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, 1997  
                       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   (I.R.S. Employer
 organization)                                      Idenfication No.)

                           816 South Garden Street
Columbia, Tennessee                                38402 - 1148
(Address of principal executive offices)           	(Zip Code)

                               (931) 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 6, 1998, was none.


                 APPLICABLE ONLY TO CORPORATE REGISTRANTS

  	Indicate the number of shares outstanding of each of the
issuer's common stock, as of  March 6, 1998.   1,400,000  shares



This filing contains   68    pages.

<PAGE>


                 DOCUMENTS INCORPORATED BY REFERENCE

(1)	Proxy Statement for 1997 Annual Stockholders Meeting of
    April 21, 1998. -- Parts I and III


(2)	Annual Report to Stockholders for Year Ended December 31,
    1997. -- Parts I and II



       
                                                  									KRAFTCPAS  
                                       									Kraft Bros., Esstman	
                                     									Patton & Harrell, PLLC
                                  									Certified Public Accounts
                                   									Member 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, 1997 and 1996, and
the related consolidated statements of income, stockholders'
equity, and cash flows for the each of the three years in the
period ended December 31, 1997.  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, 1997 and 1996, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting
principles.

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



Nashville, Tennessee
February 6, 1998


                                                 1200 Parkway Towers
                                         404 James Robertson Parkway
                                           Nashville, TN  37219-1598
                                     (615) 242-7351  * FAX  256-1952
                                         Also in Columbia, Tennessee	

<PAGE>

                         FIRST FARMERS AND MERCHANTS CORPORATION
                                 COLUMBIA, TENNESSEE



Report of Management

Financial Statements

The accompanying consolidated financial statements and the
related notes thereto have been prepared by the management of
First Farmers and Merchants Corporation (the "Corporation")
including the Corporation's only subsidiary, First Farmers and
Merchants National Bank, in accordance with generally accepted
accounting principles and, as such, include amounts, some of
which are based on judgments and estimates by management. 
Management's Discussion and Analysis appearing elsewhere in this
Annual Report is consistent with the contents of the financial
statements.

Kraft Bros., Esstman, Patton and Harrell, PLLC, the
Corporation's independent auditors, have audited the
accompanying consolidated financial statements, and their report
thereon is presented herein.  Such report represents that the
Corporation's consolidated financial statements, provided in
this Annual Report, present fairly, in all material respects,
its financial position and results of operation in conformity
with generally accepted accounting principles.


Internal Control Over Financial Reporting

Management of the Corporation is responsible for establishing
and maintaining an effective internal control system over
financial reporting presented in conformity with generally
accepted accounting principles.  The system contains monitoring
mechanisms, and actions are taken to correct deficiencies
identified.

The Audit Committee of the Board of Directors is composed of
directors who are not officers or employees of the Corporation. 
The Audit Committee of the Board of Directors is responsible for
ascertaining that the accounting policies employed by management
are reasonable and that internal control systems are adequate. 
The Internal Audit Department conducts audits and reviews of the
Corporation's operations and reports directly to the Audit
Committee of the Board of Directors.

There are inherent limitations in the effectiveness of any
internal control system, including the possibility of human
error and the possible circumvention or overriding of controls. 
Accordingly, even an effective internal control system can
provide only reasonable assurance with respect to financial
statement preparation.  Further, because of changes in
conditions, the effectiveness of an internal control system may
vary over time.

Management assessed the Corporation's internal control system
over financial reporting presented in conformity with generally
accepted accounting principles as of December 31, 1997.  This
assessment was based on criteria for effective internal control
over financial reporting described in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.  Based on
this assessment, management believes that, as of December 31,
1997, the Corporation maintained an effective internal control
system over financial reporting presented in conformity with
generally accepted accounting principles.





	/s/  Waymon L. Hickman            /s/ Patricia N. McClanahan
      Waymon L. Hickman	               Patricia N. McClanahan
	Chairman of the Board and	         Senior Vice President and
  Chief Executive Officer					       Chief Financial Officer


Columbia, Tennessee
February 6, 1998

<PAGE>


                                                           KRAFTCPAs
                                                Kraft Bros., Esstman
                                              Patton & Harrell, PLLC
                                           Certified Public Accounts
                                            Member BKR International


          REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
First Farmers and Merchants Corporation 
Columbia, Tennessee

We have examined management's assertion, included in the
accompanying Report of Management-Internal Control System Over
Financial Reporting, that as of December 31, 1997, First
Farmers and Merchants Corporation maintained an effective
internal control system over financial reporting presented in
conformity with generally accepted accounting principles.

Our examination was made in accordance with standards
established by the American Institute of Certified Public
Accountants and, accordingly, included obtaining an
understanding of internal control structure over financial
reporting, testing, and evaluating the design and operating
effectiveness of the internal control structure, and such other
procedures as we considered necessary in the circumstances. 
We believe that our examination provides a reasonable
basis for our opinion.

Because of inherent limitations in any internal control
structure, errors or irregularities may occur and not be
detected.  Also, projections of any evaluation of the internal
control structure over financial reporting to future periods are
subject to the risk that the internal control structure may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.

In our opinion, management's assertion referred to above is
fairly stated, in all material respects, based on the criteria
described in Internal Control --Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission.

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


Nashville, Tennessee
February 6, 1998


                                     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 a part of the Annual Report to
Stockholders which is included in this filing.

        

       
               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, 1997, 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 fifteen (15) 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 and Crockett 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.   At December 31, 1997, approximately $8.9
million was required to be maintained at the Federal Reserve
Bank.


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.

  		Debt and equity securities that are bought and held
  principally for the purpose of selling them in


<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)

  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 deferred
  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 payoff 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.

		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.  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 accrued 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 nonaccrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
nonaccrual status is recognized only to the extent of the excess
of cash payments received over principal payments due.


	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 $410 thousand at December 31, 1997, and $450
thousand at December 31, 1996.  

Allowance for Possible Loan Losses

	The allowance for possible loan losses is established through
provisions for loan losses charged against income.  Loan quality
is monitored by Loan Review and


<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)

the Credit Administrator.  Portions of loans deemed to be
uncollectible are charged against the allowance for losses, and
subsequent recoveries, if any, are credited to the allowance
account in the period such determination is made.  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. The allowance for
loan losses is maintained at a level believed adequate by
management to absorb estimated probable inherent loan losses.


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.


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: 
1997 - $182,613; 1996 - $224,212;  and  1995 - $168,020.

Earnings Per Share

	The Financial Accounting Standards Board has issued Statement
No. 128, "Earnings per Share". which supersedes APB Opinion No.
15.  This statement requires the presentation of earnings per
share by all entities that have common stock or potential common
stock, such as options, warrants and convertible securities,
outstanding that trade in a public market.  Those entities that
have only common stock outstanding are required to present basic
earnings per share amounts.  All other entities are required to
present basic and diluted per share amounts.  Because the
Corporation  has no potential common stock outstanding, it is
required to present only basic earnings per share and its
presentation of earnings per share will not change.  Earnings
per common share have been computed on the basis of the
weighted-average number of common shares outstanding during each
period presented.		


<PAGE>




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

NOTE  2 - INVESTMENT SECURITIES

		Securities with an amortized cost of $116,315,234 and
$103,540,673 at December 31, 1997 and 1996, respectively (fair
value: 1997 - $117,969,544;  1996 - $104,061,311), 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, 1997, 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
 <S>                             <C>              <C>            <C>          <C> 
	December 31, 1997								
	Available-for-sale securities								
	    U.S. Treasury	              $ 	22,337,240	   $  	233,853	   $	 14,893	   $	 22,556,200
	    U.S. Government agencies		     23,834,686		       53,172		     92,413		     23,795,445
     Other securities		              2,749,094		      422,591	     	 2,000		      3,169,685

		                               $	 48,921,020	   $	  709,616	   $	109,306	   $ 	49,521,330
	Held-to-maturity securities								
	    U.S. Treasury	              $ 	10,432,892	   $	  209,508	   $	   -	      $	 10,642,400
	    U.S. Government agencies		     36,552,480		      657,930		      2,048		     37,208,362
	    States and political
       subdivisions		               48,465,174		    1,218,108		     12,144		     49,671,138
	    Other securities		                815,421		       33,735		       -		           849,156
									
                              		$  	96,265,967	   $ 2,119,281	   $  14,192	   $  98,371,056

	December 31, 1996								
									
	Available-for-sale securities								
	    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

<FN>
<F1>
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, 1997, 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, 1997, 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 $11,008,435, $3,020,054, and
$7,306,453 during 1997, 1996, and 1995, respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$32,386,811, $56,112,000, and $18,848,992 during 1997, 1996, and
1995, respectively.  Gross gains of $489,697 and gross losses of
$1,725 were realized on dispositions in 1997.  There were no
realized gains or losses in 1996.  Gross gains of $1,182 and
gross losses of $-0- were realized on the dispositions in 1995.
<TABLE>
<CAPTION>
                                  		Amortized		          Fair		        Yield
                                     		Cost	            	Value		    (Unaudited)
<S>                                <C>                 <C>              <C>
Available-for-sale securities						
U.S. Treasury						
   Within one year	                $ 	8,051,787	       $ 	8,049,800		   5.5%
   After one but within five years		 14,285,453		        14,506,400		   6.2%
U.S. Government agencies						
   Within one year		                  3,994,953		         3,999,700		   6.1%
   After one but within five years		 19,585,333		        19,541,020		   5.8%
   After ten years		                    254,400		           254,725		   6.1%
Other securities		                    2,749,094		         3,169,685		   9.0%
						
                                  	$	48,921,020	       $	49,521,330		
Held-to-maturity securities						
U.S. Treasury						
   After one but within five years $	10,432,892	       $	10,642,400		   6.4%
U.S. Government agencies						
   Within one year		                  2,999,150		         2,997,100		   5.4%
   After one but within five years   18,669,684		        19,008,962		   6.6%
   After five but within ten years		 14,883,646		        15,202,300		   6.5%
States and political subdivisions						
   Within one year		                  3,239,829		         3,286,218		   9.3%
   After one but within five years		 13,595,854		        13,865,175		   7.7%
   After five but within ten years		 18,510,918		        18,983,557		   7.4%
   After ten years		                 13,118,573		        13,536,188		   7.8%
Other securities						
   After one but within five years		    315,421		           323,206		   8.0%
   After five but within ten years		    500,000		           525,950		   7.3%
						
                                  	$	96,265,967	       $	98,371,056		
<FN>
<F2>
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>
    		                                           1997		          1996

<S>                                       <C>             <C>
Commercial, financial and agricultural	   $  	60,592,529	 $ 	54,565,335
Tax exempt municipal loans		                     768,125		      605,933
Real estate				
   Construction		                              5,861,866		    8,751,021
   Commercial mortgages		                     52,968,199		   46,114,930
   Residential mortgages		                   146,768,418		  125,854,753
   Other                                     		5,869,654		    7,115,749
Consumer loans		                              58,879,231		   60,993,583

                                           		331,708,022	  	304,001,304
Less:				
   Net unamortized loan origination fees		      (347,839)		    (269,260)
   Allowance for possible loan losses		       (2,943,000)		  (2,926,063)
				
	                                         $	328,417,183   $	300,805,981
<FN>
<F3>
Table III - Loans Outstanding  by Category at December 31, 1997
and 1996
</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	                $ 	78,350	     $ 	47,052	     $ 	40,499	   $	165,901
Variable rate loans		               93,752		       30,484		       41,571		    165,807
								
                                	$	172,102	      $	77,536	      $	82,070	   $	331,708

<FN>
<F4>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1997
</FN>

</TABLE>

		Loans having recorded investments of $2,954,000 at December
31, 1997, have been identified as impaired.  The total allowance
for possible loan losses related to these loans was $1,146,000. 
Interest received on these loans during 1997 was $479,698. 
Impaired loans had recorded investments of approximately 
$5,136,000 at December 31, 1996.

		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, 1997 and 1996, 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 1997 or 1996.


<PAGE>

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

NOTE 3 - LOANS (Continued)

<TABLE>
<CAPTION>
                                   		Balance at							
                                   		Beginning 				              Amount		  Balance at	
                                   		 of Year		     Additions		 Collected		End of Year	
				
<S>                                 <C>           <C>           <C>          <C>
            1997
Aggregate of certain party loans	   $	8,222,262	  $	12,488,090	 $	8,276,031	 $	12,434,321	

            1996									
Aggregate of certain party loans	   $	7,706,004	  $	 8,454,247  $	7,937,989	 $	 8,222,262	

<FN>
<F5>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>


NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
                                          		1997		        1996		        1995	
<S>                                     <C>           <C>           <C>
Balance at beginning of year	           $	2,926,063	  $	2,678,386  	$	2,342,290	
Provision charged to operating expenses 		1,940,000		   1,300,000		     670,000	
Loan losses:							
  Loans charged off                    		(2,064,138)		 (1,388,422)		   (555,957)	
  Recoveries on loans previously							
   charged off                            		141,075		     336,099		     222,053	
							
Balance at end of year	                 $	2,943,000	  $	2,926,063	  $	2,678,386	

<FN>
<F6>
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, 1997. 
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.


NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
                                            		1997		         1996	
<S>                                       <C>            <C>
Land	                                     $	1,348,288	   $	1,348,288	
Premises		                                  7,027,521		    7,013,942	
Furniture and equipment		                   3,857,459		    4,068,373	
Leasehold improvements		                    1,209,113		    1,149,732	
                                         		13,442,381		   13,580,335	
Less allowance for depreciation and
 amortization		                            (7,029,016)		  (6,750,860)	
                                        	 $	6,413,365	   $	6,829,475	
<FN>
<F7>
Table VII - Premises and Equipment at December 31, 1997 and 1996
</FN>
</TABLE>

<PAGE>

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

NOTE 5 - BANK PREMISES AND EQUIPMENT (Continued)

		Annual provisions for depreciation and amortization of bank
premises and equipment total $651,619 for 1997, $685,005 for
1996, and $645,816 for 1995.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling approximately $2,670,000 at
December 31, 1997.                   


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, 1997, additional dividends of approximately $15,900,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for five of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2008.  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 $689,887,
$726,337, and $660,121 for equipment leases, and $112,070,
$112,384, and $111,649 for building leases, in 1997, 1996, and
1995, respectively.  Future minimum lease commitments as of
December 31, 1997, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>
 <C>                                   <C>
                        			1998	       $   513,083	
                        			1999		          121,128	
                        			2000		          124,128	
                        			2001		          124,128	
                        			2002		           86,328	
                  			Thereafter           		94,200	

	Total future minimum lease payments			$	1,062,995	

<FN>
<F8>
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>
  		                                      1997	        1996		       1995	
<S>                                   <C>          <C>          <C>
Current:				  			
   Federal                           	$	2,416,401	 $	2,422,550	 $	2,166,566	
   State		                                557,218		    628,788		    585,606	

     Total current                    		2,973,619		  3,051,338		  2,752,172	

Deferred:							
   Federal	     	                         215,949		   (137,700)		  (198,393)	
   State                                 		38,108		    (24,299)		   (35,010)	

     Total deferred		                     254,057		   (161,999)		  (233,403)	
							
     Total provision for income taxes	$	3,227,676	 $	2,889,339	 $	2,518,769	
<FN>
<F8>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                  <C>           <C>           <C>
Allowance for possible loan losses	  $	  776,888   $  	914,386	  $   815,315
Write-down of other real estate		           -          177,120       177,120
Deferred compensation		                  403,857       336,255	      256,139
Deferred loan fees		                      19,823        26,863        44,051
  Deferred tax asset	                  1,200,568     1,454,624     1,292,625	

Unrealized gain on AFS securities		     (240,124)		    (97,294)		   (157,392)
	
  Deferred tax liability              		(240,124)		   ( 97,294)		   (157,392)	

    Net deferred tax asset	          $  	960,444   $	1,357,330	  $	1,135,233	

<FN>
<F10>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                   <C>           <C>           <C>
Tax expense at statutory rate	        $	3,495,754	  $	3,317,086	  $	2,935,722	
Increase (decrease) in taxes 
  resulting from:							
    Tax-exempt interest		                (896,112)		   (859,383)		   (783,011)	
    Nondeductible interest expense		      106,329		     101,534		      89,491	
    Employee benefits		                   (55,560) 		   (34,685)		    (22,418)	
    Other nondeductible expenses							
      (nontaxable income) - net		          11,146	 	     13,515	 	     (5,695)	
    State income taxes, net of 
      federal	tax benefit               		392,915		     398,963	 	    363,393	
    Dividend income exclusion		           (33,239)	 	   (34,855)	 	   (18,324)	
    Other		                                55,891	 	    (12,836)		    (40,388)	
Total provision for income taxes	     $	3,227,676	  $	2,889,339	  $	2,518,769	
Effective tax rate		                         31.4%		       29.6%		       29.2%	
<FN>
<F11>
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 1997, 1996, and 1995 amounted to
$2,927,000, $3,140,000 and $2,756,442, respectively.

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


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 standby letters of
credit in the normal course of business at December 31, 1997,
were $21,735,000 and $1,977,000, 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 INFORMATION

		 Interest paid on deposits and other borrowings during 1997,
1996, and 1995 amounted to $17,049,703, $17,206,708, and
$14,845,107, 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, 1997 and 1996,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		The Bank's calculated risk-adjusted capital ratios exceeded
the minimum standard for a "well capitalized" bank as of 
September 30, 1997, the date of the most recent examination by
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, 1997	            Amount	 	  Ratio	     Amount	  	Ratio > or=		    Amount		  Ratio > or =

<S>                                <C>         <C>       <C>            <C>         <C>         <C>       
Total Capital (to Risk Weighted											
 Assets) Consolidated	             61,732,093		19.68%		  25,098,756		   8.00%		     31,373,445		10.00%
         Bank	                     61,153,956		19.54%		  25,040,651		   8.00%		     31,300,813		10.00%
Tier I Capital (to Risk Weighted											
 Assets) Consolidated	             58,789,093		18.74%		  12,549,378		   4.00%		     18,824,067		 6.00%
         Bank	                     58,210,956		18.60%		  12,520,325		   4.00%		     18,780,488		 6.00%
Tier I Capital (Average) 
 (to Average	Assets)  
         Consolidated	             56,515,935		10.73%		  21,073,801		   4.00%		     26,342,251		 5.00%
         Bank	                     55,946,149		10.63%		  21,047,205		   4.00%		     26,309,006		 5.00%

As of December 31, 1996											
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%		  11,988,374		   4.00%		     17,982,562		 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%		  20,102,944		   4.00%		     25,128,680		 5.00%
         Bank	                     50,574,336		10.07%		  20,089,111		   4.00%		     25,111,388		 5.00%
<FN>
<F12>
Table XII - Capital Amounts and Capital Adequacy Ratios    
</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 nonprofit 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 $684,227, $661,307 and $633,459, in 1997, 1996, and
1995, 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 (1997 - $645,985; 1996 - $620,657) purchased
in 1993 to fund the plan and the related liability (1997 -
$501,255; 1996 - $513,792) were included in other assets and
other liabilities, respectively.  Net noncash income recognized
on these policies of $25,328 in 1997 and $26,436 in 1996 is
included in the above asset values.   Net noncash income was
$14,133 in 1995.  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 $42,463 in
1997, $64,024 in 1996, and $106,066 in 1995.

		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, net of benefits paid out in 1997
and accruals, of $173,841 for 1997, $172,871 for 1996, and
$176,727 for 1995 have been recognized in the accompanying
consolidated 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.  Additional single premium universal life insurance
policies, totaling $385,000, were purchased in 1997 for new
participants.  Net noncash income recognized on these policies
of $103,953 in 1997 and $85,249 in 1996 is included in the cash
surrender values of  $2,376,124 and $1,887,171 reported in other
assets at December 31, 1997 and 1996, respectively.  Net noncash
income was $51,803 in 1995.

		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.  The value of this policy (1997 -
$819,460; 1996 - $785,330) is included in other assets, and net
noncash income recognized on this policy of $34,130 in 1997 and
net expense of $9,670 in 1996 is included in the above asset
values.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replacement/split dollar plan.  These
policies have an aggregate face amount of $3,163,750.


<PAGE>

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

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
                              		December		31,1997		         December		31,1997	
                              Carrying		     Fair      	 	Carrying		     Fair	
                             		Amount		      Value		       Amount		      Value	
Financial assets		                        (DOLLARS		IN		THOUSANDS)			
<S>                           <C>         <C>             <C>         <C>
 Cash and due from banks	     $	29,873	   $	29,873	       $	27,917	   $	27,917	
 Federal funds sold		           12,800		    12,800		          -		         - 	
 Securities held to maturity		  96,266		    98,371		       118,542		   119,226	
 Securities available for
  sale		                        48,921		    49,521		        55,898		    56,142	
 Loans, net                  		328,417		   325,323		       300,806		   309,401	
 Accrued interest receivable		   5,366		     5,366		         5,549		     5,549	

Financial liabilities									
 Deposits		                    470,282		   456,557		       460,573		   449,129	
 Federal funds purchased      		  -		         -		            5,000		     5,000	
 Short term borrowings		           602		       602		           523		       523	
 Accrued interest payable		      2,794		     2,794	         	2,539		     2,539	

<FN>
<F13>
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, 1997, 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
1997										

<S>                         <C>          <C>          <C>          <C>          <C>
Interest income	            $	9,362,178	 $	9,705,584	 $	9,774,855	 $	9,804,468	 $	38,647,085
Interest expense		            4,258,739		  4,330,171		  4,361,715		  4,353,765		  17,304,390

Net interest income		         5,103,439		  5,375,413		  5,413,140		  5,450,703		  21,342,695
Provision for possible loan
 losses		                       450,000		    290,000		    550,000	    	650,000		   1,940,000
Noninterest expenses, net 
 of noninterest income		      2,394,981		  2,405,847		  2,388,160		  1,932,079		   9,121,067
Income before income taxes		  2,258,458		  2,679,566		  2,474,980		  2,868,624		  10,281,628
Income taxes		                  556,134		    795,731		    917,613		    958,198		   3,227,676

Net income	                 $	1,702,324	 $	1,883,835	 $	1,557,367	 $	1,910,426	 $	 7,053,952

Earnings per common share										
 (1,400,000 shares)	        $	     1.22	 $	     1.35	 $	     1.11	 $	     1.36	 $	      5.04

                             		First		     Secon  		     Third		     Fourth		
                            		Quarter		    Quarter		    Quarter		    Quarter		      Total
1996										
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

<FN>
<F14>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


<PAGE>

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

NOTE 16 - DEPOSITS  

				The Bank does not have any foreign offices and all deposits
are serviced in its sixteen 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.

<TABLE>
<CAPTION>
                                  		        Year	Ended	December	31
		                                      1997   	 			    	  1996	   			      	1995				
                                 	         	(Dollars in Thousands)									
<S>                              <C>          <S><C>            <S><C>            <S><C>
Demand deposits	                 $	62,909	   	- 	%	 $	61,509   	- 	%  $	56,730		  -	 %	
NOW and money market accounts		   166,914		  3.37		 	158,450		 3.37			 149,016		 3.51		   
Savings deposits		                 43,775		  3.37			  37,421		 3.22			  34,629		 3.00		
Time deposits of less than
 $100,000		                       152,389		  5.29			 151,952		 5.40			 136,568		 5.30		
Time deposits of $100,000 or
 more		                            37,686		  5.42			  34,539  	5.41			  32,524		 5.35		
																
Total In Domestic Offices	       $463,673		  3.71%	 $443,870		 3.74%	 $409,467		 3.72%	

<FN>
<F15>
  Table XV - Average Amounts of Deposits and Average Rates Paid
             by Deposit Type at December 31
</FN>
</TABLE>
   		
<TABLE>
<CAPTION>
                                  1997		      1996		      1995
                                 				(Dollars In Thousands)		
        <S>                    <C>         <C>         <C>
        Under 3 months	        $ 	9,308	   $	11,680	   $ 	7,877
        3 to 12 months	         	25,981		    22,638		    18,407
        Over 12 months		          4,039		     4,812		     4,310

                               $ 39,328    $ 39,130    $ 30,594
<FN>						
<F16>
Table XVI - Maturities of Time Deposits of $100,000 or More at
            December 31
</FN>
</TABLE>

<PAGE>

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

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
                             Condensed Balance Sheets
                            December 31, 1997 and 1996				
                            (In Thousands of Dollars) 
<CAPTION>
Assets		                                           1997		         1996
<S>                                              <C>            <C> 
Cash	                                            $     72	      $	   142
Investment in bank subsidiary - at equity		        59,565		       53,870
Investment in credit life insurance company 
 - at cost		                                           50		           50
Investment in other securities	                        25		           22
Dividends receivable from bank subsidiary		           784		          714
Cash surrender value - life insurance		               651		          489
Other assets		                                       -		               1
				
   Total assets	                                 $	61,147	      $	55,288

Liabilities and Stockholders' Equity				
Liabilities				
  Payable to directors	                          $	   220	      $	   173
  Dividends payable		                                 784		          714
				
    Total liabilities		                             1,004		          887
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		                              45,783		       40,255
  Net unrealized gain (loss) on 
   available-for-sale securities, net of 
   tax		                                              360		          146
    Total stockholders' equity		                   60,143		       54,401

    Total liabilities and stockholders' equity   $ 61,147       $ 55,288  
<FN>
<F17>
Table XVII - Condensed Statements of Balance Sheet of Parent
</FN>
</TABLE>

<TABLE>
                           Condensed Statements of Income
                        Years Ended December 31, 1997 and 1996
                              (In Thousands of Dollars)
<CAPTION>
                                                   		1997		       1996
<S>                                               <C>          <C>
  Dividends from bank subsidiary                  $ 1,526      $ 1,372
  Other dividend income		                              80		         85
  Interest income		                                     8		          6
  Other                                              		34		         28
Operating expenses		                                   76		         68
   Income before equity in undistributed net				
    income of bank subsidiary		                     1,572		      1,423
				
Equity in undistributed net income of bank
 subsidiary		                                       5,482		      5,444
       Net Income	                                $	7,054	     $	6,867

<FN>
<F18>
Table XVIII - Condensed Statements of Income 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>
                         Condensed Statements of Cash Flows 
                       Years Ended December 31, 1997 and 1996
                            (In Thousands of Dollars)   
<CAPTION>
                                       		1997	           	1996
<S>                                    <C>              <C>
Operating activities				
  Net income for the year              	$	7,054	        $ 6,867
  Adjustments to reconcile net income
   to net cash provided by operating 
   activities				
   Equity in undistributed net income
    of bank subsidiary		                 (5,482)		       (5,444)
   Increase in other assets		               (98)		         (111)
   Increase in payables		                    47		            44
				
      Total adjustments		                (5,533)	 	      (5,511)
				
   Net cash provided by operating 
    activities		                          1,521		         1,356
				
Net cash provided by (used in) 
 investing activities				
 Purchases of investment securities      		(119)		         (133)
 Proceeds from maturities of 
  investment securities                     119		           137
 Purchase of single premium life 
  insurance policy		                       (135)	           -	

    Net cash provided by (used in) 
     investing activities		                (135)		            4
				
Net cash used in financing activities				
 Cash dividends paid		                   (1,456)		       (1,288)
 
   Increase (decrease) in cash		            (70)		           72
				
Cash at beginning of year		                 142		            70
				
Cash at end of year	                   $    	72	        $  	142

<FN>
<F19>
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 1997, 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.  "High Technology + High Commitment =
High Performance" was the challenge for the year as the Bank
committed 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.

	The accompanying tables plus the discussion and financial
information are presented to aid in understanding First Farmers
and Merchants Corporation's current financial position and
results of operations.  The emphasis of this discussion will be
on the years 1997, 1996, and 1995; 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 Corporation'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 $7.1 million for 1997 compared
to $6.9 million in 1996 and $6.1 million in 1995.  On a per
common share basis, net income was $5.04 for 1997 versus $4.90
for 1996 and $4.37 for 1995.  The improvement in 1997's earnings
resulted from a strong gross margin reinforced by loan demand
that changed the mix of earning assets as higher yielding loans 
were funded with maturing investment securities and an increase in 
noninterest income sufficient to cover a smaller increase in 
noninterest expenses and  most of the increase in taxes.  These 
improvements were partially offset by higher additions to the allowance 
for loan losses.

  	The return on average equity for 1997 was 12.2% compared to
13.2% for 1996 and 13.1% for 1995.   The return on average
assets was 1.34% for 1997 versus 1.37% for 1996 and 1.32% for
1995.

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>

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

<CAPTION>
                                   YEAR ENDED DECEMBER 31,
                                 				1997								                  1996								                  1995
                              		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	                  $	314,198		9.18	%	$	28,858	*	 $	290,413		9.43	%	$	27,373	*	 $	276,166		9.38 %	 $	25,892	*  
 Bank time deposits		                 1		 -			       -			           1   -	         -			           2		 -			        -	
 Taxable securities		           113,013		6.35			   7,173			   118,114		6.14			   7,256			   104,217		6.20			    6,457	
 Tax exempt securities		         47,366		6.96			   3,297	*		   44,158		7.10			   3,134	*		   39,105		8.07			    3,156	*
 Federal funds sold		             4,631		5.46			     253			     4,198		5.31			     223			     2,076		5.83			      121	

 TOTAL EARNING ASSETS   		      479,209		8.26		 $	39,581			   456,884		8.31		 $	37,986			   421,566		8.45		  $	35,626	
Noninterest earning assets   																								
 Cash and due from banks		       27,039								                25,760				  	                 24,829
 Bank premises and equipment		    6,633								                 6,708								                 6,246						
 Other assets		                  15,045								                13,348								                11,098						

 TOTAL ASSETS	                $	527,926							              $	502,700							              $	463,739						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY																								
Interest bearing liabilities																								
 Time and savings deposits:																								
 NOW and money market 
  accounts 	                  $	166,828		3.38	%	$	5,634		   $	158,438		3.39	%	$ 5,338 		 $	148,993		3.51	%	 $ 5,223	
 Savings		                       43,776		3.37			  1,476			     37,428		3.22			  1,204			    34,627		3.00			   1,040	
 Time                         		152,389		5.29			  8,063			    151,973		5.40			  8,210			   136,605		5.30			   7,245	
 Time over $100,000		            37,680		5.43			  2,045			     34,554		5.40		   1,866			    32,522		5.35			   1,740	

 TOTAL INTEREST BEARING 
 DEPOSITS		                     400,673	 4.30			 17,218			    382,393		4.35		  16,618			   352,747		4.32 	   15,248	
 Federal funds purchased		        1,016		5.80			     59			      1,043		5.56		      58			     2,415		5.92		      143	
 Other short-term debt		            538		5.02			     27			        622		5.79	       36			       565		5.49		       31	

 TOTAL  INTEREST BEARING 
 LIABILITIES		                  402,227		4.30	  $17,304			    384,058		4.35		 $16,712			   355,727		4.34    $15,422	

Noninterest bearing liabilities																								 
 Demand deposits		               62,903								                61,509								               56,742						 
 Other liabilities		              4,990								                 5,066								                4,515						

 TOTAL LIABILITIES		            470,120								               450,633								              416,984						
Stockholders' equity		           57,806								                52,067								               46,755						 
 TOTAL LIABILITIES AND																								
   STOCKHOLDER'S EQUITY	      $	527,926							              $	502,700		 			              $	463,739						

Spread between combined 
 rates earned and	combined 
 rates paid*				                         3.96	 %			 				               3.96 %							               4.12	%			

 Net yield on interest-earning
  assets*				                            4.65	 %							                4.66	%							               4.79 % 			

<FN>
<F1>
  * Taxable equivalent basis
</FN>
</TABLE>
Notes:

1.	U.S. Government, government agency, taxable municipal, 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 amortized cost of
available-for-sale securities were used in the calculations in
this table.

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

		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>

TABLE B - Volume and Yield/Rate Variances
   (Taxable Equivalent Basis - In Thousands)
<CAPTION>
                     		       1997 		Compared 		1996			       1996 		Compared 		1995
                              				   Yield/		Net Increase			     		  Yield/		Net Increase
                         		Volume	   	Rate		  (Decrease)			 Volume		  Rate		  (Decrease)
<S>
Revenue earned on									<C>			    <C>	      <C>          <C>       <C>      <C>         
 Net loans	               $	2,243 	 $	(758)	  $	1,485	   	 $	1,336	  $	 145	   $	1,481
 Investment securities			
  Taxable securities		       (314)		   231		      (83)			      861		    (62)		     799
  Tax-free securities		       228		    (65)		     163			       408		   (430)		     (22)
 Federal funds sold		          23		      7		       30			       124		    (22)		     102
													
  Total interest earning
   assets		                 2,180		   (585)		   1,595			     2,729		   (369)		   2,360

Interest paid on													
 NOW and money market 
  accounts		                  283		     13		      296			       331		   (216)		     115
 Savings deposits		           204		     68		      272			        84		     80		      164
 Time deposits		               23		   (170)		    (147)			      815		    150		      965
 Time over $100,000		         169		     10		      179			       109		     17		      126
 Federal funds purchased		     (2)	      3		        1			       (81)		    (4)		     (85)
 Short term debt            		 (5)		    (4)		      (9)			        3		      2		        5

   Total interest-bearing
     funds		                  672		    (80)		     592			     1,261		     29		    1,290

Net interest earnings		     1,508	  $	(505)	  $	1,003		    $	1,468	  $	(398)   $	1,070

</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,  taxable municipal, and
corporate debt securities plus equity securities in the
available-for-sale and held-to-maturity categories are taxable
investment securities.  Bank qualified 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 stockholders.  The first graph illustrates in thousands of
dollars, 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>
 		                         Investment          
                Loans			    Securities		     Other

<S>           <C>            <C>            <C>
1997		        $314,198		     $160,722		     $4,613
1996		         290,413		      162,188		      4,199
1995		         276,166		      143,358		      2,078
</TABLE>

  	Average earning assets increased 5.0% in 1997 compared to an
8.4% increase in 1996 and a 3.0% increase in 1995.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1997, average net loans represented 
65.5% of  average earning assets.  Total average net loans
increased during the last three years showing an 8.2% growth
from 1996 to 1997, a 5.2% growth from 1995 to 1996, and an 11.5%
growth from 1994 to 1995.  Average investments accounted for the
remaining balance of average earning assets at December 31,
1997, decreasing .9% from year end 1996.  Some of the proceeds
from maturities and calls of investment securities was used to
fund the expanding loan demand during the year.  Average
investments increased 14.5% in 1996.  The Bank purchased certain
assets and assumed certain deposit liabilities of  two branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  Most of the increase in investments during 1996 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.  Average total assets increased during
the last three years as evidenced by a  5.0% growth from 1996 to
1997, an 8.4% growth from 1995 to 1996, and a 2.6% growth from
1994 to 1995.


   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    Noninterest_Bearing  
                       Deposits	            Deposits	           Other
<S>                    <C>                  <C>                <C>
1997		                 $390,077			          $80,205			         $  -    
1996		                  382,393			           61,509			          1,043
1995		                  352,747			           56,742			          3,526
</TABLE>


  	The bank's average deposits grew during the last three years
reflecting a 4.4% growth from 1996 to 1997, an 8.4% growth from
1995 to 1996, and a 1.3% growth from 1994 to 1995.  Short and
medium term rates remained competitive compared to longer term
rates during 1997 and some depositors left money in or moved
money back into interest-bearing transaction accounts, which
increased 5.3% during 1997 and 6.3% in 1996.  However, over half
of the increase during 1996 was attributable to the acquisition.
 Average interest-bearing checking accounts decreased 7.6 % in
1995 as investors took advantage of higher certificate of
deposit rates.  Average savings deposits increased  almost 17.0%
during 1997 and 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.  Average certificates of deposit under
$100,000 increased .3% during 1997, 11.3% during 1996, 60.0%
from the acquisition, and 8.0% in 1995.  Certificates of deposit
over $100,000 increased 9.1% in 1997 compared to 6.3% in 1996,
87.8% from the acquisition, and 24.8% in 1995.  

<PAGE>

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


LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT

   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, 1997, 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, 1997, 1996, and 1995 was 4.65%, 4.66%, and 4.79% respectively.

<TABLE>
TABLE C - Rate Sensitivity of Earning Assets and
Interest-Bearing Liabilities										

<CAPTION>
                               (Dollars in Thousands)										
                          		3 Months		   3-6		       6-12		      Over 1		
As of December 31, 1997		   or Less	    Months		    Months		      Year		     Total
<S>                        <C>         <C>         <C>         <C>          <C>                                 
Earning assets										
 Federal funds sold	       $	12,800	   $    -	     $	   -	     $     -	     $ 	12,800
 Taxable investment
   securities		               3,928		     7,989		     5,000		     80,574		     97,491
 Tax-exempt investment
   securities                 1,151		       720		     1,150		     45,275		     48,296
 Loans and leases, net of
   unearned                  61,297		    45,612		    65,193	     159,606		    331,708
										
      Total earning assets		 79,176		    54,321		    71,343		    285,455		    490,295

Interest-bearing 
 liabilities										
 NOW and money market 
   accounts		                48,546		       -		      66,832		     40,656		    156,034
    Savings		                   -		         -		      44,170		        -		       44,170
    Time		                   42,702		    30,421		    54,807		     22,614		    150,544
    Time over $100,000		     10,242		     8,917		    16,536		      3,634		     39,329
    Other short-term debt		     602		       -		         -		          -		          602

      Total interest 
       bearing liabilities		102,092		    39,338		   182,345		     66,904	   $	390,679

Noninterest-bearing, net								                                 (99,616)		

Net asset/liability 
 funding gap		              (22,916)		   14,983		  (111,002)		   118,935		
										
Cumulative net asset/
  liability funding gap	  $	(22,916)	  $	(7,933)	$	(118,935)	  $	    -		

<FN>
<F2>
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 & 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, 1997.  

   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 $3.0 million at December
31, 1997, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent .9% of gross loans. 
Commercial loans comprised $.6 million of the total, with loans
secured by real estate accounting for $1.4 million, and
installment loans $1.0 million.  The gross interest income that
would have been recorded during 1997 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 $431, $374, and $365 thousand for
the years ended December 31, 1997, 1996, and 1995 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.

  	The bar graph on the bottom of this page  shows the increase in
average net loans (in thousands of dollars) and the line shows
the ratio of net loan charge offs to average loans.  The ratio
at December 31, 1997 was .61%.   Management monitoring found and
corrected a problem in consumer loan underwriting that
contributed to the higher net charge off percentage in 1997. 
The following table is the data illustrated by this graph.
<TABLE>
<CAPTION>
			                    Avg Loans		  Ratio Net
			                  Outstanding		  CO/Avg Ln

          <S>          <C>           <C>
          1981		       $ 54,908      .0027	
          1982		         60,119		    .0077
          1983		         66,964		    .0039
          1984		         80,055		    .0036
          1985		         98,353		    .0044
          1986		        120,243		    .0036
          1987		        142,959		    .0077
          1988		        154,506		    .0027
          1989		        163,003		    .0032
          1990		        172,749		    .0030
          1991		        182,561		    .0037
          1992		        215,158 		   .0023
          1993		        233,608		    .0030
          1994		        247,791		    .0014
          1995		        276,166		    .0012
          1996		        290,413		    .0036
          1997		        314,198		    .0061
</TABLE>

<PAGE>

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

<TABLE>

TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO

                                              				December		31				
                         		     1997	 	    1996		     1995	 	    1994		     1993
             		                              (Dollars In	Thousands)				
<S>                          <C>        <C>        <C>        <C>        <C>                           
Average amount of loans
 outstanding                	$	314,198	 $	290,413	 $	276,166  $	247,791	 $	233,608
Balance of allowance for 
 possible loan losses at 
 beginning of year	          $  	2,926	 $	  2,678	 $	  2,342	 $	  2,024	 $	  2,254
 Loans charged-off:										
   Loans secured by real 
    estate		                        88	       368		       15		      135		      396
   Commercial and industrial
    loans		                        605		      141		      170		       42		      222
   Individuals		                 1,371 		     879		      371		      246		      230
      TOTAL  LOANS CHARGED
       OFF		                     2,064		    1,388		      556		      423		      848
Recoveries of loans 
 previously charged off:										
   Loans secured by real 
    estate		                         8		      111		       97		        9		       56
   Commercial and industrial
    loans		                         53		       42		       14		       36		       52
   Individuals                    		80		      183		      111		       36		       40
      TOTAL RECOVERIES		           141		      336		      222		       81		      148
        NET  LOANS
         CHARGED-O 		            1,923		    1,052		      334		      342		      700
Provision charged to 
 operating expenses              1,940		    1,300		      670		      660		      470
  BALANCE OF ALLOWANCE FOR	
   POSSIBLE LOAN LOSSES AT										
   END OF YEAR	              $  	2,943	 $  	2,926	 $  	2,678	 $  	2,342	 $  	2,024

Ratio of net charge-offs 
 during the	period to average
 loans outstanding		              0.61%		    0.36%		    0.12%	   	0.14%		     0.30%

</TABLE>

CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

  	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1997, the Corporation had a ratio of
average tier 1 capital to average assets of 10.73%.  This
compares to a ratio of average tier 1 capital to average assets
of 10.36% at December 31, 1996, and 10.08% at December 31, 1995.

  	Cash dividends declared in 1997 were 11.2% more than those paid
in 1996.  The dividend to net income ratio was 22%.  Additional
dividends of approximately $15.9 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, 1997, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 18.7% and 19.7% respectively.  At
December 31, 1996, the comparable ratios were 17.7% and 18.7%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital.

  	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>
               		1991	 		$30,194
               		1992			  33,414
               		1993			  37,454
               		1994			  41,820
               		1995			  46,755
               		1996			  52,067
               		1997			  57,806
</TABLE>

<PAGE>

             FIRST FARMERS AND MERCHANTS COPROATION AND SUBSIDIARY
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANACIAL CONDITION 
                         AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Interest Income

  	Total interest income increased 4.2% in 1997 enhanced by loan
growth in all the market areas the Bank serves.  Interest and
fees earned on loans increased 5.5% in 1997 accounting for 74.6%
of gross interest income.  Interest earned on investment
securities and other investments increased .7% in 1997 rounding
out gross interest income contributing 25.4%.  Total interest
income increased 7.5% in 1996 and 11.9% in 1995.


Interest Expense

  	Total interest expense increased 3.6% in 1997 due mostly to the
increase in interest-bearing deposits.  This increase compares
favorably to a 8.4% increase in 1996, about half of which can be
attributed to the acquisition, and a 19.9% increase in 1995. 
The cost of interest-bearing deposits remained steady all year
under monthly monitoring by the Asset/Liability Committee.  This
contributed to the strong gross margin achieved during 1997.  
The net interest margin (tax equivalent net interest income
divided by average earning assets) was 4.7% at the end of 1997
and 1996 and 4.8% at the end of  1995.

  	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 19.6% during 1997 led by fees on
deposits.  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.  This compares to a 28.4% increase
in 1996 and a 14.9% increase in 1995.

  	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1997 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  		$1,471			      21.2%
 Other service fees			            845   			   12.2%
	Securities gains			              488			       7.0%
	Fees on deposits			            3,744  			    53.9%
	Other				                        394		     	  5.7%

</TABLE>

	Noninterest expenses, excluding the provision for possible loan
losses, increased 6.2% in 1997 which compares favorably with the
5.8% increase in 1996.  The increase in 1995 was 6.2%. 
Increased productivity fostered by our technology improvements
as the learning curve diminished and cost control efforts
contributed to this cost containment.  Included in this category
is net occupancy expense for an additional office opened in 1997
and furniture and equipment, which includes technology expenses,
that was down over 5% from 1996.

	A pie chart is included at this point in the materials sent to
out stockholders illustrating the composition of noninterest
expense in 1997 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			                   $7,319			            45.6%
 Furniture and equipment		       1,501			             9.3%
 Occupancy			                    1,317			             8.2%
 Other					                      5,927			            36.9%

</TABLE>

<PAGE>

                    FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDTION
                                AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
   		                            1997		       1996		       1995		       1994		       1993

<S>                         <C>          <C>          <C>          <C>          <C>                                   
INTEREST INCOME										
 Interest and fees on loans	$	28,841,420	$	27,343,817	$	25,857,982	$	21,130,914	$	19,518,742
										
 Income on investment 
  securities										
   Taxable interest		          6,802,934		  6,892,118		  6,179,492		  7,012,626		  6,925,404
   Exempt from federal 
    income tax		               2,488,475		  2,366,764		  2,156,813		  2,184,666		  1,857,168
   Dividends		                   260,759		    256,951		    177,790		    204,948		     72,054
										
                             		9,552,168		  9,515,833		  8,514,095		  9,402,240		  8,854,626

 Other interest
  income		                       253,497		    223,019		    121,492		    284,384	  	  347,287


    TOTAL INTEREST
     INCOME		                 38,647,085		 37,082,669		 34,493,569		 30,817,538	  28,720,655

INTEREST EXPENSE 										
 Interest on deposits		       17,218,537		 16,617,525		 15,247,875		 12,770,618		 11,998,235
 Interest on other short 
  term borrowings		               85,853		     94,232		    174,370		     93,286		     38,339
										
    TOTAL INTEREST EXPENSE		  17,304,390	  16,711,757		 15,422,245		 12,863,904		 12,036,574

      NET INTEREST INCOME		   21,342,695	  20,370,912		 19,071,324		 17,953,634		 16,684,081

PROVISION FOR POSSIBLE LOAN
 LOSSES		                      1,940,000		  1,300,000		    670,000		    660,000		    470,000

    NET INTEREST INCOME 
     AFTER PROVISION FOR 
     LOAN LOSSES		            19,402,695		 19,070,912		 18,401,324		 17,293,634		 16,214,081

NONINTEREST  INCOME										

 Trust department income		     1,470,568		  1,323,525	  	1,251,642	  	1,249,359		    863,952
 Service fees on deposit 
  accounts		                   3,744,381		  3,373,805		  2,697,332		  2,317,992		  2,206,026
 Other service fees, 
  commissions, and fees		        845,072		    745,523		    300,407		    336,758		    509,009
 Other operating income		        394,322		    363,430		    322,634		    319,466		    315,108
 Securities gains (losses)     		487,972		       -		         1,182		   (243,690)		    23,896

    TOTAL NONINTEREST INCOME		 6,942,315		  5,806,283		  4,573,197		  3,979,885		  3,917,991

NONINTEREST  EXPENSES										
 Salaries and employee
  benefits		                   7,319,460		  7,030,588		  6,620,827		  6,247,706		  5,686,965
 Net occupancy expense		       1,316,588		  1,211,067		  1,279,434		  1,190,678		  1,070,971
 Furniture and equipment
  expense		                    1,500,486		  1,580,753		  1,382,769		  1,069,856		    889,848
 Deposit insurance		              57,004		      6,549		    499,709		    890,646		    826,966
 Other operating expenses		    5,869,844		  5,292,103		  4,557,307		  4,109,461		  4,180,105
										
    TOTAL NONINTEREST
     EXPENSES		               16,063,382		 15,121,060		 14,340,046		 13,508,347		 12,654,855

     INCOME BEFORE PROVISION										
       FOR INCOME TAXES		     10,281,628		  9,756,135		  8,634,475		  7,765,172		  7,477,217

PROVISION FOR INCOME TAXES		   3,227,676		  2,889,339		  2,518,769		  2,203,746		  2,220,965

     NET INCOME       	     $ 	7,053,952	$	 6,866,796	$	 6,115,706	$	 5,561,426	$ 	5,256,252
										
EARNINGS PER COMMON SHARE 										
 (1,400,000 outstanding
   shares)	                 $	      5.04	$	      4.90	$	      4.37	$	      3.97	$	      3.75

</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 2.7% higher in 1997 than in 1996.  As indicated
earlier, the improvement in 1997's earnings resulted from a
strong gross margin reinforced by loans increasing as a
percentage of earning assets, an increase in noninterest income
sufficient to cover a smaller increase in noninterest expenses,
and most of the increase in taxes.  These improvements were
partially offset by higher additions to the allowance for loan
losses associated with a corrected loan underwriting problem.


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

  	The Financial Accounting Standards Board has issued two
standards that have been adopted by the Corporation as follows:
(1)  Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share" requires a reconciliation of the
numerators and the denominators of the basic and diluted
per-share computation for income from continuing operations. 
The statement is effective prospectively for earnings per share
computation for both interim and annual periods ending after
December 31, 1997.  Because the Corporation has no potential
common stock outstanding, it is required to present only basic
earnings per share and its presentation of earnings per share
did not change. (2)  Statement of Financial Accounting Standards 
No. 129 (SFAS 129), "Disclosure of Information about Capital Structure" 
requires an entity to explain, in summary form within its
financial statements, the pertinent rights and privileges of the
various securities outstanding.  The Corporation only has one
class of common stock outstanding and this statement had no
material effect on the financial statements.

   	The Financial Accounting Standards Board has issued two
standards that have not been adopted by the Corporation as
follows: (1)  Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income" purposes that
an entity report a measure of all changes in equity that result
from recognized transactions and other economic events of the
period other than transactions with owners in their capacity as
owners.  The statement is effective for fiscal years beginning
after December 15, 1997.  Management does not believe this
statement will have any material effect on future financial
statements except for disclosures.  (2)  Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information" establishes
guidelines for reporting financial information about an
operating segment or component of an enterprise.  The statement
is effective for fiscal years beginning after December 15, 1997.
 Management does not believe this statement will have any
material effect on future financial statements except for
disclosures.


YEAR 2000 COMPLIANCE TASK FORCE

 		A Year 2000 Compliance Task Force has been established to
evaluate the mission critical software and hardware that must be
compatible for continued satisfactory data processing;
representations have been obtained, or are in the process of
being obtained, from our software and hardware vendors,
confirming their Year 2000 compatibility; and plans are in place
for testing our systems' compatibility before June 30, 1998. 
Management believes that our information systems are well on
their way to being Year 2000 compliant.

<PAGE>

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

SHAREHOLDER INFORMATION

  	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1997, had a
market value of $109 million and were held by 1,618 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 tables below show 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.

   These tables were shown graphically in the materials	sent to our
stockholders.

<TABLE>
<CAPTION>

                       				Price Range of	  		 Dividend
                        				Common Stock	     	 	Paid
                         			High	    	Low		    Per Share
 
<S>     <C>              <C>       <C>          <C>
       	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

       	First quarter	   $	67.00	  $	65.00	     $	
       	Second quarter		   69.00		   69.00		      0.53
1997	   Third quarter		    72.00		   70.00		
       	Fourth quarter		   78.00		   72.00		      0.56
                                          						$	1.09

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                 COMPARATIVE DATA
                            (In Thousands of Dollars)										

                         		1997		      1996		      1995		      1994		      1993
<S>                    <C>         <C>         <C>         <C>         <C>
AVERAGE ASSETS	        $	527,926	  $	502,700	  $	463,739	  $	451,953	  $	420,760

AVERAGE LOANS (NET)	   $	314,198	  $	290,413	  $	276,166  	$	247,791	  $	233,609

AVERAGE DEPOSITS	      $	463,576	  $	443,902	  $	409,489	  $	404,412	  $	378,782

RETURN ON EQUITY AND
 ASSETS										
  Return on average 
    assets		                1.34%		     1.37%		     1.32%		     1.23%		     1.25%
										
  Return on beginning
    equity		               12.97%		    14.01%		    13.95%		    14.11%		    14.93%
 Average tier 1 
    capital to average 
    assets		               10.73%		    10.36%		    10.08%		     9.25%		     8.90%

COMMON DIVIDEND PAYOUT
 RATIO										
   Earnings per shar   $	    5.04	 $	   4.90	 $	    4.37	  $    3.97   $	   3.75

   Cash dividends per 
    share	             $	   1.09	  $	   0.98  $	    0.88	  $	   0.80	  $	   0.73

   Ratio		                    22%		       20%		      20%		        20%		       19%
</TABLE>
										
<TABLE>
<CAPTION>
                                      NET INTEREST MARGIN										
                                  (In Thousands of Dollars)										

                        		1997		      1996		      1995		      1994		      1993

<S>                    <C>         <C>         <C>         <C>         <C>     
INTEREST INCOME										
 (TAX EQUIVALENT)	     $	39,581	   $	37,986	   $	35,626	   $	32,039	   $	29,465

INTEREST EXPENSE		       17,304		    16,712		    15,422		    12,864		    12,037

                      	$	22,277	   $	21,274	   $	20,204	   $	19,175   	$	17,428

NET INTEREST MARGIN*		     4.65%		     4.66%		     4.79%		     4.68%		     4.58%


<FN>
<F3>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets.										
</FN>
										
</TABLE>




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 (200) full time employees and eighty
(80) part time employees.  Five 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 a part of the Annual Report to
Stockholders which is included in this filing.  Other real
estate owned by the Bank as of December 31, 1997, included:  (1)
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 and
(2) a house and two acres on County Farm Road five miles north
of Centerville, Tennessee.  The properties are not depreciated.

       

       
               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, 1997, 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 fifteen (15) 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 and Crockett 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.   At December 31, 1997, approximately $8.9
million was required to be maintained at the Federal Reserve
Bank.


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.

  		Debt and equity securities that are bought and held
  principally for the purpose of selling them in


<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)

  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 deferred
  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 payoff 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.

		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.  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 accrued 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 nonaccrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
nonaccrual status is recognized only to the extent of the excess
of cash payments received over principal payments due.


	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 $410 thousand at December 31, 1997, and $450
thousand at December 31, 1996.  

Allowance for Possible Loan Losses

	The allowance for possible loan losses is established through
provisions for loan losses charged against income.  Loan quality
is monitored by Loan Review and


<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)

the Credit Administrator.  Portions of loans deemed to be
uncollectible are charged against the allowance for losses, and
subsequent recoveries, if any, are credited to the allowance
account in the period such determination is made.  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. The allowance for
loan losses is maintained at a level believed adequate by
management to absorb estimated probable inherent loan losses.


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.


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: 
1997 - $182,613; 1996 - $224,212;  and  1995 - $168,020.

Earnings Per Share

	The Financial Accounting Standards Board has issued Statement
No. 128, "Earnings per Share". which supersedes APB Opinion No.
15.  This statement requires the presentation of earnings per
share by all entities that have common stock or potential common
stock, such as options, warrants and convertible securities,
outstanding that trade in a public market.  Those entities that
have only common stock outstanding are required to present basic
earnings per share amounts.  All other entities are required to
present basic and diluted per share amounts.  Because the
Corporation  has no potential common stock outstanding, it is
required to present only basic earnings per share and its
presentation of earnings per share will not change.  Earnings
per common share have been computed on the basis of the
weighted-average number of common shares outstanding during each
period presented.		


<PAGE>




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

NOTE  2 - INVESTMENT SECURITIES

		Securities with an amortized cost of $116,315,234 and
$103,540,673 at December 31, 1997 and 1996, respectively (fair
value: 1997 - $117,969,544;  1996 - $104,061,311), 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, 1997, 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
 <S>                             <C>              <C>            <C>          <C> 
	December 31, 1997								
	Available-for-sale securities								
	    U.S. Treasury	              $ 	22,337,240	   $  	233,853	   $	 14,893	   $	 22,556,200
	    U.S. Government agencies		     23,834,686		       53,172		     92,413		     23,795,445
     Other securities		              2,749,094		      422,591	     	 2,000		      3,169,685

		                               $	 48,921,020	   $	  709,616	   $	109,306	   $ 	49,521,330
	Held-to-maturity securities								
	    U.S. Treasury	              $ 	10,432,892	   $	  209,508	   $	   -	      $	 10,642,400
	    U.S. Government agencies		     36,552,480		      657,930		      2,048		     37,208,362
	    States and political
       subdivisions		               48,465,174		    1,218,108		     12,144		     49,671,138
	    Other securities		                815,421		       33,735		       -		           849,156
									
                              		$  	96,265,967	   $ 2,119,281	   $  14,192	   $  98,371,056

	December 31, 1996								
									
	Available-for-sale securities								
	    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

<FN>
<F1>
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, 1997, 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, 1997, 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 $11,008,435, $3,020,054, and
$7,306,453 during 1997, 1996, and 1995, respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$32,386,811, $56,112,000, and $18,848,992 during 1997, 1996, and
1995, respectively.  Gross gains of $489,697 and gross losses of
$1,725 were realized on dispositions in 1997.  There were no
realized gains or losses in 1996.  Gross gains of $1,182 and
gross losses of $-0- were realized on the dispositions in 1995.
<TABLE>
<CAPTION>
                                  		Amortized		          Fair		        Yield
                                     		Cost	            	Value		    (Unaudited)
<S>                                <C>                 <C>              <C>
Available-for-sale securities						
U.S. Treasury						
   Within one year	                $ 	8,051,787	       $ 	8,049,800		   5.5%
   After one but within five years		 14,285,453		        14,506,400		   6.2%
U.S. Government agencies						
   Within one year		                  3,994,953		         3,999,700		   6.1%
   After one but within five years		 19,585,333		        19,541,020		   5.8%
   After ten years		                    254,400		           254,725		   6.1%
Other securities		                    2,749,094		         3,169,685		   9.0%
						
                                  	$	48,921,020	       $	49,521,330		
Held-to-maturity securities						
U.S. Treasury						
   After one but within five years $	10,432,892	       $	10,642,400		   6.4%
U.S. Government agencies						
   Within one year		                  2,999,150		         2,997,100		   5.4%
   After one but within five years   18,669,684		        19,008,962		   6.6%
   After five but within ten years		 14,883,646		        15,202,300		   6.5%
States and political subdivisions						
   Within one year		                  3,239,829		         3,286,218		   9.3%
   After one but within five years		 13,595,854		        13,865,175		   7.7%
   After five but within ten years		 18,510,918		        18,983,557		   7.4%
   After ten years		                 13,118,573		        13,536,188		   7.8%
Other securities						
   After one but within five years		    315,421		           323,206		   8.0%
   After five but within ten years		    500,000		           525,950		   7.3%
						
                                  	$	96,265,967	       $	98,371,056		
<FN>
<F2>
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>
    		                                           1997		          1996

<S>                                       <C>             <C>
Commercial, financial and agricultural	   $  	60,592,529	 $ 	54,565,335
Tax exempt municipal loans		                     768,125		      605,933
Real estate				
   Construction		                              5,861,866		    8,751,021
   Commercial mortgages		                     52,968,199		   46,114,930
   Residential mortgages		                   146,768,418		  125,854,753
   Other                                     		5,869,654		    7,115,749
Consumer loans		                              58,879,231		   60,993,583

                                           		331,708,022	  	304,001,304
Less:				
   Net unamortized loan origination fees		      (347,839)		    (269,260)
   Allowance for possible loan losses		       (2,943,000)		  (2,926,063)
				
	                                         $	328,417,183   $	300,805,981
<FN>
<F3>
Table III - Loans Outstanding  by Category at December 31, 1997
and 1996
</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	                $ 	78,350	     $ 	47,052	     $ 	40,499	   $	165,901
Variable rate loans		               93,752		       30,484		       41,571		    165,807
								
                                	$	172,102	      $	77,536	      $	82,070	   $	331,708

<FN>
<F4>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1997
</FN>

</TABLE>

		Loans having recorded investments of $2,954,000 at December
31, 1997, have been identified as impaired.  The total allowance
for possible loan losses related to these loans was $1,146,000. 
Interest received on these loans during 1997 was $479,698. 
Impaired loans had recorded investments of approximately 
$5,136,000 at December 31, 1996.

		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, 1997 and 1996, 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 1997 or 1996.


<PAGE>

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

NOTE 3 - LOANS (Continued)

<TABLE>
<CAPTION>
                                   		Balance at							
                                   		Beginning 				              Amount		  Balance at	
                                   		 of Year		     Additions		 Collected		End of Year	
				
<S>                                 <C>           <C>           <C>          <C>
            1997
Aggregate of certain party loans	   $	8,222,262	  $	12,488,090	 $	8,276,031	 $	12,434,321	

            1996									
Aggregate of certain party loans	   $	7,706,004	  $	 8,454,247  $	7,937,989	 $	 8,222,262	

<FN>
<F5>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>


NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
                                          		1997		        1996		        1995	
<S>                                     <C>           <C>           <C>
Balance at beginning of year	           $	2,926,063	  $	2,678,386  	$	2,342,290	
Provision charged to operating expenses 		1,940,000		   1,300,000		     670,000	
Loan losses:							
  Loans charged off                    		(2,064,138)		 (1,388,422)		   (555,957)	
  Recoveries on loans previously							
   charged off                            		141,075		     336,099		     222,053	
							
Balance at end of year	                 $	2,943,000	  $	2,926,063	  $	2,678,386	

<FN>
<F6>
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, 1997. 
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.


NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
                                            		1997		         1996	
<S>                                       <C>            <C>
Land	                                     $	1,348,288	   $	1,348,288	
Premises		                                  7,027,521		    7,013,942	
Furniture and equipment		                   3,857,459		    4,068,373	
Leasehold improvements		                    1,209,113		    1,149,732	
                                         		13,442,381		   13,580,335	
Less allowance for depreciation and
 amortization		                            (7,029,016)		  (6,750,860)	
                                        	 $	6,413,365	   $	6,829,475	
<FN>
<F7>
Table VII - Premises and Equipment at December 31, 1997 and 1996
</FN>
</TABLE>

<PAGE>

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

NOTE 5 - BANK PREMISES AND EQUIPMENT (Continued)

		Annual provisions for depreciation and amortization of bank
premises and equipment total $651,619 for 1997, $685,005 for
1996, and $645,816 for 1995.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling approximately $2,670,000 at
December 31, 1997.                   


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, 1997, additional dividends of approximately $15,900,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for five of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2008.  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 $689,887,
$726,337, and $660,121 for equipment leases, and $112,070,
$112,384, and $111,649 for building leases, in 1997, 1996, and
1995, respectively.  Future minimum lease commitments as of
December 31, 1997, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>
 <C>                                   <C>
                        			1998	       $   513,083	
                        			1999		          121,128	
                        			2000		          124,128	
                        			2001		          124,128	
                        			2002		           86,328	
                  			Thereafter           		94,200	

	Total future minimum lease payments			$	1,062,995	

<FN>
<F8>
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>
  		                                      1997	        1996		       1995	
<S>                                   <C>          <C>          <C>
Current:				  			
   Federal                           	$	2,416,401	 $	2,422,550	 $	2,166,566	
   State		                                557,218		    628,788		    585,606	

     Total current                    		2,973,619		  3,051,338		  2,752,172	

Deferred:							
   Federal	     	                         215,949		   (137,700)		  (198,393)	
   State                                 		38,108		    (24,299)		   (35,010)	

     Total deferred		                     254,057		   (161,999)		  (233,403)	
							
     Total provision for income taxes	$	3,227,676	 $	2,889,339	 $	2,518,769	
<FN>
<F8>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                  <C>           <C>           <C>
Allowance for possible loan losses	  $	  776,888   $  	914,386	  $   815,315
Write-down of other real estate		           -          177,120       177,120
Deferred compensation		                  403,857       336,255	      256,139
Deferred loan fees		                      19,823        26,863        44,051
  Deferred tax asset	                  1,200,568     1,454,624     1,292,625	

Unrealized gain on AFS securities		     (240,124)		    (97,294)		   (157,392)
	
  Deferred tax liability              		(240,124)		   ( 97,294)		   (157,392)	

    Net deferred tax asset	          $  	960,444   $	1,357,330	  $	1,135,233	

<FN>
<F10>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                   <C>           <C>           <C>
Tax expense at statutory rate	        $	3,495,754	  $	3,317,086	  $	2,935,722	
Increase (decrease) in taxes 
  resulting from:							
    Tax-exempt interest		                (896,112)		   (859,383)		   (783,011)	
    Nondeductible interest expense		      106,329		     101,534		      89,491	
    Employee benefits		                   (55,560) 		   (34,685)		    (22,418)	
    Other nondeductible expenses							
      (nontaxable income) - net		          11,146	 	     13,515	 	     (5,695)	
    State income taxes, net of 
      federal	tax benefit               		392,915		     398,963	 	    363,393	
    Dividend income exclusion		           (33,239)	 	   (34,855)	 	   (18,324)	
    Other		                                55,891	 	    (12,836)		    (40,388)	
Total provision for income taxes	     $	3,227,676	  $	2,889,339	  $	2,518,769	
Effective tax rate		                         31.4%		       29.6%		       29.2%	
<FN>
<F11>
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 1997, 1996, and 1995 amounted to
$2,927,000, $3,140,000 and $2,756,442, respectively.

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


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 standby letters of
credit in the normal course of business at December 31, 1997,
were $21,735,000 and $1,977,000, 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 INFORMATION

		 Interest paid on deposits and other borrowings during 1997,
1996, and 1995 amounted to $17,049,703, $17,206,708, and
$14,845,107, 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, 1997 and 1996,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		The Bank's calculated risk-adjusted capital ratios exceeded
the minimum standard for a "well capitalized" bank as of 
September 30, 1997, the date of the most recent examination by
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, 1997	            Amount	 	  Ratio	     Amount	  	Ratio > or=		    Amount		  Ratio > or =

<S>                                <C>         <C>       <C>            <C>         <C>         <C>       
Total Capital (to Risk Weighted											
 Assets) Consolidated	             61,732,093		19.68%		  25,098,756		   8.00%		     31,373,445		10.00%
         Bank	                     61,153,956		19.54%		  25,040,651		   8.00%		     31,300,813		10.00%
Tier I Capital (to Risk Weighted											
 Assets) Consolidated	             58,789,093		18.74%		  12,549,378		   4.00%		     18,824,067		 6.00%
         Bank	                     58,210,956		18.60%		  12,520,325		   4.00%		     18,780,488		 6.00%
Tier I Capital (Average) 
 (to Average	Assets)  
         Consolidated	             56,515,935		10.73%		  21,073,801		   4.00%		     26,342,251		 5.00%
         Bank	                     55,946,149		10.63%		  21,047,205		   4.00%		     26,309,006		 5.00%

As of December 31, 1996											
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%		  11,988,374		   4.00%		     17,982,562		 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%		  20,102,944		   4.00%		     25,128,680		 5.00%
         Bank	                     50,574,336		10.07%		  20,089,111		   4.00%		     25,111,388		 5.00%
<FN>
<F12>
Table XII - Capital Amounts and Capital Adequacy Ratios    
</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 nonprofit 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 $684,227, $661,307 and $633,459, in 1997, 1996, and
1995, 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 (1997 - $645,985; 1996 - $620,657) purchased
in 1993 to fund the plan and the related liability (1997 -
$501,255; 1996 - $513,792) were included in other assets and
other liabilities, respectively.  Net noncash income recognized
on these policies of $25,328 in 1997 and $26,436 in 1996 is
included in the above asset values.   Net noncash income was
$14,133 in 1995.  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 $42,463 in
1997, $64,024 in 1996, and $106,066 in 1995.

		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, net of benefits paid out in 1997
and accruals, of $173,841 for 1997, $172,871 for 1996, and
$176,727 for 1995 have been recognized in the accompanying
consolidated 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.  Additional single premium universal life insurance
policies, totaling $385,000, were purchased in 1997 for new
participants.  Net noncash income recognized on these policies
of $103,953 in 1997 and $85,249 in 1996 is included in the cash
surrender values of  $2,376,124 and $1,887,171 reported in other
assets at December 31, 1997 and 1996, respectively.  Net noncash
income was $51,803 in 1995.

		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.  The value of this policy (1997 -
$819,460; 1996 - $785,330) is included in other assets, and net
noncash income recognized on this policy of $34,130 in 1997 and
net expense of $9,670 in 1996 is included in the above asset
values.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replacement/split dollar plan.  These
policies have an aggregate face amount of $3,163,750.


<PAGE>

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

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
                              		December		31,1997		         December		31,1997	
                              Carrying		     Fair      	 	Carrying		     Fair	
                             		Amount		      Value		       Amount		      Value	
Financial assets		                        (DOLLARS		IN		THOUSANDS)			
<S>                           <C>         <C>             <C>         <C>
 Cash and due from banks	     $	29,873	   $	29,873	       $	27,917	   $	27,917	
 Federal funds sold		           12,800		    12,800		          -		         - 	
 Securities held to maturity		  96,266		    98,371		       118,542		   119,226	
 Securities available for
  sale		                        48,921		    49,521		        55,898		    56,142	
 Loans, net                  		328,417		   325,323		       300,806		   309,401	
 Accrued interest receivable		   5,366		     5,366		         5,549		     5,549	

Financial liabilities									
 Deposits		                    470,282		   456,557		       460,573		   449,129	
 Federal funds purchased      		  -		         -		            5,000		     5,000	
 Short term borrowings		           602		       602		           523		       523	
 Accrued interest payable		      2,794		     2,794	         	2,539		     2,539	

<FN>
<F13>
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, 1997, 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
1997										

<S>                         <C>          <C>          <C>          <C>          <C>
Interest income	            $	9,362,178	 $	9,705,584	 $	9,774,855	 $	9,804,468	 $	38,647,085
Interest expense		            4,258,739		  4,330,171		  4,361,715		  4,353,765		  17,304,390

Net interest income		         5,103,439		  5,375,413		  5,413,140		  5,450,703		  21,342,695
Provision for possible loan
 losses		                       450,000		    290,000		    550,000	    	650,000		   1,940,000
Noninterest expenses, net 
 of noninterest income		      2,394,981		  2,405,847		  2,388,160		  1,932,079		   9,121,067
Income before income taxes		  2,258,458		  2,679,566		  2,474,980		  2,868,624		  10,281,628
Income taxes		                  556,134		    795,731		    917,613		    958,198		   3,227,676

Net income	                 $	1,702,324	 $	1,883,835	 $	1,557,367	 $	1,910,426	 $	 7,053,952

Earnings per common share										
 (1,400,000 shares)	        $	     1.22	 $	     1.35	 $	     1.11	 $	     1.36	 $	      5.04

                             		First		     Secon  		     Third		     Fourth		
                            		Quarter		    Quarter		    Quarter		    Quarter		      Total
1996										
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

<FN>
<F14>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


<PAGE>

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

NOTE 16 - DEPOSITS  

				The Bank does not have any foreign offices and all deposits
are serviced in its sixteen 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.

<TABLE>
<CAPTION>
                                  		        Year	Ended	December	31
		                                      1997   	 			    	  1996	   			      	1995				
                                 	         	(Dollars in Thousands)									
<S>                              <C>          <S><C>            <S><C>            <S><C>
Demand deposits	                 $	62,909	   	- 	%	 $	61,509   	- 	%  $	56,730		  -	 %	
NOW and money market accounts		   166,914		  3.37		 	158,450		 3.37			 149,016		 3.51		   
Savings deposits		                 43,775		  3.37			  37,421		 3.22			  34,629		 3.00		
Time deposits of less than
 $100,000		                       152,389		  5.29			 151,952		 5.40			 136,568		 5.30		
Time deposits of $100,000 or
 more		                            37,686		  5.42			  34,539  	5.41			  32,524		 5.35		
																
Total In Domestic Offices	       $463,673		  3.71%	 $443,870		 3.74%	 $409,467		 3.72%	

<FN>
<F15>
  Table XV - Average Amounts of Deposits and Average Rates Paid
             by Deposit Type at December 31
</FN>
</TABLE>
   		
<TABLE>
<CAPTION>
                                  1997		      1996		      1995
                                 				(Dollars In Thousands)		
        <S>                    <C>         <C>         <C>
        Under 3 months	        $ 	9,308	   $	11,680	   $ 	7,877
        3 to 12 months	         	25,981		    22,638		    18,407
        Over 12 months		          4,039		     4,812		     4,310

                               $ 39,328    $ 39,130    $ 30,594
<FN>						
<F16>
Table XVI - Maturities of Time Deposits of $100,000 or More at
            December 31
</FN>
</TABLE>

<PAGE>

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

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
                             Condensed Balance Sheets
                            December 31, 1997 and 1996				
                            (In Thousands of Dollars) 
<CAPTION>
Assets		                                           1997		         1996
<S>                                              <C>            <C> 
Cash	                                            $     72	      $	   142
Investment in bank subsidiary - at equity		        59,565		       53,870
Investment in credit life insurance company 
 - at cost		                                           50		           50
Investment in other securities	                        25		           22
Dividends receivable from bank subsidiary		           784		          714
Cash surrender value - life insurance		               651		          489
Other assets		                                       -		               1
				
   Total assets	                                 $	61,147	      $	55,288

Liabilities and Stockholders' Equity				
Liabilities				
  Payable to directors	                          $	   220	      $	   173
  Dividends payable		                                 784		          714
				
    Total liabilities		                             1,004		          887
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		                              45,783		       40,255
  Net unrealized gain (loss) on 
   available-for-sale securities, net of 
   tax		                                              360		          146
    Total stockholders' equity		                   60,143		       54,401

    Total liabilities and stockholders' equity   $ 61,147       $ 55,288  
<FN>
<F17>
Table XVII - Condensed Statements of Balance Sheet of Parent
</FN>
</TABLE>

<TABLE>
                           Condensed Statements of Income
                        Years Ended December 31, 1997 and 1996
                              (In Thousands of Dollars)
<CAPTION>
                                                   		1997		       1996
<S>                                               <C>          <C>
  Dividends from bank subsidiary                  $ 1,526      $ 1,372
  Other dividend income		                              80		         85
  Interest income		                                     8		          6
  Other                                              		34		         28
Operating expenses		                                   76		         68
   Income before equity in undistributed net				
    income of bank subsidiary		                     1,572		      1,423
				
Equity in undistributed net income of bank
 subsidiary		                                       5,482		      5,444
       Net Income	                                $	7,054	     $	6,867

<FN>
<F18>
Table XVIII - Condensed Statements of Income 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>
                         Condensed Statements of Cash Flows 
                       Years Ended December 31, 1997 and 1996
                            (In Thousands of Dollars)   
<CAPTION>
                                       		1997	           	1996
<S>                                    <C>              <C>
Operating activities				
  Net income for the year              	$	7,054	        $ 6,867
  Adjustments to reconcile net income
   to net cash provided by operating 
   activities				
   Equity in undistributed net income
    of bank subsidiary		                 (5,482)		       (5,444)
   Increase in other assets		               (98)		         (111)
   Increase in payables		                    47		            44
				
      Total adjustments		                (5,533)	 	      (5,511)
				
   Net cash provided by operating 
    activities		                          1,521		         1,356
				
Net cash provided by (used in) 
 investing activities				
 Purchases of investment securities      		(119)		         (133)
 Proceeds from maturities of 
  investment securities                     119		           137
 Purchase of single premium life 
  insurance policy		                       (135)	           -	

    Net cash provided by (used in) 
     investing activities		                (135)		            4
				
Net cash used in financing activities				
 Cash dividends paid		                   (1,456)		       (1,288)
 
   Increase (decrease) in cash		            (70)		           72
				
Cash at beginning of year		                 142		            70
				
Cash at end of year	                   $    	72	        $  	142

<FN>
<F19>
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, 1997.

<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 a part of the Annual Report to Stockholders
which is included in this filing.

       
               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, 1997, 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 fifteen (15) 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 and Crockett 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.   At December 31, 1997, approximately $8.9
million was required to be maintained at the Federal Reserve
Bank.


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.

  		Debt and equity securities that are bought and held
  principally for the purpose of selling them in


<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)

  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 deferred
  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 payoff 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.

		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.  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 accrued 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 nonaccrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
nonaccrual status is recognized only to the extent of the excess
of cash payments received over principal payments due.


	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 $410 thousand at December 31, 1997, and $450
thousand at December 31, 1996.  

Allowance for Possible Loan Losses

	The allowance for possible loan losses is established through
provisions for loan losses charged against income.  Loan quality
is monitored by Loan Review and


<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)

the Credit Administrator.  Portions of loans deemed to be
uncollectible are charged against the allowance for losses, and
subsequent recoveries, if any, are credited to the allowance
account in the period such determination is made.  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. The allowance for
loan losses is maintained at a level believed adequate by
management to absorb estimated probable inherent loan losses.


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.


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: 
1997 - $182,613; 1996 - $224,212;  and  1995 - $168,020.

Earnings Per Share

	The Financial Accounting Standards Board has issued Statement
No. 128, "Earnings per Share". which supersedes APB Opinion No.
15.  This statement requires the presentation of earnings per
share by all entities that have common stock or potential common
stock, such as options, warrants and convertible securities,
outstanding that trade in a public market.  Those entities that
have only common stock outstanding are required to present basic
earnings per share amounts.  All other entities are required to
present basic and diluted per share amounts.  Because the
Corporation  has no potential common stock outstanding, it is
required to present only basic earnings per share and its
presentation of earnings per share will not change.  Earnings
per common share have been computed on the basis of the
weighted-average number of common shares outstanding during each
period presented.		


<PAGE>




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

NOTE  2 - INVESTMENT SECURITIES

		Securities with an amortized cost of $116,315,234 and
$103,540,673 at December 31, 1997 and 1996, respectively (fair
value: 1997 - $117,969,544;  1996 - $104,061,311), 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, 1997, 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
 <S>                             <C>              <C>            <C>          <C> 
	December 31, 1997								
	Available-for-sale securities								
	    U.S. Treasury	              $ 	22,337,240	   $  	233,853	   $	 14,893	   $	 22,556,200
	    U.S. Government agencies		     23,834,686		       53,172		     92,413		     23,795,445
     Other securities		              2,749,094		      422,591	     	 2,000		      3,169,685

		                               $	 48,921,020	   $	  709,616	   $	109,306	   $ 	49,521,330
	Held-to-maturity securities								
	    U.S. Treasury	              $ 	10,432,892	   $	  209,508	   $	   -	      $	 10,642,400
	    U.S. Government agencies		     36,552,480		      657,930		      2,048		     37,208,362
	    States and political
       subdivisions		               48,465,174		    1,218,108		     12,144		     49,671,138
	    Other securities		                815,421		       33,735		       -		           849,156
									
                              		$  	96,265,967	   $ 2,119,281	   $  14,192	   $  98,371,056

	December 31, 1996								
									
	Available-for-sale securities								
	    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

<FN>
<F1>
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, 1997, 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, 1997, 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 $11,008,435, $3,020,054, and
$7,306,453 during 1997, 1996, and 1995, respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$32,386,811, $56,112,000, and $18,848,992 during 1997, 1996, and
1995, respectively.  Gross gains of $489,697 and gross losses of
$1,725 were realized on dispositions in 1997.  There were no
realized gains or losses in 1996.  Gross gains of $1,182 and
gross losses of $-0- were realized on the dispositions in 1995.
<TABLE>
<CAPTION>
                                  		Amortized		          Fair		        Yield
                                     		Cost	            	Value		    (Unaudited)
<S>                                <C>                 <C>              <C>
Available-for-sale securities						
U.S. Treasury						
   Within one year	                $ 	8,051,787	       $ 	8,049,800		   5.5%
   After one but within five years		 14,285,453		        14,506,400		   6.2%
U.S. Government agencies						
   Within one year		                  3,994,953		         3,999,700		   6.1%
   After one but within five years		 19,585,333		        19,541,020		   5.8%
   After ten years		                    254,400		           254,725		   6.1%
Other securities		                    2,749,094		         3,169,685		   9.0%
						
                                  	$	48,921,020	       $	49,521,330		
Held-to-maturity securities						
U.S. Treasury						
   After one but within five years $	10,432,892	       $	10,642,400		   6.4%
U.S. Government agencies						
   Within one year		                  2,999,150		         2,997,100		   5.4%
   After one but within five years   18,669,684		        19,008,962		   6.6%
   After five but within ten years		 14,883,646		        15,202,300		   6.5%
States and political subdivisions						
   Within one year		                  3,239,829		         3,286,218		   9.3%
   After one but within five years		 13,595,854		        13,865,175		   7.7%
   After five but within ten years		 18,510,918		        18,983,557		   7.4%
   After ten years		                 13,118,573		        13,536,188		   7.8%
Other securities						
   After one but within five years		    315,421		           323,206		   8.0%
   After five but within ten years		    500,000		           525,950		   7.3%
						
                                  	$	96,265,967	       $	98,371,056		
<FN>
<F2>
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>
    		                                           1997		          1996

<S>                                       <C>             <C>
Commercial, financial and agricultural	   $  	60,592,529	 $ 	54,565,335
Tax exempt municipal loans		                     768,125		      605,933
Real estate				
   Construction		                              5,861,866		    8,751,021
   Commercial mortgages		                     52,968,199		   46,114,930
   Residential mortgages		                   146,768,418		  125,854,753
   Other                                     		5,869,654		    7,115,749
Consumer loans		                              58,879,231		   60,993,583

                                           		331,708,022	  	304,001,304
Less:				
   Net unamortized loan origination fees		      (347,839)		    (269,260)
   Allowance for possible loan losses		       (2,943,000)		  (2,926,063)
				
	                                         $	328,417,183   $	300,805,981
<FN>
<F3>
Table III - Loans Outstanding  by Category at December 31, 1997
and 1996
</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	                $ 	78,350	     $ 	47,052	     $ 	40,499	   $	165,901
Variable rate loans		               93,752		       30,484		       41,571		    165,807
								
                                	$	172,102	      $	77,536	      $	82,070	   $	331,708

<FN>
<F4>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1997
</FN>

</TABLE>

		Loans having recorded investments of $2,954,000 at December
31, 1997, have been identified as impaired.  The total allowance
for possible loan losses related to these loans was $1,146,000. 
Interest received on these loans during 1997 was $479,698. 
Impaired loans had recorded investments of approximately 
$5,136,000 at December 31, 1996.

		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, 1997 and 1996, 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 1997 or 1996.


<PAGE>

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

NOTE 3 - LOANS (Continued)

<TABLE>
<CAPTION>
                                   		Balance at							
                                   		Beginning 				              Amount		  Balance at	
                                   		 of Year		     Additions		 Collected		End of Year	
				
<S>                                 <C>           <C>           <C>          <C>
            1997
Aggregate of certain party loans	   $	8,222,262	  $	12,488,090	 $	8,276,031	 $	12,434,321	

            1996									
Aggregate of certain party loans	   $	7,706,004	  $	 8,454,247  $	7,937,989	 $	 8,222,262	

<FN>
<F5>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>


NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
                                          		1997		        1996		        1995	
<S>                                     <C>           <C>           <C>
Balance at beginning of year	           $	2,926,063	  $	2,678,386  	$	2,342,290	
Provision charged to operating expenses 		1,940,000		   1,300,000		     670,000	
Loan losses:							
  Loans charged off                    		(2,064,138)		 (1,388,422)		   (555,957)	
  Recoveries on loans previously							
   charged off                            		141,075		     336,099		     222,053	
							
Balance at end of year	                 $	2,943,000	  $	2,926,063	  $	2,678,386	

<FN>
<F6>
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, 1997. 
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.


NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
                                            		1997		         1996	
<S>                                       <C>            <C>
Land	                                     $	1,348,288	   $	1,348,288	
Premises		                                  7,027,521		    7,013,942	
Furniture and equipment		                   3,857,459		    4,068,373	
Leasehold improvements		                    1,209,113		    1,149,732	
                                         		13,442,381		   13,580,335	
Less allowance for depreciation and
 amortization		                            (7,029,016)		  (6,750,860)	
                                        	 $	6,413,365	   $	6,829,475	
<FN>
<F7>
Table VII - Premises and Equipment at December 31, 1997 and 1996
</FN>
</TABLE>

<PAGE>

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

NOTE 5 - BANK PREMISES AND EQUIPMENT (Continued)

		Annual provisions for depreciation and amortization of bank
premises and equipment total $651,619 for 1997, $685,005 for
1996, and $645,816 for 1995.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling approximately $2,670,000 at
December 31, 1997.                   


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, 1997, additional dividends of approximately $15,900,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for five of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2008.  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 $689,887,
$726,337, and $660,121 for equipment leases, and $112,070,
$112,384, and $111,649 for building leases, in 1997, 1996, and
1995, respectively.  Future minimum lease commitments as of
December 31, 1997, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>
 <C>                                   <C>
                        			1998	       $   513,083	
                        			1999		          121,128	
                        			2000		          124,128	
                        			2001		          124,128	
                        			2002		           86,328	
                  			Thereafter           		94,200	

	Total future minimum lease payments			$	1,062,995	

<FN>
<F8>
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>
  		                                      1997	        1996		       1995	
<S>                                   <C>          <C>          <C>
Current:				  			
   Federal                           	$	2,416,401	 $	2,422,550	 $	2,166,566	
   State		                                557,218		    628,788		    585,606	

     Total current                    		2,973,619		  3,051,338		  2,752,172	

Deferred:							
   Federal	     	                         215,949		   (137,700)		  (198,393)	
   State                                 		38,108		    (24,299)		   (35,010)	

     Total deferred		                     254,057		   (161,999)		  (233,403)	
							
     Total provision for income taxes	$	3,227,676	 $	2,889,339	 $	2,518,769	
<FN>
<F8>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                  <C>           <C>           <C>
Allowance for possible loan losses	  $	  776,888   $  	914,386	  $   815,315
Write-down of other real estate		           -          177,120       177,120
Deferred compensation		                  403,857       336,255	      256,139
Deferred loan fees		                      19,823        26,863        44,051
  Deferred tax asset	                  1,200,568     1,454,624     1,292,625	

Unrealized gain on AFS securities		     (240,124)		    (97,294)		   (157,392)
	
  Deferred tax liability              		(240,124)		   ( 97,294)		   (157,392)	

    Net deferred tax asset	          $  	960,444   $	1,357,330	  $	1,135,233	

<FN>
<F10>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                   <C>           <C>           <C>
Tax expense at statutory rate	        $	3,495,754	  $	3,317,086	  $	2,935,722	
Increase (decrease) in taxes 
  resulting from:							
    Tax-exempt interest		                (896,112)		   (859,383)		   (783,011)	
    Nondeductible interest expense		      106,329		     101,534		      89,491	
    Employee benefits		                   (55,560) 		   (34,685)		    (22,418)	
    Other nondeductible expenses							
      (nontaxable income) - net		          11,146	 	     13,515	 	     (5,695)	
    State income taxes, net of 
      federal	tax benefit               		392,915		     398,963	 	    363,393	
    Dividend income exclusion		           (33,239)	 	   (34,855)	 	   (18,324)	
    Other		                                55,891	 	    (12,836)		    (40,388)	
Total provision for income taxes	     $	3,227,676	  $	2,889,339	  $	2,518,769	
Effective tax rate		                         31.4%		       29.6%		       29.2%	
<FN>
<F11>
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 1997, 1996, and 1995 amounted to
$2,927,000, $3,140,000 and $2,756,442, respectively.

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


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 standby letters of
credit in the normal course of business at December 31, 1997,
were $21,735,000 and $1,977,000, 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 INFORMATION

		 Interest paid on deposits and other borrowings during 1997,
1996, and 1995 amounted to $17,049,703, $17,206,708, and
$14,845,107, 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, 1997 and 1996,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		The Bank's calculated risk-adjusted capital ratios exceeded
the minimum standard for a "well capitalized" bank as of 
September 30, 1997, the date of the most recent examination by
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, 1997	            Amount	 	  Ratio	     Amount	  	Ratio > or=		    Amount		  Ratio > or =

<S>                                <C>         <C>       <C>            <C>         <C>         <C>       
Total Capital (to Risk Weighted											
 Assets) Consolidated	             61,732,093		19.68%		  25,098,756		   8.00%		     31,373,445		10.00%
         Bank	                     61,153,956		19.54%		  25,040,651		   8.00%		     31,300,813		10.00%
Tier I Capital (to Risk Weighted											
 Assets) Consolidated	             58,789,093		18.74%		  12,549,378		   4.00%		     18,824,067		 6.00%
         Bank	                     58,210,956		18.60%		  12,520,325		   4.00%		     18,780,488		 6.00%
Tier I Capital (Average) 
 (to Average	Assets)  
         Consolidated	             56,515,935		10.73%		  21,073,801		   4.00%		     26,342,251		 5.00%
         Bank	                     55,946,149		10.63%		  21,047,205		   4.00%		     26,309,006		 5.00%

As of December 31, 1996											
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%		  11,988,374		   4.00%		     17,982,562		 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%		  20,102,944		   4.00%		     25,128,680		 5.00%
         Bank	                     50,574,336		10.07%		  20,089,111		   4.00%		     25,111,388		 5.00%
<FN>
<F12>
Table XII - Capital Amounts and Capital Adequacy Ratios    
</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 nonprofit 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 $684,227, $661,307 and $633,459, in 1997, 1996, and
1995, 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 (1997 - $645,985; 1996 - $620,657) purchased
in 1993 to fund the plan and the related liability (1997 -
$501,255; 1996 - $513,792) were included in other assets and
other liabilities, respectively.  Net noncash income recognized
on these policies of $25,328 in 1997 and $26,436 in 1996 is
included in the above asset values.   Net noncash income was
$14,133 in 1995.  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 $42,463 in
1997, $64,024 in 1996, and $106,066 in 1995.

		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, net of benefits paid out in 1997
and accruals, of $173,841 for 1997, $172,871 for 1996, and
$176,727 for 1995 have been recognized in the accompanying
consolidated 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.  Additional single premium universal life insurance
policies, totaling $385,000, were purchased in 1997 for new
participants.  Net noncash income recognized on these policies
of $103,953 in 1997 and $85,249 in 1996 is included in the cash
surrender values of  $2,376,124 and $1,887,171 reported in other
assets at December 31, 1997 and 1996, respectively.  Net noncash
income was $51,803 in 1995.

		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.  The value of this policy (1997 -
$819,460; 1996 - $785,330) is included in other assets, and net
noncash income recognized on this policy of $34,130 in 1997 and
net expense of $9,670 in 1996 is included in the above asset
values.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replacement/split dollar plan.  These
policies have an aggregate face amount of $3,163,750.


<PAGE>

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

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
                              		December		31,1997		         December		31,1997	
                              Carrying		     Fair      	 	Carrying		     Fair	
                             		Amount		      Value		       Amount		      Value	
Financial assets		                        (DOLLARS		IN		THOUSANDS)			
<S>                           <C>         <C>             <C>         <C>
 Cash and due from banks	     $	29,873	   $	29,873	       $	27,917	   $	27,917	
 Federal funds sold		           12,800		    12,800		          -		         - 	
 Securities held to maturity		  96,266		    98,371		       118,542		   119,226	
 Securities available for
  sale		                        48,921		    49,521		        55,898		    56,142	
 Loans, net                  		328,417		   325,323		       300,806		   309,401	
 Accrued interest receivable		   5,366		     5,366		         5,549		     5,549	

Financial liabilities									
 Deposits		                    470,282		   456,557		       460,573		   449,129	
 Federal funds purchased      		  -		         -		            5,000		     5,000	
 Short term borrowings		           602		       602		           523		       523	
 Accrued interest payable		      2,794		     2,794	         	2,539		     2,539	

<FN>
<F13>
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, 1997, 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
1997										

<S>                         <C>          <C>          <C>          <C>          <C>
Interest income	            $	9,362,178	 $	9,705,584	 $	9,774,855	 $	9,804,468	 $	38,647,085
Interest expense		            4,258,739		  4,330,171		  4,361,715		  4,353,765		  17,304,390

Net interest income		         5,103,439		  5,375,413		  5,413,140		  5,450,703		  21,342,695
Provision for possible loan
 losses		                       450,000		    290,000		    550,000	    	650,000		   1,940,000
Noninterest expenses, net 
 of noninterest income		      2,394,981		  2,405,847		  2,388,160		  1,932,079		   9,121,067
Income before income taxes		  2,258,458		  2,679,566		  2,474,980		  2,868,624		  10,281,628
Income taxes		                  556,134		    795,731		    917,613		    958,198		   3,227,676

Net income	                 $	1,702,324	 $	1,883,835	 $	1,557,367	 $	1,910,426	 $	 7,053,952

Earnings per common share										
 (1,400,000 shares)	        $	     1.22	 $	     1.35	 $	     1.11	 $	     1.36	 $	      5.04

                             		First		     Secon  		     Third		     Fourth		
                            		Quarter		    Quarter		    Quarter		    Quarter		      Total
1996										
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

<FN>
<F14>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


<PAGE>

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

NOTE 16 - DEPOSITS  

				The Bank does not have any foreign offices and all deposits
are serviced in its sixteen 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.

<TABLE>
<CAPTION>
                                  		        Year	Ended	December	31
		                                      1997   	 			    	  1996	   			      	1995				
                                 	         	(Dollars in Thousands)									
<S>                              <C>          <S><C>            <S><C>            <S><C>
Demand deposits	                 $	62,909	   	- 	%	 $	61,509   	- 	%  $	56,730		  -	 %	
NOW and money market accounts		   166,914		  3.37		 	158,450		 3.37			 149,016		 3.51		   
Savings deposits		                 43,775		  3.37			  37,421		 3.22			  34,629		 3.00		
Time deposits of less than
 $100,000		                       152,389		  5.29			 151,952		 5.40			 136,568		 5.30		
Time deposits of $100,000 or
 more		                            37,686		  5.42			  34,539  	5.41			  32,524		 5.35		
																
Total In Domestic Offices	       $463,673		  3.71%	 $443,870		 3.74%	 $409,467		 3.72%	

<FN>
<F15>
  Table XV - Average Amounts of Deposits and Average Rates Paid
             by Deposit Type at December 31
</FN>
</TABLE>
   		
<TABLE>
<CAPTION>
                                  1997		      1996		      1995
                                 				(Dollars In Thousands)		
        <S>                    <C>         <C>         <C>
        Under 3 months	        $ 	9,308	   $	11,680	   $ 	7,877
        3 to 12 months	         	25,981		    22,638		    18,407
        Over 12 months		          4,039		     4,812		     4,310

                               $ 39,328    $ 39,130    $ 30,594
<FN>						
<F16>
Table XVI - Maturities of Time Deposits of $100,000 or More at
            December 31
</FN>
</TABLE>

<PAGE>

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

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
                             Condensed Balance Sheets
                            December 31, 1997 and 1996				
                            (In Thousands of Dollars) 
<CAPTION>
Assets		                                           1997		         1996
<S>                                              <C>            <C> 
Cash	                                            $     72	      $	   142
Investment in bank subsidiary - at equity		        59,565		       53,870
Investment in credit life insurance company 
 - at cost		                                           50		           50
Investment in other securities	                        25		           22
Dividends receivable from bank subsidiary		           784		          714
Cash surrender value - life insurance		               651		          489
Other assets		                                       -		               1
				
   Total assets	                                 $	61,147	      $	55,288

Liabilities and Stockholders' Equity				
Liabilities				
  Payable to directors	                          $	   220	      $	   173
  Dividends payable		                                 784		          714
				
    Total liabilities		                             1,004		          887
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		                              45,783		       40,255
  Net unrealized gain (loss) on 
   available-for-sale securities, net of 
   tax		                                              360		          146
    Total stockholders' equity		                   60,143		       54,401

    Total liabilities and stockholders' equity   $ 61,147       $ 55,288  
<FN>
<F17>
Table XVII - Condensed Statements of Balance Sheet of Parent
</FN>
</TABLE>

<TABLE>
                           Condensed Statements of Income
                        Years Ended December 31, 1997 and 1996
                              (In Thousands of Dollars)
<CAPTION>
                                                   		1997		       1996
<S>                                               <C>          <C>
  Dividends from bank subsidiary                  $ 1,526      $ 1,372
  Other dividend income		                              80		         85
  Interest income		                                     8		          6
  Other                                              		34		         28
Operating expenses		                                   76		         68
   Income before equity in undistributed net				
    income of bank subsidiary		                     1,572		      1,423
				
Equity in undistributed net income of bank
 subsidiary		                                       5,482		      5,444
       Net Income	                                $	7,054	     $	6,867

<FN>
<F18>
Table XVIII - Condensed Statements of Income 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>
                         Condensed Statements of Cash Flows 
                       Years Ended December 31, 1997 and 1996
                            (In Thousands of Dollars)   
<CAPTION>
                                       		1997	           	1996
<S>                                    <C>              <C>
Operating activities				
  Net income for the year              	$	7,054	        $ 6,867
  Adjustments to reconcile net income
   to net cash provided by operating 
   activities				
   Equity in undistributed net income
    of bank subsidiary		                 (5,482)		       (5,444)
   Increase in other assets		               (98)		         (111)
   Increase in payables		                    47		            44
				
      Total adjustments		                (5,533)	 	      (5,511)
				
   Net cash provided by operating 
    activities		                          1,521		         1,356
				
Net cash provided by (used in) 
 investing activities				
 Purchases of investment securities      		(119)		         (133)
 Proceeds from maturities of 
  investment securities                     119		           137
 Purchase of single premium life 
  insurance policy		                       (135)	           -	

    Net cash provided by (used in) 
     investing activities		                (135)		            4
				
Net cash used in financing activities				
 Cash dividends paid		                   (1,456)		       (1,288)
 
   Increase (decrease) in cash		            (70)		           72
				
Cash at beginning of year		                 142		            70
				
Cash at end of year	                   $    	72	        $  	142

<FN>
<F19>
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 1997, 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.  "High Technology + High Commitment =
High Performance" was the challenge for the year as the Bank
committed 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.

	The accompanying tables plus the discussion and financial
information are presented to aid in understanding First Farmers
and Merchants Corporation's current financial position and
results of operations.  The emphasis of this discussion will be
on the years 1997, 1996, and 1995; 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 Corporation'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 $7.1 million for 1997 compared
to $6.9 million in 1996 and $6.1 million in 1995.  On a per
common share basis, net income was $5.04 for 1997 versus $4.90
for 1996 and $4.37 for 1995.  The improvement in 1997's earnings
resulted from a strong gross margin reinforced by loan demand
that changed the mix of earning assets as higher yielding loans 
were funded with maturing investment securities and an increase in 
noninterest income sufficient to cover a smaller increase in 
noninterest expenses and  most of the increase in taxes.  These 
improvements were partially offset by higher additions to the allowance 
for loan losses.

  	The return on average equity for 1997 was 12.2% compared to
13.2% for 1996 and 13.1% for 1995.   The return on average
assets was 1.34% for 1997 versus 1.37% for 1996 and 1.32% for
1995.

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>

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

<CAPTION>
                                   YEAR ENDED DECEMBER 31,
                                 				1997								                  1996								                  1995
                              		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	                  $	314,198		9.18	%	$	28,858	*	 $	290,413		9.43	%	$	27,373	*	 $	276,166		9.38 %	 $	25,892	*  
 Bank time deposits		                 1		 -			       -			           1   -	         -			           2		 -			        -	
 Taxable securities		           113,013		6.35			   7,173			   118,114		6.14			   7,256			   104,217		6.20			    6,457	
 Tax exempt securities		         47,366		6.96			   3,297	*		   44,158		7.10			   3,134	*		   39,105		8.07			    3,156	*
 Federal funds sold		             4,631		5.46			     253			     4,198		5.31			     223			     2,076		5.83			      121	

 TOTAL EARNING ASSETS   		      479,209		8.26		 $	39,581			   456,884		8.31		 $	37,986			   421,566		8.45		  $	35,626	
Noninterest earning assets   																								
 Cash and due from banks		       27,039								                25,760				  	                 24,829
 Bank premises and equipment		    6,633								                 6,708								                 6,246						
 Other assets		                  15,045								                13,348								                11,098						

 TOTAL ASSETS	                $	527,926							              $	502,700							              $	463,739						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY																								
Interest bearing liabilities																								
 Time and savings deposits:																								
 NOW and money market 
  accounts 	                  $	166,828		3.38	%	$	5,634		   $	158,438		3.39	%	$ 5,338 		 $	148,993		3.51	%	 $ 5,223	
 Savings		                       43,776		3.37			  1,476			     37,428		3.22			  1,204			    34,627		3.00			   1,040	
 Time                         		152,389		5.29			  8,063			    151,973		5.40			  8,210			   136,605		5.30			   7,245	
 Time over $100,000		            37,680		5.43			  2,045			     34,554		5.40		   1,866			    32,522		5.35			   1,740	

 TOTAL INTEREST BEARING 
 DEPOSITS		                     400,673	 4.30			 17,218			    382,393		4.35		  16,618			   352,747		4.32 	   15,248	
 Federal funds purchased		        1,016		5.80			     59			      1,043		5.56		      58			     2,415		5.92		      143	
 Other short-term debt		            538		5.02			     27			        622		5.79	       36			       565		5.49		       31	

 TOTAL  INTEREST BEARING 
 LIABILITIES		                  402,227		4.30	  $17,304			    384,058		4.35		 $16,712			   355,727		4.34    $15,422	

Noninterest bearing liabilities																								 
 Demand deposits		               62,903								                61,509								               56,742						 
 Other liabilities		              4,990								                 5,066								                4,515						

 TOTAL LIABILITIES		            470,120								               450,633								              416,984						
Stockholders' equity		           57,806								                52,067								               46,755						 
 TOTAL LIABILITIES AND																								
   STOCKHOLDER'S EQUITY	      $	527,926							              $	502,700		 			              $	463,739						

Spread between combined 
 rates earned and	combined 
 rates paid*				                         3.96	 %			 				               3.96 %							               4.12	%			

 Net yield on interest-earning
  assets*				                            4.65	 %							                4.66	%							               4.79 % 			

<FN>
<F1>
  * Taxable equivalent basis
</FN>
</TABLE>
Notes:

1.	U.S. Government, government agency, taxable municipal, 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 amortized cost of
available-for-sale securities were used in the calculations in
this table.

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

		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>

TABLE B - Volume and Yield/Rate Variances
   (Taxable Equivalent Basis - In Thousands)
<CAPTION>
                     		       1997 		Compared 		1996			       1996 		Compared 		1995
                              				   Yield/		Net Increase			     		  Yield/		Net Increase
                         		Volume	   	Rate		  (Decrease)			 Volume		  Rate		  (Decrease)
<S>
Revenue earned on									<C>			    <C>	      <C>          <C>       <C>      <C>         
 Net loans	               $	2,243 	 $	(758)	  $	1,485	   	 $	1,336	  $	 145	   $	1,481
 Investment securities			
  Taxable securities		       (314)		   231		      (83)			      861		    (62)		     799
  Tax-free securities		       228		    (65)		     163			       408		   (430)		     (22)
 Federal funds sold		          23		      7		       30			       124		    (22)		     102
													
  Total interest earning
   assets		                 2,180		   (585)		   1,595			     2,729		   (369)		   2,360

Interest paid on													
 NOW and money market 
  accounts		                  283		     13		      296			       331		   (216)		     115
 Savings deposits		           204		     68		      272			        84		     80		      164
 Time deposits		               23		   (170)		    (147)			      815		    150		      965
 Time over $100,000		         169		     10		      179			       109		     17		      126
 Federal funds purchased		     (2)	      3		        1			       (81)		    (4)		     (85)
 Short term debt            		 (5)		    (4)		      (9)			        3		      2		        5

   Total interest-bearing
     funds		                  672		    (80)		     592			     1,261		     29		    1,290

Net interest earnings		     1,508	  $	(505)	  $	1,003		    $	1,468	  $	(398)   $	1,070

</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,  taxable municipal, and
corporate debt securities plus equity securities in the
available-for-sale and held-to-maturity categories are taxable
investment securities.  Bank qualified 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 stockholders.  The first graph illustrates in thousands of
dollars, 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>
 		                         Investment          
                Loans			    Securities		     Other

<S>           <C>            <C>            <C>
1997		        $314,198		     $160,722		     $4,613
1996		         290,413		      162,188		      4,199
1995		         276,166		      143,358		      2,078
</TABLE>

  	Average earning assets increased 5.0% in 1997 compared to an
8.4% increase in 1996 and a 3.0% increase in 1995.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1997, average net loans represented 
65.5% of  average earning assets.  Total average net loans
increased during the last three years showing an 8.2% growth
from 1996 to 1997, a 5.2% growth from 1995 to 1996, and an 11.5%
growth from 1994 to 1995.  Average investments accounted for the
remaining balance of average earning assets at December 31,
1997, decreasing .9% from year end 1996.  Some of the proceeds
from maturities and calls of investment securities was used to
fund the expanding loan demand during the year.  Average
investments increased 14.5% in 1996.  The Bank purchased certain
assets and assumed certain deposit liabilities of  two branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  Most of the increase in investments during 1996 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.  Average total assets increased during
the last three years as evidenced by a  5.0% growth from 1996 to
1997, an 8.4% growth from 1995 to 1996, and a 2.6% growth from
1994 to 1995.


   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    Noninterest_Bearing  
                       Deposits	            Deposits	           Other
<S>                    <C>                  <C>                <C>
1997		                 $390,077			          $80,205			         $  -    
1996		                  382,393			           61,509			          1,043
1995		                  352,747			           56,742			          3,526
</TABLE>


  	The bank's average deposits grew during the last three years
reflecting a 4.4% growth from 1996 to 1997, an 8.4% growth from
1995 to 1996, and a 1.3% growth from 1994 to 1995.  Short and
medium term rates remained competitive compared to longer term
rates during 1997 and some depositors left money in or moved
money back into interest-bearing transaction accounts, which
increased 5.3% during 1997 and 6.3% in 1996.  However, over half
of the increase during 1996 was attributable to the acquisition.
 Average interest-bearing checking accounts decreased 7.6 % in
1995 as investors took advantage of higher certificate of
deposit rates.  Average savings deposits increased  almost 17.0%
during 1997 and 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.  Average certificates of deposit under
$100,000 increased .3% during 1997, 11.3% during 1996, 60.0%
from the acquisition, and 8.0% in 1995.  Certificates of deposit
over $100,000 increased 9.1% in 1997 compared to 6.3% in 1996,
87.8% from the acquisition, and 24.8% in 1995.  

<PAGE>

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


LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT

   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, 1997, 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, 1997, 1996, and 1995 was 4.65%, 4.66%, and 4.79% respectively.

<TABLE>
TABLE C - Rate Sensitivity of Earning Assets and
Interest-Bearing Liabilities										

<CAPTION>
                               (Dollars in Thousands)										
                          		3 Months		   3-6		       6-12		      Over 1		
As of December 31, 1997		   or Less	    Months		    Months		      Year		     Total
<S>                        <C>         <C>         <C>         <C>          <C>                                 
Earning assets										
 Federal funds sold	       $	12,800	   $    -	     $	   -	     $     -	     $ 	12,800
 Taxable investment
   securities		               3,928		     7,989		     5,000		     80,574		     97,491
 Tax-exempt investment
   securities                 1,151		       720		     1,150		     45,275		     48,296
 Loans and leases, net of
   unearned                  61,297		    45,612		    65,193	     159,606		    331,708
										
      Total earning assets		 79,176		    54,321		    71,343		    285,455		    490,295

Interest-bearing 
 liabilities										
 NOW and money market 
   accounts		                48,546		       -		      66,832		     40,656		    156,034
    Savings		                   -		         -		      44,170		        -		       44,170
    Time		                   42,702		    30,421		    54,807		     22,614		    150,544
    Time over $100,000		     10,242		     8,917		    16,536		      3,634		     39,329
    Other short-term debt		     602		       -		         -		          -		          602

      Total interest 
       bearing liabilities		102,092		    39,338		   182,345		     66,904	   $	390,679

Noninterest-bearing, net								                                 (99,616)		

Net asset/liability 
 funding gap		              (22,916)		   14,983		  (111,002)		   118,935		
										
Cumulative net asset/
  liability funding gap	  $	(22,916)	  $	(7,933)	$	(118,935)	  $	    -		

<FN>
<F2>
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 & 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, 1997.  

   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 $3.0 million at December
31, 1997, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent .9% of gross loans. 
Commercial loans comprised $.6 million of the total, with loans
secured by real estate accounting for $1.4 million, and
installment loans $1.0 million.  The gross interest income that
would have been recorded during 1997 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 $431, $374, and $365 thousand for
the years ended December 31, 1997, 1996, and 1995 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.

  	The bar graph on the bottom of this page  shows the increase in
average net loans (in thousands of dollars) and the line shows
the ratio of net loan charge offs to average loans.  The ratio
at December 31, 1997 was .61%.   Management monitoring found and
corrected a problem in consumer loan underwriting that
contributed to the higher net charge off percentage in 1997. 
The following table is the data illustrated by this graph.
<TABLE>
<CAPTION>
			                    Avg Loans		  Ratio Net
			                  Outstanding		  CO/Avg Ln

          <S>          <C>           <C>
          1981		       $ 54,908      .0027	
          1982		         60,119		    .0077
          1983		         66,964		    .0039
          1984		         80,055		    .0036
          1985		         98,353		    .0044
          1986		        120,243		    .0036
          1987		        142,959		    .0077
          1988		        154,506		    .0027
          1989		        163,003		    .0032
          1990		        172,749		    .0030
          1991		        182,561		    .0037
          1992		        215,158 		   .0023
          1993		        233,608		    .0030
          1994		        247,791		    .0014
          1995		        276,166		    .0012
          1996		        290,413		    .0036
          1997		        314,198		    .0061
</TABLE>

<PAGE>

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

<TABLE>

TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO

                                              				December		31				
                         		     1997	 	    1996		     1995	 	    1994		     1993
             		                              (Dollars In	Thousands)				
<S>                          <C>        <C>        <C>        <C>        <C>                           
Average amount of loans
 outstanding                	$	314,198	 $	290,413	 $	276,166  $	247,791	 $	233,608
Balance of allowance for 
 possible loan losses at 
 beginning of year	          $  	2,926	 $	  2,678	 $	  2,342	 $	  2,024	 $	  2,254
 Loans charged-off:										
   Loans secured by real 
    estate		                        88	       368		       15		      135		      396
   Commercial and industrial
    loans		                        605		      141		      170		       42		      222
   Individuals		                 1,371 		     879		      371		      246		      230
      TOTAL  LOANS CHARGED
       OFF		                     2,064		    1,388		      556		      423		      848
Recoveries of loans 
 previously charged off:										
   Loans secured by real 
    estate		                         8		      111		       97		        9		       56
   Commercial and industrial
    loans		                         53		       42		       14		       36		       52
   Individuals                    		80		      183		      111		       36		       40
      TOTAL RECOVERIES		           141		      336		      222		       81		      148
        NET  LOANS
         CHARGED-O 		            1,923		    1,052		      334		      342		      700
Provision charged to 
 operating expenses              1,940		    1,300		      670		      660		      470
  BALANCE OF ALLOWANCE FOR	
   POSSIBLE LOAN LOSSES AT										
   END OF YEAR	              $  	2,943	 $  	2,926	 $  	2,678	 $  	2,342	 $  	2,024

Ratio of net charge-offs 
 during the	period to average
 loans outstanding		              0.61%		    0.36%		    0.12%	   	0.14%		     0.30%

</TABLE>

CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

  	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1997, the Corporation had a ratio of
average tier 1 capital to average assets of 10.73%.  This
compares to a ratio of average tier 1 capital to average assets
of 10.36% at December 31, 1996, and 10.08% at December 31, 1995.

  	Cash dividends declared in 1997 were 11.2% more than those paid
in 1996.  The dividend to net income ratio was 22%.  Additional
dividends of approximately $15.9 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, 1997, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 18.7% and 19.7% respectively.  At
December 31, 1996, the comparable ratios were 17.7% and 18.7%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital.

  	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>
               		1991	 		$30,194
               		1992			  33,414
               		1993			  37,454
               		1994			  41,820
               		1995			  46,755
               		1996			  52,067
               		1997			  57,806
</TABLE>

<PAGE>

             FIRST FARMERS AND MERCHANTS COPROATION AND SUBSIDIARY
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANACIAL CONDITION 
                         AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Interest Income

  	Total interest income increased 4.2% in 1997 enhanced by loan
growth in all the market areas the Bank serves.  Interest and
fees earned on loans increased 5.5% in 1997 accounting for 74.6%
of gross interest income.  Interest earned on investment
securities and other investments increased .7% in 1997 rounding
out gross interest income contributing 25.4%.  Total interest
income increased 7.5% in 1996 and 11.9% in 1995.


Interest Expense

  	Total interest expense increased 3.6% in 1997 due mostly to the
increase in interest-bearing deposits.  This increase compares
favorably to a 8.4% increase in 1996, about half of which can be
attributed to the acquisition, and a 19.9% increase in 1995. 
The cost of interest-bearing deposits remained steady all year
under monthly monitoring by the Asset/Liability Committee.  This
contributed to the strong gross margin achieved during 1997.  
The net interest margin (tax equivalent net interest income
divided by average earning assets) was 4.7% at the end of 1997
and 1996 and 4.8% at the end of  1995.

  	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 19.6% during 1997 led by fees on
deposits.  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.  This compares to a 28.4% increase
in 1996 and a 14.9% increase in 1995.

  	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1997 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  		$1,471			      21.2%
 Other service fees			            845   			   12.2%
	Securities gains			              488			       7.0%
	Fees on deposits			            3,744  			    53.9%
	Other				                        394		     	  5.7%

</TABLE>

	Noninterest expenses, excluding the provision for possible loan
losses, increased 6.2% in 1997 which compares favorably with the
5.8% increase in 1996.  The increase in 1995 was 6.2%. 
Increased productivity fostered by our technology improvements
as the learning curve diminished and cost control efforts
contributed to this cost containment.  Included in this category
is net occupancy expense for an additional office opened in 1997
and furniture and equipment, which includes technology expenses,
that was down over 5% from 1996.

	A pie chart is included at this point in the materials sent to
out stockholders illustrating the composition of noninterest
expense in 1997 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			                   $7,319			            45.6%
 Furniture and equipment		       1,501			             9.3%
 Occupancy			                    1,317			             8.2%
 Other					                      5,927			            36.9%

</TABLE>

<PAGE>

                    FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDTION
                                AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
   		                            1997		       1996		       1995		       1994		       1993

<S>                         <C>          <C>          <C>          <C>          <C>                                   
INTEREST INCOME										
 Interest and fees on loans	$	28,841,420	$	27,343,817	$	25,857,982	$	21,130,914	$	19,518,742
										
 Income on investment 
  securities										
   Taxable interest		          6,802,934		  6,892,118		  6,179,492		  7,012,626		  6,925,404
   Exempt from federal 
    income tax		               2,488,475		  2,366,764		  2,156,813		  2,184,666		  1,857,168
   Dividends		                   260,759		    256,951		    177,790		    204,948		     72,054
										
                             		9,552,168		  9,515,833		  8,514,095		  9,402,240		  8,854,626

 Other interest
  income		                       253,497		    223,019		    121,492		    284,384	  	  347,287


    TOTAL INTEREST
     INCOME		                 38,647,085		 37,082,669		 34,493,569		 30,817,538	  28,720,655

INTEREST EXPENSE 										
 Interest on deposits		       17,218,537		 16,617,525		 15,247,875		 12,770,618		 11,998,235
 Interest on other short 
  term borrowings		               85,853		     94,232		    174,370		     93,286		     38,339
										
    TOTAL INTEREST EXPENSE		  17,304,390	  16,711,757		 15,422,245		 12,863,904		 12,036,574

      NET INTEREST INCOME		   21,342,695	  20,370,912		 19,071,324		 17,953,634		 16,684,081

PROVISION FOR POSSIBLE LOAN
 LOSSES		                      1,940,000		  1,300,000		    670,000		    660,000		    470,000

    NET INTEREST INCOME 
     AFTER PROVISION FOR 
     LOAN LOSSES		            19,402,695		 19,070,912		 18,401,324		 17,293,634		 16,214,081

NONINTEREST  INCOME										

 Trust department income		     1,470,568		  1,323,525	  	1,251,642	  	1,249,359		    863,952
 Service fees on deposit 
  accounts		                   3,744,381		  3,373,805		  2,697,332		  2,317,992		  2,206,026
 Other service fees, 
  commissions, and fees		        845,072		    745,523		    300,407		    336,758		    509,009
 Other operating income		        394,322		    363,430		    322,634		    319,466		    315,108
 Securities gains (losses)     		487,972		       -		         1,182		   (243,690)		    23,896

    TOTAL NONINTEREST INCOME		 6,942,315		  5,806,283		  4,573,197		  3,979,885		  3,917,991

NONINTEREST  EXPENSES										
 Salaries and employee
  benefits		                   7,319,460		  7,030,588		  6,620,827		  6,247,706		  5,686,965
 Net occupancy expense		       1,316,588		  1,211,067		  1,279,434		  1,190,678		  1,070,971
 Furniture and equipment
  expense		                    1,500,486		  1,580,753		  1,382,769		  1,069,856		    889,848
 Deposit insurance		              57,004		      6,549		    499,709		    890,646		    826,966
 Other operating expenses		    5,869,844		  5,292,103		  4,557,307		  4,109,461		  4,180,105
										
    TOTAL NONINTEREST
     EXPENSES		               16,063,382		 15,121,060		 14,340,046		 13,508,347		 12,654,855

     INCOME BEFORE PROVISION										
       FOR INCOME TAXES		     10,281,628		  9,756,135		  8,634,475		  7,765,172		  7,477,217

PROVISION FOR INCOME TAXES		   3,227,676		  2,889,339		  2,518,769		  2,203,746		  2,220,965

     NET INCOME       	     $ 	7,053,952	$	 6,866,796	$	 6,115,706	$	 5,561,426	$ 	5,256,252
										
EARNINGS PER COMMON SHARE 										
 (1,400,000 outstanding
   shares)	                 $	      5.04	$	      4.90	$	      4.37	$	      3.97	$	      3.75

</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 2.7% higher in 1997 than in 1996.  As indicated
earlier, the improvement in 1997's earnings resulted from a
strong gross margin reinforced by loans increasing as a
percentage of earning assets, an increase in noninterest income
sufficient to cover a smaller increase in noninterest expenses,
and most of the increase in taxes.  These improvements were
partially offset by higher additions to the allowance for loan
losses associated with a corrected loan underwriting problem.


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

  	The Financial Accounting Standards Board has issued two
standards that have been adopted by the Corporation as follows:
(1)  Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share" requires a reconciliation of the
numerators and the denominators of the basic and diluted
per-share computation for income from continuing operations. 
The statement is effective prospectively for earnings per share
computation for both interim and annual periods ending after
December 31, 1997.  Because the Corporation has no potential
common stock outstanding, it is required to present only basic
earnings per share and its presentation of earnings per share
did not change. (2)  Statement of Financial Accounting Standards 
No. 129 (SFAS 129), "Disclosure of Information about Capital Structure" 
requires an entity to explain, in summary form within its
financial statements, the pertinent rights and privileges of the
various securities outstanding.  The Corporation only has one
class of common stock outstanding and this statement had no
material effect on the financial statements.

   	The Financial Accounting Standards Board has issued two
standards that have not been adopted by the Corporation as
follows: (1)  Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income" purposes that
an entity report a measure of all changes in equity that result
from recognized transactions and other economic events of the
period other than transactions with owners in their capacity as
owners.  The statement is effective for fiscal years beginning
after December 15, 1997.  Management does not believe this
statement will have any material effect on future financial
statements except for disclosures.  (2)  Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information" establishes
guidelines for reporting financial information about an
operating segment or component of an enterprise.  The statement
is effective for fiscal years beginning after December 15, 1997.
 Management does not believe this statement will have any
material effect on future financial statements except for
disclosures.


YEAR 2000 COMPLIANCE TASK FORCE

 		A Year 2000 Compliance Task Force has been established to
evaluate the mission critical software and hardware that must be
compatible for continued satisfactory data processing;
representations have been obtained, or are in the process of
being obtained, from our software and hardware vendors,
confirming their Year 2000 compatibility; and plans are in place
for testing our systems' compatibility before June 30, 1998. 
Management believes that our information systems are well on
their way to being Year 2000 compliant.

<PAGE>

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

SHAREHOLDER INFORMATION

  	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1997, had a
market value of $109 million and were held by 1,618 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 tables below show 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.

   These tables were shown graphically in the materials	sent to our
stockholders.

<TABLE>
<CAPTION>

                       				Price Range of	  		 Dividend
                        				Common Stock	     	 	Paid
                         			High	    	Low		    Per Share
 
<S>     <C>              <C>       <C>          <C>
       	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

       	First quarter	   $	67.00	  $	65.00	     $	
       	Second quarter		   69.00		   69.00		      0.53
1997	   Third quarter		    72.00		   70.00		
       	Fourth quarter		   78.00		   72.00		      0.56
                                          						$	1.09

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                 COMPARATIVE DATA
                            (In Thousands of Dollars)										

                         		1997		      1996		      1995		      1994		      1993
<S>                    <C>         <C>         <C>         <C>         <C>
AVERAGE ASSETS	        $	527,926	  $	502,700	  $	463,739	  $	451,953	  $	420,760

AVERAGE LOANS (NET)	   $	314,198	  $	290,413	  $	276,166  	$	247,791	  $	233,609

AVERAGE DEPOSITS	      $	463,576	  $	443,902	  $	409,489	  $	404,412	  $	378,782

RETURN ON EQUITY AND
 ASSETS										
  Return on average 
    assets		                1.34%		     1.37%		     1.32%		     1.23%		     1.25%
										
  Return on beginning
    equity		               12.97%		    14.01%		    13.95%		    14.11%		    14.93%
 Average tier 1 
    capital to average 
    assets		               10.73%		    10.36%		    10.08%		     9.25%		     8.90%

COMMON DIVIDEND PAYOUT
 RATIO										
   Earnings per shar   $	    5.04	 $	   4.90	 $	    4.37	  $    3.97   $	   3.75

   Cash dividends per 
    share	             $	   1.09	  $	   0.98  $	    0.88	  $	   0.80	  $	   0.73

   Ratio		                    22%		       20%		      20%		        20%		       19%
</TABLE>
										
<TABLE>
<CAPTION>
                                      NET INTEREST MARGIN										
                                  (In Thousands of Dollars)										

                        		1997		      1996		      1995		      1994		      1993

<S>                    <C>         <C>         <C>         <C>         <C>     
INTEREST INCOME										
 (TAX EQUIVALENT)	     $	39,581	   $	37,986	   $	35,626	   $	32,039	   $	29,465

INTEREST EXPENSE		       17,304		    16,712		    15,422		    12,864		    12,037

                      	$	22,277	   $	21,274	   $	20,204	   $	19,175   	$	17,428

NET INTEREST MARGIN*		     4.65%		     4.66%		     4.79%		     4.68%		     4.58%


<FN>
<F3>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets.										
</FN>
										
</TABLE>




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 a part
of the Annual Report to Stockholders which is included in this
filing.


       
               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, 1997, 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 fifteen (15) 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 and Crockett 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.   At December 31, 1997, approximately $8.9
million was required to be maintained at the Federal Reserve
Bank.


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.

  		Debt and equity securities that are bought and held
  principally for the purpose of selling them in


<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)

  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 deferred
  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 payoff 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.

		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.  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 accrued 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 nonaccrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
nonaccrual status is recognized only to the extent of the excess
of cash payments received over principal payments due.


	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 $410 thousand at December 31, 1997, and $450
thousand at December 31, 1996.  

Allowance for Possible Loan Losses

	The allowance for possible loan losses is established through
provisions for loan losses charged against income.  Loan quality
is monitored by Loan Review and


<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)

the Credit Administrator.  Portions of loans deemed to be
uncollectible are charged against the allowance for losses, and
subsequent recoveries, if any, are credited to the allowance
account in the period such determination is made.  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. The allowance for
loan losses is maintained at a level believed adequate by
management to absorb estimated probable inherent loan losses.


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.


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: 
1997 - $182,613; 1996 - $224,212;  and  1995 - $168,020.

Earnings Per Share

	The Financial Accounting Standards Board has issued Statement
No. 128, "Earnings per Share". which supersedes APB Opinion No.
15.  This statement requires the presentation of earnings per
share by all entities that have common stock or potential common
stock, such as options, warrants and convertible securities,
outstanding that trade in a public market.  Those entities that
have only common stock outstanding are required to present basic
earnings per share amounts.  All other entities are required to
present basic and diluted per share amounts.  Because the
Corporation  has no potential common stock outstanding, it is
required to present only basic earnings per share and its
presentation of earnings per share will not change.  Earnings
per common share have been computed on the basis of the
weighted-average number of common shares outstanding during each
period presented.		


<PAGE>




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

NOTE  2 - INVESTMENT SECURITIES

		Securities with an amortized cost of $116,315,234 and
$103,540,673 at December 31, 1997 and 1996, respectively (fair
value: 1997 - $117,969,544;  1996 - $104,061,311), 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, 1997, 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
 <S>                             <C>              <C>            <C>          <C> 
	December 31, 1997								
	Available-for-sale securities								
	    U.S. Treasury	              $ 	22,337,240	   $  	233,853	   $	 14,893	   $	 22,556,200
	    U.S. Government agencies		     23,834,686		       53,172		     92,413		     23,795,445
     Other securities		              2,749,094		      422,591	     	 2,000		      3,169,685

		                               $	 48,921,020	   $	  709,616	   $	109,306	   $ 	49,521,330
	Held-to-maturity securities								
	    U.S. Treasury	              $ 	10,432,892	   $	  209,508	   $	   -	      $	 10,642,400
	    U.S. Government agencies		     36,552,480		      657,930		      2,048		     37,208,362
	    States and political
       subdivisions		               48,465,174		    1,218,108		     12,144		     49,671,138
	    Other securities		                815,421		       33,735		       -		           849,156
									
                              		$  	96,265,967	   $ 2,119,281	   $  14,192	   $  98,371,056

	December 31, 1996								
									
	Available-for-sale securities								
	    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

<FN>
<F1>
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, 1997, 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, 1997, 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 $11,008,435, $3,020,054, and
$7,306,453 during 1997, 1996, and 1995, respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$32,386,811, $56,112,000, and $18,848,992 during 1997, 1996, and
1995, respectively.  Gross gains of $489,697 and gross losses of
$1,725 were realized on dispositions in 1997.  There were no
realized gains or losses in 1996.  Gross gains of $1,182 and
gross losses of $-0- were realized on the dispositions in 1995.
<TABLE>
<CAPTION>
                                  		Amortized		          Fair		        Yield
                                     		Cost	            	Value		    (Unaudited)
<S>                                <C>                 <C>              <C>
Available-for-sale securities						
U.S. Treasury						
   Within one year	                $ 	8,051,787	       $ 	8,049,800		   5.5%
   After one but within five years		 14,285,453		        14,506,400		   6.2%
U.S. Government agencies						
   Within one year		                  3,994,953		         3,999,700		   6.1%
   After one but within five years		 19,585,333		        19,541,020		   5.8%
   After ten years		                    254,400		           254,725		   6.1%
Other securities		                    2,749,094		         3,169,685		   9.0%
						
                                  	$	48,921,020	       $	49,521,330		
Held-to-maturity securities						
U.S. Treasury						
   After one but within five years $	10,432,892	       $	10,642,400		   6.4%
U.S. Government agencies						
   Within one year		                  2,999,150		         2,997,100		   5.4%
   After one but within five years   18,669,684		        19,008,962		   6.6%
   After five but within ten years		 14,883,646		        15,202,300		   6.5%
States and political subdivisions						
   Within one year		                  3,239,829		         3,286,218		   9.3%
   After one but within five years		 13,595,854		        13,865,175		   7.7%
   After five but within ten years		 18,510,918		        18,983,557		   7.4%
   After ten years		                 13,118,573		        13,536,188		   7.8%
Other securities						
   After one but within five years		    315,421		           323,206		   8.0%
   After five but within ten years		    500,000		           525,950		   7.3%
						
                                  	$	96,265,967	       $	98,371,056		
<FN>
<F2>
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>
    		                                           1997		          1996

<S>                                       <C>             <C>
Commercial, financial and agricultural	   $  	60,592,529	 $ 	54,565,335
Tax exempt municipal loans		                     768,125		      605,933
Real estate				
   Construction		                              5,861,866		    8,751,021
   Commercial mortgages		                     52,968,199		   46,114,930
   Residential mortgages		                   146,768,418		  125,854,753
   Other                                     		5,869,654		    7,115,749
Consumer loans		                              58,879,231		   60,993,583

                                           		331,708,022	  	304,001,304
Less:				
   Net unamortized loan origination fees		      (347,839)		    (269,260)
   Allowance for possible loan losses		       (2,943,000)		  (2,926,063)
				
	                                         $	328,417,183   $	300,805,981
<FN>
<F3>
Table III - Loans Outstanding  by Category at December 31, 1997
and 1996
</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	                $ 	78,350	     $ 	47,052	     $ 	40,499	   $	165,901
Variable rate loans		               93,752		       30,484		       41,571		    165,807
								
                                	$	172,102	      $	77,536	      $	82,070	   $	331,708

<FN>
<F4>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1997
</FN>

</TABLE>

		Loans having recorded investments of $2,954,000 at December
31, 1997, have been identified as impaired.  The total allowance
for possible loan losses related to these loans was $1,146,000. 
Interest received on these loans during 1997 was $479,698. 
Impaired loans had recorded investments of approximately 
$5,136,000 at December 31, 1996.

		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, 1997 and 1996, 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 1997 or 1996.


<PAGE>

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

NOTE 3 - LOANS (Continued)

<TABLE>
<CAPTION>
                                   		Balance at							
                                   		Beginning 				              Amount		  Balance at	
                                   		 of Year		     Additions		 Collected		End of Year	
				
<S>                                 <C>           <C>           <C>          <C>
            1997
Aggregate of certain party loans	   $	8,222,262	  $	12,488,090	 $	8,276,031	 $	12,434,321	

            1996									
Aggregate of certain party loans	   $	7,706,004	  $	 8,454,247  $	7,937,989	 $	 8,222,262	

<FN>
<F5>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>


NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
                                          		1997		        1996		        1995	
<S>                                     <C>           <C>           <C>
Balance at beginning of year	           $	2,926,063	  $	2,678,386  	$	2,342,290	
Provision charged to operating expenses 		1,940,000		   1,300,000		     670,000	
Loan losses:							
  Loans charged off                    		(2,064,138)		 (1,388,422)		   (555,957)	
  Recoveries on loans previously							
   charged off                            		141,075		     336,099		     222,053	
							
Balance at end of year	                 $	2,943,000	  $	2,926,063	  $	2,678,386	

<FN>
<F6>
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, 1997. 
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.


NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
                                            		1997		         1996	
<S>                                       <C>            <C>
Land	                                     $	1,348,288	   $	1,348,288	
Premises		                                  7,027,521		    7,013,942	
Furniture and equipment		                   3,857,459		    4,068,373	
Leasehold improvements		                    1,209,113		    1,149,732	
                                         		13,442,381		   13,580,335	
Less allowance for depreciation and
 amortization		                            (7,029,016)		  (6,750,860)	
                                        	 $	6,413,365	   $	6,829,475	
<FN>
<F7>
Table VII - Premises and Equipment at December 31, 1997 and 1996
</FN>
</TABLE>

<PAGE>

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

NOTE 5 - BANK PREMISES AND EQUIPMENT (Continued)

		Annual provisions for depreciation and amortization of bank
premises and equipment total $651,619 for 1997, $685,005 for
1996, and $645,816 for 1995.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling approximately $2,670,000 at
December 31, 1997.                   


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, 1997, additional dividends of approximately $15,900,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for five of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2008.  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 $689,887,
$726,337, and $660,121 for equipment leases, and $112,070,
$112,384, and $111,649 for building leases, in 1997, 1996, and
1995, respectively.  Future minimum lease commitments as of
December 31, 1997, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>
 <C>                                   <C>
                        			1998	       $   513,083	
                        			1999		          121,128	
                        			2000		          124,128	
                        			2001		          124,128	
                        			2002		           86,328	
                  			Thereafter           		94,200	

	Total future minimum lease payments			$	1,062,995	

<FN>
<F8>
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>
  		                                      1997	        1996		       1995	
<S>                                   <C>          <C>          <C>
Current:				  			
   Federal                           	$	2,416,401	 $	2,422,550	 $	2,166,566	
   State		                                557,218		    628,788		    585,606	

     Total current                    		2,973,619		  3,051,338		  2,752,172	

Deferred:							
   Federal	     	                         215,949		   (137,700)		  (198,393)	
   State                                 		38,108		    (24,299)		   (35,010)	

     Total deferred		                     254,057		   (161,999)		  (233,403)	
							
     Total provision for income taxes	$	3,227,676	 $	2,889,339	 $	2,518,769	
<FN>
<F8>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                  <C>           <C>           <C>
Allowance for possible loan losses	  $	  776,888   $  	914,386	  $   815,315
Write-down of other real estate		           -          177,120       177,120
Deferred compensation		                  403,857       336,255	      256,139
Deferred loan fees		                      19,823        26,863        44,051
  Deferred tax asset	                  1,200,568     1,454,624     1,292,625	

Unrealized gain on AFS securities		     (240,124)		    (97,294)		   (157,392)
	
  Deferred tax liability              		(240,124)		   ( 97,294)		   (157,392)	

    Net deferred tax asset	          $  	960,444   $	1,357,330	  $	1,135,233	

<FN>
<F10>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                   <C>           <C>           <C>
Tax expense at statutory rate	        $	3,495,754	  $	3,317,086	  $	2,935,722	
Increase (decrease) in taxes 
  resulting from:							
    Tax-exempt interest		                (896,112)		   (859,383)		   (783,011)	
    Nondeductible interest expense		      106,329		     101,534		      89,491	
    Employee benefits		                   (55,560) 		   (34,685)		    (22,418)	
    Other nondeductible expenses							
      (nontaxable income) - net		          11,146	 	     13,515	 	     (5,695)	
    State income taxes, net of 
      federal	tax benefit               		392,915		     398,963	 	    363,393	
    Dividend income exclusion		           (33,239)	 	   (34,855)	 	   (18,324)	
    Other		                                55,891	 	    (12,836)		    (40,388)	
Total provision for income taxes	     $	3,227,676	  $	2,889,339	  $	2,518,769	
Effective tax rate		                         31.4%		       29.6%		       29.2%	
<FN>
<F11>
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 1997, 1996, and 1995 amounted to
$2,927,000, $3,140,000 and $2,756,442, respectively.

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


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 standby letters of
credit in the normal course of business at December 31, 1997,
were $21,735,000 and $1,977,000, 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 INFORMATION

		 Interest paid on deposits and other borrowings during 1997,
1996, and 1995 amounted to $17,049,703, $17,206,708, and
$14,845,107, 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, 1997 and 1996,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		The Bank's calculated risk-adjusted capital ratios exceeded
the minimum standard for a "well capitalized" bank as of 
September 30, 1997, the date of the most recent examination by
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, 1997	            Amount	 	  Ratio	     Amount	  	Ratio > or=		    Amount		  Ratio > or =

<S>                                <C>         <C>       <C>            <C>         <C>         <C>       
Total Capital (to Risk Weighted											
 Assets) Consolidated	             61,732,093		19.68%		  25,098,756		   8.00%		     31,373,445		10.00%
         Bank	                     61,153,956		19.54%		  25,040,651		   8.00%		     31,300,813		10.00%
Tier I Capital (to Risk Weighted											
 Assets) Consolidated	             58,789,093		18.74%		  12,549,378		   4.00%		     18,824,067		 6.00%
         Bank	                     58,210,956		18.60%		  12,520,325		   4.00%		     18,780,488		 6.00%
Tier I Capital (Average) 
 (to Average	Assets)  
         Consolidated	             56,515,935		10.73%		  21,073,801		   4.00%		     26,342,251		 5.00%
         Bank	                     55,946,149		10.63%		  21,047,205		   4.00%		     26,309,006		 5.00%

As of December 31, 1996											
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%		  11,988,374		   4.00%		     17,982,562		 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%		  20,102,944		   4.00%		     25,128,680		 5.00%
         Bank	                     50,574,336		10.07%		  20,089,111		   4.00%		     25,111,388		 5.00%
<FN>
<F12>
Table XII - Capital Amounts and Capital Adequacy Ratios    
</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 nonprofit 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 $684,227, $661,307 and $633,459, in 1997, 1996, and
1995, 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 (1997 - $645,985; 1996 - $620,657) purchased
in 1993 to fund the plan and the related liability (1997 -
$501,255; 1996 - $513,792) were included in other assets and
other liabilities, respectively.  Net noncash income recognized
on these policies of $25,328 in 1997 and $26,436 in 1996 is
included in the above asset values.   Net noncash income was
$14,133 in 1995.  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 $42,463 in
1997, $64,024 in 1996, and $106,066 in 1995.

		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, net of benefits paid out in 1997
and accruals, of $173,841 for 1997, $172,871 for 1996, and
$176,727 for 1995 have been recognized in the accompanying
consolidated 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.  Additional single premium universal life insurance
policies, totaling $385,000, were purchased in 1997 for new
participants.  Net noncash income recognized on these policies
of $103,953 in 1997 and $85,249 in 1996 is included in the cash
surrender values of  $2,376,124 and $1,887,171 reported in other
assets at December 31, 1997 and 1996, respectively.  Net noncash
income was $51,803 in 1995.

		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.  The value of this policy (1997 -
$819,460; 1996 - $785,330) is included in other assets, and net
noncash income recognized on this policy of $34,130 in 1997 and
net expense of $9,670 in 1996 is included in the above asset
values.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replacement/split dollar plan.  These
policies have an aggregate face amount of $3,163,750.


<PAGE>

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

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
                              		December		31,1997		         December		31,1997	
                              Carrying		     Fair      	 	Carrying		     Fair	
                             		Amount		      Value		       Amount		      Value	
Financial assets		                        (DOLLARS		IN		THOUSANDS)			
<S>                           <C>         <C>             <C>         <C>
 Cash and due from banks	     $	29,873	   $	29,873	       $	27,917	   $	27,917	
 Federal funds sold		           12,800		    12,800		          -		         - 	
 Securities held to maturity		  96,266		    98,371		       118,542		   119,226	
 Securities available for
  sale		                        48,921		    49,521		        55,898		    56,142	
 Loans, net                  		328,417		   325,323		       300,806		   309,401	
 Accrued interest receivable		   5,366		     5,366		         5,549		     5,549	

Financial liabilities									
 Deposits		                    470,282		   456,557		       460,573		   449,129	
 Federal funds purchased      		  -		         -		            5,000		     5,000	
 Short term borrowings		           602		       602		           523		       523	
 Accrued interest payable		      2,794		     2,794	         	2,539		     2,539	

<FN>
<F13>
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, 1997, 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
1997										

<S>                         <C>          <C>          <C>          <C>          <C>
Interest income	            $	9,362,178	 $	9,705,584	 $	9,774,855	 $	9,804,468	 $	38,647,085
Interest expense		            4,258,739		  4,330,171		  4,361,715		  4,353,765		  17,304,390

Net interest income		         5,103,439		  5,375,413		  5,413,140		  5,450,703		  21,342,695
Provision for possible loan
 losses		                       450,000		    290,000		    550,000	    	650,000		   1,940,000
Noninterest expenses, net 
 of noninterest income		      2,394,981		  2,405,847		  2,388,160		  1,932,079		   9,121,067
Income before income taxes		  2,258,458		  2,679,566		  2,474,980		  2,868,624		  10,281,628
Income taxes		                  556,134		    795,731		    917,613		    958,198		   3,227,676

Net income	                 $	1,702,324	 $	1,883,835	 $	1,557,367	 $	1,910,426	 $	 7,053,952

Earnings per common share										
 (1,400,000 shares)	        $	     1.22	 $	     1.35	 $	     1.11	 $	     1.36	 $	      5.04

                             		First		     Secon  		     Third		     Fourth		
                            		Quarter		    Quarter		    Quarter		    Quarter		      Total
1996										
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

<FN>
<F14>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


<PAGE>

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

NOTE 16 - DEPOSITS  

				The Bank does not have any foreign offices and all deposits
are serviced in its sixteen 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.

<TABLE>
<CAPTION>
                                  		        Year	Ended	December	31
		                                      1997   	 			    	  1996	   			      	1995				
                                 	         	(Dollars in Thousands)									
<S>                              <C>          <S><C>            <S><C>            <S><C>
Demand deposits	                 $	62,909	   	- 	%	 $	61,509   	- 	%  $	56,730		  -	 %	
NOW and money market accounts		   166,914		  3.37		 	158,450		 3.37			 149,016		 3.51		   
Savings deposits		                 43,775		  3.37			  37,421		 3.22			  34,629		 3.00		
Time deposits of less than
 $100,000		                       152,389		  5.29			 151,952		 5.40			 136,568		 5.30		
Time deposits of $100,000 or
 more		                            37,686		  5.42			  34,539  	5.41			  32,524		 5.35		
																
Total In Domestic Offices	       $463,673		  3.71%	 $443,870		 3.74%	 $409,467		 3.72%	

<FN>
<F15>
  Table XV - Average Amounts of Deposits and Average Rates Paid
             by Deposit Type at December 31
</FN>
</TABLE>
   		
<TABLE>
<CAPTION>
                                  1997		      1996		      1995
                                 				(Dollars In Thousands)		
        <S>                    <C>         <C>         <C>
        Under 3 months	        $ 	9,308	   $	11,680	   $ 	7,877
        3 to 12 months	         	25,981		    22,638		    18,407
        Over 12 months		          4,039		     4,812		     4,310

                               $ 39,328    $ 39,130    $ 30,594
<FN>						
<F16>
Table XVI - Maturities of Time Deposits of $100,000 or More at
            December 31
</FN>
</TABLE>

<PAGE>

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

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
                             Condensed Balance Sheets
                            December 31, 1997 and 1996				
                            (In Thousands of Dollars) 
<CAPTION>
Assets		                                           1997		         1996
<S>                                              <C>            <C> 
Cash	                                            $     72	      $	   142
Investment in bank subsidiary - at equity		        59,565		       53,870
Investment in credit life insurance company 
 - at cost		                                           50		           50
Investment in other securities	                        25		           22
Dividends receivable from bank subsidiary		           784		          714
Cash surrender value - life insurance		               651		          489
Other assets		                                       -		               1
				
   Total assets	                                 $	61,147	      $	55,288

Liabilities and Stockholders' Equity				
Liabilities				
  Payable to directors	                          $	   220	      $	   173
  Dividends payable		                                 784		          714
				
    Total liabilities		                             1,004		          887
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		                              45,783		       40,255
  Net unrealized gain (loss) on 
   available-for-sale securities, net of 
   tax		                                              360		          146
    Total stockholders' equity		                   60,143		       54,401

    Total liabilities and stockholders' equity   $ 61,147       $ 55,288  
<FN>
<F17>
Table XVII - Condensed Statements of Balance Sheet of Parent
</FN>
</TABLE>

<TABLE>
                           Condensed Statements of Income
                        Years Ended December 31, 1997 and 1996
                              (In Thousands of Dollars)
<CAPTION>
                                                   		1997		       1996
<S>                                               <C>          <C>
  Dividends from bank subsidiary                  $ 1,526      $ 1,372
  Other dividend income		                              80		         85
  Interest income		                                     8		          6
  Other                                              		34		         28
Operating expenses		                                   76		         68
   Income before equity in undistributed net				
    income of bank subsidiary		                     1,572		      1,423
				
Equity in undistributed net income of bank
 subsidiary		                                       5,482		      5,444
       Net Income	                                $	7,054	     $	6,867

<FN>
<F18>
Table XVIII - Condensed Statements of Income 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>
                         Condensed Statements of Cash Flows 
                       Years Ended December 31, 1997 and 1996
                            (In Thousands of Dollars)   
<CAPTION>
                                       		1997	           	1996
<S>                                    <C>              <C>
Operating activities				
  Net income for the year              	$	7,054	        $ 6,867
  Adjustments to reconcile net income
   to net cash provided by operating 
   activities				
   Equity in undistributed net income
    of bank subsidiary		                 (5,482)		       (5,444)
   Increase in other assets		               (98)		         (111)
   Increase in payables		                    47		            44
				
      Total adjustments		                (5,533)	 	      (5,511)
				
   Net cash provided by operating 
    activities		                          1,521		         1,356
				
Net cash provided by (used in) 
 investing activities				
 Purchases of investment securities      		(119)		         (133)
 Proceeds from maturities of 
  investment securities                     119		           137
 Purchase of single premium life 
  insurance policy		                       (135)	           -	

    Net cash provided by (used in) 
     investing activities		                (135)		            4
				
Net cash used in financing activities				
 Cash dividends paid		                   (1,456)		       (1,288)
 
   Increase (decrease) in cash		            (70)		           72
				
Cash at beginning of year		                 142		            70
				
Cash at end of year	                   $    	72	        $  	142

<FN>
<F19>
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 1997, 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.  "High Technology + High Commitment =
High Performance" was the challenge for the year as the Bank
committed 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.

	The accompanying tables plus the discussion and financial
information are presented to aid in understanding First Farmers
and Merchants Corporation's current financial position and
results of operations.  The emphasis of this discussion will be
on the years 1997, 1996, and 1995; 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 Corporation'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 $7.1 million for 1997 compared
to $6.9 million in 1996 and $6.1 million in 1995.  On a per
common share basis, net income was $5.04 for 1997 versus $4.90
for 1996 and $4.37 for 1995.  The improvement in 1997's earnings
resulted from a strong gross margin reinforced by loan demand
that changed the mix of earning assets as higher yielding loans 
were funded with maturing investment securities and an increase in 
noninterest income sufficient to cover a smaller increase in 
noninterest expenses and  most of the increase in taxes.  These 
improvements were partially offset by higher additions to the allowance 
for loan losses.

  	The return on average equity for 1997 was 12.2% compared to
13.2% for 1996 and 13.1% for 1995.   The return on average
assets was 1.34% for 1997 versus 1.37% for 1996 and 1.32% for
1995.

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>

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

<CAPTION>
                                   YEAR ENDED DECEMBER 31,
                                 				1997								                  1996								                  1995
                              		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	                  $	314,198		9.18	%	$	28,858	*	 $	290,413		9.43	%	$	27,373	*	 $	276,166		9.38 %	 $	25,892	*  
 Bank time deposits		                 1		 -			       -			           1   -	         -			           2		 -			        -	
 Taxable securities		           113,013		6.35			   7,173			   118,114		6.14			   7,256			   104,217		6.20			    6,457	
 Tax exempt securities		         47,366		6.96			   3,297	*		   44,158		7.10			   3,134	*		   39,105		8.07			    3,156	*
 Federal funds sold		             4,631		5.46			     253			     4,198		5.31			     223			     2,076		5.83			      121	

 TOTAL EARNING ASSETS   		      479,209		8.26		 $	39,581			   456,884		8.31		 $	37,986			   421,566		8.45		  $	35,626	
Noninterest earning assets   																								
 Cash and due from banks		       27,039								                25,760				  	                 24,829
 Bank premises and equipment		    6,633								                 6,708								                 6,246						
 Other assets		                  15,045								                13,348								                11,098						

 TOTAL ASSETS	                $	527,926							              $	502,700							              $	463,739						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY																								
Interest bearing liabilities																								
 Time and savings deposits:																								
 NOW and money market 
  accounts 	                  $	166,828		3.38	%	$	5,634		   $	158,438		3.39	%	$ 5,338 		 $	148,993		3.51	%	 $ 5,223	
 Savings		                       43,776		3.37			  1,476			     37,428		3.22			  1,204			    34,627		3.00			   1,040	
 Time                         		152,389		5.29			  8,063			    151,973		5.40			  8,210			   136,605		5.30			   7,245	
 Time over $100,000		            37,680		5.43			  2,045			     34,554		5.40		   1,866			    32,522		5.35			   1,740	

 TOTAL INTEREST BEARING 
 DEPOSITS		                     400,673	 4.30			 17,218			    382,393		4.35		  16,618			   352,747		4.32 	   15,248	
 Federal funds purchased		        1,016		5.80			     59			      1,043		5.56		      58			     2,415		5.92		      143	
 Other short-term debt		            538		5.02			     27			        622		5.79	       36			       565		5.49		       31	

 TOTAL  INTEREST BEARING 
 LIABILITIES		                  402,227		4.30	  $17,304			    384,058		4.35		 $16,712			   355,727		4.34    $15,422	

Noninterest bearing liabilities																								 
 Demand deposits		               62,903								                61,509								               56,742						 
 Other liabilities		              4,990								                 5,066								                4,515						

 TOTAL LIABILITIES		            470,120								               450,633								              416,984						
Stockholders' equity		           57,806								                52,067								               46,755						 
 TOTAL LIABILITIES AND																								
   STOCKHOLDER'S EQUITY	      $	527,926							              $	502,700		 			              $	463,739						

Spread between combined 
 rates earned and	combined 
 rates paid*				                         3.96	 %			 				               3.96 %							               4.12	%			

 Net yield on interest-earning
  assets*				                            4.65	 %							                4.66	%							               4.79 % 			

<FN>
<F1>
  * Taxable equivalent basis
</FN>
</TABLE>
Notes:

1.	U.S. Government, government agency, taxable municipal, 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 amortized cost of
available-for-sale securities were used in the calculations in
this table.

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

		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>

TABLE B - Volume and Yield/Rate Variances
   (Taxable Equivalent Basis - In Thousands)
<CAPTION>
                     		       1997 		Compared 		1996			       1996 		Compared 		1995
                              				   Yield/		Net Increase			     		  Yield/		Net Increase
                         		Volume	   	Rate		  (Decrease)			 Volume		  Rate		  (Decrease)
<S>
Revenue earned on									<C>			    <C>	      <C>          <C>       <C>      <C>         
 Net loans	               $	2,243 	 $	(758)	  $	1,485	   	 $	1,336	  $	 145	   $	1,481
 Investment securities			
  Taxable securities		       (314)		   231		      (83)			      861		    (62)		     799
  Tax-free securities		       228		    (65)		     163			       408		   (430)		     (22)
 Federal funds sold		          23		      7		       30			       124		    (22)		     102
													
  Total interest earning
   assets		                 2,180		   (585)		   1,595			     2,729		   (369)		   2,360

Interest paid on													
 NOW and money market 
  accounts		                  283		     13		      296			       331		   (216)		     115
 Savings deposits		           204		     68		      272			        84		     80		      164
 Time deposits		               23		   (170)		    (147)			      815		    150		      965
 Time over $100,000		         169		     10		      179			       109		     17		      126
 Federal funds purchased		     (2)	      3		        1			       (81)		    (4)		     (85)
 Short term debt            		 (5)		    (4)		      (9)			        3		      2		        5

   Total interest-bearing
     funds		                  672		    (80)		     592			     1,261		     29		    1,290

Net interest earnings		     1,508	  $	(505)	  $	1,003		    $	1,468	  $	(398)   $	1,070

</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,  taxable municipal, and
corporate debt securities plus equity securities in the
available-for-sale and held-to-maturity categories are taxable
investment securities.  Bank qualified 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 stockholders.  The first graph illustrates in thousands of
dollars, 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>
 		                         Investment          
                Loans			    Securities		     Other

<S>           <C>            <C>            <C>
1997		        $314,198		     $160,722		     $4,613
1996		         290,413		      162,188		      4,199
1995		         276,166		      143,358		      2,078
</TABLE>

  	Average earning assets increased 5.0% in 1997 compared to an
8.4% increase in 1996 and a 3.0% increase in 1995.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1997, average net loans represented 
65.5% of  average earning assets.  Total average net loans
increased during the last three years showing an 8.2% growth
from 1996 to 1997, a 5.2% growth from 1995 to 1996, and an 11.5%
growth from 1994 to 1995.  Average investments accounted for the
remaining balance of average earning assets at December 31,
1997, decreasing .9% from year end 1996.  Some of the proceeds
from maturities and calls of investment securities was used to
fund the expanding loan demand during the year.  Average
investments increased 14.5% in 1996.  The Bank purchased certain
assets and assumed certain deposit liabilities of  two branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  Most of the increase in investments during 1996 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.  Average total assets increased during
the last three years as evidenced by a  5.0% growth from 1996 to
1997, an 8.4% growth from 1995 to 1996, and a 2.6% growth from
1994 to 1995.


   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    Noninterest_Bearing  
                       Deposits	            Deposits	           Other
<S>                    <C>                  <C>                <C>
1997		                 $390,077			          $80,205			         $  -    
1996		                  382,393			           61,509			          1,043
1995		                  352,747			           56,742			          3,526
</TABLE>


  	The bank's average deposits grew during the last three years
reflecting a 4.4% growth from 1996 to 1997, an 8.4% growth from
1995 to 1996, and a 1.3% growth from 1994 to 1995.  Short and
medium term rates remained competitive compared to longer term
rates during 1997 and some depositors left money in or moved
money back into interest-bearing transaction accounts, which
increased 5.3% during 1997 and 6.3% in 1996.  However, over half
of the increase during 1996 was attributable to the acquisition.
 Average interest-bearing checking accounts decreased 7.6 % in
1995 as investors took advantage of higher certificate of
deposit rates.  Average savings deposits increased  almost 17.0%
during 1997 and 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.  Average certificates of deposit under
$100,000 increased .3% during 1997, 11.3% during 1996, 60.0%
from the acquisition, and 8.0% in 1995.  Certificates of deposit
over $100,000 increased 9.1% in 1997 compared to 6.3% in 1996,
87.8% from the acquisition, and 24.8% in 1995.  

<PAGE>

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


LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT

   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, 1997, 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, 1997, 1996, and 1995 was 4.65%, 4.66%, and 4.79% respectively.

<TABLE>
TABLE C - Rate Sensitivity of Earning Assets and
Interest-Bearing Liabilities										

<CAPTION>
                               (Dollars in Thousands)										
                          		3 Months		   3-6		       6-12		      Over 1		
As of December 31, 1997		   or Less	    Months		    Months		      Year		     Total
<S>                        <C>         <C>         <C>         <C>          <C>                                 
Earning assets										
 Federal funds sold	       $	12,800	   $    -	     $	   -	     $     -	     $ 	12,800
 Taxable investment
   securities		               3,928		     7,989		     5,000		     80,574		     97,491
 Tax-exempt investment
   securities                 1,151		       720		     1,150		     45,275		     48,296
 Loans and leases, net of
   unearned                  61,297		    45,612		    65,193	     159,606		    331,708
										
      Total earning assets		 79,176		    54,321		    71,343		    285,455		    490,295

Interest-bearing 
 liabilities										
 NOW and money market 
   accounts		                48,546		       -		      66,832		     40,656		    156,034
    Savings		                   -		         -		      44,170		        -		       44,170
    Time		                   42,702		    30,421		    54,807		     22,614		    150,544
    Time over $100,000		     10,242		     8,917		    16,536		      3,634		     39,329
    Other short-term debt		     602		       -		         -		          -		          602

      Total interest 
       bearing liabilities		102,092		    39,338		   182,345		     66,904	   $	390,679

Noninterest-bearing, net								                                 (99,616)		

Net asset/liability 
 funding gap		              (22,916)		   14,983		  (111,002)		   118,935		
										
Cumulative net asset/
  liability funding gap	  $	(22,916)	  $	(7,933)	$	(118,935)	  $	    -		

<FN>
<F2>
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 & 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, 1997.  

   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 $3.0 million at December
31, 1997, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent .9% of gross loans. 
Commercial loans comprised $.6 million of the total, with loans
secured by real estate accounting for $1.4 million, and
installment loans $1.0 million.  The gross interest income that
would have been recorded during 1997 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 $431, $374, and $365 thousand for
the years ended December 31, 1997, 1996, and 1995 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.

  	The bar graph on the bottom of this page  shows the increase in
average net loans (in thousands of dollars) and the line shows
the ratio of net loan charge offs to average loans.  The ratio
at December 31, 1997 was .61%.   Management monitoring found and
corrected a problem in consumer loan underwriting that
contributed to the higher net charge off percentage in 1997. 
The following table is the data illustrated by this graph.
<TABLE>
<CAPTION>
			                    Avg Loans		  Ratio Net
			                  Outstanding		  CO/Avg Ln

          <S>          <C>           <C>
          1981		       $ 54,908      .0027	
          1982		         60,119		    .0077
          1983		         66,964		    .0039
          1984		         80,055		    .0036
          1985		         98,353		    .0044
          1986		        120,243		    .0036
          1987		        142,959		    .0077
          1988		        154,506		    .0027
          1989		        163,003		    .0032
          1990		        172,749		    .0030
          1991		        182,561		    .0037
          1992		        215,158 		   .0023
          1993		        233,608		    .0030
          1994		        247,791		    .0014
          1995		        276,166		    .0012
          1996		        290,413		    .0036
          1997		        314,198		    .0061
</TABLE>

<PAGE>

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

<TABLE>

TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO

                                              				December		31				
                         		     1997	 	    1996		     1995	 	    1994		     1993
             		                              (Dollars In	Thousands)				
<S>                          <C>        <C>        <C>        <C>        <C>                           
Average amount of loans
 outstanding                	$	314,198	 $	290,413	 $	276,166  $	247,791	 $	233,608
Balance of allowance for 
 possible loan losses at 
 beginning of year	          $  	2,926	 $	  2,678	 $	  2,342	 $	  2,024	 $	  2,254
 Loans charged-off:										
   Loans secured by real 
    estate		                        88	       368		       15		      135		      396
   Commercial and industrial
    loans		                        605		      141		      170		       42		      222
   Individuals		                 1,371 		     879		      371		      246		      230
      TOTAL  LOANS CHARGED
       OFF		                     2,064		    1,388		      556		      423		      848
Recoveries of loans 
 previously charged off:										
   Loans secured by real 
    estate		                         8		      111		       97		        9		       56
   Commercial and industrial
    loans		                         53		       42		       14		       36		       52
   Individuals                    		80		      183		      111		       36		       40
      TOTAL RECOVERIES		           141		      336		      222		       81		      148
        NET  LOANS
         CHARGED-O 		            1,923		    1,052		      334		      342		      700
Provision charged to 
 operating expenses              1,940		    1,300		      670		      660		      470
  BALANCE OF ALLOWANCE FOR	
   POSSIBLE LOAN LOSSES AT										
   END OF YEAR	              $  	2,943	 $  	2,926	 $  	2,678	 $  	2,342	 $  	2,024

Ratio of net charge-offs 
 during the	period to average
 loans outstanding		              0.61%		    0.36%		    0.12%	   	0.14%		     0.30%

</TABLE>

CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

  	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1997, the Corporation had a ratio of
average tier 1 capital to average assets of 10.73%.  This
compares to a ratio of average tier 1 capital to average assets
of 10.36% at December 31, 1996, and 10.08% at December 31, 1995.

  	Cash dividends declared in 1997 were 11.2% more than those paid
in 1996.  The dividend to net income ratio was 22%.  Additional
dividends of approximately $15.9 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, 1997, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 18.7% and 19.7% respectively.  At
December 31, 1996, the comparable ratios were 17.7% and 18.7%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital.

  	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>
               		1991	 		$30,194
               		1992			  33,414
               		1993			  37,454
               		1994			  41,820
               		1995			  46,755
               		1996			  52,067
               		1997			  57,806
</TABLE>

<PAGE>

             FIRST FARMERS AND MERCHANTS COPROATION AND SUBSIDIARY
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANACIAL CONDITION 
                         AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Interest Income

  	Total interest income increased 4.2% in 1997 enhanced by loan
growth in all the market areas the Bank serves.  Interest and
fees earned on loans increased 5.5% in 1997 accounting for 74.6%
of gross interest income.  Interest earned on investment
securities and other investments increased .7% in 1997 rounding
out gross interest income contributing 25.4%.  Total interest
income increased 7.5% in 1996 and 11.9% in 1995.


Interest Expense

  	Total interest expense increased 3.6% in 1997 due mostly to the
increase in interest-bearing deposits.  This increase compares
favorably to a 8.4% increase in 1996, about half of which can be
attributed to the acquisition, and a 19.9% increase in 1995. 
The cost of interest-bearing deposits remained steady all year
under monthly monitoring by the Asset/Liability Committee.  This
contributed to the strong gross margin achieved during 1997.  
The net interest margin (tax equivalent net interest income
divided by average earning assets) was 4.7% at the end of 1997
and 1996 and 4.8% at the end of  1995.

  	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 19.6% during 1997 led by fees on
deposits.  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.  This compares to a 28.4% increase
in 1996 and a 14.9% increase in 1995.

  	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1997 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  		$1,471			      21.2%
 Other service fees			            845   			   12.2%
	Securities gains			              488			       7.0%
	Fees on deposits			            3,744  			    53.9%
	Other				                        394		     	  5.7%

</TABLE>

	Noninterest expenses, excluding the provision for possible loan
losses, increased 6.2% in 1997 which compares favorably with the
5.8% increase in 1996.  The increase in 1995 was 6.2%. 
Increased productivity fostered by our technology improvements
as the learning curve diminished and cost control efforts
contributed to this cost containment.  Included in this category
is net occupancy expense for an additional office opened in 1997
and furniture and equipment, which includes technology expenses,
that was down over 5% from 1996.

	A pie chart is included at this point in the materials sent to
out stockholders illustrating the composition of noninterest
expense in 1997 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			                   $7,319			            45.6%
 Furniture and equipment		       1,501			             9.3%
 Occupancy			                    1,317			             8.2%
 Other					                      5,927			            36.9%

</TABLE>

<PAGE>

                    FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDTION
                                AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
   		                            1997		       1996		       1995		       1994		       1993

<S>                         <C>          <C>          <C>          <C>          <C>                                   
INTEREST INCOME										
 Interest and fees on loans	$	28,841,420	$	27,343,817	$	25,857,982	$	21,130,914	$	19,518,742
										
 Income on investment 
  securities										
   Taxable interest		          6,802,934		  6,892,118		  6,179,492		  7,012,626		  6,925,404
   Exempt from federal 
    income tax		               2,488,475		  2,366,764		  2,156,813		  2,184,666		  1,857,168
   Dividends		                   260,759		    256,951		    177,790		    204,948		     72,054
										
                             		9,552,168		  9,515,833		  8,514,095		  9,402,240		  8,854,626

 Other interest
  income		                       253,497		    223,019		    121,492		    284,384	  	  347,287


    TOTAL INTEREST
     INCOME		                 38,647,085		 37,082,669		 34,493,569		 30,817,538	  28,720,655

INTEREST EXPENSE 										
 Interest on deposits		       17,218,537		 16,617,525		 15,247,875		 12,770,618		 11,998,235
 Interest on other short 
  term borrowings		               85,853		     94,232		    174,370		     93,286		     38,339
										
    TOTAL INTEREST EXPENSE		  17,304,390	  16,711,757		 15,422,245		 12,863,904		 12,036,574

      NET INTEREST INCOME		   21,342,695	  20,370,912		 19,071,324		 17,953,634		 16,684,081

PROVISION FOR POSSIBLE LOAN
 LOSSES		                      1,940,000		  1,300,000		    670,000		    660,000		    470,000

    NET INTEREST INCOME 
     AFTER PROVISION FOR 
     LOAN LOSSES		            19,402,695		 19,070,912		 18,401,324		 17,293,634		 16,214,081

NONINTEREST  INCOME										

 Trust department income		     1,470,568		  1,323,525	  	1,251,642	  	1,249,359		    863,952
 Service fees on deposit 
  accounts		                   3,744,381		  3,373,805		  2,697,332		  2,317,992		  2,206,026
 Other service fees, 
  commissions, and fees		        845,072		    745,523		    300,407		    336,758		    509,009
 Other operating income		        394,322		    363,430		    322,634		    319,466		    315,108
 Securities gains (losses)     		487,972		       -		         1,182		   (243,690)		    23,896

    TOTAL NONINTEREST INCOME		 6,942,315		  5,806,283		  4,573,197		  3,979,885		  3,917,991

NONINTEREST  EXPENSES										
 Salaries and employee
  benefits		                   7,319,460		  7,030,588		  6,620,827		  6,247,706		  5,686,965
 Net occupancy expense		       1,316,588		  1,211,067		  1,279,434		  1,190,678		  1,070,971
 Furniture and equipment
  expense		                    1,500,486		  1,580,753		  1,382,769		  1,069,856		    889,848
 Deposit insurance		              57,004		      6,549		    499,709		    890,646		    826,966
 Other operating expenses		    5,869,844		  5,292,103		  4,557,307		  4,109,461		  4,180,105
										
    TOTAL NONINTEREST
     EXPENSES		               16,063,382		 15,121,060		 14,340,046		 13,508,347		 12,654,855

     INCOME BEFORE PROVISION										
       FOR INCOME TAXES		     10,281,628		  9,756,135		  8,634,475		  7,765,172		  7,477,217

PROVISION FOR INCOME TAXES		   3,227,676		  2,889,339		  2,518,769		  2,203,746		  2,220,965

     NET INCOME       	     $ 	7,053,952	$	 6,866,796	$	 6,115,706	$	 5,561,426	$ 	5,256,252
										
EARNINGS PER COMMON SHARE 										
 (1,400,000 outstanding
   shares)	                 $	      5.04	$	      4.90	$	      4.37	$	      3.97	$	      3.75

</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 2.7% higher in 1997 than in 1996.  As indicated
earlier, the improvement in 1997's earnings resulted from a
strong gross margin reinforced by loans increasing as a
percentage of earning assets, an increase in noninterest income
sufficient to cover a smaller increase in noninterest expenses,
and most of the increase in taxes.  These improvements were
partially offset by higher additions to the allowance for loan
losses associated with a corrected loan underwriting problem.


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

  	The Financial Accounting Standards Board has issued two
standards that have been adopted by the Corporation as follows:
(1)  Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share" requires a reconciliation of the
numerators and the denominators of the basic and diluted
per-share computation for income from continuing operations. 
The statement is effective prospectively for earnings per share
computation for both interim and annual periods ending after
December 31, 1997.  Because the Corporation has no potential
common stock outstanding, it is required to present only basic
earnings per share and its presentation of earnings per share
did not change. (2)  Statement of Financial Accounting Standards 
No. 129 (SFAS 129), "Disclosure of Information about Capital Structure" 
requires an entity to explain, in summary form within its
financial statements, the pertinent rights and privileges of the
various securities outstanding.  The Corporation only has one
class of common stock outstanding and this statement had no
material effect on the financial statements.

   	The Financial Accounting Standards Board has issued two
standards that have not been adopted by the Corporation as
follows: (1)  Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income" purposes that
an entity report a measure of all changes in equity that result
from recognized transactions and other economic events of the
period other than transactions with owners in their capacity as
owners.  The statement is effective for fiscal years beginning
after December 15, 1997.  Management does not believe this
statement will have any material effect on future financial
statements except for disclosures.  (2)  Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information" establishes
guidelines for reporting financial information about an
operating segment or component of an enterprise.  The statement
is effective for fiscal years beginning after December 15, 1997.
 Management does not believe this statement will have any
material effect on future financial statements except for
disclosures.


YEAR 2000 COMPLIANCE TASK FORCE

 		A Year 2000 Compliance Task Force has been established to
evaluate the mission critical software and hardware that must be
compatible for continued satisfactory data processing;
representations have been obtained, or are in the process of
being obtained, from our software and hardware vendors,
confirming their Year 2000 compatibility; and plans are in place
for testing our systems' compatibility before June 30, 1998. 
Management believes that our information systems are well on
their way to being Year 2000 compliant.

<PAGE>

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

SHAREHOLDER INFORMATION

  	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1997, had a
market value of $109 million and were held by 1,618 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 tables below show 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.

   These tables were shown graphically in the materials	sent to our
stockholders.

<TABLE>
<CAPTION>

                       				Price Range of	  		 Dividend
                        				Common Stock	     	 	Paid
                         			High	    	Low		    Per Share
 
<S>     <C>              <C>       <C>          <C>
       	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

       	First quarter	   $	67.00	  $	65.00	     $	
       	Second quarter		   69.00		   69.00		      0.53
1997	   Third quarter		    72.00		   70.00		
       	Fourth quarter		   78.00		   72.00		      0.56
                                          						$	1.09

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                 COMPARATIVE DATA
                            (In Thousands of Dollars)										

                         		1997		      1996		      1995		      1994		      1993
<S>                    <C>         <C>         <C>         <C>         <C>
AVERAGE ASSETS	        $	527,926	  $	502,700	  $	463,739	  $	451,953	  $	420,760

AVERAGE LOANS (NET)	   $	314,198	  $	290,413	  $	276,166  	$	247,791	  $	233,609

AVERAGE DEPOSITS	      $	463,576	  $	443,902	  $	409,489	  $	404,412	  $	378,782

RETURN ON EQUITY AND
 ASSETS										
  Return on average 
    assets		                1.34%		     1.37%		     1.32%		     1.23%		     1.25%
										
  Return on beginning
    equity		               12.97%		    14.01%		    13.95%		    14.11%		    14.93%
 Average tier 1 
    capital to average 
    assets		               10.73%		    10.36%		    10.08%		     9.25%		     8.90%

COMMON DIVIDEND PAYOUT
 RATIO										
   Earnings per shar   $	    5.04	 $	   4.90	 $	    4.37	  $    3.97   $	   3.75

   Cash dividends per 
    share	             $	   1.09	  $	   0.98  $	    0.88	  $	   0.80	  $	   0.73

   Ratio		                    22%		       20%		      20%		        20%		       19%
</TABLE>
										
<TABLE>
<CAPTION>
                                      NET INTEREST MARGIN										
                                  (In Thousands of Dollars)										

                        		1997		      1996		      1995		      1994		      1993

<S>                    <C>         <C>         <C>         <C>         <C>     
INTEREST INCOME										
 (TAX EQUIVALENT)	     $	39,581	   $	37,986	   $	35,626	   $	32,039	   $	29,465

INTEREST EXPENSE		       17,304		    16,712		    15,422		    12,864		    12,037

                      	$	22,277	   $	21,274	   $	20,204	   $	19,175   	$	17,428

NET INTEREST MARGIN*		     4.65%		     4.66%		     4.79%		     4.68%		     4.58%


<FN>
<F3>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets.										
</FN>
										
</TABLE>




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 a part of the Annual Report to
Stockholders which is included in this filing.

       
             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 1997, 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.  "High Technology + High Commitment =
High Performance" was the challenge for the year as the Bank
committed 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.

	The accompanying tables plus the discussion and financial
information are presented to aid in understanding First Farmers
and Merchants Corporation's current financial position and
results of operations.  The emphasis of this discussion will be
on the years 1997, 1996, and 1995; 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 Corporation'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 $7.1 million for 1997 compared
to $6.9 million in 1996 and $6.1 million in 1995.  On a per
common share basis, net income was $5.04 for 1997 versus $4.90
for 1996 and $4.37 for 1995.  The improvement in 1997's earnings
resulted from a strong gross margin reinforced by loan demand
that changed the mix of earning assets as higher yielding loans 
were funded with maturing investment securities and an increase in 
noninterest income sufficient to cover a smaller increase in 
noninterest expenses and  most of the increase in taxes.  These 
improvements were partially offset by higher additions to the allowance 
for loan losses.

  	The return on average equity for 1997 was 12.2% compared to
13.2% for 1996 and 13.1% for 1995.   The return on average
assets was 1.34% for 1997 versus 1.37% for 1996 and 1.32% for
1995.

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>

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

<CAPTION>
                                   YEAR ENDED DECEMBER 31,
                                 				1997								                  1996								                  1995
                              		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	                  $	314,198		9.18	%	$	28,858	*	 $	290,413		9.43	%	$	27,373	*	 $	276,166		9.38 %	 $	25,892	*  
 Bank time deposits		                 1		 -			       -			           1   -	         -			           2		 -			        -	
 Taxable securities		           113,013		6.35			   7,173			   118,114		6.14			   7,256			   104,217		6.20			    6,457	
 Tax exempt securities		         47,366		6.96			   3,297	*		   44,158		7.10			   3,134	*		   39,105		8.07			    3,156	*
 Federal funds sold		             4,631		5.46			     253			     4,198		5.31			     223			     2,076		5.83			      121	

 TOTAL EARNING ASSETS   		      479,209		8.26		 $	39,581			   456,884		8.31		 $	37,986			   421,566		8.45		  $	35,626	
Noninterest earning assets   																								
 Cash and due from banks		       27,039								                25,760				  	                 24,829
 Bank premises and equipment		    6,633								                 6,708								                 6,246						
 Other assets		                  15,045								                13,348								                11,098						

 TOTAL ASSETS	                $	527,926							              $	502,700							              $	463,739						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY																								
Interest bearing liabilities																								
 Time and savings deposits:																								
 NOW and money market 
  accounts 	                  $	166,828		3.38	%	$	5,634		   $	158,438		3.39	%	$ 5,338 		 $	148,993		3.51	%	 $ 5,223	
 Savings		                       43,776		3.37			  1,476			     37,428		3.22			  1,204			    34,627		3.00			   1,040	
 Time                         		152,389		5.29			  8,063			    151,973		5.40			  8,210			   136,605		5.30			   7,245	
 Time over $100,000		            37,680		5.43			  2,045			     34,554		5.40		   1,866			    32,522		5.35			   1,740	

 TOTAL INTEREST BEARING 
 DEPOSITS		                     400,673	 4.30			 17,218			    382,393		4.35		  16,618			   352,747		4.32 	   15,248	
 Federal funds purchased		        1,016		5.80			     59			      1,043		5.56		      58			     2,415		5.92		      143	
 Other short-term debt		            538		5.02			     27			        622		5.79	       36			       565		5.49		       31	

 TOTAL  INTEREST BEARING 
 LIABILITIES		                  402,227		4.30	  $17,304			    384,058		4.35		 $16,712			   355,727		4.34    $15,422	

Noninterest bearing liabilities																								 
 Demand deposits		               62,903								                61,509								               56,742						 
 Other liabilities		              4,990								                 5,066								                4,515						

 TOTAL LIABILITIES		            470,120								               450,633								              416,984						
Stockholders' equity		           57,806								                52,067								               46,755						 
 TOTAL LIABILITIES AND																								
   STOCKHOLDER'S EQUITY	      $	527,926							              $	502,700		 			              $	463,739						

Spread between combined 
 rates earned and	combined 
 rates paid*				                         3.96	 %			 				               3.96 %							               4.12	%			

 Net yield on interest-earning
  assets*				                            4.65	 %							                4.66	%							               4.79 % 			

<FN>
<F1>
  * Taxable equivalent basis
</FN>
</TABLE>
Notes:

1.	U.S. Government, government agency, taxable municipal, 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 amortized cost of
available-for-sale securities were used in the calculations in
this table.

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

		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>

TABLE B - Volume and Yield/Rate Variances
   (Taxable Equivalent Basis - In Thousands)
<CAPTION>
                     		       1997 		Compared 		1996			       1996 		Compared 		1995
                              				   Yield/		Net Increase			     		  Yield/		Net Increase
                         		Volume	   	Rate		  (Decrease)			 Volume		  Rate		  (Decrease)
<S>
Revenue earned on									<C>			    <C>	      <C>          <C>       <C>      <C>         
 Net loans	               $	2,243 	 $	(758)	  $	1,485	   	 $	1,336	  $	 145	   $	1,481
 Investment securities			
  Taxable securities		       (314)		   231		      (83)			      861		    (62)		     799
  Tax-free securities		       228		    (65)		     163			       408		   (430)		     (22)
 Federal funds sold		          23		      7		       30			       124		    (22)		     102
													
  Total interest earning
   assets		                 2,180		   (585)		   1,595			     2,729		   (369)		   2,360

Interest paid on													
 NOW and money market 
  accounts		                  283		     13		      296			       331		   (216)		     115
 Savings deposits		           204		     68		      272			        84		     80		      164
 Time deposits		               23		   (170)		    (147)			      815		    150		      965
 Time over $100,000		         169		     10		      179			       109		     17		      126
 Federal funds purchased		     (2)	      3		        1			       (81)		    (4)		     (85)
 Short term debt            		 (5)		    (4)		      (9)			        3		      2		        5

   Total interest-bearing
     funds		                  672		    (80)		     592			     1,261		     29		    1,290

Net interest earnings		     1,508	  $	(505)	  $	1,003		    $	1,468	  $	(398)   $	1,070

</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,  taxable municipal, and
corporate debt securities plus equity securities in the
available-for-sale and held-to-maturity categories are taxable
investment securities.  Bank qualified 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 stockholders.  The first graph illustrates in thousands of
dollars, 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>
 		                         Investment          
                Loans			    Securities		     Other

<S>           <C>            <C>            <C>
1997		        $314,198		     $160,722		     $4,613
1996		         290,413		      162,188		      4,199
1995		         276,166		      143,358		      2,078
</TABLE>

  	Average earning assets increased 5.0% in 1997 compared to an
8.4% increase in 1996 and a 3.0% increase in 1995.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1997, average net loans represented 
65.5% of  average earning assets.  Total average net loans
increased during the last three years showing an 8.2% growth
from 1996 to 1997, a 5.2% growth from 1995 to 1996, and an 11.5%
growth from 1994 to 1995.  Average investments accounted for the
remaining balance of average earning assets at December 31,
1997, decreasing .9% from year end 1996.  Some of the proceeds
from maturities and calls of investment securities was used to
fund the expanding loan demand during the year.  Average
investments increased 14.5% in 1996.  The Bank purchased certain
assets and assumed certain deposit liabilities of  two branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  Most of the increase in investments during 1996 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.  Average total assets increased during
the last three years as evidenced by a  5.0% growth from 1996 to
1997, an 8.4% growth from 1995 to 1996, and a 2.6% growth from
1994 to 1995.


   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    Noninterest_Bearing  
                       Deposits	            Deposits	           Other
<S>                    <C>                  <C>                <C>
1997		                 $390,077			          $80,205			         $  -    
1996		                  382,393			           61,509			          1,043
1995		                  352,747			           56,742			          3,526
</TABLE>


  	The bank's average deposits grew during the last three years
reflecting a 4.4% growth from 1996 to 1997, an 8.4% growth from
1995 to 1996, and a 1.3% growth from 1994 to 1995.  Short and
medium term rates remained competitive compared to longer term
rates during 1997 and some depositors left money in or moved
money back into interest-bearing transaction accounts, which
increased 5.3% during 1997 and 6.3% in 1996.  However, over half
of the increase during 1996 was attributable to the acquisition.
 Average interest-bearing checking accounts decreased 7.6 % in
1995 as investors took advantage of higher certificate of
deposit rates.  Average savings deposits increased  almost 17.0%
during 1997 and 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.  Average certificates of deposit under
$100,000 increased .3% during 1997, 11.3% during 1996, 60.0%
from the acquisition, and 8.0% in 1995.  Certificates of deposit
over $100,000 increased 9.1% in 1997 compared to 6.3% in 1996,
87.8% from the acquisition, and 24.8% in 1995.  

<PAGE>

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


LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT

   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, 1997, 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, 1997, 1996, and 1995 was 4.65%, 4.66%, and 4.79% respectively.

<TABLE>
TABLE C - Rate Sensitivity of Earning Assets and
Interest-Bearing Liabilities										

<CAPTION>
                               (Dollars in Thousands)										
                          		3 Months		   3-6		       6-12		      Over 1		
As of December 31, 1997		   or Less	    Months		    Months		      Year		     Total
<S>                        <C>         <C>         <C>         <C>          <C>                                 
Earning assets										
 Federal funds sold	       $	12,800	   $    -	     $	   -	     $     -	     $ 	12,800
 Taxable investment
   securities		               3,928		     7,989		     5,000		     80,574		     97,491
 Tax-exempt investment
   securities                 1,151		       720		     1,150		     45,275		     48,296
 Loans and leases, net of
   unearned                  61,297		    45,612		    65,193	     159,606		    331,708
										
      Total earning assets		 79,176		    54,321		    71,343		    285,455		    490,295

Interest-bearing 
 liabilities										
 NOW and money market 
   accounts		                48,546		       -		      66,832		     40,656		    156,034
    Savings		                   -		         -		      44,170		        -		       44,170
    Time		                   42,702		    30,421		    54,807		     22,614		    150,544
    Time over $100,000		     10,242		     8,917		    16,536		      3,634		     39,329
    Other short-term debt		     602		       -		         -		          -		          602

      Total interest 
       bearing liabilities		102,092		    39,338		   182,345		     66,904	   $	390,679

Noninterest-bearing, net								                                 (99,616)		

Net asset/liability 
 funding gap		              (22,916)		   14,983		  (111,002)		   118,935		
										
Cumulative net asset/
  liability funding gap	  $	(22,916)	  $	(7,933)	$	(118,935)	  $	    -		

<FN>
<F2>
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 & 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, 1997.  

   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 $3.0 million at December
31, 1997, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent .9% of gross loans. 
Commercial loans comprised $.6 million of the total, with loans
secured by real estate accounting for $1.4 million, and
installment loans $1.0 million.  The gross interest income that
would have been recorded during 1997 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 $431, $374, and $365 thousand for
the years ended December 31, 1997, 1996, and 1995 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.

  	The bar graph on the bottom of this page  shows the increase in
average net loans (in thousands of dollars) and the line shows
the ratio of net loan charge offs to average loans.  The ratio
at December 31, 1997 was .61%.   Management monitoring found and
corrected a problem in consumer loan underwriting that
contributed to the higher net charge off percentage in 1997. 
The following table is the data illustrated by this graph.
<TABLE>
<CAPTION>
			                    Avg Loans		  Ratio Net
			                  Outstanding		  CO/Avg Ln

          <S>          <C>           <C>
          1981		       $ 54,908      .0027	
          1982		         60,119		    .0077
          1983		         66,964		    .0039
          1984		         80,055		    .0036
          1985		         98,353		    .0044
          1986		        120,243		    .0036
          1987		        142,959		    .0077
          1988		        154,506		    .0027
          1989		        163,003		    .0032
          1990		        172,749		    .0030
          1991		        182,561		    .0037
          1992		        215,158 		   .0023
          1993		        233,608		    .0030
          1994		        247,791		    .0014
          1995		        276,166		    .0012
          1996		        290,413		    .0036
          1997		        314,198		    .0061
</TABLE>

<PAGE>

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

<TABLE>

TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO

                                              				December		31				
                         		     1997	 	    1996		     1995	 	    1994		     1993
             		                              (Dollars In	Thousands)				
<S>                          <C>        <C>        <C>        <C>        <C>                           
Average amount of loans
 outstanding                	$	314,198	 $	290,413	 $	276,166  $	247,791	 $	233,608
Balance of allowance for 
 possible loan losses at 
 beginning of year	          $  	2,926	 $	  2,678	 $	  2,342	 $	  2,024	 $	  2,254
 Loans charged-off:										
   Loans secured by real 
    estate		                        88	       368		       15		      135		      396
   Commercial and industrial
    loans		                        605		      141		      170		       42		      222
   Individuals		                 1,371 		     879		      371		      246		      230
      TOTAL  LOANS CHARGED
       OFF		                     2,064		    1,388		      556		      423		      848
Recoveries of loans 
 previously charged off:										
   Loans secured by real 
    estate		                         8		      111		       97		        9		       56
   Commercial and industrial
    loans		                         53		       42		       14		       36		       52
   Individuals                    		80		      183		      111		       36		       40
      TOTAL RECOVERIES		           141		      336		      222		       81		      148
        NET  LOANS
         CHARGED-O 		            1,923		    1,052		      334		      342		      700
Provision charged to 
 operating expenses              1,940		    1,300		      670		      660		      470
  BALANCE OF ALLOWANCE FOR	
   POSSIBLE LOAN LOSSES AT										
   END OF YEAR	              $  	2,943	 $  	2,926	 $  	2,678	 $  	2,342	 $  	2,024

Ratio of net charge-offs 
 during the	period to average
 loans outstanding		              0.61%		    0.36%		    0.12%	   	0.14%		     0.30%

</TABLE>

CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

  	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1997, the Corporation had a ratio of
average tier 1 capital to average assets of 10.73%.  This
compares to a ratio of average tier 1 capital to average assets
of 10.36% at December 31, 1996, and 10.08% at December 31, 1995.

  	Cash dividends declared in 1997 were 11.2% more than those paid
in 1996.  The dividend to net income ratio was 22%.  Additional
dividends of approximately $15.9 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, 1997, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 18.7% and 19.7% respectively.  At
December 31, 1996, the comparable ratios were 17.7% and 18.7%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital.

  	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>
               		1991	 		$30,194
               		1992			  33,414
               		1993			  37,454
               		1994			  41,820
               		1995			  46,755
               		1996			  52,067
               		1997			  57,806
</TABLE>

<PAGE>

             FIRST FARMERS AND MERCHANTS COPROATION AND SUBSIDIARY
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANACIAL CONDITION 
                         AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Interest Income

  	Total interest income increased 4.2% in 1997 enhanced by loan
growth in all the market areas the Bank serves.  Interest and
fees earned on loans increased 5.5% in 1997 accounting for 74.6%
of gross interest income.  Interest earned on investment
securities and other investments increased .7% in 1997 rounding
out gross interest income contributing 25.4%.  Total interest
income increased 7.5% in 1996 and 11.9% in 1995.


Interest Expense

  	Total interest expense increased 3.6% in 1997 due mostly to the
increase in interest-bearing deposits.  This increase compares
favorably to a 8.4% increase in 1996, about half of which can be
attributed to the acquisition, and a 19.9% increase in 1995. 
The cost of interest-bearing deposits remained steady all year
under monthly monitoring by the Asset/Liability Committee.  This
contributed to the strong gross margin achieved during 1997.  
The net interest margin (tax equivalent net interest income
divided by average earning assets) was 4.7% at the end of 1997
and 1996 and 4.8% at the end of  1995.

  	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 19.6% during 1997 led by fees on
deposits.  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.  This compares to a 28.4% increase
in 1996 and a 14.9% increase in 1995.

  	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1997 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  		$1,471			      21.2%
 Other service fees			            845   			   12.2%
	Securities gains			              488			       7.0%
	Fees on deposits			            3,744  			    53.9%
	Other				                        394		     	  5.7%

</TABLE>

	Noninterest expenses, excluding the provision for possible loan
losses, increased 6.2% in 1997 which compares favorably with the
5.8% increase in 1996.  The increase in 1995 was 6.2%. 
Increased productivity fostered by our technology improvements
as the learning curve diminished and cost control efforts
contributed to this cost containment.  Included in this category
is net occupancy expense for an additional office opened in 1997
and furniture and equipment, which includes technology expenses,
that was down over 5% from 1996.

	A pie chart is included at this point in the materials sent to
out stockholders illustrating the composition of noninterest
expense in 1997 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			                   $7,319			            45.6%
 Furniture and equipment		       1,501			             9.3%
 Occupancy			                    1,317			             8.2%
 Other					                      5,927			            36.9%

</TABLE>

<PAGE>

                    FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDTION
                                AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
   		                            1997		       1996		       1995		       1994		       1993

<S>                         <C>          <C>          <C>          <C>          <C>                                   
INTEREST INCOME										
 Interest and fees on loans	$	28,841,420	$	27,343,817	$	25,857,982	$	21,130,914	$	19,518,742
										
 Income on investment 
  securities										
   Taxable interest		          6,802,934		  6,892,118		  6,179,492		  7,012,626		  6,925,404
   Exempt from federal 
    income tax		               2,488,475		  2,366,764		  2,156,813		  2,184,666		  1,857,168
   Dividends		                   260,759		    256,951		    177,790		    204,948		     72,054
										
                             		9,552,168		  9,515,833		  8,514,095		  9,402,240		  8,854,626

 Other interest
  income		                       253,497		    223,019		    121,492		    284,384	  	  347,287


    TOTAL INTEREST
     INCOME		                 38,647,085		 37,082,669		 34,493,569		 30,817,538	  28,720,655

INTEREST EXPENSE 										
 Interest on deposits		       17,218,537		 16,617,525		 15,247,875		 12,770,618		 11,998,235
 Interest on other short 
  term borrowings		               85,853		     94,232		    174,370		     93,286		     38,339
										
    TOTAL INTEREST EXPENSE		  17,304,390	  16,711,757		 15,422,245		 12,863,904		 12,036,574

      NET INTEREST INCOME		   21,342,695	  20,370,912		 19,071,324		 17,953,634		 16,684,081

PROVISION FOR POSSIBLE LOAN
 LOSSES		                      1,940,000		  1,300,000		    670,000		    660,000		    470,000

    NET INTEREST INCOME 
     AFTER PROVISION FOR 
     LOAN LOSSES		            19,402,695		 19,070,912		 18,401,324		 17,293,634		 16,214,081

NONINTEREST  INCOME										

 Trust department income		     1,470,568		  1,323,525	  	1,251,642	  	1,249,359		    863,952
 Service fees on deposit 
  accounts		                   3,744,381		  3,373,805		  2,697,332		  2,317,992		  2,206,026
 Other service fees, 
  commissions, and fees		        845,072		    745,523		    300,407		    336,758		    509,009
 Other operating income		        394,322		    363,430		    322,634		    319,466		    315,108
 Securities gains (losses)     		487,972		       -		         1,182		   (243,690)		    23,896

    TOTAL NONINTEREST INCOME		 6,942,315		  5,806,283		  4,573,197		  3,979,885		  3,917,991

NONINTEREST  EXPENSES										
 Salaries and employee
  benefits		                   7,319,460		  7,030,588		  6,620,827		  6,247,706		  5,686,965
 Net occupancy expense		       1,316,588		  1,211,067		  1,279,434		  1,190,678		  1,070,971
 Furniture and equipment
  expense		                    1,500,486		  1,580,753		  1,382,769		  1,069,856		    889,848
 Deposit insurance		              57,004		      6,549		    499,709		    890,646		    826,966
 Other operating expenses		    5,869,844		  5,292,103		  4,557,307		  4,109,461		  4,180,105
										
    TOTAL NONINTEREST
     EXPENSES		               16,063,382		 15,121,060		 14,340,046		 13,508,347		 12,654,855

     INCOME BEFORE PROVISION										
       FOR INCOME TAXES		     10,281,628		  9,756,135		  8,634,475		  7,765,172		  7,477,217

PROVISION FOR INCOME TAXES		   3,227,676		  2,889,339		  2,518,769		  2,203,746		  2,220,965

     NET INCOME       	     $ 	7,053,952	$	 6,866,796	$	 6,115,706	$	 5,561,426	$ 	5,256,252
										
EARNINGS PER COMMON SHARE 										
 (1,400,000 outstanding
   shares)	                 $	      5.04	$	      4.90	$	      4.37	$	      3.97	$	      3.75

</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 2.7% higher in 1997 than in 1996.  As indicated
earlier, the improvement in 1997's earnings resulted from a
strong gross margin reinforced by loans increasing as a
percentage of earning assets, an increase in noninterest income
sufficient to cover a smaller increase in noninterest expenses,
and most of the increase in taxes.  These improvements were
partially offset by higher additions to the allowance for loan
losses associated with a corrected loan underwriting problem.


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

  	The Financial Accounting Standards Board has issued two
standards that have been adopted by the Corporation as follows:
(1)  Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share" requires a reconciliation of the
numerators and the denominators of the basic and diluted
per-share computation for income from continuing operations. 
The statement is effective prospectively for earnings per share
computation for both interim and annual periods ending after
December 31, 1997.  Because the Corporation has no potential
common stock outstanding, it is required to present only basic
earnings per share and its presentation of earnings per share
did not change. (2)  Statement of Financial Accounting Standards 
No. 129 (SFAS 129), "Disclosure of Information about Capital Structure" 
requires an entity to explain, in summary form within its
financial statements, the pertinent rights and privileges of the
various securities outstanding.  The Corporation only has one
class of common stock outstanding and this statement had no
material effect on the financial statements.

   	The Financial Accounting Standards Board has issued two
standards that have not been adopted by the Corporation as
follows: (1)  Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income" purposes that
an entity report a measure of all changes in equity that result
from recognized transactions and other economic events of the
period other than transactions with owners in their capacity as
owners.  The statement is effective for fiscal years beginning
after December 15, 1997.  Management does not believe this
statement will have any material effect on future financial
statements except for disclosures.  (2)  Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information" establishes
guidelines for reporting financial information about an
operating segment or component of an enterprise.  The statement
is effective for fiscal years beginning after December 15, 1997.
 Management does not believe this statement will have any
material effect on future financial statements except for
disclosures.


YEAR 2000 COMPLIANCE TASK FORCE

 		A Year 2000 Compliance Task Force has been established to
evaluate the mission critical software and hardware that must be
compatible for continued satisfactory data processing;
representations have been obtained, or are in the process of
being obtained, from our software and hardware vendors,
confirming their Year 2000 compatibility; and plans are in place
for testing our systems' compatibility before June 30, 1998. 
Management believes that our information systems are well on
their way to being Year 2000 compliant.

<PAGE>

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

SHAREHOLDER INFORMATION

  	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1997, had a
market value of $109 million and were held by 1,618 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 tables below show 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.

   These tables were shown graphically in the materials	sent to our
stockholders.

<TABLE>
<CAPTION>

                       				Price Range of	  		 Dividend
                        				Common Stock	     	 	Paid
                         			High	    	Low		    Per Share
 
<S>     <C>              <C>       <C>          <C>
       	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

       	First quarter	   $	67.00	  $	65.00	     $	
       	Second quarter		   69.00		   69.00		      0.53
1997	   Third quarter		    72.00		   70.00		
       	Fourth quarter		   78.00		   72.00		      0.56
                                          						$	1.09

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                 COMPARATIVE DATA
                            (In Thousands of Dollars)										

                         		1997		      1996		      1995		      1994		      1993
<S>                    <C>         <C>         <C>         <C>         <C>
AVERAGE ASSETS	        $	527,926	  $	502,700	  $	463,739	  $	451,953	  $	420,760

AVERAGE LOANS (NET)	   $	314,198	  $	290,413	  $	276,166  	$	247,791	  $	233,609

AVERAGE DEPOSITS	      $	463,576	  $	443,902	  $	409,489	  $	404,412	  $	378,782

RETURN ON EQUITY AND
 ASSETS										
  Return on average 
    assets		                1.34%		     1.37%		     1.32%		     1.23%		     1.25%
										
  Return on beginning
    equity		               12.97%		    14.01%		    13.95%		    14.11%		    14.93%
 Average tier 1 
    capital to average 
    assets		               10.73%		    10.36%		    10.08%		     9.25%		     8.90%

COMMON DIVIDEND PAYOUT
 RATIO										
   Earnings per shar   $	    5.04	 $	   4.90	 $	    4.37	  $    3.97   $	   3.75

   Cash dividends per 
    share	             $	   1.09	  $	   0.98  $	    0.88	  $	   0.80	  $	   0.73

   Ratio		                    22%		       20%		      20%		        20%		       19%
</TABLE>
										
<TABLE>
<CAPTION>
                                      NET INTEREST MARGIN										
                                  (In Thousands of Dollars)										

                        		1997		      1996		      1995		      1994		      1993

<S>                    <C>         <C>         <C>         <C>         <C>     
INTEREST INCOME										
 (TAX EQUIVALENT)	     $	39,581	   $	37,986	   $	35,626	   $	32,039	   $	29,465

INTEREST EXPENSE		       17,304		    16,712		    15,422		    12,864		    12,037

                      	$	22,277	   $	21,274	   $	20,204	   $	19,175   	$	17,428

NET INTEREST MARGIN*		     4.65%		     4.66%		     4.79%		     4.68%		     4.58%


<FN>
<F3>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets.										
</FN>
										
</TABLE>




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 a part of the Annual Report to Stockholders
which is included in this filing.

       
               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, 1997, 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 fifteen (15) 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 and Crockett 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.   At December 31, 1997, approximately $8.9
million was required to be maintained at the Federal Reserve
Bank.


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.

  		Debt and equity securities that are bought and held
  principally for the purpose of selling them in


<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)

  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 deferred
  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 payoff 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.

		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.  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 accrued 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 nonaccrual status and loans in the two
most severe Loan Review classifications are specifically
evaluated for impairment.  Interest income on loans in
nonaccrual status is recognized only to the extent of the excess
of cash payments received over principal payments due.


	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 $410 thousand at December 31, 1997, and $450
thousand at December 31, 1996.  

Allowance for Possible Loan Losses

	The allowance for possible loan losses is established through
provisions for loan losses charged against income.  Loan quality
is monitored by Loan Review and


<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)

the Credit Administrator.  Portions of loans deemed to be
uncollectible are charged against the allowance for losses, and
subsequent recoveries, if any, are credited to the allowance
account in the period such determination is made.  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. The allowance for
loan losses is maintained at a level believed adequate by
management to absorb estimated probable inherent loan losses.


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.


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: 
1997 - $182,613; 1996 - $224,212;  and  1995 - $168,020.

Earnings Per Share

	The Financial Accounting Standards Board has issued Statement
No. 128, "Earnings per Share". which supersedes APB Opinion No.
15.  This statement requires the presentation of earnings per
share by all entities that have common stock or potential common
stock, such as options, warrants and convertible securities,
outstanding that trade in a public market.  Those entities that
have only common stock outstanding are required to present basic
earnings per share amounts.  All other entities are required to
present basic and diluted per share amounts.  Because the
Corporation  has no potential common stock outstanding, it is
required to present only basic earnings per share and its
presentation of earnings per share will not change.  Earnings
per common share have been computed on the basis of the
weighted-average number of common shares outstanding during each
period presented.		


<PAGE>




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

NOTE  2 - INVESTMENT SECURITIES

		Securities with an amortized cost of $116,315,234 and
$103,540,673 at December 31, 1997 and 1996, respectively (fair
value: 1997 - $117,969,544;  1996 - $104,061,311), 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, 1997, 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
 <S>                             <C>              <C>            <C>          <C> 
	December 31, 1997								
	Available-for-sale securities								
	    U.S. Treasury	              $ 	22,337,240	   $  	233,853	   $	 14,893	   $	 22,556,200
	    U.S. Government agencies		     23,834,686		       53,172		     92,413		     23,795,445
     Other securities		              2,749,094		      422,591	     	 2,000		      3,169,685

		                               $	 48,921,020	   $	  709,616	   $	109,306	   $ 	49,521,330
	Held-to-maturity securities								
	    U.S. Treasury	              $ 	10,432,892	   $	  209,508	   $	   -	      $	 10,642,400
	    U.S. Government agencies		     36,552,480		      657,930		      2,048		     37,208,362
	    States and political
       subdivisions		               48,465,174		    1,218,108		     12,144		     49,671,138
	    Other securities		                815,421		       33,735		       -		           849,156
									
                              		$  	96,265,967	   $ 2,119,281	   $  14,192	   $  98,371,056

	December 31, 1996								
									
	Available-for-sale securities								
	    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

<FN>
<F1>
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, 1997, 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, 1997, 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 $11,008,435, $3,020,054, and
$7,306,453 during 1997, 1996, and 1995, respectively.  Proceeds
from the maturity or call of held-to-maturity securities were
$32,386,811, $56,112,000, and $18,848,992 during 1997, 1996, and
1995, respectively.  Gross gains of $489,697 and gross losses of
$1,725 were realized on dispositions in 1997.  There were no
realized gains or losses in 1996.  Gross gains of $1,182 and
gross losses of $-0- were realized on the dispositions in 1995.
<TABLE>
<CAPTION>
                                  		Amortized		          Fair		        Yield
                                     		Cost	            	Value		    (Unaudited)
<S>                                <C>                 <C>              <C>
Available-for-sale securities						
U.S. Treasury						
   Within one year	                $ 	8,051,787	       $ 	8,049,800		   5.5%
   After one but within five years		 14,285,453		        14,506,400		   6.2%
U.S. Government agencies						
   Within one year		                  3,994,953		         3,999,700		   6.1%
   After one but within five years		 19,585,333		        19,541,020		   5.8%
   After ten years		                    254,400		           254,725		   6.1%
Other securities		                    2,749,094		         3,169,685		   9.0%
						
                                  	$	48,921,020	       $	49,521,330		
Held-to-maturity securities						
U.S. Treasury						
   After one but within five years $	10,432,892	       $	10,642,400		   6.4%
U.S. Government agencies						
   Within one year		                  2,999,150		         2,997,100		   5.4%
   After one but within five years   18,669,684		        19,008,962		   6.6%
   After five but within ten years		 14,883,646		        15,202,300		   6.5%
States and political subdivisions						
   Within one year		                  3,239,829		         3,286,218		   9.3%
   After one but within five years		 13,595,854		        13,865,175		   7.7%
   After five but within ten years		 18,510,918		        18,983,557		   7.4%
   After ten years		                 13,118,573		        13,536,188		   7.8%
Other securities						
   After one but within five years		    315,421		           323,206		   8.0%
   After five but within ten years		    500,000		           525,950		   7.3%
						
                                  	$	96,265,967	       $	98,371,056		
<FN>
<F2>
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>
    		                                           1997		          1996

<S>                                       <C>             <C>
Commercial, financial and agricultural	   $  	60,592,529	 $ 	54,565,335
Tax exempt municipal loans		                     768,125		      605,933
Real estate				
   Construction		                              5,861,866		    8,751,021
   Commercial mortgages		                     52,968,199		   46,114,930
   Residential mortgages		                   146,768,418		  125,854,753
   Other                                     		5,869,654		    7,115,749
Consumer loans		                              58,879,231		   60,993,583

                                           		331,708,022	  	304,001,304
Less:				
   Net unamortized loan origination fees		      (347,839)		    (269,260)
   Allowance for possible loan losses		       (2,943,000)		  (2,926,063)
				
	                                         $	328,417,183   $	300,805,981
<FN>
<F3>
Table III - Loans Outstanding  by Category at December 31, 1997
and 1996
</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	                $ 	78,350	     $ 	47,052	     $ 	40,499	   $	165,901
Variable rate loans		               93,752		       30,484		       41,571		    165,807
								
                                	$	172,102	      $	77,536	      $	82,070	   $	331,708

<FN>
<F4>
Table IV - Loan Maturities and Amounts of Loans Carrying Fixed
and Variable Interest Rates at December 31, 1997
</FN>

</TABLE>

		Loans having recorded investments of $2,954,000 at December
31, 1997, have been identified as impaired.  The total allowance
for possible loan losses related to these loans was $1,146,000. 
Interest received on these loans during 1997 was $479,698. 
Impaired loans had recorded investments of approximately 
$5,136,000 at December 31, 1996.

		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, 1997 and 1996, 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 1997 or 1996.


<PAGE>

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

NOTE 3 - LOANS (Continued)

<TABLE>
<CAPTION>
                                   		Balance at							
                                   		Beginning 				              Amount		  Balance at	
                                   		 of Year		     Additions		 Collected		End of Year	
				
<S>                                 <C>           <C>           <C>          <C>
            1997
Aggregate of certain party loans	   $	8,222,262	  $	12,488,090	 $	8,276,031	 $	12,434,321	

            1996									
Aggregate of certain party loans	   $	7,706,004	  $	 8,454,247  $	7,937,989	 $	 8,222,262	

<FN>
<F5>
Table V - Analysis of Activity in Certain Party Loans
</FN>
</TABLE>


NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
                                          		1997		        1996		        1995	
<S>                                     <C>           <C>           <C>
Balance at beginning of year	           $	2,926,063	  $	2,678,386  	$	2,342,290	
Provision charged to operating expenses 		1,940,000		   1,300,000		     670,000	
Loan losses:							
  Loans charged off                    		(2,064,138)		 (1,388,422)		   (555,957)	
  Recoveries on loans previously							
   charged off                            		141,075		     336,099		     222,053	
							
Balance at end of year	                 $	2,943,000	  $	2,926,063	  $	2,678,386	

<FN>
<F6>
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, 1997. 
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.


NOTE 5 - BANK PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
                                            		1997		         1996	
<S>                                       <C>            <C>
Land	                                     $	1,348,288	   $	1,348,288	
Premises		                                  7,027,521		    7,013,942	
Furniture and equipment		                   3,857,459		    4,068,373	
Leasehold improvements		                    1,209,113		    1,149,732	
                                         		13,442,381		   13,580,335	
Less allowance for depreciation and
 amortization		                            (7,029,016)		  (6,750,860)	
                                        	 $	6,413,365	   $	6,829,475	
<FN>
<F7>
Table VII - Premises and Equipment at December 31, 1997 and 1996
</FN>
</TABLE>

<PAGE>

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

NOTE 5 - BANK PREMISES AND EQUIPMENT (Continued)

		Annual provisions for depreciation and amortization of bank
premises and equipment total $651,619 for 1997, $685,005 for
1996, and $645,816 for 1995.  Included in premises and equipment
cost and allowance for depreciation and amortization are certain
fully depreciated assets totaling approximately $2,670,000 at
December 31, 1997.                   


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, 1997, additional dividends of approximately $15,900,000
could have been declared by the Bank to the Corporation without
regulatory agency approval.


NOTE 7 - LEASES

		Real property for five of the Bank's office locations and
certain equipment are leased under noncancelable operating
leases expiring at various times through 2008.  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 $689,887,
$726,337, and $660,121 for equipment leases, and $112,070,
$112,384, and $111,649 for building leases, in 1997, 1996, and
1995, respectively.  Future minimum lease commitments as of
December 31, 1997, under all noncancelable operating leases with
initial terms of one year or more are shown in Table VIII.

<TABLE>
 <C>                                   <C>
                        			1998	       $   513,083	
                        			1999		          121,128	
                        			2000		          124,128	
                        			2001		          124,128	
                        			2002		           86,328	
                  			Thereafter           		94,200	

	Total future minimum lease payments			$	1,062,995	

<FN>
<F8>
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>
  		                                      1997	        1996		       1995	
<S>                                   <C>          <C>          <C>
Current:				  			
   Federal                           	$	2,416,401	 $	2,422,550	 $	2,166,566	
   State		                                557,218		    628,788		    585,606	

     Total current                    		2,973,619		  3,051,338		  2,752,172	

Deferred:							
   Federal	     	                         215,949		   (137,700)		  (198,393)	
   State                                 		38,108		    (24,299)		   (35,010)	

     Total deferred		                     254,057		   (161,999)		  (233,403)	
							
     Total provision for income taxes	$	3,227,676	 $	2,889,339	 $	2,518,769	
<FN>
<F8>
Table IX - Provisions for Income Taxes
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                  <C>           <C>           <C>
Allowance for possible loan losses	  $	  776,888   $  	914,386	  $   815,315
Write-down of other real estate		           -          177,120       177,120
Deferred compensation		                  403,857       336,255	      256,139
Deferred loan fees		                      19,823        26,863        44,051
  Deferred tax asset	                  1,200,568     1,454,624     1,292,625	

Unrealized gain on AFS securities		     (240,124)		    (97,294)		   (157,392)
	
  Deferred tax liability              		(240,124)		   ( 97,294)		   (157,392)	

    Net deferred tax asset	          $  	960,444   $	1,357,330	  $	1,135,233	

<FN>
<F10>
Table X - Deferred Tax Effects of Principal Temporary Differences
</FN>
</TABLE>

<TABLE>
<CAPTION>
		                                        1997		        1996		        1995	
<S>                                   <C>           <C>           <C>
Tax expense at statutory rate	        $	3,495,754	  $	3,317,086	  $	2,935,722	
Increase (decrease) in taxes 
  resulting from:							
    Tax-exempt interest		                (896,112)		   (859,383)		   (783,011)	
    Nondeductible interest expense		      106,329		     101,534		      89,491	
    Employee benefits		                   (55,560) 		   (34,685)		    (22,418)	
    Other nondeductible expenses							
      (nontaxable income) - net		          11,146	 	     13,515	 	     (5,695)	
    State income taxes, net of 
      federal	tax benefit               		392,915		     398,963	 	    363,393	
    Dividend income exclusion		           (33,239)	 	   (34,855)	 	   (18,324)	
    Other		                                55,891	 	    (12,836)		    (40,388)	
Total provision for income taxes	     $	3,227,676	  $	2,889,339	  $	2,518,769	
Effective tax rate		                         31.4%		       29.6%		       29.2%	
<FN>
<F11>
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 1997, 1996, and 1995 amounted to
$2,927,000, $3,140,000 and $2,756,442, respectively.

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


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 standby letters of
credit in the normal course of business at December 31, 1997,
were $21,735,000 and $1,977,000, 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 INFORMATION

		 Interest paid on deposits and other borrowings during 1997,
1996, and 1995 amounted to $17,049,703, $17,206,708, and
$14,845,107, 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, 1997 and 1996,
that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject. 

		The Bank's calculated risk-adjusted capital ratios exceeded
the minimum standard for a "well capitalized" bank as of 
September 30, 1997, the date of the most recent examination by
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, 1997	            Amount	 	  Ratio	     Amount	  	Ratio > or=		    Amount		  Ratio > or =

<S>                                <C>         <C>       <C>            <C>         <C>         <C>       
Total Capital (to Risk Weighted											
 Assets) Consolidated	             61,732,093		19.68%		  25,098,756		   8.00%		     31,373,445		10.00%
         Bank	                     61,153,956		19.54%		  25,040,651		   8.00%		     31,300,813		10.00%
Tier I Capital (to Risk Weighted											
 Assets) Consolidated	             58,789,093		18.74%		  12,549,378		   4.00%		     18,824,067		 6.00%
         Bank	                     58,210,956		18.60%		  12,520,325		   4.00%		     18,780,488		 6.00%
Tier I Capital (Average) 
 (to Average	Assets)  
         Consolidated	             56,515,935		10.73%		  21,073,801		   4.00%		     26,342,251		 5.00%
         Bank	                     55,946,149		10.63%		  21,047,205		   4.00%		     26,309,006		 5.00%

As of December 31, 1996											
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%		  11,988,374		   4.00%		     17,982,562		 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%		  20,102,944		   4.00%		     25,128,680		 5.00%
         Bank	                     50,574,336		10.07%		  20,089,111		   4.00%		     25,111,388		 5.00%
<FN>
<F12>
Table XII - Capital Amounts and Capital Adequacy Ratios    
</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 nonprofit 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 $684,227, $661,307 and $633,459, in 1997, 1996, and
1995, 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 (1997 - $645,985; 1996 - $620,657) purchased
in 1993 to fund the plan and the related liability (1997 -
$501,255; 1996 - $513,792) were included in other assets and
other liabilities, respectively.  Net noncash income recognized
on these policies of $25,328 in 1997 and $26,436 in 1996 is
included in the above asset values.   Net noncash income was
$14,133 in 1995.  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 $42,463 in
1997, $64,024 in 1996, and $106,066 in 1995.

		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, net of benefits paid out in 1997
and accruals, of $173,841 for 1997, $172,871 for 1996, and
$176,727 for 1995 have been recognized in the accompanying
consolidated 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.  Additional single premium universal life insurance
policies, totaling $385,000, were purchased in 1997 for new
participants.  Net noncash income recognized on these policies
of $103,953 in 1997 and $85,249 in 1996 is included in the cash
surrender values of  $2,376,124 and $1,887,171 reported in other
assets at December 31, 1997 and 1996, respectively.  Net noncash
income was $51,803 in 1995.

		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.  The value of this policy (1997 -
$819,460; 1996 - $785,330) is included in other assets, and net
noncash income recognized on this policy of $34,130 in 1997 and
net expense of $9,670 in 1996 is included in the above asset
values.

		The Bank is beneficiary on the insurance policies that fund
the salary continuation plan, the deferred compensation plan,
and the group term replacement/split dollar plan.  These
policies have an aggregate face amount of $3,163,750.


<PAGE>

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

NOTE 14 -  FAIR VALUES OF FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
                              		December		31,1997		         December		31,1997	
                              Carrying		     Fair      	 	Carrying		     Fair	
                             		Amount		      Value		       Amount		      Value	
Financial assets		                        (DOLLARS		IN		THOUSANDS)			
<S>                           <C>         <C>             <C>         <C>
 Cash and due from banks	     $	29,873	   $	29,873	       $	27,917	   $	27,917	
 Federal funds sold		           12,800		    12,800		          -		         - 	
 Securities held to maturity		  96,266		    98,371		       118,542		   119,226	
 Securities available for
  sale		                        48,921		    49,521		        55,898		    56,142	
 Loans, net                  		328,417		   325,323		       300,806		   309,401	
 Accrued interest receivable		   5,366		     5,366		         5,549		     5,549	

Financial liabilities									
 Deposits		                    470,282		   456,557		       460,573		   449,129	
 Federal funds purchased      		  -		         -		            5,000		     5,000	
 Short term borrowings		           602		       602		           523		       523	
 Accrued interest payable		      2,794		     2,794	         	2,539		     2,539	

<FN>
<F13>
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, 1997, 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
1997										

<S>                         <C>          <C>          <C>          <C>          <C>
Interest income	            $	9,362,178	 $	9,705,584	 $	9,774,855	 $	9,804,468	 $	38,647,085
Interest expense		            4,258,739		  4,330,171		  4,361,715		  4,353,765		  17,304,390

Net interest income		         5,103,439		  5,375,413		  5,413,140		  5,450,703		  21,342,695
Provision for possible loan
 losses		                       450,000		    290,000		    550,000	    	650,000		   1,940,000
Noninterest expenses, net 
 of noninterest income		      2,394,981		  2,405,847		  2,388,160		  1,932,079		   9,121,067
Income before income taxes		  2,258,458		  2,679,566		  2,474,980		  2,868,624		  10,281,628
Income taxes		                  556,134		    795,731		    917,613		    958,198		   3,227,676

Net income	                 $	1,702,324	 $	1,883,835	 $	1,557,367	 $	1,910,426	 $	 7,053,952

Earnings per common share										
 (1,400,000 shares)	        $	     1.22	 $	     1.35	 $	     1.11	 $	     1.36	 $	      5.04

                             		First		     Secon  		     Third		     Fourth		
                            		Quarter		    Quarter		    Quarter		    Quarter		      Total
1996										
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

<FN>
<F14>
Table XIV - Consolidated Quarterly Results of Operations
</FN>
</TABLE>


<PAGE>

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

NOTE 16 - DEPOSITS  

				The Bank does not have any foreign offices and all deposits
are serviced in its sixteen 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.

<TABLE>
<CAPTION>
                                  		        Year	Ended	December	31
		                                      1997   	 			    	  1996	   			      	1995				
                                 	         	(Dollars in Thousands)									
<S>                              <C>          <S><C>            <S><C>            <S><C>
Demand deposits	                 $	62,909	   	- 	%	 $	61,509   	- 	%  $	56,730		  -	 %	
NOW and money market accounts		   166,914		  3.37		 	158,450		 3.37			 149,016		 3.51		   
Savings deposits		                 43,775		  3.37			  37,421		 3.22			  34,629		 3.00		
Time deposits of less than
 $100,000		                       152,389		  5.29			 151,952		 5.40			 136,568		 5.30		
Time deposits of $100,000 or
 more		                            37,686		  5.42			  34,539  	5.41			  32,524		 5.35		
																
Total In Domestic Offices	       $463,673		  3.71%	 $443,870		 3.74%	 $409,467		 3.72%	

<FN>
<F15>
  Table XV - Average Amounts of Deposits and Average Rates Paid
             by Deposit Type at December 31
</FN>
</TABLE>
   		
<TABLE>
<CAPTION>
                                  1997		      1996		      1995
                                 				(Dollars In Thousands)		
        <S>                    <C>         <C>         <C>
        Under 3 months	        $ 	9,308	   $	11,680	   $ 	7,877
        3 to 12 months	         	25,981		    22,638		    18,407
        Over 12 months		          4,039		     4,812		     4,310

                               $ 39,328    $ 39,130    $ 30,594
<FN>						
<F16>
Table XVI - Maturities of Time Deposits of $100,000 or More at
            December 31
</FN>
</TABLE>

<PAGE>

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

NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT CORPORATION
<TABLE>
                             Condensed Balance Sheets
                            December 31, 1997 and 1996				
                            (In Thousands of Dollars) 
<CAPTION>
Assets		                                           1997		         1996
<S>                                              <C>            <C> 
Cash	                                            $     72	      $	   142
Investment in bank subsidiary - at equity		        59,565		       53,870
Investment in credit life insurance company 
 - at cost		                                           50		           50
Investment in other securities	                        25		           22
Dividends receivable from bank subsidiary		           784		          714
Cash surrender value - life insurance		               651		          489
Other assets		                                       -		               1
				
   Total assets	                                 $	61,147	      $	55,288

Liabilities and Stockholders' Equity				
Liabilities				
  Payable to directors	                          $	   220	      $	   173
  Dividends payable		                                 784		          714
				
    Total liabilities		                             1,004		          887
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		                              45,783		       40,255
  Net unrealized gain (loss) on 
   available-for-sale securities, net of 
   tax		                                              360		          146
    Total stockholders' equity		                   60,143		       54,401

    Total liabilities and stockholders' equity   $ 61,147       $ 55,288  
<FN>
<F17>
Table XVII - Condensed Statements of Balance Sheet of Parent
</FN>
</TABLE>

<TABLE>
                           Condensed Statements of Income
                        Years Ended December 31, 1997 and 1996
                              (In Thousands of Dollars)
<CAPTION>
                                                   		1997		       1996
<S>                                               <C>          <C>
  Dividends from bank subsidiary                  $ 1,526      $ 1,372
  Other dividend income		                              80		         85
  Interest income		                                     8		          6
  Other                                              		34		         28
Operating expenses		                                   76		         68
   Income before equity in undistributed net				
    income of bank subsidiary		                     1,572		      1,423
				
Equity in undistributed net income of bank
 subsidiary		                                       5,482		      5,444
       Net Income	                                $	7,054	     $	6,867

<FN>
<F18>
Table XVIII - Condensed Statements of Income 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>
                         Condensed Statements of Cash Flows 
                       Years Ended December 31, 1997 and 1996
                            (In Thousands of Dollars)   
<CAPTION>
                                       		1997	           	1996
<S>                                    <C>              <C>
Operating activities				
  Net income for the year              	$	7,054	        $ 6,867
  Adjustments to reconcile net income
   to net cash provided by operating 
   activities				
   Equity in undistributed net income
    of bank subsidiary		                 (5,482)		       (5,444)
   Increase in other assets		               (98)		         (111)
   Increase in payables		                    47		            44
				
      Total adjustments		                (5,533)	 	      (5,511)
				
   Net cash provided by operating 
    activities		                          1,521		         1,356
				
Net cash provided by (used in) 
 investing activities				
 Purchases of investment securities      		(119)		         (133)
 Proceeds from maturities of 
  investment securities                     119		           137
 Purchase of single premium life 
  insurance policy		                       (135)	           -	

    Net cash provided by (used in) 
     investing activities		                (135)		            4
				
Net cash used in financing activities				
 Cash dividends paid		                   (1,456)		       (1,288)
 
   Increase (decrease) in cash		            (70)		           72
				
Cash at beginning of year		                 142		            70
				
Cash at end of year	                   $    	72	        $  	142

<FN>
<F19>
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 1997, 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.  "High Technology + High Commitment =
High Performance" was the challenge for the year as the Bank
committed 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.

	The accompanying tables plus the discussion and financial
information are presented to aid in understanding First Farmers
and Merchants Corporation's current financial position and
results of operations.  The emphasis of this discussion will be
on the years 1997, 1996, and 1995; 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 Corporation'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 $7.1 million for 1997 compared
to $6.9 million in 1996 and $6.1 million in 1995.  On a per
common share basis, net income was $5.04 for 1997 versus $4.90
for 1996 and $4.37 for 1995.  The improvement in 1997's earnings
resulted from a strong gross margin reinforced by loan demand
that changed the mix of earning assets as higher yielding loans 
were funded with maturing investment securities and an increase in 
noninterest income sufficient to cover a smaller increase in 
noninterest expenses and  most of the increase in taxes.  These 
improvements were partially offset by higher additions to the allowance 
for loan losses.

  	The return on average equity for 1997 was 12.2% compared to
13.2% for 1996 and 13.1% for 1995.   The return on average
assets was 1.34% for 1997 versus 1.37% for 1996 and 1.32% for
1995.

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>

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

<CAPTION>
                                   YEAR ENDED DECEMBER 31,
                                 				1997								                  1996								                  1995
                              		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	                  $	314,198		9.18	%	$	28,858	*	 $	290,413		9.43	%	$	27,373	*	 $	276,166		9.38 %	 $	25,892	*  
 Bank time deposits		                 1		 -			       -			           1   -	         -			           2		 -			        -	
 Taxable securities		           113,013		6.35			   7,173			   118,114		6.14			   7,256			   104,217		6.20			    6,457	
 Tax exempt securities		         47,366		6.96			   3,297	*		   44,158		7.10			   3,134	*		   39,105		8.07			    3,156	*
 Federal funds sold		             4,631		5.46			     253			     4,198		5.31			     223			     2,076		5.83			      121	

 TOTAL EARNING ASSETS   		      479,209		8.26		 $	39,581			   456,884		8.31		 $	37,986			   421,566		8.45		  $	35,626	
Noninterest earning assets   																								
 Cash and due from banks		       27,039								                25,760				  	                 24,829
 Bank premises and equipment		    6,633								                 6,708								                 6,246						
 Other assets		                  15,045								                13,348								                11,098						

 TOTAL ASSETS	                $	527,926							              $	502,700							              $	463,739						

LIABILITIES AND 
 STOCKHOLDERS' EQUITY																								
Interest bearing liabilities																								
 Time and savings deposits:																								
 NOW and money market 
  accounts 	                  $	166,828		3.38	%	$	5,634		   $	158,438		3.39	%	$ 5,338 		 $	148,993		3.51	%	 $ 5,223	
 Savings		                       43,776		3.37			  1,476			     37,428		3.22			  1,204			    34,627		3.00			   1,040	
 Time                         		152,389		5.29			  8,063			    151,973		5.40			  8,210			   136,605		5.30			   7,245	
 Time over $100,000		            37,680		5.43			  2,045			     34,554		5.40		   1,866			    32,522		5.35			   1,740	

 TOTAL INTEREST BEARING 
 DEPOSITS		                     400,673	 4.30			 17,218			    382,393		4.35		  16,618			   352,747		4.32 	   15,248	
 Federal funds purchased		        1,016		5.80			     59			      1,043		5.56		      58			     2,415		5.92		      143	
 Other short-term debt		            538		5.02			     27			        622		5.79	       36			       565		5.49		       31	

 TOTAL  INTEREST BEARING 
 LIABILITIES		                  402,227		4.30	  $17,304			    384,058		4.35		 $16,712			   355,727		4.34    $15,422	

Noninterest bearing liabilities																								 
 Demand deposits		               62,903								                61,509								               56,742						 
 Other liabilities		              4,990								                 5,066								                4,515						

 TOTAL LIABILITIES		            470,120								               450,633								              416,984						
Stockholders' equity		           57,806								                52,067								               46,755						 
 TOTAL LIABILITIES AND																								
   STOCKHOLDER'S EQUITY	      $	527,926							              $	502,700		 			              $	463,739						

Spread between combined 
 rates earned and	combined 
 rates paid*				                         3.96	 %			 				               3.96 %							               4.12	%			

 Net yield on interest-earning
  assets*				                            4.65	 %							                4.66	%							               4.79 % 			

<FN>
<F1>
  * Taxable equivalent basis
</FN>
</TABLE>
Notes:

1.	U.S. Government, government agency, taxable municipal, 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 amortized cost of
available-for-sale securities were used in the calculations in
this table.

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

		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>

TABLE B - Volume and Yield/Rate Variances
   (Taxable Equivalent Basis - In Thousands)
<CAPTION>
                     		       1997 		Compared 		1996			       1996 		Compared 		1995
                              				   Yield/		Net Increase			     		  Yield/		Net Increase
                         		Volume	   	Rate		  (Decrease)			 Volume		  Rate		  (Decrease)
<S>
Revenue earned on									<C>			    <C>	      <C>          <C>       <C>      <C>         
 Net loans	               $	2,243 	 $	(758)	  $	1,485	   	 $	1,336	  $	 145	   $	1,481
 Investment securities			
  Taxable securities		       (314)		   231		      (83)			      861		    (62)		     799
  Tax-free securities		       228		    (65)		     163			       408		   (430)		     (22)
 Federal funds sold		          23		      7		       30			       124		    (22)		     102
													
  Total interest earning
   assets		                 2,180		   (585)		   1,595			     2,729		   (369)		   2,360

Interest paid on													
 NOW and money market 
  accounts		                  283		     13		      296			       331		   (216)		     115
 Savings deposits		           204		     68		      272			        84		     80		      164
 Time deposits		               23		   (170)		    (147)			      815		    150		      965
 Time over $100,000		         169		     10		      179			       109		     17		      126
 Federal funds purchased		     (2)	      3		        1			       (81)		    (4)		     (85)
 Short term debt            		 (5)		    (4)		      (9)			        3		      2		        5

   Total interest-bearing
     funds		                  672		    (80)		     592			     1,261		     29		    1,290

Net interest earnings		     1,508	  $	(505)	  $	1,003		    $	1,468	  $	(398)   $	1,070

</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,  taxable municipal, and
corporate debt securities plus equity securities in the
available-for-sale and held-to-maturity categories are taxable
investment securities.  Bank qualified 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 stockholders.  The first graph illustrates in thousands of
dollars, 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>
 		                         Investment          
                Loans			    Securities		     Other

<S>           <C>            <C>            <C>
1997		        $314,198		     $160,722		     $4,613
1996		         290,413		      162,188		      4,199
1995		         276,166		      143,358		      2,078
</TABLE>

  	Average earning assets increased 5.0% in 1997 compared to an
8.4% increase in 1996 and a 3.0% increase in 1995.   As a
financial institution, the Bank's primary earning asset is
loans.  At December 31, 1997, average net loans represented 
65.5% of  average earning assets.  Total average net loans
increased during the last three years showing an 8.2% growth
from 1996 to 1997, a 5.2% growth from 1995 to 1996, and an 11.5%
growth from 1994 to 1995.  Average investments accounted for the
remaining balance of average earning assets at December 31,
1997, decreasing .9% from year end 1996.  Some of the proceeds
from maturities and calls of investment securities was used to
fund the expanding loan demand during the year.  Average
investments increased 14.5% in 1996.  The Bank purchased certain
assets and assumed certain deposit liabilities of  two branches
of Union Planters Bank of Middle Tennessee, National
Association, Nashville, Tennessee, effective as of April 1,
1996.  Most of the increase in investments during 1996 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.  Average total assets increased during
the last three years as evidenced by a  5.0% growth from 1996 to
1997, an 8.4% growth from 1995 to 1996, and a 2.6% growth from
1994 to 1995.


   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    Noninterest_Bearing  
                       Deposits	            Deposits	           Other
<S>                    <C>                  <C>                <C>
1997		                 $390,077			          $80,205			         $  -    
1996		                  382,393			           61,509			          1,043
1995		                  352,747			           56,742			          3,526
</TABLE>


  	The bank's average deposits grew during the last three years
reflecting a 4.4% growth from 1996 to 1997, an 8.4% growth from
1995 to 1996, and a 1.3% growth from 1994 to 1995.  Short and
medium term rates remained competitive compared to longer term
rates during 1997 and some depositors left money in or moved
money back into interest-bearing transaction accounts, which
increased 5.3% during 1997 and 6.3% in 1996.  However, over half
of the increase during 1996 was attributable to the acquisition.
 Average interest-bearing checking accounts decreased 7.6 % in
1995 as investors took advantage of higher certificate of
deposit rates.  Average savings deposits increased  almost 17.0%
during 1997 and 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.  Average certificates of deposit under
$100,000 increased .3% during 1997, 11.3% during 1996, 60.0%
from the acquisition, and 8.0% in 1995.  Certificates of deposit
over $100,000 increased 9.1% in 1997 compared to 6.3% in 1996,
87.8% from the acquisition, and 24.8% in 1995.  

<PAGE>

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


LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT

   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, 1997, 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, 1997, 1996, and 1995 was 4.65%, 4.66%, and 4.79% respectively.

<TABLE>
TABLE C - Rate Sensitivity of Earning Assets and
Interest-Bearing Liabilities										

<CAPTION>
                               (Dollars in Thousands)										
                          		3 Months		   3-6		       6-12		      Over 1		
As of December 31, 1997		   or Less	    Months		    Months		      Year		     Total
<S>                        <C>         <C>         <C>         <C>          <C>                                 
Earning assets										
 Federal funds sold	       $	12,800	   $    -	     $	   -	     $     -	     $ 	12,800
 Taxable investment
   securities		               3,928		     7,989		     5,000		     80,574		     97,491
 Tax-exempt investment
   securities                 1,151		       720		     1,150		     45,275		     48,296
 Loans and leases, net of
   unearned                  61,297		    45,612		    65,193	     159,606		    331,708
										
      Total earning assets		 79,176		    54,321		    71,343		    285,455		    490,295

Interest-bearing 
 liabilities										
 NOW and money market 
   accounts		                48,546		       -		      66,832		     40,656		    156,034
    Savings		                   -		         -		      44,170		        -		       44,170
    Time		                   42,702		    30,421		    54,807		     22,614		    150,544
    Time over $100,000		     10,242		     8,917		    16,536		      3,634		     39,329
    Other short-term debt		     602		       -		         -		          -		          602

      Total interest 
       bearing liabilities		102,092		    39,338		   182,345		     66,904	   $	390,679

Noninterest-bearing, net								                                 (99,616)		

Net asset/liability 
 funding gap		              (22,916)		   14,983		  (111,002)		   118,935		
										
Cumulative net asset/
  liability funding gap	  $	(22,916)	  $	(7,933)	$	(118,935)	  $	    -		

<FN>
<F2>
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 & 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, 1997.  

   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 $3.0 million at December
31, 1997, have been identified as impaired in accordance with
the provisions of SFAS 114.  They represent .9% of gross loans. 
Commercial loans comprised $.6 million of the total, with loans
secured by real estate accounting for $1.4 million, and
installment loans $1.0 million.  The gross interest income that
would have been recorded during 1997 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 $431, $374, and $365 thousand for
the years ended December 31, 1997, 1996, and 1995 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.

  	The bar graph on the bottom of this page  shows the increase in
average net loans (in thousands of dollars) and the line shows
the ratio of net loan charge offs to average loans.  The ratio
at December 31, 1997 was .61%.   Management monitoring found and
corrected a problem in consumer loan underwriting that
contributed to the higher net charge off percentage in 1997. 
The following table is the data illustrated by this graph.
<TABLE>
<CAPTION>
			                    Avg Loans		  Ratio Net
			                  Outstanding		  CO/Avg Ln

          <S>          <C>           <C>
          1981		       $ 54,908      .0027	
          1982		         60,119		    .0077
          1983		         66,964		    .0039
          1984		         80,055		    .0036
          1985		         98,353		    .0044
          1986		        120,243		    .0036
          1987		        142,959		    .0077
          1988		        154,506		    .0027
          1989		        163,003		    .0032
          1990		        172,749		    .0030
          1991		        182,561		    .0037
          1992		        215,158 		   .0023
          1993		        233,608		    .0030
          1994		        247,791		    .0014
          1995		        276,166		    .0012
          1996		        290,413		    .0036
          1997		        314,198		    .0061
</TABLE>

<PAGE>

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

<TABLE>

TABLE D - RISK ELEMENTS IN THE LOAN PORTFOLIO

                                              				December		31				
                         		     1997	 	    1996		     1995	 	    1994		     1993
             		                              (Dollars In	Thousands)				
<S>                          <C>        <C>        <C>        <C>        <C>                           
Average amount of loans
 outstanding                	$	314,198	 $	290,413	 $	276,166  $	247,791	 $	233,608
Balance of allowance for 
 possible loan losses at 
 beginning of year	          $  	2,926	 $	  2,678	 $	  2,342	 $	  2,024	 $	  2,254
 Loans charged-off:										
   Loans secured by real 
    estate		                        88	       368		       15		      135		      396
   Commercial and industrial
    loans		                        605		      141		      170		       42		      222
   Individuals		                 1,371 		     879		      371		      246		      230
      TOTAL  LOANS CHARGED
       OFF		                     2,064		    1,388		      556		      423		      848
Recoveries of loans 
 previously charged off:										
   Loans secured by real 
    estate		                         8		      111		       97		        9		       56
   Commercial and industrial
    loans		                         53		       42		       14		       36		       52
   Individuals                    		80		      183		      111		       36		       40
      TOTAL RECOVERIES		           141		      336		      222		       81		      148
        NET  LOANS
         CHARGED-O 		            1,923		    1,052		      334		      342		      700
Provision charged to 
 operating expenses              1,940		    1,300		      670		      660		      470
  BALANCE OF ALLOWANCE FOR	
   POSSIBLE LOAN LOSSES AT										
   END OF YEAR	              $  	2,943	 $  	2,926	 $  	2,678	 $  	2,342	 $  	2,024

Ratio of net charge-offs 
 during the	period to average
 loans outstanding		              0.61%		    0.36%		    0.12%	   	0.14%		     0.30%

</TABLE>

CAPITAL RESOURCES, CAPITAL, AND DIVIDENDS

  	Historically, internal growth has financed the capital needs of
the Bank.  At December 31, 1997, the Corporation had a ratio of
average tier 1 capital to average assets of 10.73%.  This
compares to a ratio of average tier 1 capital to average assets
of 10.36% at December 31, 1996, and 10.08% at December 31, 1995.

  	Cash dividends declared in 1997 were 11.2% more than those paid
in 1996.  The dividend to net income ratio was 22%.  Additional
dividends of approximately $15.9 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, 1997, the Corporation's ratios of Tier I
capital to risk-weighted assets and total capital to
risk-weighted assets were 18.7% and 19.7% respectively.  At
December 31, 1996, the comparable ratios were 17.7% and 18.7%,
respectively.  Please refer to Note 11 in the NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS in the accompanying financial
statements for more information on the capital.

  	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>
               		1991	 		$30,194
               		1992			  33,414
               		1993			  37,454
               		1994			  41,820
               		1995			  46,755
               		1996			  52,067
               		1997			  57,806
</TABLE>

<PAGE>

             FIRST FARMERS AND MERCHANTS COPROATION AND SUBSIDIARY
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANACIAL CONDITION 
                         AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Interest Income

  	Total interest income increased 4.2% in 1997 enhanced by loan
growth in all the market areas the Bank serves.  Interest and
fees earned on loans increased 5.5% in 1997 accounting for 74.6%
of gross interest income.  Interest earned on investment
securities and other investments increased .7% in 1997 rounding
out gross interest income contributing 25.4%.  Total interest
income increased 7.5% in 1996 and 11.9% in 1995.


Interest Expense

  	Total interest expense increased 3.6% in 1997 due mostly to the
increase in interest-bearing deposits.  This increase compares
favorably to a 8.4% increase in 1996, about half of which can be
attributed to the acquisition, and a 19.9% increase in 1995. 
The cost of interest-bearing deposits remained steady all year
under monthly monitoring by the Asset/Liability Committee.  This
contributed to the strong gross margin achieved during 1997.  
The net interest margin (tax equivalent net interest income
divided by average earning assets) was 4.7% at the end of 1997
and 1996 and 4.8% at the end of  1995.

  	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 19.6% during 1997 led by fees on
deposits.  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.  This compares to a 28.4% increase
in 1996 and a 14.9% increase in 1995.

  	A pie chart is included at this point in the materials sent to
our stockholders illustrating the composition of noninterest
income in 1997 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  		$1,471			      21.2%
 Other service fees			            845   			   12.2%
	Securities gains			              488			       7.0%
	Fees on deposits			            3,744  			    53.9%
	Other				                        394		     	  5.7%

</TABLE>

	Noninterest expenses, excluding the provision for possible loan
losses, increased 6.2% in 1997 which compares favorably with the
5.8% increase in 1996.  The increase in 1995 was 6.2%. 
Increased productivity fostered by our technology improvements
as the learning curve diminished and cost control efforts
contributed to this cost containment.  Included in this category
is net occupancy expense for an additional office opened in 1997
and furniture and equipment, which includes technology expenses,
that was down over 5% from 1996.

	A pie chart is included at this point in the materials sent to
out stockholders illustrating the composition of noninterest
expense in 1997 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			                   $7,319			            45.6%
 Furniture and equipment		       1,501			             9.3%
 Occupancy			                    1,317			             8.2%
 Other					                      5,927			            36.9%

</TABLE>

<PAGE>

                    FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDTION
                                AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
   		                            1997		       1996		       1995		       1994		       1993

<S>                         <C>          <C>          <C>          <C>          <C>                                   
INTEREST INCOME										
 Interest and fees on loans	$	28,841,420	$	27,343,817	$	25,857,982	$	21,130,914	$	19,518,742
										
 Income on investment 
  securities										
   Taxable interest		          6,802,934		  6,892,118		  6,179,492		  7,012,626		  6,925,404
   Exempt from federal 
    income tax		               2,488,475		  2,366,764		  2,156,813		  2,184,666		  1,857,168
   Dividends		                   260,759		    256,951		    177,790		    204,948		     72,054
										
                             		9,552,168		  9,515,833		  8,514,095		  9,402,240		  8,854,626

 Other interest
  income		                       253,497		    223,019		    121,492		    284,384	  	  347,287


    TOTAL INTEREST
     INCOME		                 38,647,085		 37,082,669		 34,493,569		 30,817,538	  28,720,655

INTEREST EXPENSE 										
 Interest on deposits		       17,218,537		 16,617,525		 15,247,875		 12,770,618		 11,998,235
 Interest on other short 
  term borrowings		               85,853		     94,232		    174,370		     93,286		     38,339
										
    TOTAL INTEREST EXPENSE		  17,304,390	  16,711,757		 15,422,245		 12,863,904		 12,036,574

      NET INTEREST INCOME		   21,342,695	  20,370,912		 19,071,324		 17,953,634		 16,684,081

PROVISION FOR POSSIBLE LOAN
 LOSSES		                      1,940,000		  1,300,000		    670,000		    660,000		    470,000

    NET INTEREST INCOME 
     AFTER PROVISION FOR 
     LOAN LOSSES		            19,402,695		 19,070,912		 18,401,324		 17,293,634		 16,214,081

NONINTEREST  INCOME										

 Trust department income		     1,470,568		  1,323,525	  	1,251,642	  	1,249,359		    863,952
 Service fees on deposit 
  accounts		                   3,744,381		  3,373,805		  2,697,332		  2,317,992		  2,206,026
 Other service fees, 
  commissions, and fees		        845,072		    745,523		    300,407		    336,758		    509,009
 Other operating income		        394,322		    363,430		    322,634		    319,466		    315,108
 Securities gains (losses)     		487,972		       -		         1,182		   (243,690)		    23,896

    TOTAL NONINTEREST INCOME		 6,942,315		  5,806,283		  4,573,197		  3,979,885		  3,917,991

NONINTEREST  EXPENSES										
 Salaries and employee
  benefits		                   7,319,460		  7,030,588		  6,620,827		  6,247,706		  5,686,965
 Net occupancy expense		       1,316,588		  1,211,067		  1,279,434		  1,190,678		  1,070,971
 Furniture and equipment
  expense		                    1,500,486		  1,580,753		  1,382,769		  1,069,856		    889,848
 Deposit insurance		              57,004		      6,549		    499,709		    890,646		    826,966
 Other operating expenses		    5,869,844		  5,292,103		  4,557,307		  4,109,461		  4,180,105
										
    TOTAL NONINTEREST
     EXPENSES		               16,063,382		 15,121,060		 14,340,046		 13,508,347		 12,654,855

     INCOME BEFORE PROVISION										
       FOR INCOME TAXES		     10,281,628		  9,756,135		  8,634,475		  7,765,172		  7,477,217

PROVISION FOR INCOME TAXES		   3,227,676		  2,889,339		  2,518,769		  2,203,746		  2,220,965

     NET INCOME       	     $ 	7,053,952	$	 6,866,796	$	 6,115,706	$	 5,561,426	$ 	5,256,252
										
EARNINGS PER COMMON SHARE 										
 (1,400,000 outstanding
   shares)	                 $	      5.04	$	      4.90	$	      4.37	$	      3.97	$	      3.75

</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 2.7% higher in 1997 than in 1996.  As indicated
earlier, the improvement in 1997's earnings resulted from a
strong gross margin reinforced by loans increasing as a
percentage of earning assets, an increase in noninterest income
sufficient to cover a smaller increase in noninterest expenses,
and most of the increase in taxes.  These improvements were
partially offset by higher additions to the allowance for loan
losses associated with a corrected loan underwriting problem.


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

  	The Financial Accounting Standards Board has issued two
standards that have been adopted by the Corporation as follows:
(1)  Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share" requires a reconciliation of the
numerators and the denominators of the basic and diluted
per-share computation for income from continuing operations. 
The statement is effective prospectively for earnings per share
computation for both interim and annual periods ending after
December 31, 1997.  Because the Corporation has no potential
common stock outstanding, it is required to present only basic
earnings per share and its presentation of earnings per share
did not change. (2)  Statement of Financial Accounting Standards 
No. 129 (SFAS 129), "Disclosure of Information about Capital Structure" 
requires an entity to explain, in summary form within its
financial statements, the pertinent rights and privileges of the
various securities outstanding.  The Corporation only has one
class of common stock outstanding and this statement had no
material effect on the financial statements.

   	The Financial Accounting Standards Board has issued two
standards that have not been adopted by the Corporation as
follows: (1)  Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting Comprehensive Income" purposes that
an entity report a measure of all changes in equity that result
from recognized transactions and other economic events of the
period other than transactions with owners in their capacity as
owners.  The statement is effective for fiscal years beginning
after December 15, 1997.  Management does not believe this
statement will have any material effect on future financial
statements except for disclosures.  (2)  Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information" establishes
guidelines for reporting financial information about an
operating segment or component of an enterprise.  The statement
is effective for fiscal years beginning after December 15, 1997.
 Management does not believe this statement will have any
material effect on future financial statements except for
disclosures.


YEAR 2000 COMPLIANCE TASK FORCE

 		A Year 2000 Compliance Task Force has been established to
evaluate the mission critical software and hardware that must be
compatible for continued satisfactory data processing;
representations have been obtained, or are in the process of
being obtained, from our software and hardware vendors,
confirming their Year 2000 compatibility; and plans are in place
for testing our systems' compatibility before June 30, 1998. 
Management believes that our information systems are well on
their way to being Year 2000 compliant.

<PAGE>

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

SHAREHOLDER INFORMATION

  	The 1,400,000 shares of common stock of First Farmers &
Merchants Corporation outstanding at December 31, 1997, had a
market value of $109 million and were held by 1,618 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 tables below show 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.

   These tables were shown graphically in the materials	sent to our
stockholders.

<TABLE>
<CAPTION>

                       				Price Range of	  		 Dividend
                        				Common Stock	     	 	Paid
                         			High	    	Low		    Per Share
 
<S>     <C>              <C>       <C>          <C>
       	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

       	First quarter	   $	67.00	  $	65.00	     $	
       	Second quarter		   69.00		   69.00		      0.53
1997	   Third quarter		    72.00		   70.00		
       	Fourth quarter		   78.00		   72.00		      0.56
                                          						$	1.09

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                 COMPARATIVE DATA
                            (In Thousands of Dollars)										

                         		1997		      1996		      1995		      1994		      1993
<S>                    <C>         <C>         <C>         <C>         <C>
AVERAGE ASSETS	        $	527,926	  $	502,700	  $	463,739	  $	451,953	  $	420,760

AVERAGE LOANS (NET)	   $	314,198	  $	290,413	  $	276,166  	$	247,791	  $	233,609

AVERAGE DEPOSITS	      $	463,576	  $	443,902	  $	409,489	  $	404,412	  $	378,782

RETURN ON EQUITY AND
 ASSETS										
  Return on average 
    assets		                1.34%		     1.37%		     1.32%		     1.23%		     1.25%
										
  Return on beginning
    equity		               12.97%		    14.01%		    13.95%		    14.11%		    14.93%
 Average tier 1 
    capital to average 
    assets		               10.73%		    10.36%		    10.08%		     9.25%		     8.90%

COMMON DIVIDEND PAYOUT
 RATIO										
   Earnings per shar   $	    5.04	 $	   4.90	 $	    4.37	  $    3.97   $	   3.75

   Cash dividends per 
    share	             $	   1.09	  $	   0.98  $	    0.88	  $	   0.80	  $	   0.73

   Ratio		                    22%		       20%		      20%		        20%		       19%
</TABLE>
										
<TABLE>
<CAPTION>
                                      NET INTEREST MARGIN										
                                  (In Thousands of Dollars)										

                        		1997		      1996		      1995		      1994		      1993

<S>                    <C>         <C>         <C>         <C>         <C>     
INTEREST INCOME										
 (TAX EQUIVALENT)	     $	39,581	   $	37,986	   $	35,626	   $	32,039	   $	29,465

INTEREST EXPENSE		       17,304		    16,712		    15,422		    12,864		    12,037

                      	$	22,277	   $	21,274	   $	20,204	   $	19,175   	$	17,428

NET INTEREST MARGIN*		     4.65%		     4.66%		     4.79%		     4.68%		     4.58%


<FN>
<F3>
*Net interest margin is net interest income (tax equivalent)
divided by average earning assets.										
</FN>
										
</TABLE>




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 21, 1998.

<PAGE>

Executive Officers of Registrant

The following is a list as of March 6, 1998, 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:
 
                                  Family		        Positions and
         Name		         Age	      Relationship  		Offices Held

Waymon L. Hickman		      63		     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	  46		     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 
                                                  Administrative 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.

<PAGE>

Executive Officers of Registrant-Continued

                     				         Family	        	Positions and
         Name		         Age       Relationship		  Offices Held

John P. Tomlinson, III	  47 	     None	           Vice President/Secretary of
                                                  FFMC.  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	     53		      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.

Patricia N. McClanahan	 53		      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.

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.


<PAGE>

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 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.

<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.


<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

       

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 of the Bank)


Date	                             March 17, 1998 


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 17, 1998 


	                   /s / Patricia N. McClanahan                            
      		Patricia N. McClanahan, Treasurer
		   (Chief Financial Officer of the Bank)


Date	                             March 17, 1998



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.









<PAGE>






Signatures  -- continued


       
Signatures -- continued

      /s/ Kenneth A. Abercrombie             
 	 Kenneth A. Abercrombie, Director

    Date      March 17, 1998                          	


      /s/ James L. Bailey, Jr.                
 	 James L. Bailey, Jr., Director

    Date      March 17, 1998                          	


      /s/ Flavius A. Barker       
 	 Flavius A. Barker, Director

    Date      March 17, 1998                          	


      /s/ Harlan D. Bowsher    
 	 Harlan D. Bowsher, Director

    Date      March 17, 1998                          	


      /s/ Hulet M. Chaney     
 	 Hulet M. Chaney,  Director

    Date      March 17, 1998                          	


      /s/ H. Terry Cook, Jr.             
 	 H. Terry Cook, Jr. , Director

    Date      March 17, 1998                         	


      /s/ W. J. Davis, Jr.                                
   W. J. Davis, Jr., Director

    Date      March 17, 1998                         	


      /s/ Thomas Napier Gordon     
  	Thomas Napier Gordon, Director

    Date      March 17, 1998                         	


      /s/ Edwin W. Halliday            
 	 Edwin W. Halliday, Director

    Date      March 17, 1998                          	


      /s/ Waymon L. Hickman             
 	 Waymon L. Hickman, Director

    Date      March 17, 1998                          	


      /s/ Tillman Knox                               	
   Tillman Knox, Director

    Date      March 17, 1998                          	


      /s/ Joe E. Lancaster                         
 	 Joe E. Lancaster, Director

    Date      March 17, 1998                          	


      /s/ T. Randy Stevens                        
 	 T. Randy Stevens, Director

    Date      March 17, 1998                          	


      /s/ Dan C. Wheeler                          
 	 Dan C. Wheeler, Director

    Date      March 17, 1998                          	


      /s/ David I. Wise                    
 	 David I. Wise, Director

    Date      March 17, 1998                          	



      /s/ W. Donald Wright                        
 	 W. Donald Wright, Director

    Date      March 17, 1998                          	






	

<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, 1997

FIRST FARMERS AND MERCHANTS CORPORATION

COLUMBIA, TENNESSEE







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, 1997, are incorporated by reference in Item 8:



	Consolidated balance sheets -- December 31, 1997 and 1996



	Consolidated statements of income -- Years ended December 31,
1997, 1996, and 1995



	Consolidated statements of cash flows -- Years ended December
31, 1997, 1996, and 1995



	Notes to consolidated financial statements -- December 31, 1997



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.







EXHIBIT INDEX



FIRST FARMERS AND MERCHANTS CORPORATION





Exhibit Number				Title or Description





	(13)				Annual Report to  Stockholders

















EXHIBIT 13



ANNUAL REPORT TO STOCKHOLDERS

FIRST FARMERS AND MERCHANTS CORPORATION