994.  In accordance with
State corporate legal requirements, the transaction was recorded
by a transfer from retained earnings to common stock in the
amount of $7,000,000 ($10 for each additional share issued). 
All per share and share data in the accompanying consolidated
financial statements and footnotes have been restated to give
retroactive effect to the transaction.


Income Taxes

		The companies file a consolidated federal income tax return. 
Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income.

		Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. 
Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred
tax assets and liabilities.


Intangible Assets

	Deposit base intangibles identified in merger transactions are
amortized over 42 to 180 months on the straight-line method. 
Total amortization expense charged to operations amounted to: 
1996 - $224,212; 1995 - $168,020;  and  1994 - $168,020.



<PAGE>


           FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES 

Securities with an amortized cost of $103,540,673 and
$93,101,954 at December 31, 1996 and 1995, respectively (fair
value: 1996 - $104,061,311;  1995 - $93,937,766), were pledged
to secure deposits and for other purposes as required or
permitted by law.  The fair value is established by an
independent pricing service as of the approximate dates
indicated.  The differences between the amortized cost and fair
value reflect current interest rates and represent the potential
gain (or loss) had the portfolio been liquidated on that date. 
Security gains (or losses) are realized only in the event of
dispositions prior to maturity.  The fair values of all
securities at December 31, 1996, either equaled or exceeded the
cost of those securities, or the decline in fair value is
considered temporary.

<TABLE>
<CAPTION>
                                      Amortized                Gross Unrealized                Fair
		                                       Cost 	            	  Gain       	 	Loss 	        	    Value 

December 31, 1996 								
Available-for-sale securities 								
<S>                                <C>                    <C>             <C>              <C>
  U.S. Treasury 	                  $ 	26,412,520 	        $  	162,913 	   $ 	  63,634 	    $ 	26,511,799 
  U.S. Government agencies   		       26,850,441 		            45,866 		      318,203   		    26,578,104 
  Other securities   		                2,635,338 		           565,044 		      148,750 		       3,051,632 
                                  	$ 	55,898,299 	        $  	773,823 	   $  	530,587 	    $ 	56,141,535 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	30,504,935 	        $ 	 106,345 	   $   	22,080 	    $ 	30,589,200 
  U.S. Government agencies   		       39,679,582 	           	245,034 		       87,434		       39,837,182 
  States and political subdivisions 		47,538,074 		           700,948		       283,420 		      47,955,602 
  Other securities 		                    819,159 		            24,878 		        - 	 	            844,037 
                                  	$	118,541,750 	        $	1,077,205 	   $  	392,934 	    $	119,226,021 

December 31, 1995 								
Available-for-sale securities 								
  U.S. Treasury 	                  $  	5,064,421 	        $   	72,679    	$ 	   - 	        $  	5,137,100 
  U.S. Government agencies 		          3,279,968 		            72,268 		        2,570		        3,349,666 
  Other securities 		                  2,531,138 		           254,102 		        3,000 		       2,782,240 
	                                  $ 	10,875,527 	        $ 	 399,049 	   $ 	   5,570 	    $ 	11,269,006 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	61,426,813 	        $  	295,846 	   $ 	  59,359 	    $ 	61,663,300 
  U.S. Government agencies 		         23,498,204 		           267,237 		       48,041		       23,717,400 
  States and political subdivisions 		42,415,025 		           934,439		       241,048 		      43,108,416 
  Other securities 		                    322,640 		            18,205 		       - 		              340,845 
                                 	 $	127,662,682 	        $	1,515,727 	   $ 	 348,448 	    $	128,829,961 

<FN>
<F4>
Table I - Amortized Cost and Fair Value of Investment Securities.
</FN>
</TABLE>


<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES  (Continued)

		At December 31, 1996, the Corporation did not hold investment
securities of any single issuer, other than obligations of the
U.S. Treasury and other U.S. Government agencies, whose
aggregate book value exceeded ten percent of stockholders'
equity.

		Table II shows the amortized cost, fair value, and weighted
yields (for tax-exempt obligations on a fully taxable basis
assuming a 34% tax rate) of investment securities at December
31, 1996, by contractual maturity.  Expected maturities may
differ from contractual maturities because issuers may have the
right to call or prepay obligations.

		Proceeds from the maturity, call, or sale of
available-for-sale securities were $3,020,054, $7,306,453, and
$25,152,051 during 1996, 1995, and 1994 respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$56,112,000, $18,848,992, and $5,092,000 during 1996, 1995, and
1994 respectively.  There were no gains or losses in 1996. 
Gross gains of $1,182 and gross losses of $-0- were realized on
the dispositions in 1995.   Gross gains of $-0- and gross losses
of $243,690 were realized on the dispositions in 1994. 

<TABLE>
<CAPTION>
                            		        Amortized 	       	 Fair 		         Yield 	
                                       		Cost 		          Value 		     (Unaudited) 	

Available-for-sale securities 							
U.S. Treasury 							
<S>                                 <C>              <C>                  <C>
  Within one year 	                 $ 	16,189,997 	  $ 	16,176,499 		     5.6% 	
  After one but within five years 	    	9,171,798 		     9,274,000		      6.3% 	
  After five but within ten years 		    1,050,725 		     1,061,300      		6.4% 	
U.S. Government agencies 							
  Within one year 		                    1,000,000 		     1,021,300 		     8.0% 	
  After one but within five years 		   24,543,375 		    24,255,710      		5.9% 	
  After five but within ten years 	    	1,043,738 	     	1,038,400      		6.2% 	
  After ten years 		                      263,328 		       262,694 		     6.1% 	
  Other securities 		                   2,635,338 		     3,051,632 		     8.9% 	
	                                   $ 	55,898,299 	  $ 	56,141,535 			

Held-to-maturity securities 							
U.S. Treasury 							
  Within one year 	                 $ 	22,067,254 		 $  22,103,400 		     5.6% 	
  After one but within five years 		    5,238,326 		     5,301,900      		6.4% 	
  After five but within ten years 		    3,199,355 		     3,183,900		      6.0% 	
U.S. Government agencies 							
  Within one year 		                    4,504,421 		     4,512,100 		     6.1% 	
  After one but within five years 		   17,076,622 		    17,210,700      		6.4% 	
  After five but within ten years 		   18,098,539 		    18,114,382      		6.4% 	
States and political subdivisions 							
  Within one year 		                    3,015,087 		     3,061,625 		    10.0% 	
  After one but within five years 		   12,976,264 		    13,229,979      		8.1% 	
  After five but within ten years 		   20,837,173 		    20,940,923       	7.4% 	
  After ten years 		                   10,709,550 		    10,723,075 		     7.8% 	
Other securities 							
  After one but within five years 		      319,159 		       330,087 		     8.0% 	
  After five but within ten years 		      500,000 		       513,950 		     7.3% 	
 	                                  $	118,541,750 	  $ 119,226,021 			
<FN>
<F5>
Table II - Contractual Maturity of Investment Securities and
Weighted Tax Equivalent Yields
</FN>
</TABLE>

<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS

<TABLE>
<CAPTION>
                                                 		    1996  		                1995  	
Loans secured by real estate 					
<S>                                               <C>                    <C>
   Construction  and  land development 	          $ 	 8,751,021 	        $  	7,399,095 	
   Farmland 		                                        6,923,739 		           7,849,137 	
   Lines of credit 		                                   192,010 		             339,108 	
   1-4 family residential property - first lien 	  	116,905,803 		         111,016,393 	
   1-4 family residential property - junior lien 		   6,461,497            		7,177,285 	
   Multifamily residential property 		                2,487,453 		           3,729,687 	
   Non farm, non residential property 		             46,114,930 		          44,224,353 	
					
      Subtotal 		                                   187,836,453 		         181,735,058 	

Commercial and  industrial loans 					
   Commercial  and  industrial 		                    53,577,210 		          51,758,675 	
   Taxable municipal loans 		                           240,000 	 	            270,000 	
   All other loans 		                                   748,125 		              88,239 	
					
      Subtotal 		                                    54,565,335 		          52,116,914 	

Tax exempt municipal loans 		                           605,933 		           1,485,071 	
					
Loans to individuals 					
   Agricultural production 		                         2,894,845 		           3,659,215 	
   Lines of credit 		                                   200,903 		             135,230 	
   Individuals for personal expenditures 		          57,897,835           		53,026,209 	
					
      Subtotal 		                                    60,993,583 		          56,820,654 	

                                                  		304,001,304 		         292,157,697 	

Less: 					
   Net unamortized loan origination fees 		            (269,260) 		           (225,368)
   Unearned interest income 		                            - 		                  (2,018) 	
   Allowance for possible loan losses 		             (2,926,063)      		    (2,678,386) 	
					
	                                                 $ 300,805,981 	        $ 289,251,925 	
<FN>
<F6>
Table III - Loans Outstanding by Category at December 31, 1996
and 1995
</FN>
</TABLE>

<TABLE>
<CAPTION>
		 	 	                                         (In Thousands of Dollars) 	 	 	 	 
                            		Within 		        One to 		          After  		
                           		One Year 		     Five Years 		     Five Years 		   Total 

<S>                         <C>               <C>               <C>         <C>
Fixed rate loans 	          $ 	66,689 	       $ 	51,604 	       $ 	25,824 	 $	144,117 
Variable rate loans 		         99,680 		         32,963 		         27,241 		  159,884 

	                           $	166,369 	       $ 	84,567 	       $ 	53,065 	 $ 304,001 
<FN>
<F7>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1996
</FN>
</TABLE>




<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS (Continued)

		Loans having recorded investments of $5,136,286 at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  The total allowance for possible
loan losses related to these loans was $1,146,000.  Interest
received on these loans during 1996 was $504,840.  Impaired
loans had recorded investments of approximately  $5,856,000 at
December 31, 1995.

		Certain parties (principally directors and senior officers of
the Corporation or the Bank, including their affiliates,
families, and companies in which they hold ten percent or more
ownership) were customers of, and had loans and other
transactions with, the Bank in the ordinary course of business. 
An analysis of  activity with respect to such loans for the
years ended December 31, 1996 and 1995, is shown in Table V that
follows.

		These totals exclude loans made in the ordinary course of
business to other companies with which neither the Corporation
nor the Bank has a relationship other than the association of
one of its directors in the capacity of officer or director. 
These loan transactions were made on substantially the same
terms as those prevailing at the time for comparable loans to
other persons.  They did not involve more than the normal risk
of collectiblity or present other unfavorable features.  No
related party loans were charged off in 1996 or 1995.
<TABLE>
<CAPTION>
                                        		Balance at 							
                                        		Beginning  				               Amount 		    Balance at 	
                                        		 of Year 		   Additions   		Collected 		  End of Year 	

            1996  									
<S>                                      <C>           <C>           <C>            <C>
Aggregate of certain party loans 	       $	7,706,004 	 $ 8,454,247 	 $	7,937,989 	  $ 8,222,262 	
									
            1995  									
Aggregate of certain party loans 	       $	6,494,271 	 $ 7,020,665   $	5,808,932 	  $ 7,706,004 	

<FN>
<F8>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>

NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES

<TABLE>
<CAPTION>
      		                                       1996  		        1995  		       1994  
<S>                                        <C>             <C>            <C>
Balance at beginning of year 	             $	2,678,386 	   $ 2,342,290 	  $	2,023,651
Provision charged to operating expenses    		1,300,000 		      670,000      		660,000 
Loan losses: 						
  Loans charged off 		                      (1,388,422) 		    (555,957) 		   (422,831) 
  Recoveries on loans previously  						
    charged off 		                             336,099 		      222,053 		      81,470 

Balance at end of year 	                   $	2,926,063 	   $	2,678,386 	  $	2,342,290 
<FN>
<F9>
Table VI - Changes in the Allowance for Possible Loan Losses 
</FN>
</TABLE>


		In the opinion of management, based on conditions reasonably
known, the allowance was adequate at December 31, 1996. 
However, the allowance may be increased or decreased based on
loan growth, changes in credit quality, and changes in general
economic conditions.

		For federal income tax purposes, the allowance for possible
loan losses is maintained at the maximum allowable by the
Internal Revenue Code.



<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
		                                                    1996          		1995  	
<S>                                              <C>             <C>
Land 	                                           $ 	1,348,288 	  $ 	1,204,288 	
Premises 		                                         7,013,942 		    6,648,329 	
Furniture and equipment 		                          4,068,373 		    3,949,617 	
Leasehold improvements 		                           1,149,732 		      879,695 	
                                                 		13,580,335 		   12,681,929 	
Less allowance for depreciation and amortization 		(6,750,860)		   (6,283,993) 	
	                                                $ 	6,829,475 	  $ 	6,397,936 	
</TABLE>
	Annual provisions for depreciation and amortization of bank
premises and equipment total $685,005 for 1996, $645,816 for
1995, and $589,045 for 1994.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling $2,590,066 at December 31,
1996.                   


NOTE 6 - LIMITATION ON SUBSIDIARY DIVIDENDS

 The approval of the Comptroller of the Currency is required
before the Bank's dividends in a given year may exceed the total
of its net profit (as defined) for the year combined with
retained net profits of the preceding two years.  As of December
31, 1996, additional dividends of approximately $14,800,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for four of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2013.  In most cases,
the leases provide for one or more renewal options of five to
ten years under the same or similar terms.  In addition, various
items of teller and office equipment are leased under cancelable
and noncancelable operating leases.  Total rental expense
incurred under all operating leases, including short-term leases
with terms of less than one month, amounted to $726,337,
$660,121, and $409,764 for equipment leases, and $112,384,
$111,649, and $97,966 for building leases, in 1996, 1995, and
1994, respectively.  Future minimum lease commitments as of
December 31, 1996, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>

<S>                                    <S>    <C>
                                     		1997  	$  	784,704 
                                       1998    	 	714,848 
                        		             1999    		 383,334 
                                     		2000    		 123,758 
                                     		2001    		 123,758 

Total future minimum lease payments 			       $	2,130,402 

<FN>
<F9>
Table VIII - Future Minimum Lease Commitments
</FN>
</TABLE>


<PAGE>



                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES
<TABLE>
<CAPTION>
                                           		1996       		1995      	  1994  

<S>                                     <C>           <C>          <C>
Current: 						
  Federal 	                             $ 2,422,550 	 $	2,166,566 	$	1,831,848 
  State 		                                  628,788 		    585,606 		   503,433 
						
      Total current 		                    3,051,338 		  2,752,172 		 2,335,281 
Deferred: 						
  Federal 		                               (137,700) 		  (198,393) 		 (111,805) 
  State 		                                  (24,299) 		   (35,010) 		  (19,730) 

      Total deferred 		                    (161,999) 		  (233,403)  		(131,535) 
      Total provision for income taxes 	$	2,889,339   $	2,518,769  $ 2,203,746 
<FN>
<F10>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                           		1996  		      1995  		      1994  
<S>                                     <C>           <C>            <C>
Allowance for possible loan losses 	    $ 	 914,386   $  	815,315 	  $ 	682,877 
Write-down of other real estate 		          177,120 		    177,120 		    159,120 
Deferred compensation 		                    336,255 		    256,139 		    156,227 
Direct lease financing 		                     - 		          - 		         36,452 
Unrealized loss on AFS securities 		          - 		          -          		32,372 
Deferred loan fees 		                        26,863 		     44,051 		     24,546 

  Deferred tax asset 		                   1,454,624 		  1,292,625 		  1,091,594 

Unrealized gain on AFS securities 		        (97,294) 		  (157,392) 		     - 

  Deferred tax liability 		                 (97,294) 	  	(157,392) 		     - 

     Net deferred tax asset 	           $ 1,357,330 	 $	1,135,233	  $	1,091,594 
<FN>
<F11>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
	     	                                             1996  		      1995       		1994  
<S>                                             <C>           <C>           <C>
Tax expense at statutory rate 	                 $	3,317,086 	 $	2,935,722 	 $	2,640,158 
Increase (decrease) in taxes resulting from: 						
  Tax-exempt interest 		                           (859,383) 	  	(783,011) 		  (780,946) 
  Nondeductible interest expense 		                 101,534 		     89,491 		     75,019 
  Other nondeductible expenses 						
    (nontaxable income) - net 		                    (21,170) 		   (28,114)		     (6,458) 
  State income taxes, net of federal 						
    tax benefit 		                                  398,963 	    	363,393 	    	319,244 
  Dividend income exclusion 		                      (34,855) 		   (18,324) 		   (29,571) 
  Other 		                                          (12,836) 		   (40,388) 		   (13,700) 
Total provision for income taxes 	              $	2,889,339 	 $ 2,518,769 	 $	2,203,746 

Effective tax rate 		                                 29.6% 		      29.2% 		      28.4% 
<FN>
<F12>
Table XI - Reconciliation of Total Income Taxes Reported with
the Amount of Income Taxes Computed                   at the
Federal Statutory Rate (34% Each Year)
</FN>
</TABLE>
<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES (Continued)

		Total income taxes paid in 1996, 1995, and 1994 amounted to
$3,140,000, $2,756,442 and $2,431,332, respectively.

		A net deferred tax asset was included in other assets in the
accompanying consolidated balance sheet.  


NOTE 9 - COMMITMENTS

		The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers.  These financial
instruments include commitments to extend credit and standby
letters of credit.  Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.  The contract or notional
amounts of those instruments reflect the extent of involvement
the Bank has in those particular financial instruments.		

		The total outstanding loan commitments and stand-by letters of
credit in the normal course of business at December 31, 1996,
were $25,605,000 and $2,283,000, respectively.  Loan commitments
are agreements to lend to a customer as long as there is not a
violation of any condition established in the contract.  Standby
letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. 
Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond
financing, and similar transactions.  The credit risk involved
in issuing letters of credit is essentially the same as that
involved in making a loan.

		The loan portfolio is well diversified with loans generally
secured by tangible personal property, real property, or stock. 
The loans are expected to be repaid from cash flow or proceeds
from the sale of selected assets of the borrowers.  Collateral
requirements for the loan portfolio are based on credit
evaluation of the customer.  It is management's opinion that
there is not a concentration of credit risk in the portfolio.


NOTE 10 - SUPPLEMENTARY CASH FLOW

		 Interest paid on deposits and other borrowings during 1996,
1995, and 1994 amounted to $17,206,708, $14,845,107, and
$12,641,299, respectively.


NOTE 11 - SHAREHOLDERS'  EQUITY

		The Corporation and the Bank are subject to federal regulatory
risk-adjusted capital adequacy standards.  Failure to meet
capital adequacy requirements can initiate certain mandatory,
and possibly additional discretionary, actions by regulators
that could have a direct material effect on the consolidated
financial statements of the Corporation and its subsidiary, the
Bank.  The regulations require the Bank to meet specific capital
adequacy guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices.  The capital
classification is also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. 

		Quantitative measures established by regulation to ensure
capital adequacy require the Corporation and the Bank to
maintain minimum amounts and ratios of Total Capital and Tier I
Capital to risk-weighted assets and of Tier I Capital to average
assets.  Management believes, as of December 31, 1996 and 1995,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		As of June 30, 1996, the Bank's calculated risk-adjusted
capital ratios exceeded the minimum standard for a "well
capitalized" bank and this classification is confirmed by the
most recent notification from the Office of the Comptroller of
the Currency.  There are no conditions or events since that
notification that management believes have changed the
institution's category.  Actual capital amounts and ratios are
presented in Table XII.


<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - SHAREHOLDERS'  EQUITY (Continued)
<TABLE>
<CAPTION>
                                                                                				      To Be Well 
                                                                               				      Capitalized Under 
                                                              		For Capital 	   	      Prompt Corrective 
                                            Actual          	Adequacy Purposes 	   	    Action Provisions 
As of December 31, 1996 		            Amount    		Ratio 		  Amount  		 Ratio > or = 	 Amount 		  Ratio > or = 
<s >                                 <C>          <C>      <C>           <C>         <C>            <C>
Total Capital (to Risk Weighted
      Assets)   Consolidated 	     	 56,004,592 		18.69% 		23,972,003	 	 8.00% 		    29,965,004 	  	10.00% 
                Bank 		              55,472,014 		18.55% 		23,923,241		  8.00% 		    29,904,051 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      53,078,528 		17.71% 		11,986,300  		4.00% 		    17,979,450 		   6.00% 
                Bank 		              52,545,950 		17.57% 		11,962,652		  4.00% 		    17,943,978 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      52,066,624 		10.36% 		20,107,993		  4.00% 		    25,134,992 		   5.00% 
                Bank 		              50,574,336 		10.07% 		20,089,111		  4.00% 		    25,111,388 		   5.00% 

As of December 31, 1995 												
Total Capital (to Risk Weighted 												
      Assets)   Consolidated 		      51,162,164 		17.87% 		22,901,838 	 	8.00% 	    	28,627,297 		  10.00% 
                Bank 		              50,682,365 		17.74% 		22,855,632	  	8.00% 		    28,569,541 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      48,483,778 		16.94% 		11,450,919		  4.00% 		    17,176,378 		   6.00% 
                Bank 		              48,003,979 		16.80% 		11,429,519	  	4.00% 		    17,144,278 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      46,754,542 		10.08% 		18,549,574		  4.00% 		    23,186,967 		   5.00% 
                Bank 		              45,891,248 	 	9.91% 		18,523,208	  	4.00% 		    23,154,010 		   5.00% 

<FN>
<F13>
Table XII - Capital Amounts and Capital Adequacy
</FN>
</TABLE>


NOTE 12 - ACQUISITIONS

		On April 1, 1996, the Bank purchased certain assets and
assumed certain deposit liabilities of the Mt. Pleasant, Maury
County, Tennessee, and Lewisburg, Marshall County, Tennessee,
branches of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee.  The Office of the
Comptroller of the Currency granted approval of this
acquisition.  Deposit liabilities totaling $19.9 million were
assumed in the transaction in exchange for other assets acquired
totaling $1.6 million and cash for the balance.  The Mt.
Pleasant branch was combined with the Bank's office there and
the building was donated to the Mt. Pleasant-Maury Phosphate
Museum, a non-profit organization dedicated to preserving the
rich history of the phosphate industry in this area and actively
promoting tourism and economic development.  The Lewisburg
branch gave the Bank a second location in Lewisburg
complementing the market penetration in Marshall County.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - EMPLOYEE BENEFIT PLANS

		The Bank contributes to a defined contribution, profit-sharing
plan covering employees who meet participation requirements. 
The amount of the contribution is discretionary as determined by
the Board of Directors up to the maximum deduction allowed for
federal income tax purposes.  Contributions to the plan, that
amounted to $661,307, $633,459 and $602,010, in 1996, 1995, and
1994, respectively, are included in salaries and employee
benefits expense. 

		In 1992, the Bank formalized a nonqualified salary
continuation plan for certain key officers.  In connection with
this plan, the value of the single premium universal life
insurance policies (1996 - $620,657; 1995 - $594,221) purchased
in 1993 to fund the plan and the related liability (1996 -
$513,792; 1995 - $482,272) were included in other assets and
other liabilities, respectively.  Net non-cash income recognized
on these policies of $26,436 in 1996 and  $14,133 in 1995 is
included in the above asset values.  The principal cost of the
plan is being accrued over the anticipated remaining period of
active employment, based on the present value of the expected
retirement benefit.  Expense related to this plan was $64,024 in
1996, $106,066 in 1995, and $98,925 in 1994.

		The Bank also implemented a deferred compensation plan which
permitted directors, beginning in 1993, to defer their
director's fees and earn interest on the deferred amount.  A
liability increase and expense of $172,871 for 1996, $176,727
for 1995, and $126,262 for 1994 are recognized in the
accompanying financial statements.  In connection with this
plan, a single premium universal life insurance policy was
purchased on the life of each director who elected to
participate.  Net non-cash income recognized on these policies
of $85,249 in 1996 and $51,803 in 1995 is included in the cash
surrender values of  $1,887,171 and $1,801,922 reported in other
assets at December 31, 1996 and 1995, respectively.

		In 1996, the Bank established an officer group term
replacement/split dollar plan to provide life insurance benefits
that would continue after retirement.  A single premium
universal life insurance policy was purchased to fund the plan
and a split dollar agreement was made with an irrevocable trust
that specified the portion of the insurance proceeds that would 
become part of the trust.  An insurance premium of $795,000 was
paid in November, 1996, of which $785,330 is the cash surrender
value at December 31, 1996, and is included in other assets, and
net expense of $9,670 is included in other operating expense.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replace- ment/split dollar plan.  These
policies have an aggregate face amount of $2,875,000.



<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
 	                                      December 31, 1996 		       December 31, 1995 
                                      	Amortized    		Fair 	     	Amortized 		   Fair 
                                         	Cost 		     Value 		       Cost 		     Value 
                                                    (Dollars in Thousands)
Financial assets 					 			
<S>                                   <C>          <C>            <C>          <C>
  Cash and cash equivalents 	         $ 	27,917 	  $ 	27,917 	    $ 	31,282	   $ 	31,282 
  Securities held to maturity 		        118,542 		   119,226 		     127,663		    128,830 
  Securities available for sale 		       55,898 		    56,142 		      10,876		     11,269 
  Loans, net 		                         300,806 		   309,401 		     289,252 		   298,076 
  Accrued interest receivable 		          5,549 		     5,549 		       5,424		      5,424 

Financial liabilities 								
  Deposits 		                           460,573 		   449,129 		     410,778 		   398,296 
  Federal funds purchased 		              5,000 		     5,000 		      10,000 		    10,000 
  Short term borrowings 		                  523 		       523 		       1,955 		     1,955 
  Accrued interest payable 		             2,539 		     2,539 		       3,034 		     3,034 

<FN>
<F14>
Table XIII - Summary of Fair Values of Financial Instruments
</FN>
</TABLE>

		Estimated fair values have been determined by the Bank using
the best available data.  Many of the Bank's financial
instruments, however, lack an available trading market as
characterized by a willing buyer and willing seller engaging in
an unforced, unforeclosed transaction.  Therefore, significant
estimations and present value calculations were used by the Bank
for the purposes of this disclosure.  Changes in assumptions or
the estimation methodologies used may have a material effect on
the estimated fair values included in this note.

		Financial assets - Cash and cash equivalents are considered to
be carried at their fair value and have not been valued
differently than has been customary with historical cost
accounting.  Securities available-for-sale and securities
held-to-maturity are valued by an independent rating service and
are disclosed in detail in Note 2 above.  A present value
discounted cash flow methodology was used to value the net loan
portfolio.  The discount rate used in these calculations was the
current rate at which new loans in the same classification for
regulatory reporting purposes would be made.  This rate was
adjusted for credit loss and assumed prepayment risk.   For
loans with floating interest rates it is presumed that estimated
fair values generally approximate the recorded book balances.

		Financial liabilities - Deposits with stated maturities have
been valued using a present value discounted cash flow with a
discount rate approximating the current market for similar
liabilities.  Financial instrument liabilities with no stated
maturities have an  estimated fair value equal to both the
amount payable on demand and the recorded book balance.  For
deposits with floating interest rates it is presumed that
estimated fair values generally approximate the recorded book
balances.  The carrying amounts of federal funds purchased and
other short term borrowings are considered to approximate their
fair values.

		  The Bank's remaining assets and liabilities which are not
considered financial instruments have not been valued
differently than has been customary with historical cost
accounting.  Management is concerned that reasonable
comparability between financial institutions may be distorted
due to the wide range of permitted valuation techniques and
numerous estimates which must be made given the absence of
active secondary markets for many of the financial instruments. 
This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values. 

		At December 31, 1996, the Bank had outstanding standby letters
of credit and commitments to extend credit.  These
off-balance-sheet financial instruments are generally
exercisable at the market rate prevailing at the date the
underlying transaction will be completed and, therefore, are
deemed to have no current fair value.  Please refer to Note 9.  
 





<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                                		First 		      Second 		     Third 	     	Fourth 		
                               		Quarter 	     	Quarter   	 	Quarter 	 	   Quarter 		       Total 
     1996  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	9,052,224 	   $	9,280,303 	 $	9,249,133  	$	9,501,009 	 $37,082,669 
Interest expense 		             3,989,386 		    4,153,059 		  4,260,324 		  4,308,988		  16,711,757 
										
Net interest income 		          5,062,838 		    5,127,244 		  4,988,809		   5,192,021 		 20,370,912 
Provision for possible loan   										
  losses 		                       250,000 		      300,000 		    200,000 		    550,000 		  1,300,000 
Noninterest expenses, net of 										
  noninterest income 		         2,327,604 		    2,234,505 		  2,335,349		   2,417,319 		  9,314,777 
										
Income before income taxes 		   2,485,234 		    2,592,739 		  2,453,460		   2,224,702 		  9,756,135 
Income taxes 		                   777,319 		      776,659 	    	694,636 		    640,725 	  	2,889,339 

Net income 	                  $ 1,707,915 	   $	1,816,080 	 $	1,758,824 	 $	1,583,977 	 $	6,866,796 

Earnings per common share 										
    (1,400,000 shares) 	      $ 	    1.22 	   $  	   1.30   $ 	    1.25 	 $ 	    1.13	  $ 	    4.90  
</TABLE>
<TABLE>
<CAPTION>
                                  	First 		     Second 		     Third 	     Fourth 		
                               		Quarter 		     Quarter 		   Quarter 		   Quarter 		       Total 
     1995  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	8,244,228 	   $ 8,640,769 	 $	8,720,212   $	8,888,360 	 $34,493,569 
Interest expense 		             3,654,485 		    3,856,594 		  3,938,600 		  3,972,566		  15,422,245 
										
Net interest income 		          4,589,743 		    4,784,175 		  4,781,612		   4,915,794 		 19,071,324 
Provision for possible loan  										
  losses 		                       145,000 		      140,000 		    180,000 		    205,000 		    670,000 
Noninterest expenses, net of 										
  noninterest income 		         2,492,505 		    2,547,595 		  2,430,466		   2,296,283 		  9,766,849 
										
Income before income taxes 		   1,952,238 		    2,096,580 		  2,171,146		   2,414,511 		  8,634,475 
Income taxes 		                   512,448 		      589,977 		    680,609 		    735,735 		  2,518,769 

Net income 	                  $ 1,439,790 	   $	1,506,603 	 $	1,490,537 	 $	1,678,776 	 $	6,115,706 

Earnings per common share 										
  (1,400,000 shares) 	        $ 	    1.03 	   $  	   1.08 	 $ 	    1.06 	 $ 	    1.20 	 $ 	    4.37 

<FN>
<F15>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


NOTE 16 - DEPOSITS

		The Bank does not have any foreign offices and all deposits
are serviced in its fifteen domestic offices.  The average
amounts of deposits and the average rates paid are summarized in
Table XV.  Maturities  of  time deposits of $100,000 or more at
December 31 are indicated in Table XVI.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - DEPOSITS  (Continued)

<TABLE>
<CAPTION>
                                            	1996  	 	             1995  	 	          1994  
                                                 (Dollars in Thousands) 					
<S>                                  <C>          <C>     <C>          <C>    <C>           <C>
Demand deposits 	                    $ 	61,509 		  - 	% 	 $ 	56,730 		  - 	% 	$ 	55,557 	   	- 	% 
NOW and money market accounts 		       158,450 		 3.37 			  149,016 		 3.51			  161,244 	   3.25 	 
Savings deposits 		                     37,421 		 3.22 			   34,629 		 3.00  			 35,036 		  2.87 	 
Time deposits of less than $100,000 		 151,952 		 5.40  			 136,568		  5.30  			126,523 	 	 4.27 	 
Time deposits of $100,000 or more 		    34,539 		 5.41 			   32,524		  5.35 			  26,053 	 	 4.32 	 
													 	 	 
Total In Domestic Offices 	          $	443,871 		 3.74% 	 $	409,467		  3.72% 	$	404,413 	 	 3.66% 

<FN>
<F16>
Table XV - Average Amounts of Deposits and Average Rates Paid by
Deposit Type at December 31
</FN>
</TABLE>
<TABLE>
	                                     1996       		1995  		     1994  
                           							       (Dollars In Thousands)
<S>                                <C>          <C>          <C>
Under 3 months 	                   $	11,680 	   $ 	7,877 	   $ 	3,117 
3 to 12 months 		                    22,638 		    18,407 		    18,250 
Over 12 months 		                     4,812 		     4,310 		     4,803 
						
	                                  $	39,130 	   $	30,594 	   $	26,170 
<FN>
<F17>
Table XVI - Maturities of Time Deposits of $100,00 or More at
December 31
</FN>
</TABLE>


NOTE 17- CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
<CAPTION>
                             December 31, 1996 and 1995                                      
                             (In Thousands of Dollars)                                       
             Assets 		                                    1996  		  1995  
<S>                                                     <C>        <C>     
Cash 	                                                  $  	 142 	 $    	70 
Investment in bank subsidiary - at equity        		       53,870 	   48,517 
Investment in credit life insurance company - at cost       		50 	      	50 
Investment in other securities 		                             22 	       22 
Dividends receivable from bank subsidiary 		                 714 	      630 
Cash surrender value - life insurance 		                     489 		     466 
Other assets 		                                                1 		       1 
				
      Total assets 	                                    $	55,288 	 $	49,756 

       Liabilities and Stockholders' Equity 				
Liabilities 				
  Payable to directors 	                                $ 	  173 	 $ 	  129 
  Dividends payable 		                                       714 		     630 

      Total liabilities 		                                   887 		     759 
Stockholders' equity 				
  Common stock - $10 par value, authorized 4,000,000 				
    shares; 1,400,000 shares issued and outstanding 		    14,000		   14,000 
  Retained earnings 		                                    40,255 		  34,761 
  Net unrealized gain (loss) on available-for-sale  				
    securities, net of tax 		                                146 		     236 
      Total stockholders' equity 	                       	54,401 		  48,997 
				
      Total liabilities and stockholders' equity 	      $	55,288 	 $	49,756 
<FN>
<F18>
Table XVII - Condensed Balance Sheets of Parent
</FN>
</TABLE>


<PAGE>

                   FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION (Continued)

<TABLE>
<CAPTION>
          
                      Years Ended December 31, 1996 and 1995       
                            (In Thousands of Dollars)              

                                               		1996  	      	1995  
Operating income 				
<S>                                            <C>           <C>
  Dividends from bank subsidiary 	             $	1,372 	     $	1,232 
  Other dividend income 		                          85 		         22 
  Interest income 		                                 6 		          2 
  Other 		                                          28 		         27 

Operating expenses 		                               68 		         87 
				
    Income before equity in undistributed net 				
      income of bank subsidiary 		               1,423 		      1,196 

Equity in undistributed net income of bank
  subsidiary 		                                  5,444		       4,920 

    Net Income 	                               $	6,867 	     $	6,116 
<FN>
<F19>
Table XVIII - Condensed Statements of Income of Parent
</FN>
</TABLE>


<TABLE>
<CAPTION>
                         Years Ended December 31, 1996 and 1995         
                               (In Thousands of Dollars)          
              
                                                   	     	 1996  	      	1995  
Operating activities 	  			
<S>                                                      <C>           <C>
  Net income for the year  	                             $	6,867 	     $	6,116 
  Adjustments to reconcile net income to net cash 				
    provided by operating activities 				
  Equity in undistributed net income of bank 
    subsidiary                                          		(5,444) 		    (4,920) 
  Increase in other assets   		                             (111) 		       (69) 
  Increase in payables 		                                     44 	         	54 
				
     Total adjustments                                    (5,511)       (4,935)

  Net cash provided by operating activities 		             1,356		       1,181 
				
Net cash provided by (used in) investing activities 				
    Purchases of investment securities 	     	              (133) 		        - 
    Proceeds from maturities of investment securities 		     137 		         - 
     Net cash provided by (used in) investing activities		     4 		         - 

Net cash used in financing activities 				
  Cash dividends paid 		                                  (1,288) 		    (1,176) 
				
    Increase (decrease) in cash 		                            72 		          5 
				
Cash at beginning of year 		                                  70 		         65 

Cash at end of year 	                                    $  	142 	     $   	70 
<FN>
<F20>
Table XIX - Condensed Statements of Cash Flows of Parent
</FN>
</TABLE>





              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS 

GENERAL

	First Farmers and Merchants Corporation, a one-bank holding
company, was formed during 1982.  Its only subsidiary, First
Farmers and Merchants National Bank, is a community bank that
was established in 1909.  The resulting financial condition of
the Corporation should be evaluated in terms of the Bank's
operations within its service area.

	During 1996, First Farmers and Merchants National Bank
strengthened its presence in the four counties in middle
Tennessee that it serves.  Deposits and loans in each of the
four counties increased.  Internal growth was the challenge for
the year to all directors, officers, and employees who were
reminded that the bank was large enough to perform yet small
enough to care about customer needs.  The Bank is positioned to
provide quality services in diverse markets and a dynamic
interest rate environment.  Our customers are enjoying the
quality service of a community bank and the safety and strength
of a regional bank.

	These tables plus the following discussion and financial
information is presented to aid in understanding First Farmers
and Merchants' current financial position and results of
operations.  The emphasis of this discussion will be on the
years 1996, 1995, and 1994; however, financial information for
prior years will also be presented when appropriate.  This
discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes to Consolidated Financial
Statements included elsewhere in this material.


FINANCIAL CONDITION 

	First Farmers and Merchants National Bank's financial condition
depends on the quality and nature of its assets, its liability
and capital structure, the market and economic conditions, and
the quality of its personnel.  The following paragraphs provide
a unique perspective on the internal structures of the
Corporation and the Bank that provide the strength in our
organization.


Summary

	The Bank reported net income of $6.9 million for 1996 compared
to $6.1 million in 1995 and $5.6 million in 1994.  On a per
common share basis, net income was $4.90 for 1996 versus $4.37
for 1995 and $3.97 for 1994.  The improvement in 1996's earnings
resulted from a wider gross margin, an increase in noninterest
income sufficient to cover a smaller increase in noninterest
expenses, and the increase in taxes.  The smaller increase in
noninterest expenses is due in part to the significant decrease
in deposit insurance.  These improve- ments were partially
offset by higher additions to the allowance for loan losses.

	The return on average equity for 1996 was 13.23% compared to
13.08% for 1995 and 13.30% for 1994.   The return on average
assets was 1.37% for 1996 versus 1.32% for 1995 and 1.23% for
1994.


Gross Interest Margin

	The gross interest margin is defined as the difference between
the revenue from earning assets, primarily interest income, and
interest expense related to interest-bearing liabilities.  The
maintenance of the gross interest margin at a level which, when
coupled with noninterest revenues, is sufficient to cover
additions to the allowance for loan losses, noninterest expenses
and income taxes, and yield an acceptable profit is critical for
success in the banking industry.  The gross interest margin is a
function of the average balances of earning assets and
interest-bearing liabilities and the yields earned and rates
paid on those balances. 

	Management activities are planned to maintain a satisfactory
spread between the yields on earning assets and the related cost
of interest-bearing funds.  The gross interest spread is
determined by comparing the taxable equivalent gross interest
margin to average earning assets before deducting the allowance
for loan losses.  This ratio reflects the overall profitability
of earning assets, including both those funded by
interest-bearing sources and those which incur no interest cost
(primarily noninterest-bearing demand deposits).  This ratio is
most often used when analyzing a banking institution's overall
gross margin profitability compared to that of other financial
institutions.  The incremental interest spread compares the
difference between the yields on earning assets and the cost of
interest-bearing funds.  This calculation and similar ratios are
used to assist in pricing decisions for interest related
products. 

	Table A entitled DISTRIBUTION OF ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY, INTEREST RATES AND INTEREST DIFFERENTIAL
presents for each of the last three years by major categories of
assets and liabilities, the average daily balances, the
components of the gross interest margin (on a taxable equivalent
basis), the yield or  rate, and the incremental and gross
interest spread.  

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

TABLE A - Distribution of Assets, Liabilities, and Stockholders'
Equity, Interest Rates 			and Interest Differential

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31, 
                              	            1996        		              1995  		                     1994  
                              	  Average  	Rate/ 	          		Average  Rate/ 				         Average 		Rate/ 		
                              	  Balance 	 Yield   Interest 		Balance 	Yield 		Interest   Balance 	 Yield 		 Interest 
ASSETS 	                                                    (Dollars In Thousands) 
Interest earning assets 																								
<S>                             <C>         <C>    <C>        <C>       <C>    <C>        <C>        <C>    <C>
 Loans, net 	                   $290,413 		 9.43% 	$	27,373* 	$276,166 	9.38% 	$	25,892* 	$247,791 		8.54% 	$	21,156* 
 Bank time deposits 		                 1 		   - 			     - 			        2    -			      - 			      - 		    - 			     - 	
 Taxable securities 		           118,030 		 6.15 			  7,256 			104,220		6.20 			  6,457 			119,960 		6.25 			  7,497 	
 Tax exempt securities 		         44,158 		 7.10 			  3,134*  		39,139 	8.06  		  3,156* 		 38,545 		8.49 			  3,274* 
 Federal funds sold 		             4,198  		5.31     			223 		  	2,076		5.83 			    121 			  2,998 		3.73 			    112 	
																								
 TOTAL EARNING ASSETS 		         456,800 		 8.32 		$	37,986			 421,603		8.45 		$	35,626 			409,294 		7.83 		$	32,039 	
Noninterest earning assets 																								
 Cash and due from banks 		       25,760 								               24,829								              25,945 						
 Bank premises and equipment 	  	  6,708 								                6,246								               6,350 						
 Other assets 		                  13,432 							 	              11,061 								             10,364

 TOTAL ASSETS 	                 $502,700 							              $463,739 					 		           $451,953 						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY 																								
Interest bearing liabilities 																								
 Time and savings deposits: 																								
 NOW and money market accounts	$158,438 	   3.37% 	$ 	5,338 		$148,993  3.51% 	$ 	5,223 		$161,244 		3.25%	 $ 	5,239 	
 Savings 		                      37,428 		  3.22 			  1,204 	 		34,627  3.00 			  1,040			  35,036 		2.87 			  1,006 	
 Time  		                       151,973		   5.40 		  	8,210 			136,605  5.30 			  7,245			 126,523 		4.27 			  5,400 	
 Time over $100,000 		           34,554 		  5.40 	  		1,866 	 		32,522		5.35 			  1,740 			 26,053 		4.32 			  1,126 	
																								
 TOTAL INTEREST BEARING 
  DEPOSITS 		                   382,393 		  4.35			  16,618 			352,747 	4.32 			 15,248 		 348,856 		3.66			  12,771 	
 Federal funds purchased 		       1,043 		  5.56 			     58 			  2,415		5.92 			    143 			  1,462 		4.86 			     71 	
 Other short-term debt 		           622 		  5.79      			36 	    		565 	5.49			      31 			    568 		3.92 			     22 	
																								
 TOTAL INTEREST BEARING 
  LIABILITIES 		                384,058 		  4.35 		$	16,712 			355,727 	4.34 		$ 15,422 			350,886 		3.67 		$	12,864 	
Noninterest bearing liabilities 																								
 Demand deposits 		              61,509 								                56,742 								             55,557
 Other liabilities 		             5,066 								                 4,515 								              3,690						

 TOTAL LIABILITIES 		           450,633 								               416,984								             410,133 						
Stockholders' equity 		          52,067 								                46,755 								             41,820
						
 TOTAL LIABILITIES AND 																								
  STOCKHOLDER'S EQUITY 	       $502,700 							               $463,739 							            $451,953 						

 Spread between combined 
   rates earned and combined 
    rates paid* 				                        3.97% 	               						4.11%							                 4.16% 			

 Net yield on interest-
  earning assets* 				                      4.66% 							               4.79% 							                4.68% 			
<FN>
<F21>
* Taxable equivalent basis
</FN>
</TABLE>

Notes:
1.	U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.
2.	The taxable equivalent adjustment has been computed based on
a 34% federal income tax rate and has given effect to the
disallowance of interest expense, for federal income tax
purposes, related to certain tax-free assets.  Loans include
nonaccrual loans for all years presented.
3.	The average balances of the fair values of available-for-sale
securities were used in the calculations in this table.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 

TABLE B - Distribution of Assets, Liabilities, and Stockholders'
          Equity, Interest Rates and Interest Differential     (Continued)

	Table B sets forth, for the periods indicated, a summary of
changes in interest earned and interest paid separated into the
amount generated by volume changes and the amount generated by
changes in the yield or rate. 

<TABLE>
<CAPTION>
                                             	  1996 Compared to 1995          	 	1995 Compared to 1994
Volume and Yield/Rate Variances 				                  Yield/ 		Net Increase       				  Yield/ 		 Net Increase 
(Taxable Equivalent Basis - In Thousands) 	 	Volume 		Rate   		(Decrease) 		   Volume 		Rate 		   (Decrease) 
Revenue earned on 												
<S>                                         <C>       <C>       <C>           <C>       <C>        <C>
  Net loans 	                               $ 1,336 	 $  	145 	 $	1,481 	     $	2,423 	 $	2,313 	  $	4,736 
  Investment securities 												
    Taxable securities 		                       856 		    (57) 		   799 		       (984) 		   (56)		  (1,040) 
    Tax-free securities 		                      405 		   (427) 		   (22) 		        50 		   (168)		    (118) 
  Federal funds sold 		                         124 		    (22) 		   102 		        (34) 		    43 		       9 

     Total interest earning assets 		         2,721 		   (361)		  2,360 		      1,455 		  2,132 		   3,587 
Interest paid on 												
  NOW and money market accounts 		              331 		   (216) 		   115 		       (398)		    382 		     (16) 
  Savings deposits 		                            84 		     80 		    164 		        (12) 		    46 		      34 
  Time deposits 		                              815 		    150 		    965 		        430 		  1,415 		   1,845 
  Time over $100,000    		                      109 		     17 		    126 		        279 		    335 		     614 
  Federal funds purchased 		                    (81) 		    (4) 		   (85) 		        46 		     26 		      72 
  Short term debt 		                              3 		      2 		      5 		        - 		        9 		       9 
												
      Total interest-bearing funds 		         1,261 		     29 		  1,290		         345 		  2,213 		   2,558 
												
Net interest earnings 	                     $	1,460 	 $ 	(390) 	$	1,070 	     $	1,110 	 $  	(81)   $	1,029 
</TABLE>
Notes:

1.	The change in interest resulting from both volume and
yield/rate has been allocated to change due to volume and change
due to yield/rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
2.	The computation of the taxable equivalent adjustment has
given effect to the disallowance of interest expense, for
federal income tax purposes, related to certain tax-free assets.
3. U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.





<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 


		Two graphs are included at this point in the material mailed to our stock-
holders.  The first graph illustrates the categories of average earning
assets and the portion each category is of the total for the
last three years.  The following table is the data illustrated
by this graph.
<TABLE>
<CAPTION>
					                 Loans        	Investment Securities	    Other
   <S>              <C>                   <C>                <C>
			1996	           	$290,413	             $162,188           $4,199
			1995		            276,166	 	            143,358 	          2,078
			1994		            247,791	 	            158,505	           2,998

</TABLE>

The second graph illustrates the average balances by category of
liabilities that fund earning assets.  The following table is
the data illustrated by this graph in thousands of dollars.

<TABLE>
<CAPTION>
		         Interest-Bearing Deposits		   Noninterest-Bearing Deposits	   Other
 <S>               <C>                           <C>                    <C>
	1996		            $382,393			                   $61,509			             $1,043
	1995		             352,747				                   56,742			              2,415
	1994		             348,856				                   55,557			              1,462
</TABLE>


		Average earning assets increased 8.4% in 1996 compared to an
3.0% increase in 1995 and a 7.6% increase in 1994.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1996, average net loans represented 
63.6% of  average earning assets.  Total average net loans
increased during the last three years showing an 5.2% growth
from 1995 to 1996, an 11.5% growth from 1994 to 1995, and a 6.1%
growth from 1993 to 1994.  Average investments represented 36.4%
of average earning assets at December 31, 1996, and increased
14.5% in 1996.  The Bank purchased certain assets and assumed
certain deposit liabilities of the Mt. Pleasant, Maury County,
Tennessee, and Lewisburg, Marshall County, Tennessee, branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  The assets purchased were buildings and equipment and not
earning assets.  Most of the increase in investments can be
attributed to the assumption of  those deposit liabilities that
were not used for the increasing loan growth.  Investments 
decreased 9.6% in 1995, and increased 11.6% in 1994.  Average
total assets increased during the last three years as evidenced
by an 8.4% growth from 1995 to 1996, a 2.6% growth from 1994 to
1995, and a 7.4% growth from 1993 to 1994.  Please refer to the
color graphs at the end of this document that illustrate this
growth.

	The bank's average deposits grew during the last three years
reflecting an 8.4% growth from 1995 to 1996, a 1.3% growth from
1994 to 1995, and a 6.8% growth from 1993 to 1994. 
Approximately half of the increase in average deposits can be
attributed to the acquisition discussed earlier in this section.
 Short and medium term rates were more competitive compared to
longer term rates during the first half of 1996 and some
depositors moved money back into interest-bearing transaction
accounts, which increased 6.3% during 1996 but had declined in
1995 as investors took advantage of higher certificate of
deposit rates.  Over half of the increase during 1996 was
attributable to the acquisition.  Average interest-bearing
checking accounts decreased 7.6 % in 1995 compared to a  9.5%
increase in 1994.  Average savings deposits increased 8.1%
during 1996, over 54% from the acquisition.  Savings deposits
have been strong historically providing a core, low cost, source
of funding.  Average savings deposits declined 1.2% in 1995
compared to a 12.2% increase in 1994.  Average certificates of
deposit under $100,000 increased 11.3% during 1996, 60.0% from
the acquisition, increased 8.0% in 1995, and declined 1.2.%  in
1994.  Certificates of deposit over $100,000 increased 6.3% in
1996, 87.8% from the acquisition,  compared to a 24.8% increase
in 1995 and a 10.4% increase in 1994.  



<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND RESULTS OF OPERATIONS 


LIQUIDITY AND INTEREST  RATE  SENSITIVITY

	The Bank maintains a formal asset and liability management
process to control interest rate risk and assist management in
maintaining reasonable stability in the gross interest margin as
a result of changes in the level of interest rates and/or the
spread relationships among interest rates.  The Bank uses an
earnings simulation model to evaluate the impact of different
interest rate scenarios on the gross margin.  Each month, the
Asset/Liability Committee monitors the relationship of rate
sensitive earning assets to rate sensitive interest bearing
liabilities (interest rate sensitivity) which is the principal
factor in determining the effect that fluctuating interest rates
will have on future net interest income.  Rate sensitive earning
assets and interest bearing liabilities are those which can be
repriced to current market rates within a defined time period. 

	Another tool used to monitor the Bank's overall interest rate
sensitivity is a gap analysis.  Table C, Rate Sensitivity of
Earning Assets and Interest-Bearing Liabilities, shows the
Bank's rate sensitive position at December 31, 1996, as measured
by gap analysis (the difference between the earning asset and
interest-bearing liability amounts scheduled to be repriced to
current market rates in subsequent periods).

	As a policy, budgeted financial goals are monitored on a
monthly basis by the Asset/Liability Committee where the actual
dollar change in net interest income given different interest
rate movements is reviewed.  A negative dollar change in net
interest income for a twelve month period of less than 3% of net
interest income given a three hundred basis point shift in
interest rates is considered an acceptable rate risk position. 
The net interest margin, on a tax equivalent basis, at December
31, 1996,  1995, and 1994 was 4.66%, 4.79%,  and 4.68%
respectively.

<TABLE>

TABLE C - Rate Sensitivity of Earning Assets and Interest-Bearing Liabilities
          (Dollars in Thousands) 
<CAPTION>
  		                                       3 Months 		 3-6 	    	6-12   		Over 1 		
As of December 31, 1996 		                 or Less 		 Months 		 Months 	 	Year		       Total 
Earning assets 										
<S>                                      <C>        <C>        <C>        <C>        <C>
  Loans and leases, net of unearned     	$ 	58,045 	$ 	42,594 	$ 	65,730 	$	137,632 	$	304,001 
  Taxable investment securities 		          13,855 	  	10,000 	  	13,500	  	 90,061 		 127,416 
  Tax-exempt investment securities 		        1,000 		   1,100 		     900		   44,271 		  47,271 
										
     Total earning assets 		                72,900 	  	53,694 		  80,130 		 271,964 	$	478,688 

Interest-bearing liabilities 										
  NOW and money market accounts 		          45,590 		     - 		    64,588		   43,136 	$ 153,314 
  Savings 		                                   - 	 	      - 		    41,594 		     - 	 	   41,594 
  Time 		                                   41,547 		  33,805 		  50,657 		  25,077 		 151,086 
  Time over $100,000 		                     11,680 		   9,813 		  12,825 		   4,812		   39,130 
  Other short-term debt 		                   5,523 		     - 	 	      - 	 	      - 		     5,523 
										
Total interest bearing liabilities 		      104,340 		  43,618 		 169,664		   73,025 	$	390,647 

Noninterest-bearing, net                                 								(88,041) 		

Net asset/liability funding gap 		         (31,440) 		 10,076 		 (89,534)		 110,898 		

Cumulative net asset/liability 
 funding gap 	                           $ (31,440) $	(21,364) $(110,898) 	$ 	  - 	 	 
<FN>
<F22>
Available-for-sale and held-to-maturity securities were combined
in the taxable investment securities category for purposes of
this table.
</FN>
</TABLE>




<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                AND RESULTS OF OPERATIONS 


LOANS AND LOAN QUALITY

	As with most commercial banking institutions, the loan
portfolio is the largest component of earning assets and
consequently provides the highest amount of revenues.  The loan
portfolio also contains, as a result of credit quality, the
highest exposure to risk.  When analyzing potential loans,
management assesses both interest rate objectives and credit
quality objectives in determining whether to make a given loan
and the appropriate pricing for that loan.  The Bank maintains a
diversified portfolio in order to spread its risk and reduce its
exposure to economic downturns which may occur in different
segments of the economy or in particular industries.    The
composition of the loan portfolio is disclosed in detail in Note
3 in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the
accompanying financial statements.

	The Bank follows written loan policies which include loan
review procedures and approvals.  Depending primarily on the
amount of the loan, there are various approval levels including
an Executive Committee of the Board of Directors that meets
weekly.

	The Bank has a Loan Review Department which performs ongoing,
independent reviews of specific loans for credit quality and
proper documentation.  This department is centralized and
independent of the lending function.  Regular reports are made
to senior management and the Executive Committee of the Board of
Directors regarding the credit quality of the loan portfolio, as
well as trends.  Every loan is assigned a risk rating by the
loan officer subject to review by Loan Review.  The Bank also
has a Credit Administrator who is responsible for assisting loan
officers in structuring new loans, reviewing problem loans,
monitoring their status from period to period, and assisting in
their resolution.  This analysis and review also includes a
formal review that is prepared quarterly to assess the risk in
the loan portfolio and to determine the adequacy of the
allowance for loans losses.  This review supported management's
assertion that the allowance was adequate at December 31, 1996.  

	Table D, RISK ELEMENTS IN THE LOAN PORTFOLIO, includes all
loans management considers to be potential problem loans,
summarizes average loan balances, and reconciles the allowance
for loan losses for each year.  Additions to the allowance,
which have been charged to operating expenses, are also
disclosed.  Management does not believe that there is a
concentration of loans to a multiple number of borrowers engaged
in similar activities. 

	Loans having recorded investments of $5.1 million at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent 1.7% of gross loans.
 Commercial loans comprised $.384 million of the total, with
loans secured by real estate accounting for $3.6 million, and
installment loans $1.1 million.  The gross interest income that
would have been recorded during 1996 if the loans had been
current in accordance with their original terms and had been
outstanding throughout the period or since origination, if held
for part of the period, was $374, $365, and $193 thousand for
the years ended December 31, 1996, 1995, and 1994 respectively. 
Please refer to Note 1 and Note 3 in the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS that are included elsewhere in this
material for more information on the Bank's policy regarding
loan impairment.

	A graph on the bottom of this page is included in the materials
sent to the stockholders that illustrates the increase in
average net loans and the ratio of net loan charge offs to
average loans for the last eight years.  The ratio at December
31, 1996 was .36%.  This ratio, although higher than 1994 and
1995 ratios, is well below industry levels.   The following
table is the data illustrated by this graph.

<TABLE>
<CAPTION>
				                                   Avg Loans       	Ratio  Net
                                  				Outstanding	       CO/Avg Ln
                      <S>              <C>                <C>
                    		1989		           $163,003	          0.0032%
                    		1990		            172,749	          0.0030
                    		1991		            182,561	          0.0037
                    		1992		            215,158	          0.0023
                    		1993		            233,608	          0.0030
                    		1994		            247,791          	0.0014
                    		1995		            276,166	          0.0012
                   			1996		            290,413	          0.0036


<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO


</TABLE>
<TABLE>
<CAPTION>
	                      								                                   December 31
                                              	1996      		1995     	 	1994     	 	1993     	 	1992  
                                                  									(Dollars  In Thousands)
<S>                                         <C>         <C>         <C>         <C>         <C>
Average amount of loans outstanding       	 $ 290,413 	 $ 276,166 	 $	247,791 	 $	233,608 	 $ 215,158 
										
Balance of allowance for possible loan 										
  losses at beginning of year 	             $  	2,678 	 $  	2,342 	 $  	2,024	  $  	2,254 	 $ 	 1,917 
Loans charged-off: 										
  Loans secured by real estate    		              368 		       15 		      135 		      396		       245 
  Commercial and industrial loans    		           141 		      170 		       42 		      222		       124 
  Individuals 		                                  879 		      371 		      246 		      230 		      249 
     TOTAL  LOANS CHARGED OFF 		                1,388 		      556 		      423 		      848		       618 
Recoveries of loans previously charged off: 										
  Loans secured by real estate 		                 111 		       97 		        9 		       56 		        3 
  Commercial and industrial loans 		               42 		       14 		       36 		       52 		       80 
  Individuals 		                                  183 		      111 		       36 		       40 		       32 
     TOTAL RECOVERIES 		                          336 		      222 		       81 		      148 		      115 
       NET  LOANS CHARGED-OFF 		                1,052 		      334 		      342		       700 		      503 
Provision charged to operating expenses 		      1,300 		      670 		      660		       470 		      840 
     BALANCE OF ALLOWANCE FOR 										
      POSSIBLE LOAN LOSSES AT 										
       END OF YEAR 	                        $ 	 2,926 	 $ 	 2,678 	 $ 	 2,342 	 $ 	 2,024 	 $ 	 2,254 

Ratio of net charge-offs during the 										
    period to average loans outstanding 		      0.36% 		    0.12% 		    0.14%		     0.30% 		    0.23% 
</TABLE>


CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1996, the Corporation had a ratio of
average capital to average assets of 10.36%.  This compares to a
ratio of average capital to average assets of 10.08% at December
31, 1995, and 9.25% at December 31, 1994.

	Cash dividends declared in 1996 were 11.4% more than those paid
in 1995.  The dividend to net income ratio was 20%.  Additional
dividends of approximately $14.8 million to the Corporation
could have been declared by the subsidiary bank without
regulatory agency approval.  The Corporation plans to maintain
or increase the payout ratio while continuing to maintain a
capital to asset ratio reflecting financial strength and
adherence to regulatory guidelines.

	As of December 31, 1996, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 17.7% and 18.7% respectively.  One
year earlier, the comparable ratios were 16.9% and 17.9%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital strength of the
Corporation and the Bank. 

		A bar graph at the bottom of this page, in the materials sent to
our stockholders, illustrates the average equity of the Corporation 
for the last six years.	The following table is the data illustrated 
by this graph in thousands of dollars.

<TABLE>
                          <S>              <C>
                      				1990		           $27,358
                      				1991		            30,194
                      				1992		            33,414
                      				1993		            37,454
                      				1994		            41,820
                      				1995		            46,755
                      				1996		            52,067
</TABLE>

<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS

Interest Income

	Total interest income increased 7.5% in 1996 due to a wider
gross margin that was enhanced by loan growth in all the market
areas the Bank serves.  Interest and fees earned on loans
increased 5.8% in 1996 accounting for 73.7% of gross interest
income.  Interest earned on investment securities and other
investments increased 12.8% in 1996 rounding out gross interest
income contributing 26.3%.  Total interest income increased
11.9% in 1995 and 7.3% in 1994.


Interest Expense

	Total interest expense increased 8.4% in 1996 due mostly to the
increase in interest-bearing deposits, about half of which can
be attributed to the acquisition indicated earlier.  This
increase compares favorably to a 19.9% increase in 1995 and a
6.9% increase in 1994.  The cost of interest-bearing deposits
remained steady all year under monthly monitoring by the
Asset/Liability Committee.  This contributed to the wider gross
margin achieved during 1996.   The net interest margin (tax
equivalent net interest income divided by average earning
assets) was 4.7% at the end of 1996 compared to 4.8% in 1995 and
4.7% in 1994.

 	Net interest income on a fully taxable equivalent basis is
influenced primarily by changes in:  (1) the volume and mix of
earning assets and sources of funding; (2) market rates of
interest, and (3) income tax rates.  The impact of some of these
factors can be controlled by management policies and actions. 
External factors also can have a significant impact on changes
in net interest income from one period to another.  Some
examples of such factors are: (1) the strength of credit demands
by customers; (2) Federal Reserve Board monetary policy, and (3)
fiscal and debt management policies of the federal government,
including changes in tax laws. 


Noninterest Income and Expense

		Noninterest income increased 28.4% during 1996 led by the
increase in service charges from new and acquired customers. 
This compares to a 14.9% increase in 1995 and a 1.6% increase in
1994.  Use of the Bank's check card generates fee income from
the clearing agent for the electronic transaction even though no
service fee is charged to Bank customers for its use.  Income
from fiduciary services provided in the Bank's Trust Department
remained strong. 

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1996 and the percentage each category is of the total.
The following table is the data illustrated by this graph in
thousands of dollars.

<TABLE>
<CAPTION>
			             Income Category        		Income $	       % of Total
         <S>                              <C>               <C>
       		Income from trust services		     $1,324			         22.8%
       		Service fees on deposits		        3,374			         58.1%
       		Other service fees		                746			         12.8%
       		Other				                           363			          6.3%
</TABLE>


		Noninterest expenses, excluding the provision for possible
loan losses, increased 5.8% in  1996 which is a much smaller
increase than the 6.2% increase in 1995.  The increase in 1994
was 5.4% for a smaller corporation.  Increased productivity
fostered by our technology improvements as the learning curve
diminished and cost control efforts contributed to this
improvement.  Included in this category is Federal Deposit
Insurance Corporation (FDIC) insurance premiums at the rate
established for "well capitalized" institutions.  This expense
was $6 thousand in 1996 compared to $500 thousand in 1995 and
$891 thousand in 1994.  Please refer to the discussion in the
CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS section above for more
information concerning the bank's capitalization.

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
expense in 1996 and the percentage each category is of the
total.  The following table is the data illustrated by this
graph in thousands of dollars.

<TABLE>
<CAPTION>
		                Expense Category	           Expense $		       % of Total
                  <S>                          <C>                  <C>
                		Personnel			                 $7,031			            46.5%
                		Occupancy			                  1,211			             8.0%
                		Furniture and equipment 		    1,581			            10.5%
                		FDIC insurance		   	              7			               0%
                		Other				                     5,292			            35.0%
</TABLE>


<PAGE>



                      FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE E - FIVE YEAR COMPARISON

<TABLE>
<CAPTION>
		                                        1996  	  	  1995      		 1994     		  1993  		     1992  
INTEREST INCOME 										
<S>                                   <C>          <C>          <C>          <C>          <C>
 Interest and fees on loans          	$27,343,817 	$25,857,982 	$21,130,914 	$19,518,742 	$19,791,548 
										
 Income on investment securities 										
   Taxable interest 		                  6,892,118 		 6,179,492 	 	7,012,626		  6,925,404 		 6,898,114 
   Exempt from federal income tax 		    2,366,764 		 2,156,813		  2,184,666 		 1,857,168 		 1,825,869 
   Dividends 		                           256,951 		   177,790 		   204,948 		    72,054		    110,874 
										
                                      		9,515,833 		 8,514,095 		 9,402,240 		 8,854,626 		 8,834,857 

 Other interest income 		                 223,019 		   121,492 		   284,384		    347,287 		   195,744 
										
    TOTAL INTEREST INCOME 		           37,082,669 		34,493,569		 30,817,538 		28,720,655 	 28,822,149 

INTEREST EXPENSE  										
  Interest on deposits 		              16,617,525 		15,247,875 		12,770,618		 11,998,235 		13,329,557 
  Interest on other short term 
   borrowings 		                           94,232 		   174,370		     93,286 		    38,339 		    47,449 
										
    TOTAL INTEREST EXPENSE 		          16,711,757 		15,422,245		 12,863,904 		12,036,574 		13,377,006 

    NET INTEREST INCOME 		             20,370,912 		19,071,324		 17,953,634 		16,684,081 		15,445,143 

PROVISION FOR POSSIBLE LOAN LOSSES  	   1,300,000 		   670,000		    660,000 		   470,000 		   840,000 
    NET INTEREST INCOME AFTER 										
      PROVISION FOR LOAN LOSSES 		     19,070,912		 18,401,324 		17,293,634 		16,214,081 		14,605,143 

NONINTEREST  INCOME 										
  Trust department income 		            1,323,525 		 1,251,642 		 1,249,359		    863,952 		   753,239 
  Service fees on deposit accounts 		   3,373,805 		 2,697,332		  2,317,992 		 2,206,026 		 2,123,096 
  Other service fees, commissions, 										
    and fees 		                           745,523 		   300,407 		   336,758 		   509,009		    401,618 
  Other operating income 		               363,430 		   322,634 		   319,466		    315,108 		   191,363 
  Available for sale securities 										
   gains (losses) 		                        - 		         1,182 		  (243,690)		    23,896 		    28,434 
										
    TOTAL NONINTEREST  INCOME 		        5,806,283 		 4,573,197		  3,979,885 		 3,917,991 		 3,497,750 

NONINTEREST  EXPENSES 										
  Salaries and employee benefits 		     7,030,588 		 6,620,827		  6,247,706 		 5,686,965 		 5,283,086 
  Net occupancy expense 		              1,211,067 		 1,279,434 		 1,190,678		  1,070,971 		   984,650 
  Furniture and equipment expense 		    1,580,753  		1,382,769  		1,069,856 		   889,848 		   801,453 
  Loss on other real estate 		              - 		        50,724 		     4,000		    103,122 		   312,064 
  Other operating expenses 		           5,298,652 		 5,006,292		  4,996,107 		 4,903,949 		 4,460,696 
										
    TOTAL NONINTEREST EXPENSES 		      15,121,060	  14,340,046 		13,508,347 		12,654,855 		11,841,949 

      INCOME BEFORE PROVISION 										
       FOR INCOME TAXES 		              9,756,135		  8,634,475 		 7,765,172 		 7,477,217 		 6,260,944 

PROVISION FOR INCOME TAXES 		           2,889,339 		 2,518,769 		 2,203,746		  2,220,965 		 1,768,840 

       NET INCOME  	                  $	6,866,796 	$ 6,115,706 	$	5,561,426  $	5,256,252 	$	4,492,104 

EARNINGS PER COMMON SHARE  										
  (1,400,000 outstanding shares) 	    $ 	    4.90  $ 	    4.37 	$ 	    3.97	 $ 	    3.75 	$ 	    3.21 
</TABLE>

<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 


Net Income

	Net income was 12.3% higher in 1996 than in 1995.  As indicated
earlier, the improvement in 1996's earnings resulted from a
wider gross margin, an increase in noninterest income sufficient
to cover a smaller increase in noninterest expenses, and the
increase in taxes.  The smaller increase in noninterest expenses
is due in part to the significant decrease in deposit insurance.
These improvements were partially offset by higher additions to
the allowance for loan losses.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ON THE FINANCIAL
STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD

	The Financial Accounting Standards Board has issued one
standard that has not been adopted by the Bank but is required
to adopted after December 31, 1996.  The Statement of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" establishes guidance on when to recognize and
how to measure these financial assets and liabilities.  The
statement is effective prospectively for transfers and servicing
of financial assets and extinguishment of liabilities occurring
after December 31, 1996.  It supersedes Statement No. 122,
"Accounting for Mortgage Servicing Rights", which was effective
for fiscal years beginning after December 15, 1995.  Management
does not believe this statement will have any material effect on
future issues.


SHAREHOLDER INFORMATION

	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1996, had a
market value of $91 million and were held by 1,525 identifiable
individuals located mostly in the market area.  A small number
of additional shareholders are not identified individually since
some bank nominees, including the bank's Trust Department, are
listed as single owners when, in fact, these holdings represent
large numbers of shareholders.  No single shareholder's
ownership exceeded five percent at year end.

	There is no established public trading market for the stock. 
The table on the right lists the high and low price of the
Corporation's common stock, as well as the semiannual dividend
paid per share, in each of the last three years.

<TABLE>
<CAPTION>
		                                Price Range of 			       Dividend 
                                	 	Common Stock 	 		         Paid 
                               	High 		     Low 		        Per Share 
 <S>    <S>                    <C>         <C>             <C>
		      First quarter          $	40.00  		 $	36.00  	      $ 	
      		Second quarter           42.00  			  37.00  		        0.39 
	1994  	Third quarter 		         43.00    			37.00  		
      		Fourth quarter 		        45.00  			  38.00  		        0.41 
                                                   								$ 	0.80  

        First quarter          $ 45.00     $ 45.00         $
      		Second quarter 		        48.00  			  45.00  		        0.43 
	1995  	Third quarter 		         50.00  			  48.00  		
      		Fourth quarter 		        54.00  			  50.00  		        0.45 
                                                   								$ 	0.88 

      		First quarter 	        $	56.00  		 $	56.00  	      $ 	
      		Second quarter 		        58.00  			  56.00  		        0.47 
	1996  	Third quarter 		         63.00  			  60.00  		
      		Fourth quarter 		        65.00  			  63.00  		        0.51 
                                                 							  	$ 	0.98 
</TABLE>


<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

<TABLE>
                                 	COMPARATIVE DATA 
                               	(In Thousands of Dollars) 
<CAPTION>
		                               1996  	 	  1995  		   1994  		   1993  		   1992  
<S>                          <C>        <C>        <C>        <C>        <C>
AVERAGE ASSETS 	             $ 502,700 	$	463,739 	$	451,953 	$	420,760 	$	381,379 

AVERAGE LOANS (NET) 	        $	290,413 	$	276,166 	$	247,791 	$ 233,609 	$	215,158 

AVERAGE DEPOSITS 	           $	443,902 	$	409,489 	$	404,412 	$	378,782	 $	343,128 

RETURN ON EQUITY AND ASSETS 										
  Return on average assets 		    1.37% 		   1.32% 		   1.23% 		   1.25%		    1.18% 

  Return on beginning equity 		 14.06% 		  13.95% 		  14.11%		   14.93% 		  14.21% 
  Average equity to  										
    average assets 		           10.36% 		  10.08% 		   9.25% 		   8.90%		    8.76% 

COMMON DIVIDEND PAYOUT RATIO 										
  Earnings per share 	       $ 	  4.90  	$  	4.37 	 $  	3.97 	 $ 	 3.75 	$	   3.21 

  Cash dividends per share 	 $ 	  0.98 	 $ 	 0.88 	 $ 	 0.80 	 $ 	 0.73	 $ 	  0.64 										

  Ratio 		                         20% 		     20% 		     20% 		     19% 		     20% 
</TABLE>

<TABLE>
                                           	NET INTEREST MARGIN 
                                         	(In Thousands of Dollars) 
<CAPTION>
                                  		1996     		1995     		1994     		1993    		1992  
INTEREST INCOME 										

<S>                              <C>        <C>        <C>        <C>       <C>
 (TAX EQUIVALENT) 	              $ 37,985 	 $	35,626 	 $	32,039 	 $	29,465  $ 29,564 

INTEREST EXPENSE 		                16,712 		  15,422 		  12,864 		  12,037 		 13,377 

	                                $	21,273  	$	20,204 	 $	19,175 	 $	17,428 	$	16,187 
NET INTEREST MARGIN* 		             4.66% 		   4.79% 		   4.68% 		   4.58% 		  4.67% 

<FN>
<F23>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets. 										
</FN>
</TABLE>

<PAGE>



Nine color graphs are included on the following page in the
materials sent to our stockholders.  The first one illustrates
net income for the last five years using information taken from
the "FIVE YEAR COMPARISON" table included above.  The second one
illustrates return on average assets for the last five years
using information from the "COMPARATIVE DATA" table on the
previous page.  The third, fourth and fifth graphs illustrate
return on stockholders' equity, earnings per share with cash
dividends and stockholder's equity  for the last five years. 
The sixth graph illustrates average net loans for the last five
years.  The seventh and eighth graphs illustrate deposits and
assets for the last five years.  The information for these
graphs was taken from the "COMPARATIVE DATA" table on the
previous page.  The final graph which illustrates  net interest
income for the last five years was taken from the net interest
margin section in the  "COMPARATIVE DATA" table on the previous
page.




Item 7.  Management's Discussion and Analysis of Financial
Condition and Results of Operations.

Management's discussion and analysis of financial condition and
results of operations is incorporated herein by reference to
Management's Discussion and Analysis of Financial Condition and
Results of Operations which are attached to and made a part of
Annual Report to Stockholders which is attached hereto as
Exhibit 13.


              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS 

GENERAL

	First Farmers and Merchants Corporation, a one-bank holding
company, was formed during 1982.  Its only subsidiary, First
Farmers and Merchants National Bank, is a community bank that
was established in 1909.  The resulting financial condition of
the Corporation should be evaluated in terms of the Bank's
operations within its service area.

	During 1996, First Farmers and Merchants National Bank
strengthened its presence in the four counties in middle
Tennessee that it serves.  Deposits and loans in each of the
four counties increased.  Internal growth was the challenge for
the year to all directors, officers, and employees who were
reminded that the bank was large enough to perform yet small
enough to care about customer needs.  The Bank is positioned to
provide quality services in diverse markets and a dynamic
interest rate environment.  Our customers are enjoying the
quality service of a community bank and the safety and strength
of a regional bank.

	These tables plus the following discussion and financial
information is presented to aid in understanding First Farmers
and Merchants' current financial position and results of
operations.  The emphasis of this discussion will be on the
years 1996, 1995, and 1994; however, financial information for
prior years will also be presented when appropriate.  This
discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes to Consolidated Financial
Statements included elsewhere in this material.


FINANCIAL CONDITION 

	First Farmers and Merchants National Bank's financial condition
depends on the quality and nature of its assets, its liability
and capital structure, the market and economic conditions, and
the quality of its personnel.  The following paragraphs provide
a unique perspective on the internal structures of the
Corporation and the Bank that provide the strength in our
organization.


Summary

	The Bank reported net income of $6.9 million for 1996 compared
to $6.1 million in 1995 and $5.6 million in 1994.  On a per
common share basis, net income was $4.90 for 1996 versus $4.37
for 1995 and $3.97 for 1994.  The improvement in 1996's earnings
resulted from a wider gross margin, an increase in noninterest
income sufficient to cover a smaller increase in noninterest
expenses, and the increase in taxes.  The smaller increase in
noninterest expenses is due in part to the significant decrease
in deposit insurance.  These improve- ments were partially
offset by higher additions to the allowance for loan losses.

	The return on average equity for 1996 was 13.23% compared to
13.08% for 1995 and 13.30% for 1994.   The return on average
assets was 1.37% for 1996 versus 1.32% for 1995 and 1.23% for
1994.


Gross Interest Margin

	The gross interest margin is defined as the difference between
the revenue from earning assets, primarily interest income, and
interest expense related to interest-bearing liabilities.  The
maintenance of the gross interest margin at a level which, when
coupled with noninterest revenues, is sufficient to cover
additions to the allowance for loan losses, noninterest expenses
and income taxes, and yield an acceptable profit is critical for
success in the banking industry.  The gross interest margin is a
function of the average balances of earning assets and
interest-bearing liabilities and the yields earned and rates
paid on those balances. 

	Management activities are planned to maintain a satisfactory
spread between the yields on earning assets and the related cost
of interest-bearing funds.  The gross interest spread is
determined by comparing the taxable equivalent gross interest
margin to average earning assets before deducting the allowance
for loan losses.  This ratio reflects the overall profitability
of earning assets, including both those funded by
interest-bearing sources and those which incur no interest cost
(primarily noninterest-bearing demand deposits).  This ratio is
most often used when analyzing a banking institution's overall
gross margin profitability compared to that of other financial
institutions.  The incremental interest spread compares the
difference between the yields on earning assets and the cost of
interest-bearing funds.  This calculation and similar ratios are
used to assist in pricing decisions for interest related
products. 

	Table A entitled DISTRIBUTION OF ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY, INTEREST RATES AND INTEREST DIFFERENTIAL
presents for each of the last three years by major categories of
assets and liabilities, the average daily balances, the
components of the gross interest margin (on a taxable equivalent
basis), the yield or  rate, and the incremental and gross
interest spread.  

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

TABLE A - Distribution of Assets, Liabilities, and Stockholders'
Equity, Interest Rates 			and Interest Differential

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31, 
                              	            1996        		              1995  		                     1994  
                              	  Average  	Rate/ 	          		Average  Rate/ 				         Average 		Rate/ 		
                              	  Balance 	 Yield   Interest 		Balance 	Yield 		Interest   Balance 	 Yield 		 Interest 
ASSETS 	                                                    (Dollars In Thousands) 
Interest earning assets 																								
<S>                             <C>         <C>    <C>        <C>       <C>    <C>        <C>        <C>    <C>
 Loans, net 	                   $290,413 		 9.43% 	$	27,373* 	$276,166 	9.38% 	$	25,892* 	$247,791 		8.54% 	$	21,156* 
 Bank time deposits 		                 1 		   - 			     - 			        2    -			      - 			      - 		    - 			     - 	
 Taxable securities 		           118,030 		 6.15 			  7,256 			104,220		6.20 			  6,457 			119,960 		6.25 			  7,497 	
 Tax exempt securities 		         44,158 		 7.10 			  3,134*  		39,139 	8.06  		  3,156* 		 38,545 		8.49 			  3,274* 
 Federal funds sold 		             4,198  		5.31     			223 		  	2,076		5.83 			    121 			  2,998 		3.73 			    112 	
																								
 TOTAL EARNING ASSETS 		         456,800 		 8.32 		$	37,986			 421,603		8.45 		$	35,626 			409,294 		7.83 		$	32,039 	
Noninterest earning assets 																								
 Cash and due from banks 		       25,760 								               24,829								              25,945 						
 Bank premises and equipment 	  	  6,708 								                6,246								               6,350 						
 Other assets 		                  13,432 							 	              11,061 								             10,364

 TOTAL ASSETS 	                 $502,700 							              $463,739 					 		           $451,953 						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY 																								
Interest bearing liabilities 																								
 Time and savings deposits: 																								
 NOW and money market accounts	$158,438 	   3.37% 	$ 	5,338 		$148,993  3.51% 	$ 	5,223 		$161,244 		3.25%	 $ 	5,239 	
 Savings 		                      37,428 		  3.22 			  1,204 	 		34,627  3.00 			  1,040			  35,036 		2.87 			  1,006 	
 Time  		                       151,973		   5.40 		  	8,210 			136,605  5.30 			  7,245			 126,523 		4.27 			  5,400 	
 Time over $100,000 		           34,554 		  5.40 	  		1,866 	 		32,522		5.35 			  1,740 			 26,053 		4.32 			  1,126 	
																								
 TOTAL INTEREST BEARING 
  DEPOSITS 		                   382,393 		  4.35			  16,618 			352,747 	4.32 			 15,248 		 348,856 		3.66			  12,771 	
 Federal funds purchased 		       1,043 		  5.56 			     58 			  2,415		5.92 			    143 			  1,462 		4.86 			     71 	
 Other short-term debt 		           622 		  5.79      			36 	    		565 	5.49			      31 			    568 		3.92 			     22 	
																								
 TOTAL INTEREST BEARING 
  LIABILITIES 		                384,058 		  4.35 		$	16,712 			355,727 	4.34 		$ 15,422 			350,886 		3.67 		$	12,864 	
Noninterest bearing liabilities 																								
 Demand deposits 		              61,509 								                56,742 								             55,557
 Other liabilities 		             5,066 								                 4,515 								              3,690						

 TOTAL LIABILITIES 		           450,633 								               416,984								             410,133 						
Stockholders' equity 		          52,067 								                46,755 								             41,820
						
 TOTAL LIABILITIES AND 																								
  STOCKHOLDER'S EQUITY 	       $502,700 							               $463,739 							            $451,953 						

 Spread between combined 
   rates earned and combined 
    rates paid* 				                        3.97% 	               						4.11%							                 4.16% 			

 Net yield on interest-
  earning assets* 				                      4.66% 							               4.79% 							                4.68% 			
<FN>
<F21>
* Taxable equivalent basis
</FN>
</TABLE>

Notes:
1.	U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.
2.	The taxable equivalent adjustment has been computed based on
a 34% federal income tax rate and has given effect to the
disallowance of interest expense, for federal income tax
purposes, related to certain tax-free assets.  Loans include
nonaccrual loans for all years presented.
3.	The average balances of the fair values of available-for-sale
securities were used in the calculations in this table.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 

TABLE B - Distribution of Assets, Liabilities, and Stockholders'
          Equity, Interest Rates and Interest Differential     (Continued)

	Table B sets forth, for the periods indicated, a summary of
changes in interest earned and interest paid separated into the
amount generated by volume changes and the amount generated by
changes in the yield or rate. 

<TABLE>
<CAPTION>
                                             	  1996 Compared to 1995          	 	1995 Compared to 1994
Volume and Yield/Rate Variances 				                  Yield/ 		Net Increase       				  Yield/ 		 Net Increase 
(Taxable Equivalent Basis - In Thousands) 	 	Volume 		Rate   		(Decrease) 		   Volume 		Rate 		   (Decrease) 
Revenue earned on 												
<S>                                         <C>       <C>       <C>           <C>       <C>        <C>
  Net loans 	                               $ 1,336 	 $  	145 	 $	1,481 	     $	2,423 	 $	2,313 	  $	4,736 
  Investment securities 												
    Taxable securities 		                       856 		    (57) 		   799 		       (984) 		   (56)		  (1,040) 
    Tax-free securities 		                      405 		   (427) 		   (22) 		        50 		   (168)		    (118) 
  Federal funds sold 		                         124 		    (22) 		   102 		        (34) 		    43 		       9 

     Total interest earning assets 		         2,721 		   (361)		  2,360 		      1,455 		  2,132 		   3,587 
Interest paid on 												
  NOW and money market accounts 		              331 		   (216) 		   115 		       (398)		    382 		     (16) 
  Savings deposits 		                            84 		     80 		    164 		        (12) 		    46 		      34 
  Time deposits 		                              815 		    150 		    965 		        430 		  1,415 		   1,845 
  Time over $100,000    		                      109 		     17 		    126 		        279 		    335 		     614 
  Federal funds purchased 		                    (81) 		    (4) 		   (85) 		        46 		     26 		      72 
  Short term debt 		                              3 		      2 		      5 		        - 		        9 		       9 
												
      Total interest-bearing funds 		         1,261 		     29 		  1,290		         345 		  2,213 		   2,558 
												
Net interest earnings 	                     $	1,460 	 $ 	(390) 	$	1,070 	     $	1,110 	 $  	(81)   $	1,029 
</TABLE>
Notes:

1.	The change in interest resulting from both volume and
yield/rate has been allocated to change due to volume and change
due to yield/rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
2.	The computation of the taxable equivalent adjustment has
given effect to the disallowance of interest expense, for
federal income tax purposes, related to certain tax-free assets.
3. U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.





<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 


		Two graphs are included at this point in the material mailed to our stock-
holders.  The first graph illustrates the categories of average earning
assets and the portion each category is of the total for the
last three years.  The following table is the data illustrated
by this graph.
<TABLE>
<CAPTION>
					                 Loans        	Investment Securities	    Other
   <S>              <C>                   <C>                <C>
			1996	           	$290,413	             $162,188           $4,199
			1995		            276,166	 	            143,358 	          2,078
			1994		            247,791	 	            158,505	           2,998

</TABLE>

The second graph illustrates the average balances by category of
liabilities that fund earning assets.  The following table is
the data illustrated by this graph in thousands of dollars.

<TABLE>
<CAPTION>
		         Interest-Bearing Deposits		   Noninterest-Bearing Deposits	   Other
 <S>               <C>                           <C>                    <C>
	1996		            $382,393			                   $61,509			             $1,043
	1995		             352,747				                   56,742			              2,415
	1994		             348,856				                   55,557			              1,462
</TABLE>


		Average earning assets increased 8.4% in 1996 compared to an
3.0% increase in 1995 and a 7.6% increase in 1994.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1996, average net loans represented 
63.6% of  average earning assets.  Total average net loans
increased during the last three years showing an 5.2% growth
from 1995 to 1996, an 11.5% growth from 1994 to 1995, and a 6.1%
growth from 1993 to 1994.  Average investments represented 36.4%
of average earning assets at December 31, 1996, and increased
14.5% in 1996.  The Bank purchased certain assets and assumed
certain deposit liabilities of the Mt. Pleasant, Maury County,
Tennessee, and Lewisburg, Marshall County, Tennessee, branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  The assets purchased were buildings and equipment and not
earning assets.  Most of the increase in investments can be
attributed to the assumption of  those deposit liabilities that
were not used for the increasing loan growth.  Investments 
decreased 9.6% in 1995, and increased 11.6% in 1994.  Average
total assets increased during the last three years as evidenced
by an 8.4% growth from 1995 to 1996, a 2.6% growth from 1994 to
1995, and a 7.4% growth from 1993 to 1994.  Please refer to the
color graphs at the end of this document that illustrate this
growth.

	The bank's average deposits grew during the last three years
reflecting an 8.4% growth from 1995 to 1996, a 1.3% growth from
1994 to 1995, and a 6.8% growth from 1993 to 1994. 
Approximately half of the increase in average deposits can be
attributed to the acquisition discussed earlier in this section.
 Short and medium term rates were more competitive compared to
longer term rates during the first half of 1996 and some
depositors moved money back into interest-bearing transaction
accounts, which increased 6.3% during 1996 but had declined in
1995 as investors took advantage of higher certificate of
deposit rates.  Over half of the increase during 1996 was
attributable to the acquisition.  Average interest-bearing
checking accounts decreased 7.6 % in 1995 compared to a  9.5%
increase in 1994.  Average savings deposits increased 8.1%
during 1996, over 54% from the acquisition.  Savings deposits
have been strong historically providing a core, low cost, source
of funding.  Average savings deposits declined 1.2% in 1995
compared to a 12.2% increase in 1994.  Average certificates of
deposit under $100,000 increased 11.3% during 1996, 60.0% from
the acquisition, increased 8.0% in 1995, and declined 1.2.%  in
1994.  Certificates of deposit over $100,000 increased 6.3% in
1996, 87.8% from the acquisition,  compared to a 24.8% increase
in 1995 and a 10.4% increase in 1994.  



<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND RESULTS OF OPERATIONS 


LIQUIDITY AND INTEREST  RATE  SENSITIVITY

	The Bank maintains a formal asset and liability management
process to control interest rate risk and assist management in
maintaining reasonable stability in the gross interest margin as
a result of changes in the level of interest rates and/or the
spread relationships among interest rates.  The Bank uses an
earnings simulation model to evaluate the impact of different
interest rate scenarios on the gross margin.  Each month, the
Asset/Liability Committee monitors the relationship of rate
sensitive earning assets to rate sensitive interest bearing
liabilities (interest rate sensitivity) which is the principal
factor in determining the effect that fluctuating interest rates
will have on future net interest income.  Rate sensitive earning
assets and interest bearing liabilities are those which can be
repriced to current market rates within a defined time period. 

	Another tool used to monitor the Bank's overall interest rate
sensitivity is a gap analysis.  Table C, Rate Sensitivity of
Earning Assets and Interest-Bearing Liabilities, shows the
Bank's rate sensitive position at December 31, 1996, as measured
by gap analysis (the difference between the earning asset and
interest-bearing liability amounts scheduled to be repriced to
current market rates in subsequent periods).

	As a policy, budgeted financial goals are monitored on a
monthly basis by the Asset/Liability Committee where the actual
dollar change in net interest income given different interest
rate movements is reviewed.  A negative dollar change in net
interest income for a twelve month period of less than 3% of net
interest income given a three hundred basis point shift in
interest rates is considered an acceptable rate risk position. 
The net interest margin, on a tax equivalent basis, at December
31, 1996,  1995, and 1994 was 4.66%, 4.79%,  and 4.68%
respectively.

<TABLE>

TABLE C - Rate Sensitivity of Earning Assets and Interest-Bearing Liabilities
          (Dollars in Thousands) 
<CAPTION>
  		                                       3 Months 		 3-6 	    	6-12   		Over 1 		
As of December 31, 1996 		                 or Less 		 Months 		 Months 	 	Year		       Total 
Earning assets 										
<S>                                      <C>        <C>        <C>        <C>        <C>
  Loans and leases, net of unearned     	$ 	58,045 	$ 	42,594 	$ 	65,730 	$	137,632 	$	304,001 
  Taxable investment securities 		          13,855 	  	10,000 	  	13,500	  	 90,061 		 127,416 
  Tax-exempt investment securities 		        1,000 		   1,100 		     900		   44,271 		  47,271 
										
     Total earning assets 		                72,900 	  	53,694 		  80,130 		 271,964 	$	478,688 

Interest-bearing liabilities 										
  NOW and money market accounts 		          45,590 		     - 		    64,588		   43,136 	$ 153,314 
  Savings 		                                   - 	 	      - 		    41,594 		     - 	 	   41,594 
  Time 		                                   41,547 		  33,805 		  50,657 		  25,077 		 151,086 
  Time over $100,000 		                     11,680 		   9,813 		  12,825 		   4,812		   39,130 
  Other short-term debt 		                   5,523 		     - 	 	      - 	 	      - 		     5,523 
										
Total interest bearing liabilities 		      104,340 		  43,618 		 169,664		   73,025 	$	390,647 

Noninterest-bearing, net                                 								(88,041) 		

Net asset/liability funding gap 		         (31,440) 		 10,076 		 (89,534)		 110,898 		

Cumulative net asset/liability 
 funding gap 	                           $ (31,440) $	(21,364) $(110,898) 	$ 	  - 	 	 
<FN>
<F22>
Available-for-sale and held-to-maturity securities were combined
in the taxable investment securities category for purposes of
this table.
</FN>
</TABLE>




<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                AND RESULTS OF OPERATIONS 


LOANS AND LOAN QUALITY

	As with most commercial banking institutions, the loan
portfolio is the largest component of earning assets and
consequently provides the highest amount of revenues.  The loan
portfolio also contains, as a result of credit quality, the
highest exposure to risk.  When analyzing potential loans,
management assesses both interest rate objectives and credit
quality objectives in determining whether to make a given loan
and the appropriate pricing for that loan.  The Bank maintains a
diversified portfolio in order to spread its risk and reduce its
exposure to economic downturns which may occur in different
segments of the economy or in particular industries.    The
composition of the loan portfolio is disclosed in detail in Note
3 in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the
accompanying financial statements.

	The Bank follows written loan policies which include loan
review procedures and approvals.  Depending primarily on the
amount of the loan, there are various approval levels including
an Executive Committee of the Board of Directors that meets
weekly.

	The Bank has a Loan Review Department which performs ongoing,
independent reviews of specific loans for credit quality and
proper documentation.  This department is centralized and
independent of the lending function.  Regular reports are made
to senior management and the Executive Committee of the Board of
Directors regarding the credit quality of the loan portfolio, as
well as trends.  Every loan is assigned a risk rating by the
loan officer subject to review by Loan Review.  The Bank also
has a Credit Administrator who is responsible for assisting loan
officers in structuring new loans, reviewing problem loans,
monitoring their status from period to period, and assisting in
their resolution.  This analysis and review also includes a
formal review that is prepared quarterly to assess the risk in
the loan portfolio and to determine the adequacy of the
allowance for loans losses.  This review supported management's
assertion that the allowance was adequate at December 31, 1996.  

	Table D, RISK ELEMENTS IN THE LOAN PORTFOLIO, includes all
loans management considers to be potential problem loans,
summarizes average loan balances, and reconciles the allowance
for loan losses for each year.  Additions to the allowance,
which have been charged to operating expenses, are also
disclosed.  Management does not believe that there is a
concentration of loans to a multiple number of borrowers engaged
in similar activities. 

	Loans having recorded investments of $5.1 million at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent 1.7% of gross loans.
 Commercial loans comprised $.384 million of the total, with
loans secured by real estate accounting for $3.6 million, and
installment loans $1.1 million.  The gross interest income that
would have been recorded during 1996 if the loans had been
current in accordance with their original terms and had been
outstanding throughout the period or since origination, if held
for part of the period, was $374, $365, and $193 thousand for
the years ended December 31, 1996, 1995, and 1994 respectively. 
Please refer to Note 1 and Note 3 in the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS that are included elsewhere in this
material for more information on the Bank's policy regarding
loan impairment.

	A graph on the bottom of this page is included in the materials
sent to the stockholders that illustrates the increase in
average net loans and the ratio of net loan charge offs to
average loans for the last eight years.  The ratio at December
31, 1996 was .36%.  This ratio, although higher than 1994 and
1995 ratios, is well below industry levels.   The following
table is the data illustrated by this graph.

<TABLE>
<CAPTION>
				                                   Avg Loans       	Ratio  Net
                                  				Outstanding	       CO/Avg Ln
                      <S>              <C>                <C>
                    		1989		           $163,003	          0.0032%
                    		1990		            172,749	          0.0030
                    		1991		            182,561	          0.0037
                    		1992		            215,158	          0.0023
                    		1993		            233,608	          0.0030
                    		1994		            247,791          	0.0014
                    		1995		            276,166	          0.0012
                   			1996		            290,413	          0.0036


<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO


</TABLE>
<TABLE>
<CAPTION>
	                      								                                   December 31
                                              	1996      		1995     	 	1994     	 	1993     	 	1992  
                                                  									(Dollars  In Thousands)
<S>                                         <C>         <C>         <C>         <C>         <C>
Average amount of loans outstanding       	 $ 290,413 	 $ 276,166 	 $	247,791 	 $	233,608 	 $ 215,158 
										
Balance of allowance for possible loan 										
  losses at beginning of year 	             $  	2,678 	 $  	2,342 	 $  	2,024	  $  	2,254 	 $ 	 1,917 
Loans charged-off: 										
  Loans secured by real estate    		              368 		       15 		      135 		      396		       245 
  Commercial and industrial loans    		           141 		      170 		       42 		      222		       124 
  Individuals 		                                  879 		      371 		      246 		      230 		      249 
     TOTAL  LOANS CHARGED OFF 		                1,388 		      556 		      423 		      848		       618 
Recoveries of loans previously charged off: 										
  Loans secured by real estate 		                 111 		       97 		        9 		       56 		        3 
  Commercial and industrial loans 		               42 		       14 		       36 		       52 		       80 
  Individuals 		                                  183 		      111 		       36 		       40 		       32 
     TOTAL RECOVERIES 		                          336 		      222 		       81 		      148 		      115 
       NET  LOANS CHARGED-OFF 		                1,052 		      334 		      342		       700 		      503 
Provision charged to operating expenses 		      1,300 		      670 		      660		       470 		      840 
     BALANCE OF ALLOWANCE FOR 										
      POSSIBLE LOAN LOSSES AT 										
       END OF YEAR 	                        $ 	 2,926 	 $ 	 2,678 	 $ 	 2,342 	 $ 	 2,024 	 $ 	 2,254 

Ratio of net charge-offs during the 										
    period to average loans outstanding 		      0.36% 		    0.12% 		    0.14%		     0.30% 		    0.23% 
</TABLE>


CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1996, the Corporation had a ratio of
average capital to average assets of 10.36%.  This compares to a
ratio of average capital to average assets of 10.08% at December
31, 1995, and 9.25% at December 31, 1994.

	Cash dividends declared in 1996 were 11.4% more than those paid
in 1995.  The dividend to net income ratio was 20%.  Additional
dividends of approximately $14.8 million to the Corporation
could have been declared by the subsidiary bank without
regulatory agency approval.  The Corporation plans to maintain
or increase the payout ratio while continuing to maintain a
capital to asset ratio reflecting financial strength and
adherence to regulatory guidelines.

	As of December 31, 1996, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 17.7% and 18.7% respectively.  One
year earlier, the comparable ratios were 16.9% and 17.9%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital strength of the
Corporation and the Bank. 

		A bar graph at the bottom of this page, in the materials sent to
our stockholders, illustrates the average equity of the Corporation 
for the last six years.	The following table is the data illustrated 
by this graph in thousands of dollars.

<TABLE>
                          <S>              <C>
                      				1990		           $27,358
                      				1991		            30,194
                      				1992		            33,414
                      				1993		            37,454
                      				1994		            41,820
                      				1995		            46,755
                      				1996		            52,067
</TABLE>

<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS

Interest Income

	Total interest income increased 7.5% in 1996 due to a wider
gross margin that was enhanced by loan growth in all the market
areas the Bank serves.  Interest and fees earned on loans
increased 5.8% in 1996 accounting for 73.7% of gross interest
income.  Interest earned on investment securities and other
investments increased 12.8% in 1996 rounding out gross interest
income contributing 26.3%.  Total interest income increased
11.9% in 1995 and 7.3% in 1994.


Interest Expense

	Total interest expense increased 8.4% in 1996 due mostly to the
increase in interest-bearing deposits, about half of which can
be attributed to the acquisition indicated earlier.  This
increase compares favorably to a 19.9% increase in 1995 and a
6.9% increase in 1994.  The cost of interest-bearing deposits
remained steady all year under monthly monitoring by the
Asset/Liability Committee.  This contributed to the wider gross
margin achieved during 1996.   The net interest margin (tax
equivalent net interest income divided by average earning
assets) was 4.7% at the end of 1996 compared to 4.8% in 1995 and
4.7% in 1994.

 	Net interest income on a fully taxable equivalent basis is
influenced primarily by changes in:  (1) the volume and mix of
earning assets and sources of funding; (2) market rates of
interest, and (3) income tax rates.  The impact of some of these
factors can be controlled by management policies and actions. 
External factors also can have a significant impact on changes
in net interest income from one period to another.  Some
examples of such factors are: (1) the strength of credit demands
by customers; (2) Federal Reserve Board monetary policy, and (3)
fiscal and debt management policies of the federal government,
including changes in tax laws. 


Noninterest Income and Expense

		Noninterest income increased 28.4% during 1996 led by the
increase in service charges from new and acquired customers. 
This compares to a 14.9% increase in 1995 and a 1.6% increase in
1994.  Use of the Bank's check card generates fee income from
the clearing agent for the electronic transaction even though no
service fee is charged to Bank customers for its use.  Income
from fiduciary services provided in the Bank's Trust Department
remained strong. 

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1996 and the percentage each category is of the total.
The following table is the data illustrated by this graph in
thousands of dollars.

<TABLE>
<CAPTION>
			             Income Category        		Income $	       % of Total
         <S>                              <C>               <C>
       		Income from trust services		     $1,324			         22.8%
       		Service fees on deposits		        3,374			         58.1%
       		Other service fees		                746			         12.8%
       		Other				                           363			          6.3%
</TABLE>


		Noninterest expenses, excluding the provision for possible
loan losses, increased 5.8% in  1996 which is a much smaller
increase than the 6.2% increase in 1995.  The increase in 1994
was 5.4% for a smaller corporation.  Increased productivity
fostered by our technology improvements as the learning curve
diminished and cost control efforts contributed to this
improvement.  Included in this category is Federal Deposit
Insurance Corporation (FDIC) insurance premiums at the rate
established for "well capitalized" institutions.  This expense
was $6 thousand in 1996 compared to $500 thousand in 1995 and
$891 thousand in 1994.  Please refer to the discussion in the
CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS section above for more
information concerning the bank's capitalization.

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
expense in 1996 and the percentage each category is of the
total.  The following table is the data illustrated by this
graph in thousands of dollars.

<TABLE>
<CAPTION>
		                Expense Category	           Expense $		       % of Total
                  <S>                          <C>                  <C>
                		Personnel			                 $7,031			            46.5%
                		Occupancy			                  1,211			             8.0%
                		Furniture and equipment 		    1,581			            10.5%
                		FDIC insurance		   	              7			               0%
                		Other				                     5,292			            35.0%
</TABLE>


<PAGE>



                      FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE E - FIVE YEAR COMPARISON

<TABLE>
<CAPTION>
		                                        1996  	  	  1995      		 1994     		  1993  		     1992  
INTEREST INCOME 										
<S>                                   <C>          <C>          <C>          <C>          <C>
 Interest and fees on loans          	$27,343,817 	$25,857,982 	$21,130,914 	$19,518,742 	$19,791,548 
										
 Income on investment securities 										
   Taxable interest 		                  6,892,118 		 6,179,492 	 	7,012,626		  6,925,404 		 6,898,114 
   Exempt from federal income tax 		    2,366,764 		 2,156,813		  2,184,666 		 1,857,168 		 1,825,869 
   Dividends 		                           256,951 		   177,790 		   204,948 		    72,054		    110,874 
										
                                      		9,515,833 		 8,514,095 		 9,402,240 		 8,854,626 		 8,834,857 

 Other interest income 		                 223,019 		   121,492 		   284,384		    347,287 		   195,744 
										
    TOTAL INTEREST INCOME 		           37,082,669 		34,493,569		 30,817,538 		28,720,655 	 28,822,149 

INTEREST EXPENSE  										
  Interest on deposits 		              16,617,525 		15,247,875 		12,770,618		 11,998,235 		13,329,557 
  Interest on other short term 
   borrowings 		                           94,232 		   174,370		     93,286 		    38,339 		    47,449 
										
    TOTAL INTEREST EXPENSE 		          16,711,757 		15,422,245		 12,863,904 		12,036,574 		13,377,006 

    NET INTEREST INCOME 		             20,370,912 		19,071,324		 17,953,634 		16,684,081 		15,445,143 

PROVISION FOR POSSIBLE LOAN LOSSES  	   1,300,000 		   670,000		    660,000 		   470,000 		   840,000 
    NET INTEREST INCOME AFTER 										
      PROVISION FOR LOAN LOSSES 		     19,070,912		 18,401,324 		17,293,634 		16,214,081 		14,605,143 

NONINTEREST  INCOME 										
  Trust department income 		            1,323,525 		 1,251,642 		 1,249,359		    863,952 		   753,239 
  Service fees on deposit accounts 		   3,373,805 		 2,697,332		  2,317,992 		 2,206,026 		 2,123,096 
  Other service fees, commissions, 										
    and fees 		                           745,523 		   300,407 		   336,758 		   509,009		    401,618 
  Other operating income 		               363,430 		   322,634 		   319,466		    315,108 		   191,363 
  Available for sale securities 										
   gains (losses) 		                        - 		         1,182 		  (243,690)		    23,896 		    28,434 
										
    TOTAL NONINTEREST  INCOME 		        5,806,283 		 4,573,197		  3,979,885 		 3,917,991 		 3,497,750 

NONINTEREST  EXPENSES 										
  Salaries and employee benefits 		     7,030,588 		 6,620,827		  6,247,706 		 5,686,965 		 5,283,086 
  Net occupancy expense 		              1,211,067 		 1,279,434 		 1,190,678		  1,070,971 		   984,650 
  Furniture and equipment expense 		    1,580,753  		1,382,769  		1,069,856 		   889,848 		   801,453 
  Loss on other real estate 		              - 		        50,724 		     4,000		    103,122 		   312,064 
  Other operating expenses 		           5,298,652 		 5,006,292		  4,996,107 		 4,903,949 		 4,460,696 
										
    TOTAL NONINTEREST EXPENSES 		      15,121,060	  14,340,046 		13,508,347 		12,654,855 		11,841,949 

      INCOME BEFORE PROVISION 										
       FOR INCOME TAXES 		              9,756,135		  8,634,475 		 7,765,172 		 7,477,217 		 6,260,944 

PROVISION FOR INCOME TAXES 		           2,889,339 		 2,518,769 		 2,203,746		  2,220,965 		 1,768,840 

       NET INCOME  	                  $	6,866,796 	$ 6,115,706 	$	5,561,426  $	5,256,252 	$	4,492,104 

EARNINGS PER COMMON SHARE  										
  (1,400,000 outstanding shares) 	    $ 	    4.90  $ 	    4.37 	$ 	    3.97	 $ 	    3.75 	$ 	    3.21 
</TABLE>

<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 


Net Income

	Net income was 12.3% higher in 1996 than in 1995.  As indicated
earlier, the improvement in 1996's earnings resulted from a
wider gross margin, an increase in noninterest income sufficient
to cover a smaller increase in noninterest expenses, and the
increase in taxes.  The smaller increase in noninterest expenses
is due in part to the significant decrease in deposit insurance.
These improvements were partially offset by higher additions to
the allowance for loan losses.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ON THE FINANCIAL
STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD

	The Financial Accounting Standards Board has issued one
standard that has not been adopted by the Bank but is required
to adopted after December 31, 1996.  The Statement of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" establishes guidance on when to recognize and
how to measure these financial assets and liabilities.  The
statement is effective prospectively for transfers and servicing
of financial assets and extinguishment of liabilities occurring
after December 31, 1996.  It supersedes Statement No. 122,
"Accounting for Mortgage Servicing Rights", which was effective
for fiscal years beginning after December 15, 1995.  Management
does not believe this statement will have any material effect on
future issues.


SHAREHOLDER INFORMATION

	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1996, had a
market value of $91 million and were held by 1,525 identifiable
individuals located mostly in the market area.  A small number
of additional shareholders are not identified individually since
some bank nominees, including the bank's Trust Department, are
listed as single owners when, in fact, these holdings represent
large numbers of shareholders.  No single shareholder's
ownership exceeded five percent at year end.

	There is no established public trading market for the stock. 
The table on the right lists the high and low price of the
Corporation's common stock, as well as the semiannual dividend
paid per share, in each of the last three years.

<TABLE>
<CAPTION>
		                                Price Range of 			       Dividend 
                                	 	Common Stock 	 		         Paid 
                               	High 		     Low 		        Per Share 
 <S>    <S>                    <C>         <C>             <C>
		      First quarter          $	40.00  		 $	36.00  	      $ 	
      		Second quarter           42.00  			  37.00  		        0.39 
	1994  	Third quarter 		         43.00    			37.00  		
      		Fourth quarter 		        45.00  			  38.00  		        0.41 
                                                   								$ 	0.80  

        First quarter          $ 45.00     $ 45.00         $
      		Second quarter 		        48.00  			  45.00  		        0.43 
	1995  	Third quarter 		         50.00  			  48.00  		
      		Fourth quarter 		        54.00  			  50.00  		        0.45 
                                                   								$ 	0.88 

      		First quarter 	        $	56.00  		 $	56.00  	      $ 	
      		Second quarter 		        58.00  			  56.00  		        0.47 
	1996  	Third quarter 		         63.00  			  60.00  		
      		Fourth quarter 		        65.00  			  63.00  		        0.51 
                                                 							  	$ 	0.98 
</TABLE>


<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

<TABLE>
                                 	COMPARATIVE DATA 
                               	(In Thousands of Dollars) 
<CAPTION>
		                               1996  	 	  1995  		   1994  		   1993  		   1992  
<S>                          <C>        <C>        <C>        <C>        <C>
AVERAGE ASSETS 	             $ 502,700 	$	463,739 	$	451,953 	$	420,760 	$	381,379 

AVERAGE LOANS (NET) 	        $	290,413 	$	276,166 	$	247,791 	$ 233,609 	$	215,158 

AVERAGE DEPOSITS 	           $	443,902 	$	409,489 	$	404,412 	$	378,782	 $	343,128 

RETURN ON EQUITY AND ASSETS 										
  Return on average assets 		    1.37% 		   1.32% 		   1.23% 		   1.25%		    1.18% 

  Return on beginning equity 		 14.06% 		  13.95% 		  14.11%		   14.93% 		  14.21% 
  Average equity to  										
    average assets 		           10.36% 		  10.08% 		   9.25% 		   8.90%		    8.76% 

COMMON DIVIDEND PAYOUT RATIO 										
  Earnings per share 	       $ 	  4.90  	$  	4.37 	 $  	3.97 	 $ 	 3.75 	$	   3.21 

  Cash dividends per share 	 $ 	  0.98 	 $ 	 0.88 	 $ 	 0.80 	 $ 	 0.73	 $ 	  0.64 										

  Ratio 		                         20% 		     20% 		     20% 		     19% 		     20% 
</TABLE>

<TABLE>
                                           	NET INTEREST MARGIN 
                                         	(In Thousands of Dollars) 
<CAPTION>
                                  		1996     		1995     		1994     		1993    		1992  
INTEREST INCOME 										

<S>                              <C>        <C>        <C>        <C>       <C>
 (TAX EQUIVALENT) 	              $ 37,985 	 $	35,626 	 $	32,039 	 $	29,465  $ 29,564 

INTEREST EXPENSE 		                16,712 		  15,422 		  12,864 		  12,037 		 13,377 

	                                $	21,273  	$	20,204 	 $	19,175 	 $	17,428 	$	16,187 
NET INTEREST MARGIN* 		             4.66% 		   4.79% 		   4.68% 		   4.58% 		  4.67% 

<FN>
<F23>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets. 										
</FN>
</TABLE>

<PAGE>



Nine color graphs are included on the following page in the
materials sent to our stockholders.  The first one illustrates
net income for the last five years using information taken from
the "FIVE YEAR COMPARISON" table included above.  The second one
illustrates return on average assets for the last five years
using information from the "COMPARATIVE DATA" table on the
previous page.  The third, fourth and fifth graphs illustrate
return on stockholders' equity, earnings per share with cash
dividends and stockholder's equity  for the last five years. 
The sixth graph illustrates average net loans for the last five
years.  The seventh and eighth graphs illustrate deposits and
assets for the last five years.  The information for these
graphs was taken from the "COMPARATIVE DATA" table on the
previous page.  The final graph which illustrates  net interest
income for the last five years was taken from the net interest
margin section in the  "COMPARATIVE DATA" table on the previous
page.





Item 8.  Financial Statements and Supplementary Data.

Financial statements and supplementary data are incorporated
herein by reference to Consolidated Financial Statements, Notes
to Consolidated Financial Statements, and Management's
Discussion and Analysis of Financial Condition and Results of
Operation which are attached hereto as Exhibit 13.


<TABLE>
       FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY          
                      CONSOLIDATED BALANCE SHEETS                             
                      DECEMBER 31, 1996 and 1995                           
<CAPTION>
ASSETS 		                                           1996  		        1995  
<S>                                              <C>             <C>
Cash and due from banks         	                $ 	27,916,507	  $ 	31,281,706 
Securities 				
 Available for sale (amortized cost 
  $55,898,299 and $10,875,527 respectively)   		    56,141,535 		   11,269,006 
 Held to maturity (fair value $119,226,021 
  and $128,829,961 respectively) 		                118,541,750 		  127,662,682 
      Total securities - Note 2 		                 174,683,285		   138,931,688 
Loans, net of unearned income - Note 3 		          303,732,044		   291,930,311 
 Allowance for possible loan losses - Note 4   		   (2,926,063)		   (2,678,386) 
      Net loans 		                                 300,805,981 		  289,251,925 
Bank premises and equipment, at cost less
 allowance for depreciation and 
 amortization - Note 5   		                          6,829,475 		    6,397,936 
Other assets 		                                     15,094,426 		   11,171,993 

      TOTAL ASSETS 	                             $	525,329,674 	 $	477,035,248 

LIABILITIES 				
Deposits 				
 Noninterest-bearing 	                           $ 	75,589,511 	 $ 	67,420,536 
 Interest-bearing (including certificates 
  of deposit over $100,000: 
   1996 - $39,129,547; 1995 - $30,593,803)       		384,983,050 		  343,357,525 
       Total deposits 		                           460,572,561 		  410,778,061 
Federal funds purchased 		                           5,000,000 		   10,000,000 
Dividends payable 		                                   714,000 		      630,000 
Other short term liabilities 		                        522,928 		    1,955,000 
Accounts payable and accrued liabilities 		          4,119,059 		    4,675,712 
				
      TOTAL LIABILITIES 		                         470,928,548 		  428,038,773 
				
COMMITMENTS AND CONTINGENCIES - Notes 7 and 9 				
				
STOCKHOLDERS' EQUITY 				
Common stock - $10 par value, authorized 
 4,000,000 shares; 1,400,000 shares issued 
 and outstanding - Note 1 		                        14,000,000 		   14,000,000 
Retained earnings - Note 6 		                       40,255,185 		   34,760,389 
Net unrealized loss on available-for-sale
 securities, net of tax                              		145,941 		      236,086 
     TOTAL STOCKHOLDERS' EQUITY 		                  54,401,126 		   48,996,475 

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $	525,329,674 	 $	477,035,248 

</TABLE>

<TABLE>
                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
                     YEARS ENDED DECEMBER 31, 1996, 1995, and 1994 
<CAPTION>
                                                		 				           Net Unrealized 		
				                                                 	            	Gain (Loss) On 		
                                                   		Common       		Retained    	  	Available-for-sale 		
                                                    		Stock   	    	Earnings 	        	Securities 		           Total 
          
<S>                                              <C>            <C>                <C>                      <C>
BALANCE AT JANUARY 1, 1994 	                     $ 	7,000,000 	 $ 32,407,573 	     $     	- 	               $	39,407,573 
Cumulative effect of change in 
  accounting principle (net of
  deferred income taxes of $171,405) - Note 1 		        - 		          27,684		           229,424 		              257,108 
Two-for-one stock split - Note 1 		                 7,000,000 		  (7,000,000) 		           -		                     - 
Net income for the year 		                              - 		       5,561,426 		            - 		                5,561,426 
Cash dividends declared, $.80 per share 		              - 		      (1,120,000) 		           -		                (1,120,000) 
Net unrealized loss on available-for-sale 
  securities, net of tax		                              - 		           - 		             (277,981) 		            (277,981) 

BALANCE AT DECEMBER 31, 1994 		                    14,000,000     29,876,683		           (48,557) 		          43,828,126 
Net income for the year 		                              - 		       6,115,706 		            - 		                6,115,706 
Cash dividends declared, $.88 per share 		              - 		      (1,232,000) 		           -		                (1,232,000) 
Net unrealized gain on available-for-sale
  securities, net of tax 		                             - 		           - 		              284,643 		              284,643 

BALANCE AT DECEMBER 31, 1995 		                    14,000,000 		  34,760,389 		          236,086		            48,996,475 
Net income for the year 		                              - 		       6,866,796 		            - 		                6,866,796 
Cash dividends declared, $.98 per share 		              - 		      (1,372,000) 		           -		                (1,372,000) 
Net unrealized loss on available-for-sale
  securities, net of tax 		                             - 		           - 		              (90,145) 		             (90,145) 

BALANCE AT DECEMBER 31, 1996 	                   $	14,000,000 	 $	40,255,185 	     $   	 145,941 	          $	54,401,126 
<FN>
<F1>
The accompanying notes are an integral part of the consolidated
financial statements. 								
</FN>
</TABLE>


<PAGE>

<TABLE>
              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME                      
                  YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994        
<CAPTION>
                                      		    1996  		       1995  	   	    1994  
INTEREST INCOME 						
<S>                                   <C>            <C>            <C>
 Interest and fees on loans 	         $ 	27,343,817 	$ 	25,857,982 	$ 	21,130,914 
						
 Interest on investment securities 						
   Taxable interest 		                    6,892,118 		   6,179,492 		   7,185,169 
   Exempt from federal income tax 		      2,366,764 		   2,156,813    		2,184,666 
   Dividends 		                             256,951 		     177,790 		     204,948 
                                        		9,515,833 		   8,514,095 		   9,574,783 
   Other interest income 		                 223,019 		     121,492 		     111,841 
						
     TOTAL INTEREST INCOME 		            37,082,669 		  34,493,569   		30,817,538 

INTEREST EXPENSE  						
  Interest on deposits 		                16,617,525 		  15,247,875 		  12,770,618 
  Interest on other short term  
    borrowings 		                            94,232 		     174,370		       93,286 
						
     TOTAL INTEREST EXPENSE 		           16,711,757 		  15,422,245   		12,863,904 

     NET INTEREST INCOME 		              20,370,912 		  19,071,324		   17,953,634 
PROVISION FOR POSSIBLE LOAN 
  LOSSES - Note 4 		                      1,300,000		      670,000 		     660,000 

     NET INTEREST INCOME AFTER 						
       PROVISION FOR LOAN LOSSES 		      19,070,912		   18,401,324 		  17,293,634 

NONINTEREST  INCOME 						
  Trust department income 		              1,323,525 		   1,251,642 		   1,249,359 
  Service fees on deposit accounts 		     3,373,805 		   2,697,332	    	2,317,992 
  Other service fees, commissions, 
    and fees 		                             745,523		      300,407 		     336,758 
  Other operating income 		                 363,430 		     322,634 		     319,466 
  Available for sale securities 
    gains (losses) 		                         -		            1,182 		    (243,690) 
						
     TOTAL NONINTEREST INCOME 		          5,806,283 		   4,573,197		    3,979,885 

NONINTEREST  EXPENSES 						
  Salaries and employee benefits 		       7,030,588 		   6,620,827		    6,247,706 
  Net occupancy expense 		                1,211,067 		   1,279,434 		   1,190,678 
  Furniture and equipment expense 		      1,580,753 		   1,382,769	    	1,069,856 
  Deposit insurance 		                        6,549 		     499,709 		     890,646 
  Loss on other real estate 		                - 		          50,724 		       4,000 
  Other operating expenses 		             5,292,103 		   4,506,583    		4,105,461 
						
     TOTAL NONINTEREST EXPENSES 		       15,121,060		   14,340,046 		  13,508,347 

       INCOME BEFORE PROVISION FOR 						
         INCOME TAXES 		                  9,756,135 		   8,634,475		    7,765,172 
						
PROVISION FOR INCOME TAXES - Note 8 		    2,889,339 		   2,518,769		    2,203,746 
						
         NET INCOME  	                $  	6,866,796 	$  	6,115,706 	$  	5,561,426 

EARNINGS PER COMMON SHARE - Note 1 						
  (1,400,000 outstanding shares) 	    $ 	      4.90 	$       	4.37 	$       	3.97 
<FN>
<F2>
The accompanying notes are an integral part of the consolidated
financial statements. 						
</FN>
</TABLE>

<PAGE>

<TABLE>
                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY 
                          CONSOLIDATED STATEMENTS OF CASH FLOWS        
                      YEARS ENDED DECEMBER 31, 1996, 1995, and 1994      
<CAPTION>
                                          		1996        		1995        		1994  
OPERATING ACTIVITIES 						
<S>                                      <C>           <C>           <C>
  Net income 	                           $ 	6,866,796 	$ 	6,115,706 	$ 	5,561,426 
  Adjustments to reconcile net income
   to net cash provided by operating
   activities 						  
    Excess of provision for possible   
     loan losses over net charge offs   		    247,677 		    336,096 		    318,639 
    Provision for depreciation and   
     amortization of premises and   
     equipment 		                             685,005 		    645,816 		    589,045 
    Provision for depreciation of  
     leased equipment 		                      521,500		       - 	 	         - 
    Amortization of deposit base  
     intangibles 		                           224,212		     168,020 		    168,020 
    Amortization of investment    
     security premiums, net of   
     accretion of discounts 		                553,355 		    641,104		     678,968 
    Increase in cash surrender value
     of life insurance contracts 		          (111,685) 		   (65,936) 		   (75,287) 
    Deferred income taxes 		                 (161,999) 		  (233,403) 		  (163,907) 
   (Increase) decrease in 						  
     Interest receivable 		                  (125,119) 		  (255,109)		   (992,872) 
     Other assets 		                          307,844 		    912,162 		    344,572 
    Increase (decrease) in   						
     Interest payable 		                     (494,950) 		   577,137 		    222,605 
     Other liabilities   		                   (61,704) 	   	458,939 		    287,975 
						
       TOTAL ADJUSTMENTS 	  	               1,584,136 		  3,184,826		   1,377,758 
						
       NET CASH PROVIDED BY OPERATING
         ACTIVITIES                       		8,450,932 	  	9,300,532 		  6,939,184 

INVESTING ACTIVITIES 						
  Proceeds from maturities, calls, and
   sales of available-for-sale securities	  3,020,054 		  7,306,453  		25,152,051 
  Proceeds from maturities and calls of
   held-to-maturity securities 		          56,112,000 		 18,848,992 		  5,092,000 
  Purchases of investment securities 						
   Available-for-sale 		                  (48,222,295) 	 (3,168,200)		(16,942,994) 
   Held-to-maturity 		                    (47,364,954) 		(6,459,372)		(19,495,987) 
  Net increase in loans 		                (11,801,733)  (29,236,191)		(18,778,658) 
  Purchases of premises and equipment    		(1,116,543) 	  	(850,672)   		(418,586) 
  Purchase of equipment leased 		          (2,607,500) 		     - 	 	         - 
  Purchase of deposit base intangibles   		(1,124,258)  		    - 	      	    - 
  Purchase of single premium life 
   insurance contract                      		(785,330) 	   	  -      	 	    - 
						
       NET CASH USED BY INVESTING
        ACTIVITIES                      		(53,890,559) 	(13,558,990)		(25,392,174) 

FINANCING ACTIVITIES 						
 Net increase in noninterest-bearing
  and interest-bearing deposits 		         29,930,577 	  	5,625,638	  	16,217,348 
 Assumption of deposit liabilities
  - Note 12 		                             19,863,923 		      - 	 	         - 
 Net increase (decrease) in short
  term borrowings                        		(6,432,072)  		4,355,000 	  	7,000,000 
 Cash dividends 		                         (1,288,000) 		(1,176,000) 		(1,071,000) 
						
       NET CASH PROVIDED BY FINANCING
        ACTIVITIES                       		42,074,428   		8,804,638  		22,146,348 

       INCREASE (DECREASE) IN CASH AND
        CASH EQUIVALENTS                 		(3,365,199) 	 	4,546,180 		  3,693,358 

CASH AND CASH EQUIVALENTS AT BEGINNING
 OF YEAR 		                                31,281,706		  26,735,526 		 23,042,168 
						
CASH AND CASH EQUIVALENTS AT END OF 
 YEAR 	                                  $	27,916,507 	$	31,281,706 	$	26,735,526 
<FN>
<F3>
The accompanying notes are an integral part of the consolidated
financial statements.
</FN>
</TABLE>

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

		First Farmers and Merchants Corporation (the Corporation) was
incorporated on March 31, 1982, as a Tennessee corporation.  On 
April 13, 1982, the Board of Directors of the Corporation
adopted a resolution to execute and deliver to the Board of
Governors of the Federal Reserve System an application pursuant
to Section 3(a)(1) of the Bank Holding Company Act of 1956, as
amended, for prior approval by the Board of action to be taken
by the Corporation which would result in its becoming a bank
holding company. 

		As of December 31, 1996, the only subsidiary of the
Corporation was the Bank.  The Bank is a national banking
association which was organized in 1954 as a successor to a
state bank organized in 1909.  The Bank  conducts a full-service
commercial banking business at its principal office at 816 South
Garden Street, Columbia, Tennessee and at fourteen (14)
branches:  High Street Branch, Northside Branch, Shady Brook
Mall Branch, Hatcher Lane Branch, and Campbell Plaza Branch in
Columbia; Mt. Pleasant Branch in Mt. Pleasant; Spring Hill
Branch in Spring Hill; Lawrenceburg Branch in Lawrenceburg;
Leoma Branch in Leoma; Loretto Branch in Loretto; Lewisburg
Branch and Lewisburg West Branch in Lewisburg; Chapel Hill
Branch in Chapel Hill; and Centerville Branch in Centerville. 
The Bank provides automatic teller machine services in the
Northfield Complex at the Saturn location near Spring Hill, and
in Columbia at the Tennessee Farm Bureau, Columbia State
Community College, and Maury Regional Hospital.

		The community service area of the Bank is comprised of Maury,
Lawrence, Marshall, Hickman, and adjacent counties.  Commercial
banking in the marketing area served by the Bank is highly
competitive.  Although the Bank is ranked as the largest bank in
the area, in terms of total deposits, the Bank faces substantial
competition from fourteen (14) other banks, two (2) savings and
loan associations, and several credit unions located in the
marketing area.


Accounting Policies

		The accounting principles followed and the methods of applying
those principles conform with generally accepted accounting
principles and to general practices in the banking industry. 
The significant policies are summarized as follows.


Principles of Consolidation

		The accompanying consolidated financial statements present the
accounts of the Corporation and its wholly-owned subsidiary, the
Bank.  Material intercompany accounts and transactions have been
eliminated in consolidation.


Use of Estimates in the Preparation of Financial Statements

		The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.


Cash and Due From Banks

		Included in cash and due from banks are legally reserved
amounts which are required to be maintained on an average basis
in the form of cash and balances due from the Federal Reserve
Bank and other banks.  Average reserve requirements for the year
ended December 31, 1996, amounted to approximately $8.9 million.


Cash Equivalents

		Cash equivalents include cash on hand, cash due from banks,
and federal funds sold.  Federal funds are sold for one-day
periods.


Securities

		 Investments are classified in three categories and accounted
for as follows: 

		Debt securities that the Bank has the positive intent and
ability to hold to maturity are classified as held-to-maturity
and reported at amortized cost with premiums and discounts
recognized in interest income using the interest method over the
period to maturity.

<PAGE>

             FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities (Continued)

		Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are
classified as trading securities and reported at fair value,
with  unrealized gains and losses included in earnings.

		Debt and equity securities that may be sold prior to maturity
for asset/liability management purposes, or that may be sold in
response to changes in interest rates, changes in prepayment
risk, to increase regulatory capital or other similar factors,
are classified as available-for-sale securities and reported at
fair value, with unrealized gains and losses, net of tax, 
excluded from earnings and reported as a separate component of
stockholders' equity.  Gains and losses realized on the sale of
available-for-sale securities are determined using the specific
identification method.

		Declines in the fair value of individual available-for-sale
and held-to-maturity securities below their cost that are other
than temporary are included in earnings as realized losses.


Loans

		Loans that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off generally
are stated at their outstanding unpaid principal balances net of
any deferred fees or costs on originated loans, or unamortized
premiums or discounts on purchased loans.  A loan is considered
impaired when it is probable that an institution will be unable
to collect all amounts due (principal and interest) according to
the contractual terms of the loan agreement.  The Bank evaluates
smaller balance homogeneous loans collectively for impairment. 
Loans secured by one to four family residential properties,
consumer installment loans, and line of credit loans are
considered smaller-balance homogeneous loans.

		Interest on loans is computed daily based on the principal
amount outstanding.  Loan origination fees and related direct
costs are deferred and recognized as an adjustment of yield on
the interest method.  Interest accruals are discontinued when
loans are ninety days past-due or when a loan is considered
impaired.  All loans in non-accrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
non-accrual status is recognized only to the extent of the
excess of cash payments received over principal payments due.

		When a loan is collateral dependent, impairment is measured
based on the observable market price or the fair value of the
collateral.  For other loans, the amount of impairment is
measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. 
Positive changes in the net present value of an impaired loan
will in no event be used to increase the value of a loan above
the amount of the loan.


	Other Real Estate

		Other real estate, which is included in other assets,
represents real estate acquired through foreclosure and is
stated at the lower of fair value, net of estimated selling
costs, or cost, at the date of foreclosure.  If, at the time of
foreclosure, the fair value of the real estate is less than the
Bank's carrying value of the related loan, a write-down is
recognized through a charge to the allowance for possible loan
losses, and the fair value becomes the new cost for subsequent
accounting.  If the Bank later determines that the cost of the
property cannot be recovered through sale or use, a write-down
is recognized by a  charge to operations.  When the property is
not in a condition suitable for sale or use at the time of
foreclosure, completion and holding costs, including such items
as real estate taxes, maintenance and insurance, are capitalized
up to the estimated net realizable value of the property. 
However, when the property is in a condition for sale or use at
the time of foreclosure, or the property is already carried at
its estimated net realizable value, any subsequent holding costs
are expensed.  Legal fees and any other direct costs relating to
foreclosures are charged to operations when incurred.

		The Bank's recorded value for other real estate was
approximately $450 thousand at December 31, 1996, and $483
thousand at December 31, 1995.  


Allowance for Possible Loan Losses

	The allowance for possible loan losses is maintained at a level
believed adequate by management to absorb estimated probable
inherent loan losses.  Loan quality is monitored by Loan 


<PAGE>



            FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Possible Loan Losses (Continued)

Review, the Special Assets Committee, and the Credit
Administrator.  The amount by which a loan is determined to be
impaired is added to the allowance account in the period such
determination is made.  Recoveries on loans previously charged
off are credited to the allowance account in the period
received.  The adequacy of the allowance for possible loan
losses is evaluated quarterly in conjunction with loan review
reports and evaluations that are discussed in a meeting with
loan officers and loan administration.  The Bank's past loan
loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated
value of any underlying collateral, composition of the loan
portfolio, current economic conditions, and other relevant
factors are considered in this evaluation.  This process is
inherently subjective as it requires material estimates that are
susceptible to significant change including the amounts and
timing of future cash flows expected to be received on impaired
loans.


Premises and Equipment

		Premises and equipment are stated at cost, less accumulated
depreciation and amortization.  The provision for depreciation
is computed principally on an accelerated cost recovery method
over the estimated useful lives of the assets, which range as
follows:  buildings - 15 to 50 years and equipment - 3 to 33
years.  Costs of major additions and improvements are
capitalized.  Expenditures for maintenance and repairs are
charged to operations as incurred.  Gains or losses from the
disposition of property are reflected in operations, and the
asset accounts and related allowances for depreciation are
reduced. 

		Certain other equipment purchased for lease to an outside
party under a five year operating lease is included in other
assets at cost less accumulated depreciation.  The equipment is
being depreciated on an accelerated basis over seven years.  


Trust Department Income

		Trust department income is recognized on the accrual basis in
the applicable period earned.


Stock Split

		During 1994, the Corporation amended its corporate charter to
increase the number of authorized shares of its common stock
from 2,000,000 to 4,000,000 shares and on April 12, 1994, the
Corporation's stockholders approved a two-for-one split effected
in the form of a 100% stock dividend distributed May 30, 1994,
to shareholders of record on April 12, 1994.  In accordance with
State corporate legal requirements, the transaction was recorded
by a transfer from retained earnings to common stock in the
amount of $7,000,000 ($10 for each additional share issued). 
All per share and share data in the accompanying consolidated
financial statements and footnotes have been restated to give
retroactive effect to the transaction.


Income Taxes

		The companies file a consolidated federal income tax return. 
Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income.

		Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. 
Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred
tax assets and liabilities.


Intangible Assets

	Deposit base intangibles identified in merger transactions are
amortized over 42 to 180 months on the straight-line method. 
Total amortization expense charged to operations amounted to: 
1996 - $224,212; 1995 - $168,020;  and  1994 - $168,020.



<PAGE>


           FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES 

Securities with an amortized cost of $103,540,673 and
$93,101,954 at December 31, 1996 and 1995, respectively (fair
value: 1996 - $104,061,311;  1995 - $93,937,766), were pledged
to secure deposits and for other purposes as required or
permitted by law.  The fair value is established by an
independent pricing service as of the approximate dates
indicated.  The differences between the amortized cost and fair
value reflect current interest rates and represent the potential
gain (or loss) had the portfolio been liquidated on that date. 
Security gains (or losses) are realized only in the event of
dispositions prior to maturity.  The fair values of all
securities at December 31, 1996, either equaled or exceeded the
cost of those securities, or the decline in fair value is
considered temporary.

<TABLE>
<CAPTION>
                                      Amortized                Gross Unrealized                Fair
		                                       Cost 	            	  Gain       	 	Loss 	        	    Value 

December 31, 1996 								
Available-for-sale securities 								
<S>                                <C>                    <C>             <C>              <C>
  U.S. Treasury 	                  $ 	26,412,520 	        $  	162,913 	   $ 	  63,634 	    $ 	26,511,799 
  U.S. Government agencies   		       26,850,441 		            45,866 		      318,203   		    26,578,104 
  Other securities   		                2,635,338 		           565,044 		      148,750 		       3,051,632 
                                  	$ 	55,898,299 	        $  	773,823 	   $  	530,587 	    $ 	56,141,535 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	30,504,935 	        $ 	 106,345 	   $   	22,080 	    $ 	30,589,200 
  U.S. Government agencies   		       39,679,582 	           	245,034 		       87,434		       39,837,182 
  States and political subdivisions 		47,538,074 		           700,948		       283,420 		      47,955,602 
  Other securities 		                    819,159 		            24,878 		        - 	 	            844,037 
                                  	$	118,541,750 	        $	1,077,205 	   $  	392,934 	    $	119,226,021 

December 31, 1995 								
Available-for-sale securities 								
  U.S. Treasury 	                  $  	5,064,421 	        $   	72,679    	$ 	   - 	        $  	5,137,100 
  U.S. Government agencies 		          3,279,968 		            72,268 		        2,570		        3,349,666 
  Other securities 		                  2,531,138 		           254,102 		        3,000 		       2,782,240 
	                                  $ 	10,875,527 	        $ 	 399,049 	   $ 	   5,570 	    $ 	11,269,006 

Held-to-maturity securities 								
  U.S. Treasury 	                  $ 	61,426,813 	        $  	295,846 	   $ 	  59,359 	    $ 	61,663,300 
  U.S. Government agencies 		         23,498,204 		           267,237 		       48,041		       23,717,400 
  States and political subdivisions 		42,415,025 		           934,439		       241,048 		      43,108,416 
  Other securities 		                    322,640 		            18,205 		       - 		              340,845 
                                 	 $	127,662,682 	        $	1,515,727 	   $ 	 348,448 	    $	128,829,961 

<FN>
<F4>
Table I - Amortized Cost and Fair Value of Investment Securities.
</FN>
</TABLE>


<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - INVESTMENT SECURITIES  (Continued)

		At December 31, 1996, the Corporation did not hold investment
securities of any single issuer, other than obligations of the
U.S. Treasury and other U.S. Government agencies, whose
aggregate book value exceeded ten percent of stockholders'
equity.

		Table II shows the amortized cost, fair value, and weighted
yields (for tax-exempt obligations on a fully taxable basis
assuming a 34% tax rate) of investment securities at December
31, 1996, by contractual maturity.  Expected maturities may
differ from contractual maturities because issuers may have the
right to call or prepay obligations.

		Proceeds from the maturity, call, or sale of
available-for-sale securities were $3,020,054, $7,306,453, and
$25,152,051 during 1996, 1995, and 1994 respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$56,112,000, $18,848,992, and $5,092,000 during 1996, 1995, and
1994 respectively.  There were no gains or losses in 1996. 
Gross gains of $1,182 and gross losses of $-0- were realized on
the dispositions in 1995.   Gross gains of $-0- and gross losses
of $243,690 were realized on the dispositions in 1994. 

<TABLE>
<CAPTION>
                            		        Amortized 	       	 Fair 		         Yield 	
                                       		Cost 		          Value 		     (Unaudited) 	

Available-for-sale securities 							
U.S. Treasury 							
<S>                                 <C>              <C>                  <C>
  Within one year 	                 $ 	16,189,997 	  $ 	16,176,499 		     5.6% 	
  After one but within five years 	    	9,171,798 		     9,274,000		      6.3% 	
  After five but within ten years 		    1,050,725 		     1,061,300      		6.4% 	
U.S. Government agencies 							
  Within one year 		                    1,000,000 		     1,021,300 		     8.0% 	
  After one but within five years 		   24,543,375 		    24,255,710      		5.9% 	
  After five but within ten years 	    	1,043,738 	     	1,038,400      		6.2% 	
  After ten years 		                      263,328 		       262,694 		     6.1% 	
  Other securities 		                   2,635,338 		     3,051,632 		     8.9% 	
	                                   $ 	55,898,299 	  $ 	56,141,535 			

Held-to-maturity securities 							
U.S. Treasury 							
  Within one year 	                 $ 	22,067,254 		 $  22,103,400 		     5.6% 	
  After one but within five years 		    5,238,326 		     5,301,900      		6.4% 	
  After five but within ten years 		    3,199,355 		     3,183,900		      6.0% 	
U.S. Government agencies 							
  Within one year 		                    4,504,421 		     4,512,100 		     6.1% 	
  After one but within five years 		   17,076,622 		    17,210,700      		6.4% 	
  After five but within ten years 		   18,098,539 		    18,114,382      		6.4% 	
States and political subdivisions 							
  Within one year 		                    3,015,087 		     3,061,625 		    10.0% 	
  After one but within five years 		   12,976,264 		    13,229,979      		8.1% 	
  After five but within ten years 		   20,837,173 		    20,940,923       	7.4% 	
  After ten years 		                   10,709,550 		    10,723,075 		     7.8% 	
Other securities 							
  After one but within five years 		      319,159 		       330,087 		     8.0% 	
  After five but within ten years 		      500,000 		       513,950 		     7.3% 	
 	                                  $	118,541,750 	  $ 119,226,021 			
<FN>
<F5>
Table II - Contractual Maturity of Investment Securities and
Weighted Tax Equivalent Yields
</FN>
</TABLE>

<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS

<TABLE>
<CAPTION>
                                                 		    1996  		                1995  	
Loans secured by real estate 					
<S>                                               <C>                    <C>
   Construction  and  land development 	          $ 	 8,751,021 	        $  	7,399,095 	
   Farmland 		                                        6,923,739 		           7,849,137 	
   Lines of credit 		                                   192,010 		             339,108 	
   1-4 family residential property - first lien 	  	116,905,803 		         111,016,393 	
   1-4 family residential property - junior lien 		   6,461,497            		7,177,285 	
   Multifamily residential property 		                2,487,453 		           3,729,687 	
   Non farm, non residential property 		             46,114,930 		          44,224,353 	
					
      Subtotal 		                                   187,836,453 		         181,735,058 	

Commercial and  industrial loans 					
   Commercial  and  industrial 		                    53,577,210 		          51,758,675 	
   Taxable municipal loans 		                           240,000 	 	            270,000 	
   All other loans 		                                   748,125 		              88,239 	
					
      Subtotal 		                                    54,565,335 		          52,116,914 	

Tax exempt municipal loans 		                           605,933 		           1,485,071 	
					
Loans to individuals 					
   Agricultural production 		                         2,894,845 		           3,659,215 	
   Lines of credit 		                                   200,903 		             135,230 	
   Individuals for personal expenditures 		          57,897,835           		53,026,209 	
					
      Subtotal 		                                    60,993,583 		          56,820,654 	

                                                  		304,001,304 		         292,157,697 	

Less: 					
   Net unamortized loan origination fees 		            (269,260) 		           (225,368)
   Unearned interest income 		                            - 		                  (2,018) 	
   Allowance for possible loan losses 		             (2,926,063)      		    (2,678,386) 	
					
	                                                 $ 300,805,981 	        $ 289,251,925 	
<FN>
<F6>
Table III - Loans Outstanding by Category at December 31, 1996
and 1995
</FN>
</TABLE>

<TABLE>
<CAPTION>
		 	 	                                         (In Thousands of Dollars) 	 	 	 	 
                            		Within 		        One to 		          After  		
                           		One Year 		     Five Years 		     Five Years 		   Total 

<S>                         <C>               <C>               <C>         <C>
Fixed rate loans 	          $ 	66,689 	       $ 	51,604 	       $ 	25,824 	 $	144,117 
Variable rate loans 		         99,680 		         32,963 		         27,241 		  159,884 

	                           $	166,369 	       $ 	84,567 	       $ 	53,065 	 $ 304,001 
<FN>
<F7>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1996
</FN>
</TABLE>




<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - LOANS (Continued)

		Loans having recorded investments of $5,136,286 at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  The total allowance for possible
loan losses related to these loans was $1,146,000.  Interest
received on these loans during 1996 was $504,840.  Impaired
loans had recorded investments of approximately  $5,856,000 at
December 31, 1995.

		Certain parties (principally directors and senior officers of
the Corporation or the Bank, including their affiliates,
families, and companies in which they hold ten percent or more
ownership) were customers of, and had loans and other
transactions with, the Bank in the ordinary course of business. 
An analysis of  activity with respect to such loans for the
years ended December 31, 1996 and 1995, is shown in Table V that
follows.

		These totals exclude loans made in the ordinary course of
business to other companies with which neither the Corporation
nor the Bank has a relationship other than the association of
one of its directors in the capacity of officer or director. 
These loan transactions were made on substantially the same
terms as those prevailing at the time for comparable loans to
other persons.  They did not involve more than the normal risk
of collectiblity or present other unfavorable features.  No
related party loans were charged off in 1996 or 1995.
<TABLE>
<CAPTION>
                                        		Balance at 							
                                        		Beginning  				               Amount 		    Balance at 	
                                        		 of Year 		   Additions   		Collected 		  End of Year 	

            1996  									
<S>                                      <C>           <C>           <C>            <C>
Aggregate of certain party loans 	       $	7,706,004 	 $ 8,454,247 	 $	7,937,989 	  $ 8,222,262 	
									
            1995  									
Aggregate of certain party loans 	       $	6,494,271 	 $ 7,020,665   $	5,808,932 	  $ 7,706,004 	

<FN>
<F8>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>

NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES

<TABLE>
<CAPTION>
      		                                       1996  		        1995  		       1994  
<S>                                        <C>             <C>            <C>
Balance at beginning of year 	             $	2,678,386 	   $ 2,342,290 	  $	2,023,651
Provision charged to operating expenses    		1,300,000 		      670,000      		660,000 
Loan losses: 						
  Loans charged off 		                      (1,388,422) 		    (555,957) 		   (422,831) 
  Recoveries on loans previously  						
    charged off 		                             336,099 		      222,053 		      81,470 

Balance at end of year 	                   $	2,926,063 	   $	2,678,386 	  $	2,342,290 
<FN>
<F9>
Table VI - Changes in the Allowance for Possible Loan Losses 
</FN>
</TABLE>


		In the opinion of management, based on conditions reasonably
known, the allowance was adequate at December 31, 1996. 
However, the allowance may be increased or decreased based on
loan growth, changes in credit quality, and changes in general
economic conditions.

		For federal income tax purposes, the allowance for possible
loan losses is maintained at the maximum allowable by the
Internal Revenue Code.



<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
		                                                    1996          		1995  	
<S>                                              <C>             <C>
Land 	                                           $ 	1,348,288 	  $ 	1,204,288 	
Premises 		                                         7,013,942 		    6,648,329 	
Furniture and equipment 		                          4,068,373 		    3,949,617 	
Leasehold improvements 		                           1,149,732 		      879,695 	
                                                 		13,580,335 		   12,681,929 	
Less allowance for depreciation and amortization 		(6,750,860)		   (6,283,993) 	
	                                                $ 	6,829,475 	  $ 	6,397,936 	
</TABLE>
	Annual provisions for depreciation and amortization of bank
premises and equipment total $685,005 for 1996, $645,816 for
1995, and $589,045 for 1994.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling $2,590,066 at December 31,
1996.                   


NOTE 6 - LIMITATION ON SUBSIDIARY DIVIDENDS

 The approval of the Comptroller of the Currency is required
before the Bank's dividends in a given year may exceed the total
of its net profit (as defined) for the year combined with
retained net profits of the preceding two years.  As of December
31, 1996, additional dividends of approximately $14,800,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for four of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2013.  In most cases,
the leases provide for one or more renewal options of five to
ten years under the same or similar terms.  In addition, various
items of teller and office equipment are leased under cancelable
and noncancelable operating leases.  Total rental expense
incurred under all operating leases, including short-term leases
with terms of less than one month, amounted to $726,337,
$660,121, and $409,764 for equipment leases, and $112,384,
$111,649, and $97,966 for building leases, in 1996, 1995, and
1994, respectively.  Future minimum lease commitments as of
December 31, 1996, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>

<S>                                    <S>    <C>
                                     		1997  	$  	784,704 
                                       1998    	 	714,848 
                        		             1999    		 383,334 
                                     		2000    		 123,758 
                                     		2001    		 123,758 

Total future minimum lease payments 			       $	2,130,402 

<FN>
<F9>
Table VIII - Future Minimum Lease Commitments
</FN>
</TABLE>


<PAGE>



                  FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES
<TABLE>
<CAPTION>
                                           		1996       		1995      	  1994  

<S>                                     <C>           <C>          <C>
Current: 						
  Federal 	                             $ 2,422,550 	 $	2,166,566 	$	1,831,848 
  State 		                                  628,788 		    585,606 		   503,433 
						
      Total current 		                    3,051,338 		  2,752,172 		 2,335,281 
Deferred: 						
  Federal 		                               (137,700) 		  (198,393) 		 (111,805) 
  State 		                                  (24,299) 		   (35,010) 		  (19,730) 

      Total deferred 		                    (161,999) 		  (233,403)  		(131,535) 
      Total provision for income taxes 	$	2,889,339   $	2,518,769  $ 2,203,746 
<FN>
<F10>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                           		1996  		      1995  		      1994  
<S>                                     <C>           <C>            <C>
Allowance for possible loan losses 	    $ 	 914,386   $  	815,315 	  $ 	682,877 
Write-down of other real estate 		          177,120 		    177,120 		    159,120 
Deferred compensation 		                    336,255 		    256,139 		    156,227 
Direct lease financing 		                     - 		          - 		         36,452 
Unrealized loss on AFS securities 		          - 		          -          		32,372 
Deferred loan fees 		                        26,863 		     44,051 		     24,546 

  Deferred tax asset 		                   1,454,624 		  1,292,625 		  1,091,594 

Unrealized gain on AFS securities 		        (97,294) 		  (157,392) 		     - 

  Deferred tax liability 		                 (97,294) 	  	(157,392) 		     - 

     Net deferred tax asset 	           $ 1,357,330 	 $	1,135,233	  $	1,091,594 
<FN>
<F11>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
	     	                                             1996  		      1995       		1994  
<S>                                             <C>           <C>           <C>
Tax expense at statutory rate 	                 $	3,317,086 	 $	2,935,722 	 $	2,640,158 
Increase (decrease) in taxes resulting from: 						
  Tax-exempt interest 		                           (859,383) 	  	(783,011) 		  (780,946) 
  Nondeductible interest expense 		                 101,534 		     89,491 		     75,019 
  Other nondeductible expenses 						
    (nontaxable income) - net 		                    (21,170) 		   (28,114)		     (6,458) 
  State income taxes, net of federal 						
    tax benefit 		                                  398,963 	    	363,393 	    	319,244 
  Dividend income exclusion 		                      (34,855) 		   (18,324) 		   (29,571) 
  Other 		                                          (12,836) 		   (40,388) 		   (13,700) 
Total provision for income taxes 	              $	2,889,339 	 $ 2,518,769 	 $	2,203,746 

Effective tax rate 		                                 29.6% 		      29.2% 		      28.4% 
<FN>
<F12>
Table XI - Reconciliation of Total Income Taxes Reported with
the Amount of Income Taxes Computed                   at the
Federal Statutory Rate (34% Each Year)
</FN>
</TABLE>
<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - FEDERAL AND STATE INCOME TAXES (Continued)

		Total income taxes paid in 1996, 1995, and 1994 amounted to
$3,140,000, $2,756,442 and $2,431,332, respectively.

		A net deferred tax asset was included in other assets in the
accompanying consolidated balance sheet.  


NOTE 9 - COMMITMENTS

		The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers.  These financial
instruments include commitments to extend credit and standby
letters of credit.  Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.  The contract or notional
amounts of those instruments reflect the extent of involvement
the Bank has in those particular financial instruments.		

		The total outstanding loan commitments and stand-by letters of
credit in the normal course of business at December 31, 1996,
were $25,605,000 and $2,283,000, respectively.  Loan commitments
are agreements to lend to a customer as long as there is not a
violation of any condition established in the contract.  Standby
letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. 
Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond
financing, and similar transactions.  The credit risk involved
in issuing letters of credit is essentially the same as that
involved in making a loan.

		The loan portfolio is well diversified with loans generally
secured by tangible personal property, real property, or stock. 
The loans are expected to be repaid from cash flow or proceeds
from the sale of selected assets of the borrowers.  Collateral
requirements for the loan portfolio are based on credit
evaluation of the customer.  It is management's opinion that
there is not a concentration of credit risk in the portfolio.


NOTE 10 - SUPPLEMENTARY CASH FLOW

		 Interest paid on deposits and other borrowings during 1996,
1995, and 1994 amounted to $17,206,708, $14,845,107, and
$12,641,299, respectively.


NOTE 11 - SHAREHOLDERS'  EQUITY

		The Corporation and the Bank are subject to federal regulatory
risk-adjusted capital adequacy standards.  Failure to meet
capital adequacy requirements can initiate certain mandatory,
and possibly additional discretionary, actions by regulators
that could have a direct material effect on the consolidated
financial statements of the Corporation and its subsidiary, the
Bank.  The regulations require the Bank to meet specific capital
adequacy guidelines that involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices.  The capital
classification is also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. 

		Quantitative measures established by regulation to ensure
capital adequacy require the Corporation and the Bank to
maintain minimum amounts and ratios of Total Capital and Tier I
Capital to risk-weighted assets and of Tier I Capital to average
assets.  Management believes, as of December 31, 1996 and 1995,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		As of June 30, 1996, the Bank's calculated risk-adjusted
capital ratios exceeded the minimum standard for a "well
capitalized" bank and this classification is confirmed by the
most recent notification from the Office of the Comptroller of
the Currency.  There are no conditions or events since that
notification that management believes have changed the
institution's category.  Actual capital amounts and ratios are
presented in Table XII.


<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - SHAREHOLDERS'  EQUITY (Continued)
<TABLE>
<CAPTION>
                                                                                				      To Be Well 
                                                                               				      Capitalized Under 
                                                              		For Capital 	   	      Prompt Corrective 
                                            Actual          	Adequacy Purposes 	   	    Action Provisions 
As of December 31, 1996 		            Amount    		Ratio 		  Amount  		 Ratio > or = 	 Amount 		  Ratio > or = 
<s >                                 <C>          <C>      <C>           <C>         <C>            <C>
Total Capital (to Risk Weighted
      Assets)   Consolidated 	     	 56,004,592 		18.69% 		23,972,003	 	 8.00% 		    29,965,004 	  	10.00% 
                Bank 		              55,472,014 		18.55% 		23,923,241		  8.00% 		    29,904,051 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      53,078,528 		17.71% 		11,986,300  		4.00% 		    17,979,450 		   6.00% 
                Bank 		              52,545,950 		17.57% 		11,962,652		  4.00% 		    17,943,978 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      52,066,624 		10.36% 		20,107,993		  4.00% 		    25,134,992 		   5.00% 
                Bank 		              50,574,336 		10.07% 		20,089,111		  4.00% 		    25,111,388 		   5.00% 

As of December 31, 1995 												
Total Capital (to Risk Weighted 												
      Assets)   Consolidated 		      51,162,164 		17.87% 		22,901,838 	 	8.00% 	    	28,627,297 		  10.00% 
                Bank 		              50,682,365 		17.74% 		22,855,632	  	8.00% 		    28,569,541 		  10.00% 
Tier I Capital (to Risk Weighted 												
      Assets)   Consolidated 		      48,483,778 		16.94% 		11,450,919		  4.00% 		    17,176,378 		   6.00% 
                Bank 		              48,003,979 		16.80% 		11,429,519	  	4.00% 		    17,144,278 		   6.00% 
Tier I Capital (Average) (to Average 												
      Assets)   Consolidated 		      46,754,542 		10.08% 		18,549,574		  4.00% 		    23,186,967 		   5.00% 
                Bank 		              45,891,248 	 	9.91% 		18,523,208	  	4.00% 		    23,154,010 		   5.00% 

<FN>
<F13>
Table XII - Capital Amounts and Capital Adequacy
</FN>
</TABLE>


NOTE 12 - ACQUISITIONS

		On April 1, 1996, the Bank purchased certain assets and
assumed certain deposit liabilities of the Mt. Pleasant, Maury
County, Tennessee, and Lewisburg, Marshall County, Tennessee,
branches of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee.  The Office of the
Comptroller of the Currency granted approval of this
acquisition.  Deposit liabilities totaling $19.9 million were
assumed in the transaction in exchange for other assets acquired
totaling $1.6 million and cash for the balance.  The Mt.
Pleasant branch was combined with the Bank's office there and
the building was donated to the Mt. Pleasant-Maury Phosphate
Museum, a non-profit organization dedicated to preserving the
rich history of the phosphate industry in this area and actively
promoting tourism and economic development.  The Lewisburg
branch gave the Bank a second location in Lewisburg
complementing the market penetration in Marshall County.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - EMPLOYEE BENEFIT PLANS

		The Bank contributes to a defined contribution, profit-sharing
plan covering employees who meet participation requirements. 
The amount of the contribution is discretionary as determined by
the Board of Directors up to the maximum deduction allowed for
federal income tax purposes.  Contributions to the plan, that
amounted to $661,307, $633,459 and $602,010, in 1996, 1995, and
1994, respectively, are included in salaries and employee
benefits expense. 

		In 1992, the Bank formalized a nonqualified salary
continuation plan for certain key officers.  In connection with
this plan, the value of the single premium universal life
insurance policies (1996 - $620,657; 1995 - $594,221) purchased
in 1993 to fund the plan and the related liability (1996 -
$513,792; 1995 - $482,272) were included in other assets and
other liabilities, respectively.  Net non-cash income recognized
on these policies of $26,436 in 1996 and  $14,133 in 1995 is
included in the above asset values.  The principal cost of the
plan is being accrued over the anticipated remaining period of
active employment, based on the present value of the expected
retirement benefit.  Expense related to this plan was $64,024 in
1996, $106,066 in 1995, and $98,925 in 1994.

		The Bank also implemented a deferred compensation plan which
permitted directors, beginning in 1993, to defer their
director's fees and earn interest on the deferred amount.  A
liability increase and expense of $172,871 for 1996, $176,727
for 1995, and $126,262 for 1994 are recognized in the
accompanying financial statements.  In connection with this
plan, a single premium universal life insurance policy was
purchased on the life of each director who elected to
participate.  Net non-cash income recognized on these policies
of $85,249 in 1996 and $51,803 in 1995 is included in the cash
surrender values of  $1,887,171 and $1,801,922 reported in other
assets at December 31, 1996 and 1995, respectively.

		In 1996, the Bank established an officer group term
replacement/split dollar plan to provide life insurance benefits
that would continue after retirement.  A single premium
universal life insurance policy was purchased to fund the plan
and a split dollar agreement was made with an irrevocable trust
that specified the portion of the insurance proceeds that would 
become part of the trust.  An insurance premium of $795,000 was
paid in November, 1996, of which $785,330 is the cash surrender
value at December 31, 1996, and is included in other assets, and
net expense of $9,670 is included in other operating expense.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replace- ment/split dollar plan.  These
policies have an aggregate face amount of $2,875,000.



<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
 	                                      December 31, 1996 		       December 31, 1995 
                                      	Amortized    		Fair 	     	Amortized 		   Fair 
                                         	Cost 		     Value 		       Cost 		     Value 
                                                    (Dollars in Thousands)
Financial assets 					 			
<S>                                   <C>          <C>            <C>          <C>
  Cash and cash equivalents 	         $ 	27,917 	  $ 	27,917 	    $ 	31,282	   $ 	31,282 
  Securities held to maturity 		        118,542 		   119,226 		     127,663		    128,830 
  Securities available for sale 		       55,898 		    56,142 		      10,876		     11,269 
  Loans, net 		                         300,806 		   309,401 		     289,252 		   298,076 
  Accrued interest receivable 		          5,549 		     5,549 		       5,424		      5,424 

Financial liabilities 								
  Deposits 		                           460,573 		   449,129 		     410,778 		   398,296 
  Federal funds purchased 		              5,000 		     5,000 		      10,000 		    10,000 
  Short term borrowings 		                  523 		       523 		       1,955 		     1,955 
  Accrued interest payable 		             2,539 		     2,539 		       3,034 		     3,034 

<FN>
<F14>
Table XIII - Summary of Fair Values of Financial Instruments
</FN>
</TABLE>

		Estimated fair values have been determined by the Bank using
the best available data.  Many of the Bank's financial
instruments, however, lack an available trading market as
characterized by a willing buyer and willing seller engaging in
an unforced, unforeclosed transaction.  Therefore, significant
estimations and present value calculations were used by the Bank
for the purposes of this disclosure.  Changes in assumptions or
the estimation methodologies used may have a material effect on
the estimated fair values included in this note.

		Financial assets - Cash and cash equivalents are considered to
be carried at their fair value and have not been valued
differently than has been customary with historical cost
accounting.  Securities available-for-sale and securities
held-to-maturity are valued by an independent rating service and
are disclosed in detail in Note 2 above.  A present value
discounted cash flow methodology was used to value the net loan
portfolio.  The discount rate used in these calculations was the
current rate at which new loans in the same classification for
regulatory reporting purposes would be made.  This rate was
adjusted for credit loss and assumed prepayment risk.   For
loans with floating interest rates it is presumed that estimated
fair values generally approximate the recorded book balances.

		Financial liabilities - Deposits with stated maturities have
been valued using a present value discounted cash flow with a
discount rate approximating the current market for similar
liabilities.  Financial instrument liabilities with no stated
maturities have an  estimated fair value equal to both the
amount payable on demand and the recorded book balance.  For
deposits with floating interest rates it is presumed that
estimated fair values generally approximate the recorded book
balances.  The carrying amounts of federal funds purchased and
other short term borrowings are considered to approximate their
fair values.

		  The Bank's remaining assets and liabilities which are not
considered financial instruments have not been valued
differently than has been customary with historical cost
accounting.  Management is concerned that reasonable
comparability between financial institutions may be distorted
due to the wide range of permitted valuation techniques and
numerous estimates which must be made given the absence of
active secondary markets for many of the financial instruments. 
This lack of uniform valuation methodologies also introduces a
greater degree of subjectivity to these estimated fair values. 

		At December 31, 1996, the Bank had outstanding standby letters
of credit and commitments to extend credit.  These
off-balance-sheet financial instruments are generally
exercisable at the market rate prevailing at the date the
underlying transaction will be completed and, therefore, are
deemed to have no current fair value.  Please refer to Note 9.  
 





<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                                		First 		      Second 		     Third 	     	Fourth 		
                               		Quarter 	     	Quarter   	 	Quarter 	 	   Quarter 		       Total 
     1996  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	9,052,224 	   $	9,280,303 	 $	9,249,133  	$	9,501,009 	 $37,082,669 
Interest expense 		             3,989,386 		    4,153,059 		  4,260,324 		  4,308,988		  16,711,757 
										
Net interest income 		          5,062,838 		    5,127,244 		  4,988,809		   5,192,021 		 20,370,912 
Provision for possible loan   										
  losses 		                       250,000 		      300,000 		    200,000 		    550,000 		  1,300,000 
Noninterest expenses, net of 										
  noninterest income 		         2,327,604 		    2,234,505 		  2,335,349		   2,417,319 		  9,314,777 
										
Income before income taxes 		   2,485,234 		    2,592,739 		  2,453,460		   2,224,702 		  9,756,135 
Income taxes 		                   777,319 		      776,659 	    	694,636 		    640,725 	  	2,889,339 

Net income 	                  $ 1,707,915 	   $	1,816,080 	 $	1,758,824 	 $	1,583,977 	 $	6,866,796 

Earnings per common share 										
    (1,400,000 shares) 	      $ 	    1.22 	   $  	   1.30   $ 	    1.25 	 $ 	    1.13	  $ 	    4.90  
</TABLE>
<TABLE>
<CAPTION>
                                  	First 		     Second 		     Third 	     Fourth 		
                               		Quarter 		     Quarter 		   Quarter 		   Quarter 		       Total 
     1995  										
<S>                           <C>             <C>           <C>           <C>           <C>
Interest income 	             $	8,244,228 	   $ 8,640,769 	 $	8,720,212   $	8,888,360 	 $34,493,569 
Interest expense 		             3,654,485 		    3,856,594 		  3,938,600 		  3,972,566		  15,422,245 
										
Net interest income 		          4,589,743 		    4,784,175 		  4,781,612		   4,915,794 		 19,071,324 
Provision for possible loan  										
  losses 		                       145,000 		      140,000 		    180,000 		    205,000 		    670,000 
Noninterest expenses, net of 										
  noninterest income 		         2,492,505 		    2,547,595 		  2,430,466		   2,296,283 		  9,766,849 
										
Income before income taxes 		   1,952,238 		    2,096,580 		  2,171,146		   2,414,511 		  8,634,475 
Income taxes 		                   512,448 		      589,977 		    680,609 		    735,735 		  2,518,769 

Net income 	                  $ 1,439,790 	   $	1,506,603 	 $	1,490,537 	 $	1,678,776 	 $	6,115,706 

Earnings per common share 										
  (1,400,000 shares) 	        $ 	    1.03 	   $  	   1.08 	 $ 	    1.06 	 $ 	    1.20 	 $ 	    4.37 

<FN>
<F15>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


NOTE 16 - DEPOSITS

		The Bank does not have any foreign offices and all deposits
are serviced in its fifteen domestic offices.  The average
amounts of deposits and the average rates paid are summarized in
Table XV.  Maturities  of  time deposits of $100,000 or more at
December 31 are indicated in Table XVI.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - DEPOSITS  (Continued)

<TABLE>
<CAPTION>
                                            	1996  	 	             1995  	 	          1994  
                                                 (Dollars in Thousands) 					
<S>                                  <C>          <C>     <C>          <C>    <C>           <C>
Demand deposits 	                    $ 	61,509 		  - 	% 	 $ 	56,730 		  - 	% 	$ 	55,557 	   	- 	% 
NOW and money market accounts 		       158,450 		 3.37 			  149,016 		 3.51			  161,244 	   3.25 	 
Savings deposits 		                     37,421 		 3.22 			   34,629 		 3.00  			 35,036 		  2.87 	 
Time deposits of less than $100,000 		 151,952 		 5.40  			 136,568		  5.30  			126,523 	 	 4.27 	 
Time deposits of $100,000 or more 		    34,539 		 5.41 			   32,524		  5.35 			  26,053 	 	 4.32 	 
													 	 	 
Total In Domestic Offices 	          $	443,871 		 3.74% 	 $	409,467		  3.72% 	$	404,413 	 	 3.66% 

<FN>
<F16>
Table XV - Average Amounts of Deposits and Average Rates Paid by
Deposit Type at December 31
</FN>
</TABLE>
<TABLE>
	                                     1996       		1995  		     1994  
                           							       (Dollars In Thousands)
<S>                                <C>          <C>          <C>
Under 3 months 	                   $	11,680 	   $ 	7,877 	   $ 	3,117 
3 to 12 months 		                    22,638 		    18,407 		    18,250 
Over 12 months 		                     4,812 		     4,310 		     4,803 
						
	                                  $	39,130 	   $	30,594 	   $	26,170 
<FN>
<F17>
Table XVI - Maturities of Time Deposits of $100,00 or More at
December 31
</FN>
</TABLE>


NOTE 17- CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
<CAPTION>
                             December 31, 1996 and 1995                                      
                             (In Thousands of Dollars)                                       
             Assets 		                                    1996  		  1995  
<S>                                                     <C>        <C>     
Cash 	                                                  $  	 142 	 $    	70 
Investment in bank subsidiary - at equity        		       53,870 	   48,517 
Investment in credit life insurance company - at cost       		50 	      	50 
Investment in other securities 		                             22 	       22 
Dividends receivable from bank subsidiary 		                 714 	      630 
Cash surrender value - life insurance 		                     489 		     466 
Other assets 		                                                1 		       1 
				
      Total assets 	                                    $	55,288 	 $	49,756 

       Liabilities and Stockholders' Equity 				
Liabilities 				
  Payable to directors 	                                $ 	  173 	 $ 	  129 
  Dividends payable 		                                       714 		     630 

      Total liabilities 		                                   887 		     759 
Stockholders' equity 				
  Common stock - $10 par value, authorized 4,000,000 				
    shares; 1,400,000 shares issued and outstanding 		    14,000		   14,000 
  Retained earnings 		                                    40,255 		  34,761 
  Net unrealized gain (loss) on available-for-sale  				
    securities, net of tax 		                                146 		     236 
      Total stockholders' equity 	                       	54,401 		  48,997 
				
      Total liabilities and stockholders' equity 	      $	55,288 	 $	49,756 
<FN>
<F18>
Table XVII - Condensed Balance Sheets of Parent
</FN>
</TABLE>


<PAGE>

                   FIRST  FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION (Continued)

<TABLE>
<CAPTION>
          
                      Years Ended December 31, 1996 and 1995       
                            (In Thousands of Dollars)              

                                               		1996  	      	1995  
Operating income 				
<S>                                            <C>           <C>
  Dividends from bank subsidiary 	             $	1,372 	     $	1,232 
  Other dividend income 		                          85 		         22 
  Interest income 		                                 6 		          2 
  Other 		                                          28 		         27 

Operating expenses 		                               68 		         87 
				
    Income before equity in undistributed net 				
      income of bank subsidiary 		               1,423 		      1,196 

Equity in undistributed net income of bank
  subsidiary 		                                  5,444		       4,920 

    Net Income 	                               $	6,867 	     $	6,116 
<FN>
<F19>
Table XVIII - Condensed Statements of Income of Parent
</FN>
</TABLE>


<TABLE>
<CAPTION>
                         Years Ended December 31, 1996 and 1995         
                               (In Thousands of Dollars)          
              
                                                   	     	 1996  	      	1995  
Operating activities 	  			
<S>                                                      <C>           <C>
  Net income for the year  	                             $	6,867 	     $	6,116 
  Adjustments to reconcile net income to net cash 				
    provided by operating activities 				
  Equity in undistributed net income of bank 
    subsidiary                                          		(5,444) 		    (4,920) 
  Increase in other assets   		                             (111) 		       (69) 
  Increase in payables 		                                     44 	         	54 
				
     Total adjustments                                    (5,511)       (4,935)

  Net cash provided by operating activities 		             1,356		       1,181 
				
Net cash provided by (used in) investing activities 				
    Purchases of investment securities 	     	              (133) 		        - 
    Proceeds from maturities of investment securities 		     137 		         - 
     Net cash provided by (used in) investing activities		     4 		         - 

Net cash used in financing activities 				
  Cash dividends paid 		                                  (1,288) 		    (1,176) 
				
    Increase (decrease) in cash 		                            72 		          5 
				
Cash at beginning of year 		                                  70 		         65 

Cash at end of year 	                                    $  	142 	     $   	70 
<FN>
<F20>
Table XIX - Condensed Statements of Cash Flows of Parent
</FN>
</TABLE>





              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS 

GENERAL

	First Farmers and Merchants Corporation, a one-bank holding
company, was formed during 1982.  Its only subsidiary, First
Farmers and Merchants National Bank, is a community bank that
was established in 1909.  The resulting financial condition of
the Corporation should be evaluated in terms of the Bank's
operations within its service area.

	During 1996, First Farmers and Merchants National Bank
strengthened its presence in the four counties in middle
Tennessee that it serves.  Deposits and loans in each of the
four counties increased.  Internal growth was the challenge for
the year to all directors, officers, and employees who were
reminded that the bank was large enough to perform yet small
enough to care about customer needs.  The Bank is positioned to
provide quality services in diverse markets and a dynamic
interest rate environment.  Our customers are enjoying the
quality service of a community bank and the safety and strength
of a regional bank.

	These tables plus the following discussion and financial
information is presented to aid in understanding First Farmers
and Merchants' current financial position and results of
operations.  The emphasis of this discussion will be on the
years 1996, 1995, and 1994; however, financial information for
prior years will also be presented when appropriate.  This
discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes to Consolidated Financial
Statements included elsewhere in this material.


FINANCIAL CONDITION 

	First Farmers and Merchants National Bank's financial condition
depends on the quality and nature of its assets, its liability
and capital structure, the market and economic conditions, and
the quality of its personnel.  The following paragraphs provide
a unique perspective on the internal structures of the
Corporation and the Bank that provide the strength in our
organization.


Summary

	The Bank reported net income of $6.9 million for 1996 compared
to $6.1 million in 1995 and $5.6 million in 1994.  On a per
common share basis, net income was $4.90 for 1996 versus $4.37
for 1995 and $3.97 for 1994.  The improvement in 1996's earnings
resulted from a wider gross margin, an increase in noninterest
income sufficient to cover a smaller increase in noninterest
expenses, and the increase in taxes.  The smaller increase in
noninterest expenses is due in part to the significant decrease
in deposit insurance.  These improve- ments were partially
offset by higher additions to the allowance for loan losses.

	The return on average equity for 1996 was 13.23% compared to
13.08% for 1995 and 13.30% for 1994.   The return on average
assets was 1.37% for 1996 versus 1.32% for 1995 and 1.23% for
1994.


Gross Interest Margin

	The gross interest margin is defined as the difference between
the revenue from earning assets, primarily interest income, and
interest expense related to interest-bearing liabilities.  The
maintenance of the gross interest margin at a level which, when
coupled with noninterest revenues, is sufficient to cover
additions to the allowance for loan losses, noninterest expenses
and income taxes, and yield an acceptable profit is critical for
success in the banking industry.  The gross interest margin is a
function of the average balances of earning assets and
interest-bearing liabilities and the yields earned and rates
paid on those balances. 

	Management activities are planned to maintain a satisfactory
spread between the yields on earning assets and the related cost
of interest-bearing funds.  The gross interest spread is
determined by comparing the taxable equivalent gross interest
margin to average earning assets before deducting the allowance
for loan losses.  This ratio reflects the overall profitability
of earning assets, including both those funded by
interest-bearing sources and those which incur no interest cost
(primarily noninterest-bearing demand deposits).  This ratio is
most often used when analyzing a banking institution's overall
gross margin profitability compared to that of other financial
institutions.  The incremental interest spread compares the
difference between the yields on earning assets and the cost of
interest-bearing funds.  This calculation and similar ratios are
used to assist in pricing decisions for interest related
products. 

	Table A entitled DISTRIBUTION OF ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY, INTEREST RATES AND INTEREST DIFFERENTIAL
presents for each of the last three years by major categories of
assets and liabilities, the average daily balances, the
components of the gross interest margin (on a taxable equivalent
basis), the yield or  rate, and the incremental and gross
interest spread.  

<PAGE>

               FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

TABLE A - Distribution of Assets, Liabilities, and Stockholders'
Equity, Interest Rates 			and Interest Differential

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31, 
                              	            1996        		              1995  		                     1994  
                              	  Average  	Rate/ 	          		Average  Rate/ 				         Average 		Rate/ 		
                              	  Balance 	 Yield   Interest 		Balance 	Yield 		Interest   Balance 	 Yield 		 Interest 
ASSETS 	                                                    (Dollars In Thousands) 
Interest earning assets 																								
<S>                             <C>         <C>    <C>        <C>       <C>    <C>        <C>        <C>    <C>
 Loans, net 	                   $290,413 		 9.43% 	$	27,373* 	$276,166 	9.38% 	$	25,892* 	$247,791 		8.54% 	$	21,156* 
 Bank time deposits 		                 1 		   - 			     - 			        2    -			      - 			      - 		    - 			     - 	
 Taxable securities 		           118,030 		 6.15 			  7,256 			104,220		6.20 			  6,457 			119,960 		6.25 			  7,497 	
 Tax exempt securities 		         44,158 		 7.10 			  3,134*  		39,139 	8.06  		  3,156* 		 38,545 		8.49 			  3,274* 
 Federal funds sold 		             4,198  		5.31     			223 		  	2,076		5.83 			    121 			  2,998 		3.73 			    112 	
																								
 TOTAL EARNING ASSETS 		         456,800 		 8.32 		$	37,986			 421,603		8.45 		$	35,626 			409,294 		7.83 		$	32,039 	
Noninterest earning assets 																								
 Cash and due from banks 		       25,760 								               24,829								              25,945 						
 Bank premises and equipment 	  	  6,708 								                6,246								               6,350 						
 Other assets 		                  13,432 							 	              11,061 								             10,364

 TOTAL ASSETS 	                 $502,700 							              $463,739 					 		           $451,953 						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY 																								
Interest bearing liabilities 																								
 Time and savings deposits: 																								
 NOW and money market accounts	$158,438 	   3.37% 	$ 	5,338 		$148,993  3.51% 	$ 	5,223 		$161,244 		3.25%	 $ 	5,239 	
 Savings 		                      37,428 		  3.22 			  1,204 	 		34,627  3.00 			  1,040			  35,036 		2.87 			  1,006 	
 Time  		                       151,973		   5.40 		  	8,210 			136,605  5.30 			  7,245			 126,523 		4.27 			  5,400 	
 Time over $100,000 		           34,554 		  5.40 	  		1,866 	 		32,522		5.35 			  1,740 			 26,053 		4.32 			  1,126 	
																								
 TOTAL INTEREST BEARING 
  DEPOSITS 		                   382,393 		  4.35			  16,618 			352,747 	4.32 			 15,248 		 348,856 		3.66			  12,771 	
 Federal funds purchased 		       1,043 		  5.56 			     58 			  2,415		5.92 			    143 			  1,462 		4.86 			     71 	
 Other short-term debt 		           622 		  5.79      			36 	    		565 	5.49			      31 			    568 		3.92 			     22 	
																								
 TOTAL INTEREST BEARING 
  LIABILITIES 		                384,058 		  4.35 		$	16,712 			355,727 	4.34 		$ 15,422 			350,886 		3.67 		$	12,864 	
Noninterest bearing liabilities 																								
 Demand deposits 		              61,509 								                56,742 								             55,557
 Other liabilities 		             5,066 								                 4,515 								              3,690						

 TOTAL LIABILITIES 		           450,633 								               416,984								             410,133 						
Stockholders' equity 		          52,067 								                46,755 								             41,820
						
 TOTAL LIABILITIES AND 																								
  STOCKHOLDER'S EQUITY 	       $502,700 							               $463,739 							            $451,953 						

 Spread between combined 
   rates earned and combined 
    rates paid* 				                        3.97% 	               						4.11%							                 4.16% 			

 Net yield on interest-
  earning assets* 				                      4.66% 							               4.79% 							                4.68% 			
<FN>
<F21>
* Taxable equivalent basis
</FN>
</TABLE>

Notes:
1.	U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.
2.	The taxable equivalent adjustment has been computed based on
a 34% federal income tax rate and has given effect to the
disallowance of interest expense, for federal income tax
purposes, related to certain tax-free assets.  Loans include
nonaccrual loans for all years presented.
3.	The average balances of the fair values of available-for-sale
securities were used in the calculations in this table.



<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 

TABLE B - Distribution of Assets, Liabilities, and Stockholders'
          Equity, Interest Rates and Interest Differential     (Continued)

	Table B sets forth, for the periods indicated, a summary of
changes in interest earned and interest paid separated into the
amount generated by volume changes and the amount generated by
changes in the yield or rate. 

<TABLE>
<CAPTION>
                                             	  1996 Compared to 1995          	 	1995 Compared to 1994
Volume and Yield/Rate Variances 				                  Yield/ 		Net Increase       				  Yield/ 		 Net Increase 
(Taxable Equivalent Basis - In Thousands) 	 	Volume 		Rate   		(Decrease) 		   Volume 		Rate 		   (Decrease) 
Revenue earned on 												
<S>                                         <C>       <C>       <C>           <C>       <C>        <C>
  Net loans 	                               $ 1,336 	 $  	145 	 $	1,481 	     $	2,423 	 $	2,313 	  $	4,736 
  Investment securities 												
    Taxable securities 		                       856 		    (57) 		   799 		       (984) 		   (56)		  (1,040) 
    Tax-free securities 		                      405 		   (427) 		   (22) 		        50 		   (168)		    (118) 
  Federal funds sold 		                         124 		    (22) 		   102 		        (34) 		    43 		       9 

     Total interest earning assets 		         2,721 		   (361)		  2,360 		      1,455 		  2,132 		   3,587 
Interest paid on 												
  NOW and money market accounts 		              331 		   (216) 		   115 		       (398)		    382 		     (16) 
  Savings deposits 		                            84 		     80 		    164 		        (12) 		    46 		      34 
  Time deposits 		                              815 		    150 		    965 		        430 		  1,415 		   1,845 
  Time over $100,000    		                      109 		     17 		    126 		        279 		    335 		     614 
  Federal funds purchased 		                    (81) 		    (4) 		   (85) 		        46 		     26 		      72 
  Short term debt 		                              3 		      2 		      5 		        - 		        9 		       9 
												
      Total interest-bearing funds 		         1,261 		     29 		  1,290		         345 		  2,213 		   2,558 
												
Net interest earnings 	                     $	1,460 	 $ 	(390) 	$	1,070 	     $	1,110 	 $  	(81)   $	1,029 
</TABLE>
Notes:

1.	The change in interest resulting from both volume and
yield/rate has been allocated to change due to volume and change
due to yield/rate in proportion to the relationship of the
absolute dollar amounts of the change in each.
2.	The computation of the taxable equivalent adjustment has
given effect to the disallowance of interest expense, for
federal income tax purposes, related to certain tax-free assets.
3. U.S. Government, government agency, and corporate debt
securities plus equity securities in the available-for-sale and
held-to-maturity categories are taxable investment securities. 
Municipal debt securities are nontaxable and classified as
held-to-maturity.





<PAGE>

                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 


		Two graphs are included at this point in the material mailed to our stock-
holders.  The first graph illustrates the categories of average earning
assets and the portion each category is of the total for the
last three years.  The following table is the data illustrated
by this graph.
<TABLE>
<CAPTION>
					                 Loans        	Investment Securities	    Other
   <S>              <C>                   <C>                <C>
			1996	           	$290,413	             $162,188           $4,199
			1995		            276,166	 	            143,358 	          2,078
			1994		            247,791	 	            158,505	           2,998

</TABLE>

The second graph illustrates the average balances by category of
liabilities that fund earning assets.  The following table is
the data illustrated by this graph in thousands of dollars.

<TABLE>
<CAPTION>
		         Interest-Bearing Deposits		   Noninterest-Bearing Deposits	   Other
 <S>               <C>                           <C>                    <C>
	1996		            $382,393			                   $61,509			             $1,043
	1995		             352,747				                   56,742			              2,415
	1994		             348,856				                   55,557			              1,462
</TABLE>


		Average earning assets increased 8.4% in 1996 compared to an
3.0% increase in 1995 and a 7.6% increase in 1994.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1996, average net loans represented 
63.6% of  average earning assets.  Total average net loans
increased during the last three years showing an 5.2% growth
from 1995 to 1996, an 11.5% growth from 1994 to 1995, and a 6.1%
growth from 1993 to 1994.  Average investments represented 36.4%
of average earning assets at December 31, 1996, and increased
14.5% in 1996.  The Bank purchased certain assets and assumed
certain deposit liabilities of the Mt. Pleasant, Maury County,
Tennessee, and Lewisburg, Marshall County, Tennessee, branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  The assets purchased were buildings and equipment and not
earning assets.  Most of the increase in investments can be
attributed to the assumption of  those deposit liabilities that
were not used for the increasing loan growth.  Investments 
decreased 9.6% in 1995, and increased 11.6% in 1994.  Average
total assets increased during the last three years as evidenced
by an 8.4% growth from 1995 to 1996, a 2.6% growth from 1994 to
1995, and a 7.4% growth from 1993 to 1994.  Please refer to the
color graphs at the end of this document that illustrate this
growth.

	The bank's average deposits grew during the last three years
reflecting an 8.4% growth from 1995 to 1996, a 1.3% growth from
1994 to 1995, and a 6.8% growth from 1993 to 1994. 
Approximately half of the increase in average deposits can be
attributed to the acquisition discussed earlier in this section.
 Short and medium term rates were more competitive compared to
longer term rates during the first half of 1996 and some
depositors moved money back into interest-bearing transaction
accounts, which increased 6.3% during 1996 but had declined in
1995 as investors took advantage of higher certificate of
deposit rates.  Over half of the increase during 1996 was
attributable to the acquisition.  Average interest-bearing
checking accounts decreased 7.6 % in 1995 compared to a  9.5%
increase in 1994.  Average savings deposits increased 8.1%
during 1996, over 54% from the acquisition.  Savings deposits
have been strong historically providing a core, low cost, source
of funding.  Average savings deposits declined 1.2% in 1995
compared to a 12.2% increase in 1994.  Average certificates of
deposit under $100,000 increased 11.3% during 1996, 60.0% from
the acquisition, increased 8.0% in 1995, and declined 1.2.%  in
1994.  Certificates of deposit over $100,000 increased 6.3% in
1996, 87.8% from the acquisition,  compared to a 24.8% increase
in 1995 and a 10.4% increase in 1994.  



<PAGE>



                FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                             AND RESULTS OF OPERATIONS 


LIQUIDITY AND INTEREST  RATE  SENSITIVITY

	The Bank maintains a formal asset and liability management
process to control interest rate risk and assist management in
maintaining reasonable stability in the gross interest margin as
a result of changes in the level of interest rates and/or the
spread relationships among interest rates.  The Bank uses an
earnings simulation model to evaluate the impact of different
interest rate scenarios on the gross margin.  Each month, the
Asset/Liability Committee monitors the relationship of rate
sensitive earning assets to rate sensitive interest bearing
liabilities (interest rate sensitivity) which is the principal
factor in determining the effect that fluctuating interest rates
will have on future net interest income.  Rate sensitive earning
assets and interest bearing liabilities are those which can be
repriced to current market rates within a defined time period. 

	Another tool used to monitor the Bank's overall interest rate
sensitivity is a gap analysis.  Table C, Rate Sensitivity of
Earning Assets and Interest-Bearing Liabilities, shows the
Bank's rate sensitive position at December 31, 1996, as measured
by gap analysis (the difference between the earning asset and
interest-bearing liability amounts scheduled to be repriced to
current market rates in subsequent periods).

	As a policy, budgeted financial goals are monitored on a
monthly basis by the Asset/Liability Committee where the actual
dollar change in net interest income given different interest
rate movements is reviewed.  A negative dollar change in net
interest income for a twelve month period of less than 3% of net
interest income given a three hundred basis point shift in
interest rates is considered an acceptable rate risk position. 
The net interest margin, on a tax equivalent basis, at December
31, 1996,  1995, and 1994 was 4.66%, 4.79%,  and 4.68%
respectively.

<TABLE>

TABLE C - Rate Sensitivity of Earning Assets and Interest-Bearing Liabilities
          (Dollars in Thousands) 
<CAPTION>
  		                                       3 Months 		 3-6 	    	6-12   		Over 1 		
As of December 31, 1996 		                 or Less 		 Months 		 Months 	 	Year		       Total 
Earning assets 										
<S>                                      <C>        <C>        <C>        <C>        <C>
  Loans and leases, net of unearned     	$ 	58,045 	$ 	42,594 	$ 	65,730 	$	137,632 	$	304,001 
  Taxable investment securities 		          13,855 	  	10,000 	  	13,500	  	 90,061 		 127,416 
  Tax-exempt investment securities 		        1,000 		   1,100 		     900		   44,271 		  47,271 
										
     Total earning assets 		                72,900 	  	53,694 		  80,130 		 271,964 	$	478,688 

Interest-bearing liabilities 										
  NOW and money market accounts 		          45,590 		     - 		    64,588		   43,136 	$ 153,314 
  Savings 		                                   - 	 	      - 		    41,594 		     - 	 	   41,594 
  Time 		                                   41,547 		  33,805 		  50,657 		  25,077 		 151,086 
  Time over $100,000 		                     11,680 		   9,813 		  12,825 		   4,812		   39,130 
  Other short-term debt 		                   5,523 		     - 	 	      - 	 	      - 		     5,523 
										
Total interest bearing liabilities 		      104,340 		  43,618 		 169,664		   73,025 	$	390,647 

Noninterest-bearing, net                                 								(88,041) 		

Net asset/liability funding gap 		         (31,440) 		 10,076 		 (89,534)		 110,898 		

Cumulative net asset/liability 
 funding gap 	                           $ (31,440) $	(21,364) $(110,898) 	$ 	  - 	 	 
<FN>
<F22>
Available-for-sale and held-to-maturity securities were combined
in the taxable investment securities category for purposes of
this table.
</FN>
</TABLE>




<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                AND RESULTS OF OPERATIONS 


LOANS AND LOAN QUALITY

	As with most commercial banking institutions, the loan
portfolio is the largest component of earning assets and
consequently provides the highest amount of revenues.  The loan
portfolio also contains, as a result of credit quality, the
highest exposure to risk.  When analyzing potential loans,
management assesses both interest rate objectives and credit
quality objectives in determining whether to make a given loan
and the appropriate pricing for that loan.  The Bank maintains a
diversified portfolio in order to spread its risk and reduce its
exposure to economic downturns which may occur in different
segments of the economy or in particular industries.    The
composition of the loan portfolio is disclosed in detail in Note
3 in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the
accompanying financial statements.

	The Bank follows written loan policies which include loan
review procedures and approvals.  Depending primarily on the
amount of the loan, there are various approval levels including
an Executive Committee of the Board of Directors that meets
weekly.

	The Bank has a Loan Review Department which performs ongoing,
independent reviews of specific loans for credit quality and
proper documentation.  This department is centralized and
independent of the lending function.  Regular reports are made
to senior management and the Executive Committee of the Board of
Directors regarding the credit quality of the loan portfolio, as
well as trends.  Every loan is assigned a risk rating by the
loan officer subject to review by Loan Review.  The Bank also
has a Credit Administrator who is responsible for assisting loan
officers in structuring new loans, reviewing problem loans,
monitoring their status from period to period, and assisting in
their resolution.  This analysis and review also includes a
formal review that is prepared quarterly to assess the risk in
the loan portfolio and to determine the adequacy of the
allowance for loans losses.  This review supported management's
assertion that the allowance was adequate at December 31, 1996.  

	Table D, RISK ELEMENTS IN THE LOAN PORTFOLIO, includes all
loans management considers to be potential problem loans,
summarizes average loan balances, and reconciles the allowance
for loan losses for each year.  Additions to the allowance,
which have been charged to operating expenses, are also
disclosed.  Management does not believe that there is a
concentration of loans to a multiple number of borrowers engaged
in similar activities. 

	Loans having recorded investments of $5.1 million at December
31, 1996, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent 1.7% of gross loans.
 Commercial loans comprised $.384 million of the total, with
loans secured by real estate accounting for $3.6 million, and
installment loans $1.1 million.  The gross interest income that
would have been recorded during 1996 if the loans had been
current in accordance with their original terms and had been
outstanding throughout the period or since origination, if held
for part of the period, was $374, $365, and $193 thousand for
the years ended December 31, 1996, 1995, and 1994 respectively. 
Please refer to Note 1 and Note 3 in the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS that are included elsewhere in this
material for more information on the Bank's policy regarding
loan impairment.

	A graph on the bottom of this page is included in the materials
sent to the stockholders that illustrates the increase in
average net loans and the ratio of net loan charge offs to
average loans for the last eight years.  The ratio at December
31, 1996 was .36%.  This ratio, although higher than 1994 and
1995 ratios, is well below industry levels.   The following
table is the data illustrated by this graph.

<TABLE>
<CAPTION>
				                                   Avg Loans       	Ratio  Net
                                  				Outstanding	       CO/Avg Ln
                      <S>              <C>                <C>
                    		1989		           $163,003	          0.0032%
                    		1990		            172,749	          0.0030
                    		1991		            182,561	          0.0037
                    		1992		            215,158	          0.0023
                    		1993		            233,608	          0.0030
                    		1994		            247,791          	0.0014
                    		1995		            276,166	          0.0012
                   			1996		            290,413	          0.0036


<PAGE>



                   FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO


</TABLE>
<TABLE>
<CAPTION>
	                      								                                   December 31
                                              	1996      		1995     	 	1994     	 	1993     	 	1992  
                                                  									(Dollars  In Thousands)
<S>                                         <C>         <C>         <C>         <C>         <C>
Average amount of loans outstanding       	 $ 290,413 	 $ 276,166 	 $	247,791 	 $	233,608 	 $ 215,158 
										
Balance of allowance for possible loan 										
  losses at beginning of year 	             $  	2,678 	 $  	2,342 	 $  	2,024	  $  	2,254 	 $ 	 1,917 
Loans charged-off: 										
  Loans secured by real estate    		              368 		       15 		      135 		      396		       245 
  Commercial and industrial loans    		           141 		      170 		       42 		      222		       124 
  Individuals 		                                  879 		      371 		      246 		      230 		      249 
     TOTAL  LOANS CHARGED OFF 		                1,388 		      556 		      423 		      848		       618 
Recoveries of loans previously charged off: 										
  Loans secured by real estate 		                 111 		       97 		        9 		       56 		        3 
  Commercial and industrial loans 		               42 		       14 		       36 		       52 		       80 
  Individuals 		                                  183 		      111 		       36 		       40 		       32 
     TOTAL RECOVERIES 		                          336 		      222 		       81 		      148 		      115 
       NET  LOANS CHARGED-OFF 		                1,052 		      334 		      342		       700 		      503 
Provision charged to operating expenses 		      1,300 		      670 		      660		       470 		      840 
     BALANCE OF ALLOWANCE FOR 										
      POSSIBLE LOAN LOSSES AT 										
       END OF YEAR 	                        $ 	 2,926 	 $ 	 2,678 	 $ 	 2,342 	 $ 	 2,024 	 $ 	 2,254 

Ratio of net charge-offs during the 										
    period to average loans outstanding 		      0.36% 		    0.12% 		    0.14%		     0.30% 		    0.23% 
</TABLE>


CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1996, the Corporation had a ratio of
average capital to average assets of 10.36%.  This compares to a
ratio of average capital to average assets of 10.08% at December
31, 1995, and 9.25% at December 31, 1994.

	Cash dividends declared in 1996 were 11.4% more than those paid
in 1995.  The dividend to net income ratio was 20%.  Additional
dividends of approximately $14.8 million to the Corporation
could have been declared by the subsidiary bank without
regulatory agency approval.  The Corporation plans to maintain
or increase the payout ratio while continuing to maintain a
capital to asset ratio reflecting financial strength and
adherence to regulatory guidelines.

	As of December 31, 1996, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 17.7% and 18.7% respectively.  One
year earlier, the comparable ratios were 16.9% and 17.9%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital strength of the
Corporation and the Bank. 

		A bar graph at the bottom of this page, in the materials sent to
our stockholders, illustrates the average equity of the Corporation 
for the last six years.	The following table is the data illustrated 
by this graph in thousands of dollars.

<TABLE>
                          <S>              <C>
                      				1990		           $27,358
                      				1991		            30,194
                      				1992		            33,414
                      				1993		            37,454
                      				1994		            41,820
                      				1995		            46,755
                      				1996		            52,067
</TABLE>

<PAGE>



              FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS 

RESULTS OF OPERATIONS

Interest Income

	Total interest income increased 7.5% in 1996 due to a wider
gross margin that was enhanced by loan growth in all the market
areas the Bank serves.  Interest and fees earned on loans
increased 5.8% in 1996 accounting for 73.7% of gross interest
income.  Interest earned on investment securities and other
investments increased 12.8% in 1996 rounding out gross interest
income contributing 26.3%.  Total interest income increased
11.9% in 1995 and 7.3% in 1994.


Interest Expense

	Total interest expense increased 8.4% in 1996 due mostly to the
increase in interest-bearing deposits, about half of which can
be attributed to the acquisition indicated earlier.  This
increase compares favorably to a 19.9% increase in 1995 and a
6.9% increase in 1994.  The cost of interest-bearing deposits
remained steady all year under monthly monitoring by the
Asset/Liability Committee.  This contributed to the wider gross
margin achieved during 1996.   The net interest margin (tax
equivalent net interest income divided by average earning
assets) was 4.7% at the end of 1996 compared to 4.8% in 1995 and
4.7% in 1994.

 	Net interest income on a fully taxable equivalent basis is
influenced primarily by changes in:  (1) the volume and mix of
earning assets and sources of funding; (2) market rates of
interest, and (3) income tax rates.  The impact of some of these
factors can be controlled by management policies and actions. 
External factors also can have a significant impact on changes
in net interest income from one period to another.  Some
examples of such factors are: (1) the strength of credit demands
by customers; (2) Federal Reserve Board monetary policy, and (3)
fiscal and debt management policies of the federal government,
including changes in tax laws. 


Noninterest Income and Expense

		Noninterest income increased 28.4% during 1996 led by the
increase in service charges from new and acquired customers. 
This compares to a 14.9% increase in 1995 and a 1.6% increase in
1994.  Use of the Bank's check card generates fee income from
the clearing agent for the electronic transaction even though no
service fee is charged to Bank customers for its use.  Income
from fiduciary services provided in the Bank's Trust Department
remained strong. 

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1996 and the percentage each category is of the total.
The following table is the data illustrated by this graph in
thousands of dollars.

<TABLE>
<CAPTION>
			             Income Category        		Income $	       % of Total
         <S>                              <C>               <C>
       		Income from trust services		     $1,324			         22.8%
       		Service fees on deposits		        3,374			         58.1%
       		Other service fees		                746			         12.8%
       		Other				                           363			          6.3%
</TABLE>


		Noninterest expenses, excluding the provision for possible
loan losses, increased 5.8% in  1996 which is a much smaller
increase than the 6.2% increase in 1995.  The increase in 1994
was 5.4% for a smaller corporation.  Increased productivity
fostered by our technology improvements as the learning curve
diminished and cost control efforts contributed to this
improvement.  Included in this category is Federal Deposit
Insurance Corporation (FDIC) insurance premiums at the rate
established for "well capitalized" institutions.  This expense
was $6 thousand in 1996 compared to $500 thousand in 1995 and
$891 thousand in 1994.  Please refer to the discussion in the
CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS section above for more
information concerning the bank's capitalization.

	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
expense in 1996 and the percentage each category is of the
total.  The following table is the data illustrated by this
graph in thousands of dollars.

<TABLE>
<CAPTION>
		                Expense Category	           Expense $		       % of Total
                  <S>                          <C>                  <C>
                		Personnel			                 $7,031			            46.5%
                		Occupancy			                  1,211			             8.0%
                		Furniture and equipment 		    1,581			            10.5%
                		FDIC insurance		   	              7			               0%
                		Other				                     5,292			            35.0%
</TABLE>


<PAGE>



                      FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                  AND RESULTS OF OPERATIONS 


TABLE E - FIVE YEAR COMPARISON

<TABLE>
<CAPTION>
		                                        1996  	  	  1995      		 1994     		  1993  		     1992  
INTEREST INCOME 										
<S>                                   <C>          <C>          <C>          <C>          <C>
 Interest and fees on loans          	$27,343,817 	$25,857,982 	$21,130,914 	$19,518,742 	$19,791,548 
										
 Income on investment securities 										
   Taxable interest 		                  6,892,118 		 6,179,492 	 	7,012,626		  6,925,404 		 6,898,114 
   Exempt from federal income tax 		    2,366,764 		 2,156,813		  2,184,666 		 1,857,168 		 1,825,869 
   Dividends 		                           256,951 		   177,790 		   204,948 		    72,054		    110,874 
										
                                      		9,515,833 		 8,514,095 		 9,402,240 		 8,854,626 		 8,834,857 

 Other interest income 		                 223,019 		   121,492 		   284,384		    347,287 		   195,744 
										
    TOTAL INTEREST INCOME 		           37,082,669 		34,493,569		 30,817,538 		28,720,655 	 28,822,149 

INTEREST EXPENSE  										
  Interest on deposits 		              16,617,525 		15,247,875 		12,770,618		 11,998,235 		13,329,557 
  Interest on other short term 
   borrowings 		                           94,232 		   174,370		     93,286 		    38,339 		    47,449 
										
    TOTAL INTEREST EXPENSE 		          16,711,757 		15,422,245		 12,863,904 		12,036,574 		13,377,006 

    NET INTEREST INCOME 		             20,370,912 		19,071,324		 17,953,634 		16,684,081 		15,445,143 

PROVISION FOR POSSIBLE LOAN LOSSES  	   1,300,000 		   670,000		    660,000 		   470,000 		   840,000 
    NET INTEREST INCOME AFTER 										
      PROVISION FOR LOAN LOSSES 		     19,070,912		 18,401,324 		17,293,634 		16,214,081 		14,605,143 

NONINTEREST  INCOME 										
  Trust department income 		            1,323,525 		 1,251,642 		 1,249,359		    863,952 		   753,239 
  Service fees on deposit accounts 		   3,373,805 		 2,697,332		  2,317,992 		 2,206,026 		 2,123,096 
  Other service fees, commissions, 										
    and fees 		                           745,523 		   300,407 		   336,758 		   509,009		    401,618 
  Other operating income 		               363,430 		   322,634 		   319,466		    315,108 		   191,363 
  Available for sale securities 										
   gains (losses) 		                        - 		         1,182 		  (243,690)		    23,896 		    28,434 
										
    TOTAL NONINTEREST  INCOME 		        5,806,283 		 4,573,197		  3,979,885 		 3,917,991 		 3,497,750 

NONINTEREST  EXPENSES 										
  Salaries and employee benefits 		     7,030,588 		 6,620,827		  6,247,706 		 5,686,965 		 5,283,086 
  Net occupancy expense 		              1,211,067 		 1,279,434 		 1,190,678		  1,070,971 		   984,650 
  Furniture and equipment expense 		    1,580,753  		1,382,769  		1,069,856 		   889,848 		   801,453 
  Loss on other real estate 		              - 		        50,724 		     4,000		    103,122 		   312,064 
  Other operating expenses 		           5,298,652 		 5,006,292		  4,996,107 		 4,903,949 		 4,460,696 
										
    TOTAL NONINTEREST EXPENSES 		      15,121,060	  14,340,046 		13,508,347 		12,654,855 		11,841,949 

      INCOME BEFORE PROVISION 										
       FOR INCOME TAXES 		              9,756,135		  8,634,475 		 7,765,172 		 7,477,217 		 6,260,944 

PROVISION FOR INCOME TAXES 		           2,889,339 		 2,518,769 		 2,203,746		  2,220,965 		 1,768,840 

       NET INCOME  	                  $	6,866,796 	$ 6,115,706 	$	5,561,426  $	5,256,252 	$	4,492,104 

EARNINGS PER COMMON SHARE  										
  (1,400,000 outstanding shares) 	    $ 	    4.90  $ 	    4.37 	$ 	    3.97	 $ 	    3.75 	$ 	    3.21 
</TABLE>

<PAGE>

                 FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                               AND RESULTS OF OPERATIONS 


Net Income

	Net income was 12.3% higher in 1996 than in 1995.  As indicated
earlier, the improvement in 1996's earnings resulted from a
wider gross margin, an increase in noninterest income sufficient
to cover a smaller increase in noninterest expenses, and the
increase in taxes.  The smaller increase in noninterest expenses
is due in part to the significant decrease in deposit insurance.
These improvements were partially offset by higher additions to
the allowance for loan losses.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ON THE FINANCIAL
STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD

	The Financial Accounting Standards Board has issued one
standard that has not been adopted by the Bank but is required
to adopted after December 31, 1996.  The Statement of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" establishes guidance on when to recognize and
how to measure these financial assets and liabilities.  The
statement is effective prospectively for transfers and servicing
of financial assets and extinguishment of liabilities occurring
after December 31, 1996.  It supersedes Statement No. 122,
"Accounting for Mortgage Servicing Rights", which was effective
for fiscal years beginning after December 15, 1995.  Management
does not believe this statement will have any material effect on
future issues.


SHAREHOLDER INFORMATION

	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1996, had a
market value of $91 million and were held by 1,525 identifiable
individuals located mostly in the market area.  A small number
of additional shareholders are not identified individually since
some bank nominees, including the bank's Trust Department, are
listed as single owners when, in fact, these holdings represent
large numbers of shareholders.  No single shareholder's
ownership exceeded five percent at year end.

	There is no established public trading market for the stock. 
The table on the right lists the high and low price of the
Corporation's common stock, as well as the semiannual dividend
paid per share, in each of the last three years.

<TABLE>
<CAPTION>
		                                Price Range of 			       Dividend 
                                	 	Common Stock 	 		         Paid 
                               	High 		     Low 		        Per Share 
 <S>    <S>                    <C>         <C>             <C>
		      First quarter          $	40.00  		 $	36.00  	      $ 	
      		Second quarter           42.00  			  37.00  		        0.39 
	1994  	Third quarter 		         43.00    			37.00  		
      		Fourth quarter 		        45.00  			  38.00  		        0.41 
                                                   								$ 	0.80  

        First quarter          $ 45.00     $ 45.00         $
      		Second quarter 		        48.00  			  45.00  		        0.43 
	1995  	Third quarter 		         50.00  			  48.00  		
      		Fourth quarter 		        54.00  			  50.00  		        0.45 
                                                   								$ 	0.88 

      		First quarter 	        $	56.00  		 $	56.00  	      $ 	
      		Second quarter 		        58.00  			  56.00  		        0.47 
	1996  	Third quarter 		         63.00  			  60.00  		
      		Fourth quarter 		        65.00  			  63.00  		        0.51 
                                                 							  	$ 	0.98 
</TABLE>


<PAGE>

             FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS 

<TABLE>
                                 	COMPARATIVE DATA 
                               	(In Thousands of Dollars) 
<CAPTION>
		                               1996  	 	  1995  		   1994  		   1993  		   1992  
<S>                          <C>        <C>        <C>        <C>        <C>
AVERAGE ASSETS 	             $ 502,700 	$	463,739 	$	451,953 	$	420,760 	$	381,379 

AVERAGE LOANS (NET) 	        $	290,413 	$	276,166 	$	247,791 	$ 233,609 	$	215,158 

AVERAGE DEPOSITS 	           $	443,902 	$	409,489 	$	404,412 	$	378,782	 $	343,128 

RETURN ON EQUITY AND ASSETS 										
  Return on average assets 		    1.37% 		   1.32% 		   1.23% 		   1.25%		    1.18% 

  Return on beginning equity 		 14.06% 		  13.95% 		  14.11%		   14.93% 		  14.21% 
  Average equity to  										
    average assets 		           10.36% 		  10.08% 		   9.25% 		   8.90%		    8.76% 

COMMON DIVIDEND PAYOUT RATIO 										
  Earnings per share 	       $ 	  4.90  	$  	4.37 	 $  	3.97 	 $ 	 3.75 	$	   3.21 

  Cash dividends per share 	 $ 	  0.98 	 $ 	 0.88 	 $ 	 0.80 	 $ 	 0.73	 $ 	  0.64 										

  Ratio 		                         20% 		     20% 		     20% 		     19% 		     20% 
</TABLE>

<TABLE>
                                           	NET INTEREST MARGIN 
                                         	(In Thousands of Dollars) 
<CAPTION>
                                  		1996     		1995     		1994     		1993    		1992  
INTEREST INCOME 										

<S>                              <C>        <C>        <C>        <C>       <C>
 (TAX EQUIVALENT) 	              $ 37,985 	 $	35,626 	 $	32,039 	 $	29,465  $ 29,564 

INTEREST EXPENSE 		                16,712 		  15,422 		  12,864 		  12,037 		 13,377 

	                                $	21,273  	$	20,204 	 $	19,175 	 $	17,428 	$	16,187 
NET INTEREST MARGIN* 		             4.66% 		   4.79% 		   4.68% 		   4.58% 		  4.67% 

<FN>
<F23>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets. 										
</FN>
</TABLE>

<PAGE>



Nine color graphs are included on the following page in the
materials sent to our stockholders.  The first one illustrates
net income for the last five years using information taken from
the "FIVE YEAR COMPARISON" table included above.  The second one
illustrates return on average assets for the last five years
using information from the "COMPARATIVE DATA" table on the
previous page.  The third, fourth and fifth graphs illustrate
return on stockholders' equity, earnings per share with cash
dividends and stockholder's equity  for the last five years. 
The sixth graph illustrates average net loans for the last five
years.  The seventh and eighth graphs illustrate deposits and
assets for the last five years.  The information for these
graphs was taken from the "COMPARATIVE DATA" table on the
previous page.  The final graph which illustrates  net interest
income for the last five years was taken from the net interest
margin section in the  "COMPARATIVE DATA" table on the previous
page.




Item 9.  Disagreements on Accounting and Financial Disclosure.

None.


                              PART III

Item 10.  Directors and Executive Officers of the Registrant.

Reference is made to First Farmers and Merchants Corporation's
definitive Proxy Statement (Incorporated herein by reference)
pursuant to Regulation 14 A, Solicitation of Proxies, which
involves the election of Directors.  The present terms of
Directors and officers extend to April 15, 1997.

<PAGE>

Executive Officers of Registrant


The following is a list as of March 1, 1997, showing the names
and ages of all executive officers of First Farmers and
Merchants Corporation ("FFMC"), the nature of any family
relationships between them, and all positions and offices with
the Corporation held by each of them:

<TABLE>
<CAPTION>
				                            Family		         Positions and
         Name		        Age	  Relationship		      Offices Held
<S>                     <C>      <C>         <C>
Waymon L. Hickman       62		     None	       Chairman of the Board and Chief
                                             Executive Officer of FFMC.  Chairman
                                             and Chief Executive Officer of 
                                             the Bank.  Employed in 1958. Named 
                                             Assistant Cashier in 1959.  Named
                                             Assistant Vice-President in 1961,
                                             and promoted to Vice-President 
                                             in 1962.  Elected Director in 
                                             1967 and First Vice-President and
                                             Trust Officer in 1969. Promoted 
                                             in 1973 to Executive Vice-
                                             President and Senior Trust
                                             Officer.  Elected President of 
                                             Bank and Chief Administrative 
                                             Officer in August 1980.  Elected
                                             President of FFMC in April, 1982.
                                             Elected Chief Executive officer 
                                             of the Bank in December, 1990.
                                             Elected Chairman of the Board of
                                             Directors of the Bank effective
                                             December 31, 1995.


Thomas Randall Stevens	 45		     None	       President and Chief Operating
                                             Officer and Director of the Bank.
                                             Director and Vice President of 
                                             FFMC.  Employed in 1973. Promoted 
                                             to Commercial Bank Officer in
                                             1974.  Promoted to Assistant 
                                             Vice President in 1976. Promoted
                                             to Vice President in 1979.  
                                             Became Vice President and Trust
                                             Officer in 1982.  Promoted to 
                                             First Vice President in 1984. 
                                             Promoted to Executive Vice 
                                             President and Chief Admin-
                                             istrative Officer in 1990.  
                                             Elected as Director of the Bank
                                             in 1991 and Director and Vice 
                                             President of FFMC in 1991. 
                                             Elected President and Chief 
                                             Operating Officer of the Bank
                                             effective December 31, 1995.
</TABLE>
<PAGE>

Executive Officers of Registrant-Continued

<TABLE>
<CAPTION>
                    			     	   Family		         Positions and   
         Name		        Age	  Relationship		      Offices Held
<S>                     <C>     <C>           <C>
Edward A. Cox		         74		     None	        Vice President of FFMC.  Senior
                                              Vice President and Director of 
                                              Planning and Training of the Bank. 
                                              Employed in 1982.  In 1989 
                                              promoted to Vice President of
                                              Bank. Elected Assistant 
                                              Secretary of FFMC in March 1987.
                                              Promoted to Senior Vice 
                                              President of the Bank in 
                                              December, 1990.  Elected Vice 
                                              President of FFMC in 1991. 

John P. Tomlinson, III	 46 	     None	        Vice President/Secretary ofFFMC.
                                              Executive Vice President and 
                                              Manager of Mortgage Lending of
                                              the Bank.  Employed in 1973.  
                                              Promoted to Commercial Bank 
                                              Officer in 1974.  Named 
                                              Assistant Vice President in 1976. 
                                              Promoted to Vice President in
                                              1979.  Named Manager of Mortgage
                                              Lending in 1986.  Promoted to 
                                              Senior Vice President in 1990. 
                                              Promoted to Executive Vice 
                                              President in 1995.  Elected 
                                              Secretary of FFMC in April, 1996.
                                              Named Vice President of FFMC 
                                              December 17, 1996.

Martha M. McKennon	     52		     None        	Assistant Secretary of FFMC. 
                                              Assistant Vice President and 
                                              Executive Assistant of the Bank. 
                                              Employed in 1974. Promoted to 
                                              Customer Service Representative
                                              in 1980.  Named Executive  
                                              Assistant in 1984.  Promoted to 
                                              Assistant Vice President/Executive
                                              Assistant in 1991.  Named Assistant
                                              Secretary of FFMC December 17, 1996.

</TABLE>

<PAGE>


Executive Officers of Registrant-Continued

<TABLE>
<CAPTION>
                         				   Family		         Positions and
         Name		        Age	  Relationship		      Offices Held
<S>                     <C>      <C>         <C>
Patricia N. McClanahan	 52		     None	       Senior Vice President and Chief
                                             Financial Officer/ Cashier of
                                             the Bank and Treasurer of FFMC. 
                                             Employed in 1980.  Promoted to
                                             Internal Bank Auditor in 1981. 
                                             Promoted to Bank Controller in 
                                             1984.  Promoted to Bank Controller
                                             and Cashier in 1987.  Promoted 
                                             to Bank Vice President and 
                                             Controller/Cashier in 1989.  
                                             Promoted to Bank Senior Vice
                                             President and Controller/Cashier
                                             in 1990.  Elected as Treasurer
                                             of FFMC in 1991.  Named Chief 
                                             Financial Officer in 1996.
</TABLE>



Item 11.  Executive Compensation and Transactions.

Reference is made to First Farmers and Merchants Corporation's
definitive Proxy Statement (incorporated herein by reference)
pursuant to Regulation 14 A, Solicitation of Proxies, which
involves the election of Directors.


Item 12.  Security Ownership of Certain Beneficial Owners and
Management.

Reference is made to First Farmers and Merchants Corporation's
definitive Proxy Statement (incorporated herein by reference)
pursuant to Regulation 14 A, Solicitation of Proxies, which
involves the election of Directors.


Item 13.  Certain Relationships and Related Transaction.

Reference is made to First Farmers and Merchants Corporation's
definitive Proxy Statement (incorporated herein by reference)
pursuant to Regulation 14 A, Solicitation of proxies, which
involves the election of directors.



<PAGE>

Item 14.  Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.*

	(a)	(1) and (2) - The response to this portion of Item 14 is
     submitted as a separate section of this report.

   		(3) - The following exhibits are filed herewith:

          			(13) Annual report to stockholders

	(d)	Financial Statement Schedules - The response to this
     portion of Item 14 is submitted as a separate section of this
     report.

A Form 8-K was completed and submitted separately regarding a
purchase that was consummated January 24, 1992.

<PAGE>




Signatures



Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



FIRST FARMERS AND MERCHANTS CORPORATION





BY	   /s/ Waymon L. Hickman               

     			  Waymon L. Hickman,
 	Chairman of the Board and Chief Executive Officer
(Chairman of the Board and Chief Executive Officer of the Bank)


Date	          March 18, 1997                
                    


Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.


	     /s / Thomas Randall Stevens                   

         		Thomas Randall Stevens, President
	(President and Chief Operating Officer of the Bank)


Date	          March 18, 1997                
                    



      /s / Patricia N. McClanahan                 

		Patricia N. McClanahan, Treasurer
		   (Principal Accounting Officer)



Date	            March 18, 1997                
                    




<PAGE>


Signatures -- continued


   /s/ Kenneth A. Abercrombie             /s/ Sam D. Kennedy       
Kenneth A. Abercrombie, Director        		Sam D. Kennedy, Director

Date  March 18, 1997                      Date  March 18, 1997           


/s/ James L. Bailey, Jr.                 	/s/Tillman Knox    
James L. Bailey, Jr., Director		          Tillman Knox, Director

Date March 18, 1997                       Date March 18, 1997     


/s/ Harlan D. Bowsher                     /s/ Joe E. Lancaster  
Harlan D. Bowsher, Director             		Joe E. Lancaster, Director

Date March 18, 1997                      	Date March 18, 1997      


/s/ H. Terry Cook, Jr.        	           /s/ Flavius Barker              
H. Terry Cook, Jr., Director            		Flavius Barker, Director

Date March 18, 1997                       Date March 18, 1997


/s/ W. J. Davis, Jr.          	          /s/ Thomas Randall Stevens
W. J. Davis, Jr., Director        	      Thomas Randall Stevens, Director

Date March 18, 1997                      Date March 18, 1997


/s/ Tom Napier Gordon                    /s/ Dan C. Wheeler   
Tom Napier Gordon, Director		            Dan C. Wheeler, Director

Date March 18, 1997                      Date March 18, 1997       


/s/ Edwin W. Halliday                    /s/ David I. Wise  
Edwin W. Halliday, Director		            David I. Wise, Director

Date March 18, 1997                     	Date March 18, 1997          


/s/ Waymon L. Hickman                    /s/ W. Donald Wright         
Waymon L. Hickman, Director		            W. Donald Wright, Director

Date March 18, 1997                     	Date March 18, 1997                  




<PAGE>


                      ANNUAL REPORT ON FORM 10-K

                   ITEM 14(a)(1) and (2) ITEM 14(d)

         LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

                   YEAR ENDED DECEMBER 31, 1996

               FIRST FARMERS AND MERCHANTS CORPORATION

                        COLUMBIA, TENNESSEE



<PAGE>

FORM 10-K -- ITEM 14(a)(1) and (2)
 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY


LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

The following consolidated financial statements of First Farmers
and Merchants Corporation and Subsidiary, included in the annual
report of the registrant to its security holders for the year
ended December 31, 1996, are incorporated by reference in Item 8:

	Consolidated balance sheets -- December 31, 1996 and 1995

	Consolidated statements of income -- Years ended December 31,
 1996, 1995, and 1994

	Consolidated statements of cash flows -- Years ended December
 31, 1996, 1995, and 1994

	Notes to consolidated financial statements -- December 31, 1996


The following financial statement schedules of First Farmers and
Merchants Corporation and subsidiary are included in Item 14(d):

	None


All other schedules to the consolidated financial statements
required by Article 9 of Regulation S-X and all other schedules
to the financial statements of the registrant required by
Article 5 of Regulation S-X are not required under the related
instructions or are inapplicable and therefore, have been
omitted.


<PAGE>



                             EXHIBIT INDEX


                FIRST FARMERS AND MERCHANTS CORPORATION


          Exhibit Number				       Title or Description

            	(13)				          Annual Report to  Stockholders



<PAGE>









  
                               EXHIBIT 13


                     ANNUAL REPORT TO STOCKHOLDERS

                 FIRST FARMERS AND MERCHANTS CORPORATION