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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES
EXCHANGE 
             ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31,
2002

[  ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 0-11709

First Citizens
Bancshares, Inc.(Exact name of registrant as specified in its charter)

|Tennessee                       | 62-1180360                       
|------------------------------- | ---------------------------------
|(State or other jurisdiction of | (IRS Employer Identification No.)
|incorporation or organization)  |                                  

P.O. Box 370, First
Citizens Place
Dyersburg, Tennessee 38025-0370

(731) 285-4410
(Registrant's telephone number, including area code)________________________

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:Common Stock
(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 disclosure of delinquent filers pursuant to Item 405 Regulation
S-K (229.40 of this chapter) is not contained herein, and will not be contained
herein, and will not be contained, to the best of 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. Yes [x]   
No [ ]

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of U.A.)  Yes [x]  No [ ]

________________________

The aggregate market value of
voting stock held by nonaffiliates of the registrant at June 30, 2002 was
$91,768,350.

Of the registrant's only class of
common stock (no par value) there were 3,661,236 shares outstanding as of
December 31, 2002 (net of Treasury Stock).

________________________

DOCUMENTS
INCORPORATED BY
REFERENCE:

Portions of the Proxy
Statement dated March 14, 2003 (Part III) filed by electronic submission

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PART I

ITEM 1 - BUSINESS

GENERAL

First Citizens Bancshares, Inc.  is a Tennessee Corporation organized and incorporated
in 1982 and commenced operations in September, 1983. Bancshares is registered
as a bank holding company under the Bank Holding Company Act of 1956, as amended
and elected, effective April 19, 2000 to become a financial holding company
pursuant to the provisions of the Gramm-Leach Bliley Act. As a financial holding company,
Bancshares may engage in activities that are financial in nature or incidental to a financial activity.  Permissible activities for a financial holding company are contained in Regulation Y of Federal Reserve
regulations. Bancshares may continue to claim the benefits of financial holding
company status so long as each depository institution owned by the company remains well capitalized and well managed.  In addition,
Bancshares may not commence new activities under sections 4(k) or 4(n) of the Bank Holding Company Act or acquire control of a company engaged in activities under those sections if any of
The Company's insured depository institutions receive a rating of less than satisfactory under any examination conducted to determine compliance with the Community Reinvestment Act.
Bancshares is a two bank holding company consisting of First Citizens National
Bank total assets $546 million, principal office in Dyersburg, Tennessee and
Munford Union Bank total assets $148 million, principal office located in
Munford Tennessee. At December 31, 2002 the Corporation had total assets of 
$694
million compared to $538 million at December 31, 2001.

The Principal Executive Officers are at
One First Citizens Place, Dyersburg, Tennessee. Our telephone number is
731-285-4410. Our website is firstcitizens-bank.com. We intend to post to our
website our annual , quarterly and current reports as soon as reasonably
practicable after filing with the SEC.

Bancshares, through
its principal banking subsidiaries, First Citizens National Bank  and Munford Union Bank and banking-related subsidiaries, provides a
broad range of financial services. The Company is engaged in both retail and
commercial banking business. First Citizens National Bank was chartered as a
national bank in 1900 and operates in Northwest, Tennessee. First Citizens operates
under the supervision of the Comptroller of the Currency, and is insured up to
applicable limits by the Federal Deposit Insurance Corporation (FDIC) and is a
member of the Federal Reserve System. Munford Union Bank, chartered by the State
Department of Financial Institutions in 1925 operates in Southeast Tennessee.
Munford Union also operates under the supervision of the FDIC. Munford Union is insured up to the applicable limits defined by the
FDIC. The subsidiary banks are also subject to
various requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon and limitations on the types of investments that may be made, activities
that may be engaged in, and types of services that may be offered. Various
consumer laws and regulations also affect the operations of the subsidiary
banks. In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve as it attempts to control
the money supply and credit availability in order to influence the economy. The
subsidiary banks operate under the day-to-day management of  their officers and
directors; and formulate their own policies with respect to lending practices,
interest rates and service charges and other banking matters.

Bancshares' primary source of income is dividends received from
bank subsidiaries. Dividend payments are determined in relation to earnings, deposit growth and capital position
of the subsidiaries in compliance with regulatory guidelines. Management anticipates that future increases in the capital of
Bancshares will be accomplished through earnings retention or capital injection.

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The following table sets forth a comparative analysis of Assets, Deposits, Net Loans, and Equity Capital of Bancshares as of December 31, for the years indicated:

|                     | December 31,  
|-------------------- | --------------
|                     | (in thousands)
|                     | 2002          
|Total Assets         | $  694,198    
|Total Deposits       | 531,642       
|Total Net Loans      | 447,827       
|Total Equity Capital | 54,601        

Individual bank performance is compared to industry standards through utilization of the Uniform Bank Performance Report (UBPR), published quarterly by the Federal Financial Institution's Examination Council.

Presented in the following chart are comparisons of
Bancshares with peer group banks for the periods indicated:

|                                                                                                                                     | As of December 31,
|------------------------------------------------------------------------------------------------------------------------------------ | ------------------
|                                                                                                                                     | *
      2002      
|                                                                                                                                     | Bancshares        
|Average Assets/Net Interest Income                                                                                                   | 4.13%             
|Average Assets/Net Operating Income                                                                                                  | 1.27              
|Net loan losses/Average total loans                                                                                                  | 0.23              
|Primary Capital/Average Assets                                                                                                       | 7.94              
|Cash Dividends/Net Income**                                                                                                          | 50.74             
|                                                                                                                                     |                   
|** Performance as of
      12/31/02 is
      compared to peer group ratios as of 09/30/02 (Most recent Federal Reserve
      Report)

EXPANSION

On November 12, 1999 the Gramm-Leach-Bliley Act was signed into law.  The act contains seven titles, each of which focuses on a different aspect of the financial services industry. This new law
significantly changed the way we do business by opening up new business opportunities to the banking industry.

Based on authority granted under this act, Bancshares,
formerly a bank holding company, converted to a financial holding company.  As a financial holding company, Bancshares may engage in activities that are financial in nature or incidental to a financial activity.

Bancshares through its strategic planning process has stated its
intention to seek profitable opportunities that would utilize excess capital and maximize income within the West Tennessee Area.
Bancsharess' objective in acquiring other banking institutions would be for asset growth and diversification into other market areas.  Acquisitions would afford
Bancshares increased economies of scale within the data processing function and better utilization of human resources.  Any acquisition approved by Bancshares, would be deemed to be in the best interest of Bancshares and its shareholders.

Bancshares acquired
Munford Union Bank in May 2002. This acquisition added $148 million in assets
housed in five locations in Tipton and Shelby Counties in South Tennessee to
Bancshares' balance sheet. In addition, the acquisition expanded Bancshares
market into one of the fastest growing areas of the state.

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SUPERVISION AND REGULATION

Bancshares is a
two-bank financial holding company under the Bank Holding Company Act of 1956, as amended, and is subject to supervision and examination by the Board of Governors of the Federal Reserve.
As a financial holding company, Bancshares is required to file with the Federal Reserve annual reports and other information regarding
its business obligations and those of its subsidiaries. Federal Reserve approval must be obtained before Bancshares may:

> Acquire ownership or control of any voting securities of a bank or
>       bank holding company where the acquisition results in the bank holding
>       company owning or controlling more than 5 percent of a class of voting securities of that bank or
>       bank holding company;
>     Acquire substantially all assets of a bank or
>       bank holding company or merge with another bank holding company.

Federal Reserve approval is not required for a bank subsidiary of a
bank holding company to merge with or acquire substantially all assets of another bank if prior approval of a federal supervisory agency, such as the Comptroller of the Currency is required under the Bank Merger Act.  Relocation of a subsidiary bank of a
bank holding company from one state to another requires prior approval of the Federal Reserve and is subject to the prohibitions of the Douglas Amendment.

The Bank Holding Company Act provides that the Federal Reserve shall not approve any acquisition, merger or consolidation which would result in a monopoly or which would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of the United States.  Further, the Federal Reserve may not approve any other proposed acquisition, merger, or consolidation, the effect of which might be to substantially lessen competition or tend to create a monopoly in any section of the country, or which in any manner would be in restraint of trade, unless the anti-competitive effect of the proposed transaction is clearly outweighed in favor of public interest by the probable effect of the transaction in meeting convenience and needs of the community to be served. An amendment effective February 4, 1993 further provides that an application may be denied if the applicant has failed to provide the Federal Reserve with adequate assurances that it will make available such information on its operations and activities, and the operations and activities of any affiliate, deemed appropriate to determine and enforce compliance with the Bank Holding Company Act and any other applicable federal banking statutes and regulations.  In addition, consideration is given to the competence, experience and integrity of the officers, directors and principal shareholders of the applicant and any subsidiaries as well as the banks and bank holding companies concerned.  The Federal Reserve also considers the record of the applicant and its affiliates in fulfilling commitments to conditions imposed by the Federal Reserve in connection with prior applications.

A bank holding company is prohibited with limited exceptions from engaging directly or indirectly through its subsidiaries in activities unrelated to banking or managing or controlling banks.  One exception to this limitation permits ownership of a company engaged solely in furnishing services to banks; another permits ownership of shares of the company, all of the activities of which the Federal Reserve has determined after due notice and opportunity for hearing, to be so closely related to banking or managing or controlling banks, as to be a proper incident thereto.  Moreover, under the 1970 amendments to the Act and to the Board's regulations, a financial holding company and its subsidiaries are prohibited from engaging in certain "tie-in" arrangements in connection with any extension of credit or provision of any property or service. Subsidiary banks of a
financial holding company are subject to certain restrictions imposed by the Federal Reserve Act on any extension of credit to the financial holding company or to any of its other subsidiaries, or investments in the stock or other securities thereof, and on the taking of such stock or securities as collateral for loans to any borrower.

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Financial holding companies are required to file an annual report of their operations with the Federal Reserve, and they and their subsidiaries are subject to examination by the Federal Reserve.

RECENTLY ISSUED
ACCOUNTING STANDARDS

Accounting standards on
business combinations (FASB 141) and accounting for goodwill (FASB 142) had an
impact on Bancshares' financials. Purchase accounting has been applied on our
Munford Union acquisition and will be applied to any others that might take place in the future.
Bancshares has calculated the fair value of our one unit and compared the
value to the unit's book value. FASB 142 adopts a more aggregate view for
goodwill and bases the accounting on the units of the combined entity into which
an acquired entity is integrated (reporting units per FASB 131). If the book
value is determined to be below the fair value assessment, there is no
impairment loss. But, if the fair value is below book, this means that goodwill
has been impaired, and a write down is required.  As of December 31, 2002, there was no impairment;
therefore, no amortization expense will be required. Bancshares adopted this
statement (FASB 142) on January 1, 2002 and the benchmark was applied. The amount of
amortization eliminated in 2002 was $25 thousand per month. We do not anticipate
any impairment write-downs in 2003.

FASB Statement 144
supercedes Statement 121 and provides a single accounting model for long lived
assets to be disposed of. This statement did not have a material impact on
Bancshares financial condition or results of operations.

In April 2002, FASB
issued Statement 145, "Rescission of Statements 4, 44 and 64. Amendment of
FASB 13 and Technical Corrections" (Statement 145). Statement 145 rescinds
Statement 4, which required all gains and losses from extinguishment of debt to
be aggregated and, if material, classified as an extraordinary item, net of tax.
The provisions of this statement did not have a material impact on Bancshares.

FASB Statement
No. 147, (Acquisition of Certain Financial Institutions) will
replace certain paragraphs in Statement 72, Accounting for Certain Acquisitions
of Banking or Thrift Institutions. This issuance has no immediate impact on
Bancshares, but could be applicable if Bancshares buys another branch.

FASB issued Statement
No. 148 (issued December 2002). This statement amends FASB 123, Accounting for Stock
Based Compensation and is not applicable to Bancshares.

CAPITAL ADEQUACY

Bancshares is subject to capital adequacy requirements imposed by the Federal Reserve. 
The Federal Reserve has adopted risk-based capital guidelines for bank holding companies. 
The minimum guideline for the ratio of total capital to risk weighted assets
(including certain off-balance-sheet items such as standby letters of credit) is 8%, and the
minimum ratio of Tier 1 Capital to risk-weighted assets is 4%. At least half of
the Total Capital must be composed of common stock, minority interests in the
equity capital accounts of consolidated subsidiaries, non-cumulative perpetual
preferred stock and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets (Tier 1 Capital). The
remainder may consist of qualifying subordinated debt, certain types of
mandatory convertible securities and perpetual debt, other preferred stock and a
limited amount of loan loss reserves. At December 31, 2002, Bancshares' risk-based capital ratio was 10.92% significantly in excess of 8%
mandated by regulation, but less than the 13.81% at year-end 2001. The
level of capital at year-end was reduced by an investment of $5 million of
capital toward the purchase price of Munford Union Bank. Risk based capital
focuses primarily on broad categories of credit risk and incorporates elements
of transfer, interest rate and market risks. The calculation of risk-based
capital ratio is accomplished by dividing qualifying capital by weighted risk
assets. Tier 1 leverage ratio at year-end 2002 was 6.76 percent, with total
capital as a percentage of total assets net of loan loss reserves at 7.86%.

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Failure to meet capital
guidelines could subject a financial holding company to a variety of enforcement remedies, including
the termination of deposit insurance by the FDIC, and to certain restrictions on its business and in certain
circumstances to the appointment of a conservator or receiver.

BANKING BUSINESS

Bancshares is the
financial holding company for First
Citizens, Munford Union Bank, First
Citizens Capital Assets, and First Citizens (TN) statutory Trust II, is
headquartered in Dyersburg, Tennessee. First Citizens and Munford
Union Bank (the subsidiary banks) provide customary banking services, such as
checking and savings accounts, funds transfers, various types of time deposits
and safe deposit facilities. Other services also include the financing of commercial transactions and
making and servicing both secured and unsecured loans to individuals, firms, and corporations.
First Citizens is a leader in agricultural lending in
Tennessee. Agricultural services include operating loans as well as financing for the purchase of equipment and farm land.  The consumer lending department makes direct loans to individuals for personal, automobile, real estate, home improvement, business and collateral needs. Mortgage lending makes available long term fixed and variable rate loans to finance the purchase of residential real estate.  These loans are sold in the secondary market without retaining servicing rights.
Commercial lending operations include various types of credit services for customers.

The subsidiary banks have a total of 38 banking locations (17
branch banks and 21 free standing ATMs) in five Tennessee counties. First
Citizens owns and operates four wholly owned subsidiaries that
provides the following services:

- First Citizens Financial Plus, Inc., a bank service
    corporation wholly owned by First Citizens provides licensed
    brokerage services that allows the bank to compete on a limited basis with
    numerous non-bank entities who pose a continuing threat to the customer
    base. The brokerage firm operates two locations in Northwest Tennessee.
- Delta Finance provides consumer finance services
    consisting primarily of consumer and residential real estate loans out of
    three office locations in West Tennessee.
- White and Associates/First Citizens Insurance, LLC was
    chartered by the State of Tennessee and is a general insurance agency
    offering a full line of insurance products including casualty, life and
    health, and crop insurance. First Citizens holds a 50%
    ownership in the company. The insurance agency occupies two offices in
    Northwest Tennessee.
- First Citizens was granted trust powers
    in 1925 and has maintained an active Trust department since that time.
    Assets as of December 2002 were $138 million. Trust services offered include
    but are not limited to estate settlement, trustee of living trusts,
    testamentary trustee, court appointed conservator and guardian, agent for
    investment accounts, and trustee of pension and profit sharing trusts.
- Nevada I and Nevada II, corporations organized and
    existing under the laws of the state of Nevada. The activities of
    Nevada I are the ownership of stock in Nevada II and the ownership of
    certain loans pursuant to a participation agreement. The principal activity
    of Nevada II is to acquire and sell investment securities as well as collect
    the income from the portfolio.

Munford Union Bank owns and operates two wholly owned
subsidiaries, Nevada Investments III and Nevada Investments IV serving the same
purpose for Munford Union as Nevada I and II serve for First Citizens.

The business of providing financial services is highly competitive. The competition involves not only other banks but non-financial enterprises as well. In addition to competing with other commercial banks in the service area,
Bancshares subsidiary banks compete with savings and loan associations, insurance companies, savings banks, small loan companies, finance companies, mortgage companies, real estate investment trusts, certain governmental agencies, credit card organizations, and other enterprises.

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The following tabular analysis sets forth the competitive position of First Citizens
and Munford Union when compared with other financial institutions in the service area for the period ending June 30,
2002.

Dyer, Lauderdale,
        Obion, Tipton & Weakley Counties Market(Banks Only)(in
        thousands)Bank Name
      # of
        Offices
      Total   
        Deposits  06/30/02
      % of   
        Market   
        Share   06/30/02First Citizens National Bank
      13
      $  
        398,301
      18.86
      %Union Planters Bank, National Association
      17
      231,791
      10.98First State Bank
      6
      191,763
      9.08BancorpSouth Bank
      5
      156,567
      7.41Bank of Ripley
      5
      120,767
      5.72Commercial Bank & Trust Co.
      2
      96,951
      4.59INSOUTH Bank
      3
      94,263
      4.46Reelfoot Bank
      4
      91,068
      4.31City State Bank
      4
      82,835
      3.92Security Bank
      6
      79,678
      3.77Bank of Sharon
      2
      74,835
      3.54First Tennessee Bank, National
        Association
      2
      71,824
      3.40Munford Union
        Bank
      2
      65,579
      3.11Bank of
        Gleason
      1
      59,894
      2.84Weakley County
        Bank
      3
      51,128
      2.42Bank of Halls
      2
      43,099
      2.04Greenfield Banking
        Company
      2
      37,473
      1.77Brighton Bank
      2
      35,741
      1.69Bank of
        Friendship
      1
      30,853
      1.46Lauderdale County Bank
      2
      29,061
      1.38Gates Banking & Trust Co.
      1
      26,982
      1.28Bank Tennessee
      1
      19,883
      0.94Farmers Bank, Woodland Mills, TN
      1
      12,414
      0.59Bank of Mason
      1
      9,235
      0.44Total
      88
      $ 
        2,111,985
      100.00
      %


At December 31, 2002 Bancshares and its
subsidiaries employed a total of 256 full time equivalent employees. Having been a part of
Dyersburg/Dyer County in excess of 100 years, First Citizens is privileged to enjoy a significant share (60% market share) of the financial services market.
Expansion into other counties in West Tennessee increased the fulltime
equivalent from 204 at year-end 2001 to the current total of 256.  Planning has afforded
Bancshares both the physical resources and data processing technology to meet financial needs generated by this growth.

USURY, RECENT LEGISLATION AND ECONOMIC ENVIRONMENT

Tennessee usury laws limit the rate of interest that may be charged by banks. Certain Federal laws provide for preemption of state usury laws. Legislation
enacted in 1983 amends Tennessee usury laws to permit interest at an annual rate of interest four (4) percentage points above the average prime loan rate for the most recent week for which such an average rate has been published by the Board of Governors of the Federal Reserve, or twenty-four percent (24%), which ever is less (TCA 47-14-102(3)). The "Most Favored Lender Doctrine" permits national banks to charge the highest rate permitted by any state lender.

Specific usury laws may apply to certain categories of loans, such as the limitation placed on interest rates on single pay loans of $1,000.00 or less for one year or less.  Rates charged on installment loans, including credit cards, as well as other types of loans may be governed by the Industrial Loan and Thrift Companies Act.

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IMPACT OF GRAMM LEACH-BLILEY ACT

The Gramm-Leach-Bliley
Financial Modernization Act of 1999 permits bank holding companies meeting
certain management, capital, and community reinvestment act standards to engage
in a substantially broader range of non-banking activities than permitted
previously, including insurance underwriting and merchant banking activities.
The Act repeals sections 20 and 32 of the Glass Steagall Act, permitting
affiliations of banks with securities firms and registered investment companies.
The Act authorizes financial holding companies, permitting banks to be owned by
security firms, insurance companies and merchant banking companies and visaversa.
Some of these affiliations are also permissible for bank subsidiaries. The Act
gives the Federal Reserve Board authority to regulate financial holding
companies, but provides for functional regulation of subsidiary activities.

The Gramm-Leach-Bliley
Financial Modernization Act also modifies financial privacy and community
reinvestment laws. The new financial privacy provisions generally prohibit
financial institutions such as the Bank from disclosing non-public personal
financial information to third parties unless customers have the opportunity to
opt out of the disclosure. The Act also magnifies the consequences of a bank
receiving a less than a satisfactory community reinvestment act rating, by
freezing new activities until the institution achieves a better community
reinvestment act rating.

CUSTOMER INFORMATION SECURITY AND CUSTOMER FINANCIAL PRIVACY

The Board of Governors of the Federal Reserve System published guidelines for Customer Information Security and Customer Financial Privacy with a mandatory effective date of July 1, 2001.  First Citizens has established policies in adherence to the published guidelines.

The three principal requirements relating to the Privacy of Consumer Financial Information in the
GLBA:

- Financial institutions must provide their customers with notices describing their privacy policies and practices, including their policies with respect to the disclosure of nonpublic personal information to their affiliates and to nonaffiliated third parties.  The notices must be provided at the time the customer relationship is established and annually thereafter.

- Subject to specified exceptions, financial institutions may not disclose nonpublic personal information about consumers to any nonaffiliated third party unless consumers are given a reasonable opportunity to direct that such information not be shared (to "opt out").

- Financial institutions generally may not disclose customer account numbers to any nonaffiliated third party for marketing purposes.

The Customer Information Security guidelines implement section 501(b) of the Gramm-Leach-Bliley Act.  The act requires the agencies to establish standards for financial institutions relating to administrative, technical and physical safeguards for customer records and information.
The guidelines require financial institutions to establish an information security program to:

- Identify and assess the risks that may threaten customer information;
- Develop a written plan containing policies and procedures to manage and control these risks;
- Implement and test the plan; and
- Adjust the plan on a continuing basis to account for changes in technology, the sensitivity of customer information, and internal or external threats to information security

Each institution may implement a security program appropriate to its size and complexity and the nature and scope of its operations.  First Citizens National Bank has structured and implemented a financial security program that complies with all principal requirements of the act.

Monetary policies of regulatory authorities, including the Federal Reserve have a significant effect on operating results of bank holding companies and their subsidiary banks.  The Federal Reserve regulates the national supply of bank credit by open market operations in United States Government securities, changes in the discount rate on bank borrowings, and changes in reserve requirements against bank deposits. A tool once extensively used by the Federal Reserve to control growth and distribution of bank loans, investments and deposits has been eliminated through deregulation.  Competition, not regulation, dictates rates which must be paid and/or charged in order to attract and retain customers.

Federal Reserve monetary policies have materially affected the operating results of commercial banks in the past and are expected to do so in the future.  The nature of future monetary policies and the effect of such policies on the business and earnings of the company and its subsidiaries cannot be accurately predicted.

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SARBANES-OXLEY ACT OF 2002

The Sarbanes-Oxley Act of 2002 imposes
new duties on public companies and executives, directors, auditors, plan
administrators, attorneys, as well as securities analysts. It creates new
regulatory framework for the audit profession and set new standards for auditor
independence. In addition, it expands criminal and civil liabilities with the
intent of restoring trust in the integrity of disclosures and accounting
practices of public companies. Bancshares has and will continue
to implement requirements of this act in an effort to ensure that investors in
the stock of Bancshares are well informed.

INSURANCE ACTIVITIES

Subsidiaries of Bancshares sell
various types of insurance as agent in the State of Tennessee. Insurance
activities are subject to regulation by the states in which such business is
transacted. Although most of such regulation focuses on insurance companies and
their insurance products, insurance agents and their activities are also subject
to regulation by the states, including, among other things, licensing and
marketing and sales practices.

ITEM 2.     PROPERTIES

First Citizens owns and occupies a six-story building in Dyersburg, Tennessee containing approximately 50,453 square feet of office space, bearing the municipal address of
One First Citizens Place (formerly 200 West Court).  First Citizens owns the Banking Annex containing total square footage of 12,989 which provides operating space for banking departments i.e. agricultural services, training and public relations, as well as the bank's Brokerage subsidiaries.  The municipal address of the bank occupied portion of the Annex is 215-219 Masonic Street.

DOWNTOWN DRIVE-IN:

The land and building occupied by the Downtown Drive-in Branch located at 113 South Church Street, Dyersburg, Tennessee is owned by First Citizens National Bank.  The building, newly constructed in 2001 occupies approximately 898 square feet and
is a remote motor bank with six drive-thru lanes and a
drive-up ATM lane.

GREEN VILLAGE:

The Green Village Office is located at 620 U.S. 51 Bypass adjacent to the Green Village Shopping Center.  Construction of the new office was completed in June 2000.  The 6400 square foot facility is designed to generate and service a much larger customer base than currently exists. The addition of a commercial lender to staff, a small business center designed to focus on the needs of local business and a full service postal facility lay the groundwork for growth and development at this location.  This facility is equipped with seven drive up teller lanes, one of which is an ATM.

NEWBERN:

The Newbern Branch, also owned by First Citizens, is located on North Monroe Street, Newbern, Tennessee.  The building contains approximately 4,284 square feet and occupies land which measures approximately 1.5 acres. A separate facility located in Newbern on the corner of Highway 51 and RoEllen Road houses an ATM.  Both land and building are owned by the Bank.

INDUSTRIAL PARK:

The Industrial Park Branch located at 2211 St. John Avenue is a full service banking facility that offers drive-thru Teller and ATM services. The building
owned by First Citizens National Bank contains approximately 2,773 square feet
and is located on 1.12 acres of land. The Industrial Park Branch, became
operational in November, 1994.

RIPLEY:

The Ripley, Lauderdale County facility contains approximately
3,500 square feet and is located on 1.151 acres of land located at 316 Cleveland
Street in Ripley, Tennessee. The facility, newly constructed in 1999 offers
full service banking with four drive-up lanes and a twenty four hour access
drive-up ATM.

TROY:

The Bank of Troy was purchased by First Citizens National Bank
in early 1998. The Troy Branch is located on Harper Street just west of Highway
51 in Troy, Tennessee. The building is two story brick and siding. The site
consists of three lots with maximum dimensions on each side being 272 feet and
260 feet. The first floor in the main building contains 5,896 square feet and
houses a full service branch facility. Most of the building was constructed in
1970 with additions and renovations being made since that time. First Citizens
has two ATMs located in Troy, one at 510 East Harper Street and the other in the
Little General Store.

UNION CITY:

The Union City branch
operates two full service facilities, a motor branch and three ATM's in Obion
County. The main office is located at 100 Washington Avenue in Union City. The
brick building consists of 52,500 square feet on three floors and is a
combination of two buildings. The bank occupies 10,000 square feet of the ground
floor. An additional 3,750 square feet are used for storage space. The other
3,750 square feet of the ground floor are leased to Snappy Tomato Pizza Company.
A motor branch is located at First and Harrison Streets across from the main
office. The East branch facility and ATM are located at 1509 East Reelfoot
Avenue in Union City.

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MARTIN:

The Martin office is located at 200
University Ave., Martin, TN.  38237. A temporary modular building of
approximately 1800 square feet was located at this address on approximately 1.08
acres in April 2002. The modular location houses a one lane drive-up facility.
Two ATMs  offer banking services, one a drive-up on University Ave. and a
second occupies space in the Student Center of The University of Tennessee at
Martin. A permanent building is under construction at 200 University Ave. that
will occupy 4,042 square feet.

MUNFORD UNION BANK:

MAIN OFFICE:

The main banking location of Munford
Union Bank is 1426 Munford Avenue, Munford, TN. 38058. The two-story brick
veneer building contains approximately 10,171 square feet and is located on a
lot size of 65,700 square feet. A remote building located at 1483 Munford Avenue
serves as a drive-thru facility for the main bank. The remote contains
approximately 443 square feet and is located on lot size of 36,254 square feet.

ATOKA:

Atoka branch is located on the Atoka-Idaville
Road at 123 Atoka-Munford Avenue, Atoka, Tennessee  38004. The bank
building has approximately 2,950 square feet located on a lot size of 52,272.
The Atoka Branch also has an ATM.

MILLINGTON:

A full service branch facility is
located at 8170 Highway 51 N. Millington, Shelby County, TN.  38053. The
branch is a brick veneer building consisting of 2,680 square feet located on a
lot size of 36,155 square feet. The Millington Branch has a drive-thru ATM.

BARTLETT:

Bartlett branch is located at 7580
Highway 70, Bartlett, Shelby County, TN.  38135. The property consists of a
one-story brick veneer building containing approximately 3,102 square feet. The
lot size is 50,747 square feet. A drive-thru ATM is attached to the facility.

There are no liens or encumbrances
against any properties owned by First Citizens.

ITEM 3.     LEGAL PROCEEDINGS

The subsidiary banks are involved in routine legal
issues. However, the outcome of these issues are not expected to have a material
adverse effect to the subsidiary banks.

ITEM 4.     SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the year ending
December 31, 2002, there were no meetings, annual or special, of the
shareholders of Bancshares. No matters were submitted to a vote of the
shareholders nor were proxies solicited by management or any other person.

-10-

---

PART II

ITEM 5.     MARKET FOR REGISTRANT'S
COMMON STOCK AND RELATED STOCKHOLDER MATTERS

As of December 31, 2002 there were
1,009
shareholders of Bancshares' stock. Bancshares common stock is not actively
traded on any market. Per share prices reflected in the following table are
based on records of actual sales during stated time periods of which management
of Bancshares is aware. These records may
not include all sales during these time periods if sale prices were not reported to
First Citizens  in connection with a transfer of shares.

Quarter Ended
    
    High
    LowMarch 31, 2002
    $  
      23.00
    $  19.00June 30, 2002
    $  
      25.00
    $ 
      25.00September 30, 2002
    $  
      30.00
    $ 
      25.00December 31, 2002
    $  
      30.00
    $ 
      27.50March 31, 2001
    $   20.00
    $  19.00June 30, 2001
    $   23.00
    $  19.00September 30, 2001
    $   23.00
    $  23.00December 31, 2001
    $   25.00
    $  23.00


Dividend pay-outs per share were 1.04
  dollar in 2002, 1.00 dollar in 2001 and .90 cents in 2000.

Dividends -
        2002DividendPer Share
    QuarterDeclared.26
    1st.26
    2nd.26
    3rd.26
    4thTotal
      $1.04


Future dividends will depend on Bancshares'
earnings and financial condition and other factors which the Board of Directors
of Bancshares considers relevant.

ITEM 6.     SELECTED FINANCIAL DATA

The following table presents information for Bancshares
effective December 31 for the years indicated.

2002



2001



2000



1999



1998(Dollars in
      thousands, except per share data)Net Interest & Fee Income
    $   
      24,262



    $    19,917



    $    18,594



    $    19,305



    $    17,964Gross Interest Income
    38,970



    39,189



    38,137



    36,085



    35,252Income From Continuing Operations
    7,832



    5,761



    4,612



    5,799



    4,474Long Term Obligations (1)
    83,881



    63,075



    44,237



    11,264



    25,486Income Per Share from Continuing Operation
      (2)
    $ 
      2.14



    $  1.56



    $  1.24



    $  1.58



    $  1.25Net Income per Common Share (2)
    $ 
      2.14



    $  1.56



    $  1.24



    $  1.58



    $  1.25Cash Dividends Declared per Common Share (2)
    $ 
      1.04



    $  1.00



    $  1.00



    $  0.90



    $  0.75Total Assets at Year End
    $  694,198



    $  537,991



    $  500,954



    $  472,670



    $  472,153Allowance for Loan Losses as a % Loans
    1.24%



    1.08%



    1.10%



    1.14%



    1.25%Allowance for Loan Losses as a % of
            Non-Performing Loans
    144.31%



    141.97%



    125.01%



    445.26%



    509.62%Loans 90 Days Past Due as a % of Loans
    0.37%



    0.33%



    0.47%



    0.10%



    0.14%


(1)    Long Term Obligations consist of FHLB
Borrowings, an ESOP obligation, and Finance Company Debts.

(2)    Restated to reflect 4 for 1 Stock Split
on June 15, 1998.

-11-

---

ITEM 7.     MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Bancshares is the financial holding company for First Citizens, Munford Union Bank, First Citizens Capital
  Assets, and First Citizens (TN) Statutory Trust II, is headquartered in Dyersburg, Tennessee.
  First Citizens and Munford National Bank are diversified
  financial service institutions, which provides banking and other financial services to
  its customers and operates four wholly owned subsidiaries:
  Financial Plus, Inc., Delta Finance, Inc., Nevada Investments I, Inc., and
  Nevada Investments II, Inc. First Citizens also owns 50% of White and
  Associates/First Citizens Insurance LLC and First Citizens/White and
  Associates Insurance Company, Inc. These subsidiary activities consist of
  brokerage, personal finance, investments, insurance related products and
  credit insurance. Munford Union Bank operates two wholly-owned subsidiaries,
  Nevada Investments III and Nevada Investments IV, Inc.

FORWARD LOOKING STATEMENTS

Management's discussion may contain
forward-looking statements with respect to Bancshares' beliefs, plans, goals
  and estimates. Forward-looking statements are necessarily based upon estimates
  and assumptions that are inherently subject to significant banking, economic,
  and competitive uncertainties, many of which are beyond management's control.
  When used in this discussion, the words "anticipate,"
  "project," "expect," "believe,"
  "should," "intend," "is likely," "going
  forward" and other expressions are intended to identify forward-looking
  statements. These forward-looking statements are within the meaning of section
  27A of the Securities Exchange Act of 1934. Such statements may include, but
  are not limited to, projections of income or loss, expenses, acquisitions,
  plans for the future and others.

RESULTS OF OPERATIONS

Bancshares recorded net income of $7.8 million for the year
ended December 31, 2002, an increase of 36.05% over 2001 operating results.
Earnings per share of $2.14 reflected consistent improvement throughout the year
with first and second quarter earnings being $.48, third quarter $.58 and fourth
quarter per share earnings increasing to $.60. This compares to earnings of
$1.56 per share reported in the prior year. Return on average assets was 1.28
percent for 2002 compared to 1.10 percent in 2001. Total assets at December 31,
2002 were $694 million and are inclusive of $115 million in assets added as a
result of the purchase of Munford Union Bank. Asset growth of the acquisition
has been strong, increasing 20% since being acquired in June 2002. Return on
average equity improved to 15.09% from 11.98% for the prior period, in line with
strategic planning goals. A goal of the Strategic Plan approved by the Board in
2001 called for the deployment of capital in areas with the potential to enhance
shareholder return and expand markets of the bank. In striving to meet this
goal, a dividend of $5 million was paid to Bancshares by First Citizens to be
applied toward the purchase of Munford Union Bank, with the balance of the
purchase price funded through borrowings. Return on Equity for 2002 includes
seven months of net earnings ($982 thousand) from Munford Union Bank, resulting
in a positive per share impact of $.27.

The Board of Bancshares approved a stock buy-back program in
year 2000 that provided for the purchase of $1 million per year of company stock
over a five-year period. A total of 56,357 shares have been accumulated to date.
In January of 2003, the board reaffirmed the buy-back decision, but opted to
make shares acquired through this program available to shareholders desiring to
increase their holdings or to new investors. Increased demand for Bancshares
stock and the opportunity to utilize capital to fund the expansion of First
Citizens into new markets drove this change in strategy.

The effective tax rate for the current period is 29% versus 28%
for the prior period. The tax rate is impacted by numerous factors, including but
not limited to the level of tax-free investments within our investment portfolio,
certain tax benefits which could result from ESOP debt, and other factors incidental
to the financial services business. At the present time, there are no tax laws being
introduced that will have a material impact on the tax rate being applied to company
earnings. Bancshares does not transact business outside the United States.

Net interest income increased $4.3 million or 28.2 percent
over the prior twelve months, primarily the result of a reduction in the cost of
funding liabilities. A decline in the federal funds rate from 6.50 percent in
September of 2000 to the current level of 1.75 percent had a material impact on
Bancshares' earnings, forcing down funding costs and increasing net interest
margins. The impact of declines over the past twelve months was substantial,
reducing the cost of funds for First Citizens National Bank by 161 basis points.
Average rates paid on time deposits experienced the most dramatic decrease,
falling to 3.16 percent from 5.33 percent. Because of the liability sensitive
nature of the balance sheet, Bancshares benefits more in a low or declining rate
environment than from a rising rate environment. In an environment of rapidly
rising rates, Bancshares liabilities re-price at a faster rate than do earning
assets causing a decrease in net interest income. The net yield on average
earnings assets was 4.47 percent for the current period compared to 4.35 percent
and 4.36 percent in 2001 and 2000.

Net interest income (stated in millions) after loan loss
provision in 2002, 2001 and 2000 was $22.7, $18.2 and $17.1. Recoveries of
loans previously charged off, a reduction in new loans charged against the
reserve and the addition of reserves totaling $968 thousand incident to the
merger, resulted in a lower provision from earnings to cover loan losses for
the period just ended. Net charge offs for 2002 were $848 thousand compared to
$1.4 million in 2001, a reduction of 20.21%. Additional write downs and
accelerated charge-offs within the loan portfolio resulting from a declining
economy contributed to the higher level in 2001. The ratio of loan loss
reserves to total loans as of December 31, 2002 was 1.25% compared to 1.09% at
December 31, 2001.

-12-

---

Secondary mortgage activity exceeded prior record levels as
consumers opted to take advantage of the low rate environment by refinancing
existing home mortgages. Income and fees recorded from this activity increased
each quarter of 2002, with fourth quarter earnings of $336,000 exceeding all
prior records. Total income for quarters one through three was $158,000,
$169,000 and $239,000 respectively. Activity the first quarter of 2003 is
projected to mirror results of fourth quarter 2002, with future activity
dependent on economic conditions.

NON-INTEREST INCOME

The following table reflects restated non-interest income for
the years ending December 31, 2002, 2001, and 2000:

December 31Change from
        Prior Year(in
        thousands)Increase
        (Decrease)
      
      Increase
        (Decrease)Total
        2002
      Amount
      Percentage
      Total
        2001
      Amount
      Percentage
    
    Total 2000Service Charges on
       Deposit Accounts
    $  3,620
    $     406
    12.63 %
    $  3,214
    $    503
    18.55 %
    $  2,711Trust Fees
    802
    (57)
    (6.63)%
    859
    (24)
    (2.72)%
    883Brokerage
    891
    131
    17.23 %
    760
    (190)
    (20.00)%
    950Other
    2,375
    813
    52.04 %
    1,562
    34
    2.23 %
    1,528Total Non-interest
                 income
    $  7,688
    $  1,293
    20.21 %
    $  6,395
    $    323
    5.32 %
    $  6,072======
    ======
    =======
    ======
    ======
    =======
    ======


Non-interest income increased $1.3 million or 20.21 percent when comparing
2002 results to 2001. In the year 2002 non-interest income (fee income)
contributed 16.47 percent to total revenue compared to 14.02 percent for the
same period last year. The contribution to non-interest income from Munford
Union Bank for the reportable period was $612 thousand or 7.96 percent of total
income in this category. Since the acquisition took place in June of 2002, only
seven months of income is reflected from this source. Excluding incremental
income received from Munford Union, Bancshares' non-interest income would have
increase 10.64 percent. Non-interest income is derived from service charges on
deposit accounts, income from fiduciary activities, brokerage fees and all other
income not categorized as interest income. The most significant increase in
non-interest income was derived from service charges on checking accounts,
increasing $406 thousand or 12.63 percent. In addition, Bancshares' portion of
net income generated by First Citizens/White and Associates Insurance Company,
LLC totaled $326,000 for the twelve months ending December 31, 2002 and is
included in this category. Also included in non-interest income is pre-tax
income of $191 thousand received from the sale of First Citizens' credit card
portfolio in 2002 and bon profits totaling $189 thousand. The decision to divest
the bank of its credit card portfolio was based on risk factors, high
maintenance costs and the limited contribution to income.

NON-INTEREST EXPENSE

|December 31                                
|-------------------------------------------
|Change from
      Prior Year               
|(in thousands)                             
|                                           
|                                           
|Salaries & Employee
           Benefits    
|Occupancy Expense                          
|Other Operating
         Expense           
|Total Non-Interest
                 expense
|                                           

The non-interest expense category is dominated by salary and
benefit expense and comprises 56 percent of the total in 2002. The increase of
15.74% in this category for 2002 reflects an increase in number of full time
equivalent staff from 204 at December 31, 2001 to 256 at the end of 2002. The
increase in staff can be attributed to the Munford Union acquisition (43
fulltime equivalent), a de novo branch in Martin, TN., (4.25 fulltime
equivalent) and additional staff necessary to support expansion within the
mortgage lending and brokerage divisions. Efficiencies implemented in previous
years have reduced or controlled non-interest expense levels and contributed to
efforts focused on improving the efficiency ratio of the company. A comparison
of 2002, 2001 and 2000 results reflects ratios of 59.24 percent, 62.64 percent
and 66.60 percent respectively.

The 13.99 percent increase in net occupancy expense reflects
the increase in numbers of locations brought about by the Munford Union
acquisition (5), and de novo branches in Martin and Arlington (2). Equipment
depreciation expense is driven by information technology demands in support of
service delivery systems necessary to meet customer demand and the need to place
the bank at a competitive advantage. While every effort will be made to ensure
efficiencies in these areas, the expansion strategy adopted by the board will
continue to exert pressure on occupancy and depreciation expense as markets are
expanded by future acquisitions and the establishment of de novo branches.

-13-

---

Other operating expenses increased $282 thousand or 5.82
percent from December 31, 2001 and reflects additional marketing expense
associated with expansion into new markets, legal and other acquisition costs
incurred as a result of the Munford acquisition, and increased costs associated
with management of other real estate owned. Efforts to divest the portfolio of
an increased inventory of foreclosed properties have been successful as we ended
2002 with approximately the same level that existed at December 31, 2001 in
spite of increased foreclosures in 2002. Other real estate totaled $1.8 million
at December 31, 2002 compared to $1.7 million at December 31, 2001 and was
inclusive of $648 thousand other real estate held by Munford Union. Impaired
goodwill expense is zero for the current reportable period compared to $269
thousand for 2001.

December 31,
      Assets Per Employee
      Assets Per EmployeePeer Group*2002
      $ 
        2,712
      $ 
        3,530**2001
      $  2,637
      $  3,3502000
      $  2,397
      $  2,8601999
      $  2,328
      $  2,540***1998
      $  2,354
      $  2,400


*         Includes Munford staff**      The Peer Group for First
Citizens changed when we exceeded $500 million in assets
***    1998 includes Bank of Troy and Delta
Finance II. Assets per employee increased due to Troy's positive position.

COMPOSITION OF DEPOSITS

The average daily amounts of deposits and rates paid on such
deposits are summarized for the periods indicated:

|                                     | As of December 31,          
|------------------------------------ | ----------------------------
|                                     | 2002                        
|                                     | AverageBalance              
|                                     | (Dollars
      in thousands)
|Non-Interest Bearing Demand Deposits | $  49,005                   
|Savings Deposits                     | 146,844                     
|Time Deposits                        | 267,681                     
|Total Deposits                       | $ 463,530                   
|                                     | ========                    

Market share data for the State of Tennessee, counties of
Dyer, Lauderdale, Obion, Weakley, and Tipton is included in a table contained in
Item 1 Banking Business of this report. A review of the table reflects that
First Citizens was a market share leader with $398 million in deposits
accounting for 18.86 percent of total market share. Union Planters Bank,
National Association, a competitor in markets of both First Citizens and Munford
Union Bank was second in market share accounting for 10.98 percent of total
deposits. Bancshares' total deposits at December 31, 2002 were $463,530 thousand
at an average rate of 3.17% compared to $389,940 thousand at December 31, 2001
at an average rate of 3.92%. Growth in the deposit base is a result of consumers
moving dollars into insured investments away from equities and mutual funds. A
second drawing card for deposit growth is the Wall Street checking account
introduced first quarter 2001 which continues to draw deposits that in the past
had flowed to a similar deposit account offered by brokerage firms. Total
deposit dollars in the Wall Street account was in excess of $40 million for year
2002.

First Citizens continues to offer free checking coupled with
overdraft privilege to attract and retain deposit relationships. Overdraft
privilege is a discretionary non-contractual service designed to protect the
customer against having their checks returned. Each customer is given an
overdraft privilege limit based on the type of account the customer has with the
bank and other factors. Overdraft privilege allows the customer to overdraw
their account feeling confident checks will be paid within their assigned limit
as long as they make regular deposits into their account. Customers are charged
the normal overdraft fee for each item paid into overdraft. If the item is over
their assigned limit, it will be returned and a non-sufficient fund fee will be
assessed.

Maturity distribution of time deposits reflects that 78% of
total time deposits in the amount of $100,000 or more will re-price in the next
twelve months. Customers are hesitant to lock in rates on time deposit accounts
for longer than twelve months given a lack of stability in the economy and low
interest rate environment. Time deposits maturing in over 12 months accounts for
$30.6 million or 21.85% of maturity distribution total.

Core deposits serve as a source of liquidity for Bancshares.
The short term borrowings table reflects maximum amount of borrowings at month
end was $10.3 million at December 31, 2002 compared to $33.4 million for the
same time period last year. Average amounts outstanding for the period was $4.4
million compared to $4.7 million last year. Long term debt, primarily Federal
Home Loan Bank Borrowings reflects average volume at year end 2002 of $67
million at an average rate of 5.36%, with an average maturity of five years and
a re-pricing frequency of fixed rate. Liquidity management and long term
borrowings are discussed within the Liquidity section of this report.

-14-

---

SHORT TERM BORROWINGS

As of December 312002
      2001Amount outstanding - end of period
      $           --
      $           --Weighted Average Rate of Outstanding
      N/A
      N/AMaximum Amount of Borrowings at Month End
      $  10,276
      $  33,391Average Amounts Outstanding for Period
      4,477
      4,727Weighted Average Rate of Average Amounts
      2.02%
      3.75%




Average Volume
    Average
       Rate
    Average   Maturity
    Repricing
       FrequencyFHLB Borrowings
    67,277
    5.36%
    5 years
  
  FixedCorrespondent Debt
    6,844
    3.63%
    10 years
  
  VariableTrust Preferred Debt
    2,917
    5.46%
    10 years
  Variable


The following table sets forth the maturity distribution of
Certificates of Deposit and other time deposits of $100,000 or more outstanding
on the books of the subsidiary banks on December 31, 2002. The overall total increased
in excess of $44 million when compared to the prior year. Munford Union deposits
included in the 2002 total are $32 million.

|Maturity
      Distribution of Time Deposits in Amounts of $100,000 and Over
|----------------------------------------------------------------------------
|December 31                                                                 
|(in thousands)                                                              
|                                                                            
|                                                                            
|                                                                            
|Maturing in:                                                                
|3 months or less                                                            
|Over 3 through 12
      months                                              
|Over 12 monhts                                                              
|Total                                                                       
|                                                                            

The following table sets forth an analysis of sources and uses
of funds for the years under comparison.

|SOURCES AND
      USES OF FUNDS                                          
|-------------------------------------------------------------------------
|(in thousands)                                                           
|                                                                         
|                                                                         
|Funding Uses                                                             
|Interest-Earning Assets:                                                 
|Loans (Net of Unearned 
              Discounts & Reserve)               
|Taxable Investment Securities                                            
|Non-Taxable Investment
      Securities                                  
|Federal Funds Sold                                                       
|Interest-Earning Deposits in
      Banks                                 
|Total
      Interest-Earning Assets                                      
|Other Uses                                                               
|Total Funding Uses                                                       
|Interest-Bearing Liabilities:                                            
|Savings Deposits                                                         
|Time Deposits                                                            
|Federal Funds Purchased and
           Other Interest-Bearing Liabilities
|Total
      Interest-Bearing Liabilities                                 
|Demand Deposits                                                          
|Other Sources                                                            
|Total
      Funding Sources                                              
|                                                                         

-15-

---

SUMMARY - AVERAGE BALANCE SHEET AND NET
INTEREST INCOME ANALYSIS
(FIRST CITIZENS NATIONAL BANK)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Monthly Average
      Balances and Interest Rates
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 2002                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Average
      OutstandingBalance                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | (Dollars in
      Thousands)                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ASSETS                                           
|Interest-earning
      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                  
|Total
      loans (1) (2) (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $ 411,890                                        
|Investment securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                  
|Taxable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 100,344                                          
|Exempt (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 28,421                                           
|Interest Earning Deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 2,521                                            
|Federal funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 13,987                                           
|Lease financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | --                                               
|Total interest earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 557,163                                          
|Non-Interest earning assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                  
|Cash and Due From Banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 14,355                                           
|Bank Premises and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 16,522                                           
|Other Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 28,778                                           
|Total Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $ 616,818                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ========                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | LIABILITIES AND
       SHAREHOLDERS' EQUITY      
|Interest-bearing
      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                  
|Savings deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $ 146,844                                        
|Time
      deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 267,681                                          
|Federal
      funds purchased and Other
          Interest Bearing Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                               | 98,192                                           
|Total interest-bearing liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 512,717                                          
|Noninterest- bearing
      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                  
|Demand deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 49,005                                           
|Other
      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 3,040                                            
|Total liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 564,762                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                  
|Shareholders' equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 52,056                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                  
|Total liabilities and
      shareholders'
            equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $ 616,818                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ========                                         
|Net interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                  
|Net yield on average earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                  
|_____________________
      (1)  Loan totals are shown net of interest collected, not earned and
      loan loss reserves.
      (2)  Fee Income is included in interest income and the computations
      of the yield on loans.
      (3)  Includes loans on non-accrual status.
      (4)  Interest and rates on securities which are non-taxable for
      Federal Income Tax purposes are presented on a taxable equivalent basis.
      (5)  Includes interest bearing deposit accounts excluding time
      deposits.

-16-

---

|VOLUME/RATE
      ANALYSIS                                                                   
|---------------------------------------------------------------------------------------------
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Interest Earned On:                                                                          
|Loans                                                                                        
|Taxable investments                                                                          
|Tax Exempt Investment Securities                                                             
|Interest Bearing Deposits with
      Other Banks                                             
|Federal Funds Sold and
      Securities purchased
            under agreement to resell      
|Lease Financing                                                                              
|Total Interest Earning Assets                                                                
|Interest Paid On:                                                                            
|Savings deposits                                                                             
|Time
      deposits                                                                          
|Federal Funds Purchased and
      Securities Sold Under
              Agreement to Repurchase
|Total Interest Bearing Liabilities                                                           
|Net Interest Earnings                                                                        
|                                                                                             

A summary of average interest earning assets and interest
bearing liabilities is set forth in the preceding table together with average
yields on the earning assets and average cost on the interest bearing
liabilities. Interest earning assets total $557,163 thousand at an average rate
of 7.11%, interest earned of $39,656 thousand for the year 2002 compared to
$465,756 thousand average rate of 8.48% and interest earned of $39,542 thousand
in year 2001. Interest bearing liabilities total $512,717 thousand interest
expense of $14,708 thousand in year 2002 compared to $430,201 thousand interest
expense of $19,272 thousand and $385,104 thousand in year 2001. The average rate
for those years was 2.86% and 4.47% respectively. A reduction in the Federal
Funds rate from 6.50% in September 2000 to the 1.50% at December 31, 2002,
materially reduced cost of funds resulting in improved interest rate margins and
net income levels for the bank. Average volume change in Interest Earning Assets
and Liabilities is caused through the combination of the balance sheet of First
Citizens and Munford Union Bank.

|LOAN
    PORTFOLIO ANALYSIS
    COMPOSITION OF LOANS
|----------------------------------------------------
|                                                    
|                                                    
|                                                    
|Real Estate Loans:                                  
|Construction                                        
|Mortgage                                            
|Commercial, Financial and 
     Agricultural Loans  
|Installment Loans to Individuals                    
|Other Loans                                         
|TOTAL LOANS                                         

-17-

---

December 31,
        2002 as Compared to December 31, 2001(in
        thousands)Loan Category
    
    Amount
      of         Increase (Decrease)
    %
      of              Increase (Decrease)Real Estate
    $ 
      80,912
    30.81 %Commercial, Financial and
           Agricultural
    3,236
    5.01 %Installment Loans to Individuals
    (111)
    (0.28)%Other Loans
    417
    15.30 %TOTAL LOANS
    $ 
      84,454
    22.88 %=======
    ========


Total loans at December 31, 2002 were $453 million compared
to $369 million at December 31, 2001. Core net loan growth (excluding
acquisitions) increased only $14 million or 3.91 percent when comparing the
current period to December 2001. Weak loan growth can be attributed to the
slowing economy, a tightening in credit underwriting standards and a rise in
unemployment rates in certain markets in which the subsidiary banks operate. In
spite of economic conditions, overall loan portfolio quality remains high with
approximately $343 million or 76 percent of total portfolio volume recorded in
real estate loans; $67.7 million or 15 percent in Commercial and Agricultural
loans with installment loans to individuals comprising 9 percent of total
portfolio, unchanged from year-end 2001. The loan portfolio of Munford Union
Bank is comprised primarily of loans secured by real estate, with 85% of the
portfolio falling within this category. Portfolio quality is excellent with net
charge-offs for all of 2002 totaling only $5 thousand. The loan loss reserve as
a percent of total loans was 1.24 percent at December 31, 2002 versus 1.08
percent at year-end 2001. Net charge-offs to average net loans for the current
reportable period were .20 percent, the lowest in the past five years. This
compares to .38 percent for the prior year. Loan demand over the next twelve
months is expected to remain soft resulting in lower than average growth
percentages for First Citizens Bancshares. We will use this time to foster the
development of new business relationships and to position the company to take
advantage of improved economic conditions that are sure to come.

Quarterly Unemployment rate for Dyer, Obion and Lauderdale
Counties for 4th quarter 2002 were as follows:

- Dyer County 5.8% compared to 9.8%, 7.4% and 6.2% for
    the three previous consecutive quarters of 2002.
- Obion County 5.2% compared to 5.0%, 3.8%, and 3.9% for
    the three previous consecutive quarters of 2002.
- Lauderdale County 9.1% compared to 11.2%, 8.7%, and
    9.5% for the three previous consecutive quarters of 2002.

Quarterly unemployment rate for Shelby County, Memphis area
for 4th quarter 2002 was 4.5% compared to 5.4%, 5.5%, and 5.0% for the previous
consecutive quarters of 2002. Unemployment rate for the state of Tennessee for
the four quarters of 2002 were 5.4%, 5.1%, 4.9%, and 4.9%.

The First Citizens loan portfolio is made up of quality
credits and is well diversified with a concentration of credit in real estate
related loans. Total real estate related loans are approximately $107,694
thousand at year-end 2002. The largest category of loans is residential mortgage
loans, comprising 29.99 percent of total loans, which historically have low loan
loss experience. The following table lists categories of real estate loans,
volume and category type as a percentage of total loans and loan policy limits
established for each category.

Category

Volume
Actual   Percentage
Policy    PercentageAgriculture
  $    19,309,636
5.38%
20.00%Land Acquisition
  $    21,015,506
5.86%
10.00%Development & Commercial Construction
  $    47,267,312
13.17%
30.00%Residential Construction
  $      7,470,733
2.08%
10.00%Residential Mortgage
  $  107,693,900
29.99%
40.00%


-18-

---

REPOSSESSED REAL PROPERTY:

The book value of repossessed real property held by
Bancshares at December 31, 2002, inclusive of Munford Union Bank was $1.7
million. Without the total of other real estate property of Munford Union,
repossessed real property was $1,057 thousand for First Citizens. Repossessed
real property at the end of December 31, 2001 was $1.7 million. Foreclosed
properties have been listed with local realtors and a plan to market those
properties is in place.

Loan Administration sets policy guidelines approved by the
Board of Directors regarding portfolio diversification and underwriting
standards. Loan policy also includes board approved guidelines for
collateralization, loans in excess of loan to value limits, maximum loan amount,
maximum maturity and amortization period for each loan type. Policy guidelines
for loan to value ratio and maturities related to various collateral are as
follows:

Collateral
    
    Maximum  Amortization
    Maximum LTVReal Estate
    Various (*)
    Various (*)Equipment
    5 Years
    75%Inventory
    5 Years
    50%A/R
    5 Years
    75%Livestock
    5 Years
    80%Crops
    1 Year
    50%*Securities
    10 Years
    75% (Listed)
      50% (Unlisted)(*) See discussion
      * Maximum LTV on margin stocks (stocks not listed on a national exchange)
      when
         proceeds are used to purchase or carry same, shall be 50%.


Diversification of the real estate
portfolio is a necessary and desirable goal of the real estate loan
policy. In order to achieve and maintain a prudent degree of diversity, given
the composition of the market area and the general economic state of the
market area, Bancshares will strive to maintain a real estate loan portfolio
diversification based upon the following:

- Agricultural loans totaling in the aggregate no more than
20% of total loans.
- Land acquisition and development loans totaling in the
aggregate no more than 10% of total loans.
- Commercial construction loans totaling in the aggregate no
more than 10% of total loans.
- Residential construction loans totaling in the aggregate no
more than 10% of total loans.
- Residential mortgage loans totaling in the aggregate no more
than 40% of total loans.
- Commercial loans totaling in the aggregate no more than 30%
of total loans.

-19-

---

It is the policy of Bancshares that no real estate loan will be made
(except in accordance with the provisions for certain loans in excess of
supervisory limits provided for hereinafter) that exceed the loan-to-value
percentage limitations ("LTV limits") designated by category as
follows:

Loan Category
  LTV LimitRaw Land
      65%Land Development or Farmland
      75%Construction:Commercial, multi-family, and
        other non-residential
      80%1-to-4 family residential
      80%Improved Property
      80%Owner-occupied 1-to-4 family and home
        equity
      80%


Multi-family construction loans include loans
secured by cooperatives and condominiums. Owner-occupied 1-to-4 family and home
equity loans which equal or exceed 90% LTV at origination must have either
private mortgage insurance or other readily marketable collateral pledged in
support of the credit.

On occasion, the Loan Committee may entertain
and approve a request to lend sums in excess of the LTV limits as established by
policy, provided that:

The request is fully documented to support
the fact that other credit factors justify the approval of that particular loan
as an exception to the LTV limit;

The loan, if approved, is designated in the
Bank's records and reported as an aggregate number with all other such loans
approved by the full Board of Directors on at least a quarterly basis;

The aggregate total of all loans so
approved, including the extension of credit then under consideration, shall not
exceed 50% of the Bank's total capital; and

Provided further that the aggregate
portion of these loans in excess of the LTV limits that are classified as
commercial, agricultural, multi-family or non-1-to-4 family
residential property shall not exceed 30% of the Bank's total capital.

Amortization Schedules: Every loan must have a
documented repayment arrangement. While reasonable flexibility is
necessary to meet the credit needs of customers, in general all loans
should be repaid within the following time frames:

Loan Category
  Amortized PeriodRaw Land
      10 YearsConstruction:Commercial, multi-family, and
        other non-residential
      20 Years1-to-4 family residential
      20 YearsImproved Property/Farmland
      20 YearsOwner-occupied 1-to-4 family and home
        equity
      20 Years


-20-

---

The average yield on loans of First Citizens National Bank for
the years indicated are as follows:

|2002  | 2001  | 2000  | 1999  | 1998 
|----- | ----- | ----- | ----- | -----
|7.93% | 9.22% | 9.57% | 9.10% | 9.72%

The aggregate amount of unused guarantees, commitments to
extend credit and standby letters of credit was $86,323,000 at December 31,
2002.

LOAN MATURITIES
      AND SENSITIVITY TO CHANGES IN INTEREST RATESDue in One
      Year or Less
    Due after one year
      but withinfive years
    Due after fiveyears(Dollars
      in thousands)Real Estate
    $  52,919
    $   
      56,518
    $  53,618Commercial, Financial and Agricultural
    30,390
    30,605
    3,501All Other Loans
    10,127
    31,586
    212Totals
    $  93,436
    $  118,709
    $  56,881=======
    =======
    =======


Loans with Maturities After One Year for which:                                                                                                    
(in thousands)
Interest Rates are Fixed or Predetermined                                    
$294,562
Interest Rates are Floating or Adjustable                                         
74,464

The degree of interest rate risk to which a bank is subjected
can be controlled through a well managed asset/liability management program.
Bancshares controls interest rate risk by matching assets and liabilities,
better explained by employing interest-sensitive funds in assets that are also
interest sensitive. Bancshares is liability sensitive since liabilities
re-price at a much quicker rate than assets. This means that in a rising rate
environment net income would be diluted, while a flat rate or a
lower rate environment would result in stable to improved interest rate margins
and net income. In recent years the interest rate environment as well as
competitive pricing strategies of Bancshares' competition has resulted in a
transition in the loan portfolio from primary floating or adjustable rates to a
more predetermined or fixed rate portfolio. One of the tools used to ensure
market rate return is variable rate loans totaling $74 million or loans held in
the portfolio that will mature in one year or less totaling $93.4 million. A
total of 40.6% of average loans will re-price either immediately with a
change in interest rates or within 12 months, while $187.6 million or 45.56 % of
average outstanding loans will mature after one year, but within five years.
Only $56.9 million or approximately 16% of average outstanding loans bear
maturities of greater than five years.

-21-

---

NON-PERFORMING LOANS

|Non-accrual, Restructured and Past Due Loans and
Foreclosed Properties                            
|--------------------------------------------------------------------------------------------------
|December 31,                                                                                      
|(in thousands)                                                                                    
|                                                                                                  
|                                                                                                  
|Non-accrual Loans                                                                                 
|Restructured Loans                                                                                
|Foreclosed Property Other Real Estate                                                             
|Other Repossessed Assets                                                                          
|Loans and Leases 90 days Past due and still 
    accruing interest                                
|Total Non-performing Assets                                                                       
|                                                                                                  
|Non-performing assets as a percent of loans and leases
    plus foreclosed property at end of year
|Allowance as a percent of:                                                                        
|Non-performing assets                                                                             
|Gross Loans                                                                                       
|Addition to Reserve as a percent of Net
Charge-Offs                                               
|Loans and leases 90 days past due as a percent of
loans
      and leases at year end              
|Recoveries as a percent of Gross Charge-Offs                                                      

Non-performing assets consists of non-accrual loans, restructured loans,
foreclosed properties, and loans and leases 90 days past due and still accruing
interest. Non-performing loans at December 31, 2002 and December 31, 2001 were
$5.7 million or 1.25% and $4.5 million or 1.23% of loans, leases plus foreclosed
property. Loans and leases 90 days past due and still accruing interest ($1.7
million at 12/31/02) consists of smaller consumer loans and are not necessarily
reflective of a deterioration of any segment of the loan portfolio. Allowance
for loan loss as a percent of non-performing assets as 99.21%, 88.08% and
194.06% as of December 31, 2002, 2001, 2000. Non-performing assets total at year
end 2002 is reflective of non-performing credits of Munford Union Bank totaling
approximately $600 thousand. The allowance as a percent of gross loans for the
same time periods was 1.24%, 1.08% and 1.10% well in excess of the percentage
required by regulation. Loan policy calls for an allowance balance of at least
1% of total loans. Continued improvements reflected in the financial ratios are
indicative of well communicated loan policies and procedures. Categorization of
a loan as non-performing is not in itself a reliable indicator of potential loan
loss. The policy states that the bank shall not accrue interest or discount on
(1) any asset which is maintained on a cash basis because of deterioration in
the financial position of the borrower, (2) any asset for which payment-in-full
of interest or principal is not expected, or (3) any asset upon which principal
or interest has been in default for a period of 90 days or more unless it is
both well secured and in the process of collection. For purposes of applying the
90 day due test for the non-accrual of interest discussed above, the date on
which an asset reaches non-accrual status is determined by its contractual term.
A debt is well secured if it is secured (1) by collateral in the form of liens
or pledges or real or personal property, including securities that have a
realizable value sufficient to discharge the debt (including accrued interest)
in full, considered to be proceeding in due course either through legal action,
including judgement enforcement procedures, or, in appropriate circumstances,
through collection efforts not involving legal action which are reasonably
expected to result in repayment of the debt or in its restoration to a current
status. Loans that represent a potential loss are adequately reserved for in the
provision for loan losses.

-22-

---

Interest income on loans is recorded on an accrual basis. The accrual of
interest is discontinued on all loans, except consumer loans, which become 90
days past due, unless the loan is well secured and in the process of collection.
Consumer loans which become past due 90 to 120 days are charged to the allowance
for loan losses. The gross interest income that would have been recorded for the
twelve months ending December 31, 2002 if all loans reports as non-accrual had
been current in accordance with their original terms and had been outstanding
throughout the period is $175,000. Interest income on loans reported as ninety
days past due and on interest accrual status was $147,520 for 2001. Loans on
which terms have been modified to provide for a reduction of either principal or
interest as a result of deterioration in the financial position of the borrower
are considered to be "Restructured Loans". Bancshares has no
Restructured Loans for the period being reported.

Certain loans contained on the bank's Internal
Problem Loan List are not included in the listing of non-accrual, past due or
restructured loans. Management is confident that, although certain of these
loans may pose credit problems, any potential for loss has been provided for by
specific allocations to the Loan Loss Reserve Account. Loan officers are
required to develop a "Plan of Action" for each problem loan within
their portfolio. Adherence to each established plan is monitored by Loan
Administration and re-evaluated at regular intervals for effectiveness.

|LOAN LOSS EXPERIENCE AND RESERVE FOR LOAN
LOSSES                               
|-------------------------------------------------------------------------------
|(in thousands)                                                                 
|December 31,                                                                   
|                                                                               
|                                                                               
|Average Net Loans Outstanding                                                  
|Balance of Reserve for Loan Losses at Beginning of Period                      
|Loan Charge-Offs                                                               
|Recovery of Loans Previously Charged Off                                       
|Net Loans Charged Off                                                          
|Additions to Reserve Charged to Operating Expense                              
|Changes incident to Mergers                                                    
|Balance at End of Period                                                       
|                                                                               
|Ratio of Net Charge-Offs during quarter to
       Average Net Loans Outstanding

The preceding table summarizes activity posted
to the Loan Loss Reserve Account for the past five years. The summary includes
the average net loans outstanding; changes in the reserve for loan losses
arising from loans charged off and recoveries on loans previously charged off;
additions to the reserve which have been charged to operating expenses; and the
ratio of net loans charged off to average loans outstanding. Changes to the
Reserve Account for the year just ended consisted of Loans charged off of
$1,743,000 (2) Recovery of loans previously charged off $895,000 and (3)
Additions to reserves totaling $1,518,000.

An analysis of the allocation of the allowance
for Loan Losses is made on a fiscal quarter at the end of the month, (February,
May, August, and November) and reported to the board at its meeting immediately
preceding quarter-end. Requirements of FASB 114 & 118 have been incorporated
into the policy for Accounting by Creditor for impairment of a loan. A loan is
impaired when it is probable that a creditor will be unable to collect all
amounts due of principal and interest according to the original contractional
terms of the loan. Impairment means: (1) Impairment of a loan shall exist when the
present value of expected future cash flows discounted at the loans effective
interest rate impede full collection of the contract; and (2) Fair Value of the
collateral, if the loan is collateral dependent, indicates unexpected collection
of full contract value. The impairment decision will be reported to the Board of
Directors and other appropriate regulatory agencies as specified in FASB 114 and
118. Bancshares will continue to follow regulatory guidelines for income
recognition for purposes of generally accepted accounting principles, as well as
regulatory accounting principles.

-23-

---

An annual review of the loan portfolio to
identify the risks will cover a minimum of 70% of the gross portfolio less
installment loans. In addition, any single note or series of notes directly or
indirectly related to one borrower which equals 25% of the bank's legal lending
limit will be included in the review automatically.

In order to predict probable losses on loans,
allowance determination policy shall reflect historical losses on pools of loans
and the relationship to actual previously predicted losses. If significant
differences are evident, then justification shall be addressed. If probable
losses are detected then appropriate assets shall be identified as impaired,
they will be analyzed, and specific allocations funded in order to avoid
extraordinary charges to reserve. It shall be incumbent upon loan administration
to ensure that assets are graded for quality in a timely manner and appropriate
reserves maintained, based on internal analysis. Local trends in sales tax
receipts, unemployment, and economic development shall be assessed quarterly and
adjustments made to allowance based on upward or downward trends to these
elements. National economic conditions shall be monitored but direct a much
lesser impact on allowance determination.

For analysis purposes, the loan portfolio is
separated into four classifications:

1. Pass - Loans that have been reviewed and
graded high quality or no major deficiencies.
2. Watch - Loans which, because of unusual
circumstances, need to be supervised with slightly more attention than is
common.
3. Problem - Loans which require additional
collection efforts to liquidate both principal and interest.
4. Specific Allocation - Loans, in total or in
part, in which a future loss is possible.

Examples of factors taken into consideration
during the review are: Industry or geographic economic problems, sale of
business, change of or disagreement among management, unusual growth or
expansion of the business, past due status of either principal or interest for
90 days, placed on non-accrual or renegotiated status, declining financial
condition, adverse change in personal life, frequent overdrafts, lack of
cooperation by borrower, decline in marketability or market value of collateral,
insufficient cash flow, and inadequate collateral values.

-24-

---

Identification of impaired loans from
non-performing assets as well as bankrupt and doubtful loans is paramount to the
reserve analysis. Special allocations shall support loans found to be collateral
or interest cash flow deficient. In addition an allowance shall be determined
for pools of loans including all other criticized assets as well as small
homogeneous loans managed by delinquency. In no circumstance shall the reserve
fall below 1% of total loans less government guarantees. The following is a
sample of information analyzed quarterly to determine the allowance for loan
losses.

LOAN LOSS
        ALLOWANCE ANALYSISLOSS 1 YR.
      AVERAGE BALANCE 1 YR.
      PERCENT
      CURRENT BALANCE
      RESERVE REQUIREDI.
      CREDIT
        CARDS
    
    $
    GROSS $
    %
    $
    $II.
    INSTALL.
      LOANS
    $
    NET $
    %
    $
    $III.
    IMPAIRED
      WITH ALLOCATIONS
    
    
    
    $
    $IMPAIRED
      WITHOUT ALLOCATIONS
    
    
    
    $
    $ALLOWANCEIV.
    DOUBTFUL
    
    
    50.00%
    $
    $SUBSTANDARD
    
    
    10.00%ACCOUNTS
      RECEIVABLE FACTORING
    
    
    1.00%WATCH
    
    
    5.00%OTHER
      LOANS NOT LISTED PREVIOUSLY LESS SBA/FMHA GUARANTEED PORTIONS
    
    
    0.75%TOTAL LOANS
    
    
    
    $V.
    LETTERS
      OF CREDIT
    
    
    0.75%
    $
    $
  VI.
    OTHER
      REAL ESTATE OWNED
    
    
    
    
    $RESERVE
        REQUIRED
      
      
      
      
      $RESERVE
        BALANCE
      
      
      
      
      $EXCESS
        (DEFICIT)
      
      
      
      
      $RESERVE
        AS % OF TOTAL LOANS
      
      
      %PEER
        GROUP %
      
      
      %LOSS
        EXPERIENCE III & IV (AVERAGE LAST 3 YEARS)
      
      % OR $


Accounting for adjustments to the value of
Other Real Estate when recorded subsequent to foreclosure is accomplished on the
basis of an independent appraisal. The asset is recorded at the lesser of its
appraised value or the loan balance. Any reduction in value is charged to the
allowance for possible loan losses. All other real estate parcels are appraised
annually and the carrying value is adjusted to reflect the decline, if any, in
its realizable value. Such adjustments are charged directly to expense.

-25-

---

Management estimates the approximate amount of
charge-offs for the 12 month period ending December 31, 2003 to be as follows:

AmountDomestic:Commercial, Financial and Agricultural
$   550,000Real Estate - Construction
--Real Estate - Mortgage
500,000Installment Loans to individuals
700,000Lease financing
--01/01/03 through 12/31/03 Total
$  1,750,000


The following table will identify charge-offs by category for the periods
ending December 31 as indicated:

Year Ending December 31,(in thousands)Charge-Offs:
2002
2001
2000
1999Domestic:Commercial, Financial and Agricultural
$     188
$    1,537
$    761
$    236Real Estate - Construction
--
--
--
--Real Estate - Mortgage
803
480
340
142Installment Loans to individuals
& credit cards
752
795
600
836Lease financing
--
--
--
--Total
$   1,743
$   2,017
$   1,701
$  1,214Recoveries:Domestic:Commercial, Financial and Agricultural
$      
91
$      336
$        52
$       89Real Estate - Construction
--
--
--
--Real Estate - Mortgage
565
95
39
6Installment Loans to individuals
& credit cards
239
194
244
244Lease financing
--
--
--
--Total
$     
895
$      625
$      335
$      339Net Charge-offs
$    (848)
$   1,392
($   1,366)
($      875)


COMPOSITION OF INVESTMENT SECURITIES

|                                    | December 31,
(in thousands)
|----------------------------------- | ---------------------------
|                                    | 2002                       
|U.S. Treasury & Government Agencies | $  101,415                 
|State & Political Subdivisions      | 35,906                     
|All Others                          | 5,551                      
|TOTALS                              | $ 142,872                  
|                                    | =======                    

-26-

---

MATURITY AND YIELD ON SECURITIES

|                                                                                                                              | December 31, 2002
      (in thousands)
|----------------------------------------------------------------------------------------------------------------------------- | --------------------------------------
|                                                                                                                              | Maturing
      Within One Year        
|                                                                                                                              | Amount                                
|U.S. Treasury and Government Agencies                                                                                         | $ 37,295                              
|State and Political Subdivisions*                                                                                             | 1,885                                 
|All Others                                                                                                                    | --                                    
|Totals                                                                                                                        | $ 2,316                               
|                                                                                                                              | ======                                
|________________________________
      * Yields on tax free investments are stated herein on a taxable equivalent
      basis

HELD TO MATURITY AND AVAILABLE FOR SALE SECURITIES

|December 31, 2002                                                                                                                                     
|------------------------------------------------------------------------------------------------------------------------------------------------------
|(in thousands)                                                                                                                                        
|                                                                                                                                                      
|                                                                                                                                                      
|U.S. Treasury Securities                                                                                                                              
|U.S. Government agency and corporation obligations                                                                                                    
|Securities issued by states and political subdivisions in the
U.S.:                                                                                   
|Taxable Securities                                                                                                                                    
|Tax-exempt securities                                                                                                                                 
|U.S. Securities:                                                                                                                                      
|Debt Securities                                                                                                                                       
|Equity Securities (including Federal Reserve stock)                                                                                                   
|Foreign securities:                                                                                                                                   
|Debt Securities                                                                                                                                       
|                                                                                                                                                      
|Total (sum of column A items 1 through 5.a must equal Schedule
HC, item 2.a and sum of column D, items 1 through 5.b must equal Schedule HC,
item 2.b)

(1) Includes equity securities without readily determinable
fair values at historical cost.

(2) Includes Small Business Administration "Guaranteed
Loan Pool Certificates," U.S. Maritime Administration obligations, and
      Export-Import Bank participation certificates.

(3) Includes obligations (other than pass-through securities,
CMOs, and REMICs) issued by the Farm Credit System, the Federal Home Loan
      Bank
System, the Federal Home Loan Mortgage Corporation, the Federal National
Mortgage Association, the Financing Corporation,
      Resolution Funding Corporation,
the Student Loan Marketing Association, and the Tennessee Valley Authority.

Objectives of the investment portfolio
management are to provide safety of principal, adequate liquidity, insulate
GAAP capital against excessive changes in market value, insulate earnings from
excessive change, and finally optimize investment performance. Investments also
serve as collateral for government, public funds, and large deposit accounts
  that exceed Federal Deposit Insured limits. Pledged investments at year-end
  totaled $103 million. Total investments at December 31, 2002 were $142,872
  thousand with 27% or $39 million maturing within 12 months. Remaining
  investment maturities are $47,033 thousand or 33% maturing after one year and
  within five years and $57 million or 40% maturing after five years. The
  average life, maturity and yield of the investments were 3.06 years, 4.22
  years, and 4.77 years respectively. A review of peer data indicates the
  portfolio yield is less than peers as a result of above average maturities,
  paydowns, and calls occurring in 2002 and 2001.

-27-

---

Nevada Investments I and II were incorporated in 2000 as
subsidiaries of First Citizens with the sole purpose of housing the investment
portfolio. Nevada III and IV were formed in 2002 to house the investments of the
newly acquired Munford Union Bank. Annual savings resulting from the formation
of these corporation, net of management fees exceed $300 thousand on an annual
basis. The banks' investment portfolios are managed through a portfolio advisory
agreement with FTN Financial.

Tennessee governor has proposed legislation that might have a
negative impact on our Nevada Corporations if the legislation does pass in the
year 2003. This change would negatively impact Bancshares' earnings over
$300,000 on an annual basis.

Bancshares' investment strategy is to classify most of the
portfolio as available for sale, which are carried on the balance sheet at fair
market value. Classification of available for sale investments allows
flexibility to actively manage the portfolio under various market conditions.
Bancshares does not use the trading account. Callable U.S. Agencies investments
called in 2001 totaled approximately 50% of the bond portfolio. The called
investment amounts were reinvested into mortgage backed agencies with very
defined traunches and predictable characteristics. These investments also carry
an average life of less than 5 years. U.S. Treasuries and Agencies account for
71% of the investment portfolio with mortgage related investments comprising the
largest percentage of this category and 50% of total portfolio. Precisely
defined mortgage related investments produce consistent cash flows and enable
the Company to defend against rising interest rates. Called agency volumes had a
material affect on improvement noted in the Banks' liquidity position in 2001.
Year 2002 reflects above average maturities, pay-downs and calls in the
investment portfolio, but significantly below 2001 volumes. Flow of funds
reflected on the statement of cash flows indicates net loan growth $14.3 million
while investment purchases will increase $87.9 million. Economic conditions
caused a material slowdown in loan growth creating an excess flow of funds into
the investment portfolio. The declining rate environment supported a material
increase in the market value of the portfolio, increasing other comprehensive
income in the capital section 199% when compared to prior year.

FASB 115
required banks to maintain separate investment portfolios for Held-to-Maturity,
Available for Sale, and Trading Account Investments. FASB 115 also requires
banks to mark to market the Available for Sale and Trading Account investments
at the end of each calendar quarter. Held-to-Maturity account investments are
stated at amortized cost on the balance sheet. All purchase and sale
transactions in 2002 were made in accordance with specifications set forth in
FASB 115. The trading account at December 31, 2002 maintained a zero balance.

First
Citizens engaged in derivative activity as defined by FASB 133
(Reference Footnote 2 of the Accountant's Report page 49).

Gains/Losses
reflected in year-end income statements attributable to trading account
securities for the five year period ending 12/31/02 are zero.

The
following table allocates by category unrealized Gains/Losses within the total
portfolio as of December 31, 2002 (in thousands):

|                                                                                            | Unrealized     | Net         
|------------------------------------------------------------------------------------------- | -------------- | ------------
|                                                                                            | Gains          | Losses      
|                                                                                            |                |             
|U.S. Treasury Securities and Obligations of
      U.S. Government Agencies and Corporations | $ 
      1,407 | $ 
      160
|Obligations of States and Political
      Subdivisions                                      | 1,843          | 11          
|All others                                                                                  | 312            | --          
|Totals                                                                                      | $ 3,562        | $ 
      171
|                                                                                            | ======         | ====        

-28-

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this Item is incorporated herein by reference
to the "Interstate Risk Management" subsection of Notes 2, 18 & 19
to the Consolidated Financial Statements.

LIQUIDITY AND INTEREST RATE SENSITIVITY

Liquidity is managed in a manner to ensure the availability
of ample funding to satisfy loan demand, fund investment opportunities, and
large deposit withdrawals. The primary funding sources for Bancshares includes
customer core deposits, Federal Home Loan Bank borrowings, as well as
correspondent bank and other borrowings. Customer based sources accounted for
83.12 percent of funding for the current year versus 82.78 percent for the prior
year. Borrowed funds from the Federal Home Loan Bank amounted to 10.78 percent
($69 million) of total funding for 2002 compared to 12.29 percent ($60 million)
last year. The Federal Home Loan Bank line of credit is $117 million, with $33
million available at year-end. As of December 31, 2002, First Citizens held $30
million in short term Certificates of Deposit from the State of Tennessee.
Because of the lack of loan demand, certain of these deposits will not be re-bid
at maturity, reducing the level of Federal Funds Sold and improving net interest
margins. At year-end 2002, First Citizens held $9.9 million in brokered
Certificates of Deposit, representing 1.9% of total deposits.

Bancshares' liquidity position improved dramatically in 2002,
the result of called investments, above average deposit growth and soft loan
demand. Consumers moving dollars into insured investments and away from equities
and mutual funds can attribute much of the deposit growth in 2002 to the
"flight to quality". The end result of above average deposit growth
coupled with slow loan demand is the investment of excess funds into Federal
Funds Sold, earning an average overnight rate of 1.50%. This places stress on
earnings and pressure on net interest margins. Bancshares' liquidity position is
further strengthened by ready access to a diversified base of wholesale
borrowings which include lines of credit with the Federal Home Loan Bank and
correspondent bank totaling in excess of $140 million. Bancshares has a line of
credit for $13 million earmarked for acquisitions and other financial needs of
the holding company. The available line amount as of December 31, 2002 was $3.9
million. Bancshares has a crisis contingency liquidity plan to defend against
any material downturn in the liquidity position.

When evaluating liquidity, comparison is made between funding
needs and the current level of liquidity, plus liquidity that would likely be
available from other sources. This comparison should determine whether funds
management practices are adequate. Management should be able to manage
unplanned changes in funding sources, as well as react to changes in market
conditions that could hinder the bank's ability to quickly liquidate assets
with minimal loss. Funds management practices should ensure that Bancshares does
not maintain liquidity at too high a cost or by relying unduly on wholesale or
credit-sensitive funding sources. Office of the Comptroller of the Currency has
established benchmarks for comparison. The following areas are considered
Liquidity Red Flags:

- Significant increases in reliance on wholesale funding.
- Significant increases in large certificates of deposit,
  brokered deposits, or deposits with interest rates higher than the market.
- Mismatched funding
  - funding long-term assets with
  short-term liabilities or short-term assets with long-term liabilities.
- Significant increases in borrowings.
- Significant increases in dependence on funding sources other
  than core deposits.
- Reduction in borrowing lines by correspondent banks.
- Increases in cost of funds.
- Declines in levels of core deposits.
- Significant decreases in short-term investments.

Liquidity is a concern of the Asset/Liability and will
continue to seek alternative funding sources that are conducive to our net
interest margin strategies. The following table reflects Bancshares position
as of December 31, 2002 in comparison to the OCC Liquidity Benchmarks.

OCC Liquidity Benchmark
      Actual 12/31/02
      Actual 12/31/01Short Term Liabilities/Total Assets > 20%
    
    16.70%
    21.35%On Hand Liquidity to Total Liabilities < 8%
  
  9.38%
  10.50%Loan to Deposits < 80%
  
  90.34%
  91.45%Wholesale Funds/Total Sources > 15%
  
  17.34%
  16.66%Non Core Funding Dependence > 20%
  
  47.89%
  68.15%


-29-

---

There are no known trends or uncertainties
that are likely to have a material affect on Bancshares' liquidity or capital
resources. There currently exists no recommendations by regulatory authorities
which if implemented, would have such an affect. There are no matters of which
management is aware that have not been disclosed.

Interest rate sensitivity varies with
different types of interest-earning assets and interest-bearing liabilities.
Overnight federal funds, on which rates change daily, and loans which are tied
to the prime rate are much more sensitive than long-term investment securities
and fixed rate loans. The shorter term interest sensitive assets and liabilities
are the key to measurement of the interest sensitivity gap. Minimizing this gap
is a continual challenge and a primary objective of the asset/liability
management program.

The following condensed gap report provides an
analysis of interest rate sensitivity of earning assets and costing liabilities. Interest rate risk is
separated and analyzed according to the following categories of risk: (1)
  re-pricing, (2) yield curve, (3) option risk, (4)
price risk and (5) basis risk. Trading assets are utilized infrequently and are
addressed in the investment policy. Any unfavorable trends reflected in interest
rate margins will cause an immediate adjustment to the bank's gap position or
asset/liability management strategies. The following data schedule reflects a
summary of Bancshares' interest rate risk using simulations. The projected
12 month exposure is based on 5 different rate movements (flat, rising, or
declining). Three different rate scenarios were used for rising rates since
  Bancshares is liability sensitive. The rising rate scenarios will dilute
  Bancshares net income because liabilities re-price faster than its
  assets. In a rising rate cycle, non-maturity deposits will not re-price until
  a 250 or 300 basis point rise takes place. In a declining rate cycle,
  non-maturity deposits will re-price with market conditions until deposits hit
  a floor position. A 200 basis point rise in rates would cause earnings to
  decrease because liabilities would re-price quicker than rate sensitive
  assets.

Interest Rate Risk
December 2002
(in thousands)

Tier
Capital                       
  $42,918

Projected 12 Month Exposure

Net InterestIncome Levels
      Rate Movesin Basis Pts.
      CurrentPosition
      PossibleScenarios
      Variance
      % of Net IntIncome
      % of Net IntIncomeDeclining 4
      -400
      $
        18,763
      $ 
        14,311
      ($
        4,452)
      (23.73%)
      20.00%Declining 3
      -300
      18,763
      16,029
      ($
        2,734)
      (14.57%)
      20.00%Declining 2
      -200
      18,763
      17,973
      ($
        790)
      (4.21%)
      20.00%Declining 1
      -100
      18,763
      19,373
      610
      3.25%
      10.00%Most Likely-Base
      0
      18,763
      18,763
      0
      0.00%
      0.00%Rising 1
      100
      18,763
      18,319
      ($   
        444)
      (2.37%)
      (10.00%)Rising 2
      200
      18,763
      17,758
      ($
        1,005)
      (5.36%)
      (25.00%)Rising 3
      300
      18,763
      18,552
      ($
        211)
      (1.12%)
      (25.00%)Rising 4
      400
      18,763
      19,149
      $
        386
      2.06%
      (30.00%)


Notes

Net interest income as presented in the preceding table
assumes that interest rates would change immediately on the total portfolio, a
scenario which would reflect a worst case position and is unlikely to happen. A
revised investment management strategy approved by the Board in 2000 will spread
the call feature on investments and borrowings over a time period sufficient to
minimize the impact of interest of rate changes to the income statement. This
will avoid a repeat of the situation which occurred in 2000, when numerous calls
were made on both investments and borrowings, significantly increasing the cost
of funds and significantly increasing the cost of funds and negatively impacting
net interest margins.

Bancshares
has implemented multiple strategies to reduce interest rate risk: extended
Federal Home Loan Bank borrowings, shortened the repricing date of loans,
implemented an interest rate swap that gave the company a variable rate income
stream, and increased investments in mortgage backed investments that enables the
company to have constant cash inflows.

The rising rate scenarios will dilute
Bancshares' net income because liabilities re-price faster than its assets.
In a rising rate cycle, non-maturity deposits will not re-price until a 250 or
300 basis point rise takes place. In a declining rate cycle, non-maturity
deposits will re-price with market conditions until deposits hit a floor
position. A 200 basis point rise in rates would cause earnings to decrease
because liabilities would re-price quicker than rate sensitive assets.

-29-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/02
(in thousands)

|                               | O/N
  BAL | O/N
 RATE | 0-3
 MONTHS
   BAL | 0-3
 RATE | 3-12
 MONTHS 
BAL | 3-12
 RATE
|------------------------------ | --------- | --------- | ------------------ | --------- | ----------------- | ----------
|                               |           |           |                    |           |                   |           
|Assets:                        |           |           |                    |           |                   |           
|Cash and Due From              | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Total Cash and Due From        | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|US Treasury                    | 0.00      | 0.00      | 0.00               | 0.00      | 1,405.00          | 3.63      
|US Agency                      | 0.00      | 0.00      | 9,342.75           | 2.97      | 11,424.44         | 2.76      
|MBS                            | 0.00      | 0.00      | 6,339.76           | 5.13      | 36,189.80         | 5.74      
|Agency                         | 0.00      | 0.00      | 15,682.51          | 3.84      | 47,614.25         | 5.02      
|Municipals                     | 0.00      | 0.00      | 493.62             | 4.15      | 1,894.65          | 4.15      
|Corp & Others                  | 0.00      | 0.00      | 5,239.00           | 7.08      | 0.00              | 0.00      
|Equities                       | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Unrealized G/L                 | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Total Investments              | 0.00      | 0.00      | 21,415.13          | 4.64      | 50,913.90         | 4.95      
|Fed Funds Sold                 | 0.00      | 0.00      | 26,393.00          | 1.25      | 0.00              | 0.00      
|Fed Funds Sold-Balance         | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Total Fed Funds Sold           | 0.00      | 0.00      | 26,393.00          | 1.25      | 0.00              | 0.00      
|Commercial Variable            | 0.00      | 0.00      | 12,386.56          | 4.75      | 20,135.36         | 4.67      
|Commercial Fixed               | 0.00      | 0.00      | 6,185.36           | 6.02      | 11,840.11         | 6.47      
|Contra Loans - Troy            | 0.00      | 0.00      | 271.00             | (0.50)    | 0.00              | 0.00      
|Floor                          | 0.00      | 0.00      | 107.00             | 4.25      | 0.00              | 0.00      
|Unearned                       | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Total Commercial               | 0.00      | 0.00      | 18,949.92          | 5.08      | 31,975.46         | 5.33      
|Real Estate Variable           | 0.00      | 0.00      | 46,127.48          | 5.67      | 15,276.85         | 6.40      
|Real Estate Fixed              | 0.00      | 0.00      | 41,320.13          | 7.30      | 76,290.47         | 7.05      
|Home Equity +1                 | 0.00      | 0.00      | 12,216.44          | 4.38      | 0.00              | 0.00      
|Home Equity +2                 | 0.00      | 0.00      | 3,755.04           | 5.09      | 0.00              | 0.00      
|Home Equity                    | 0.00      | 0.00      | 15,971.48          | 4.54      | 0.00              | 0.00      
|Secondary Mortgage             | 0.00      | 0.00      | 5,858.76           | 4.25      | 0.00              | 0.00      
|Total Real Estate              | 0.00      | 0.00      | 109,277.86         | 6.04      | 91,567.32         | 6.94      
|Installment Variable           | 0.00      | 0.00      | 480.93             | 5.62      | 225.78            | 5.72      
|Installment Fixed              | 0.00      | 0.00      | 7,016.72           | 7.91      | 15,360.51         | 8.14      
|Finance Company - 78s          | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Total Installment              | 0.00      | 0.00      | 7,497.65           | 7.77      | 15,586.29         | 8.10      
|Credit Cards                   | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Overdrafts                     | 0.00      | 0.00      | 755.04             | 1.31      | 0.00              | 0.00      
|Total Other Loans              | 0.00      | 0.00      | 755.04             | 1.31      | 0.00              | 0.00      
|Total Loans                    | 0.00      | 0.00      | 136,480.47         | 5.98      | 139,129.08        | 6.70      
|Loan Loss Reserve              | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Total Net Loans                | 0.00      | 0.00      | 136,480.47         | 5.98      | 139,129.08        | 6.70      
|Building, Furniture & Fixtures | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Other Real Estate              | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Other Assets                   | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Total Assets                   | 0.00      | 0.00      | 184,288.60         | 5.15      | 190,042.98        | 6.23      
|                               |           |           |                    |           |                   |           
|Liabilities:                   |           |           |                    |           |                   |           
|Demand                         | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Total Demand                   | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|Regular                        | 0.00      | 0.00      | 0.00               | 0.00      | 5,842.60          | 1.00      
|NOW                            | 0.00      | 0.00      | 0.00               | 0.00      | 11,633.90         | 1.00      
|Business                       | 0.00      | 0.00      | 0.00               | 0.00      | 160.80            | 0.70      
|IMF                            | 0.00      | 0.00      | 0.00               | 0.00      | 0.00              | 0.00      
|First Rate                     | 0.00      | 0.00      | 0.00               | 0.00      | 7,166.00          | 1.10      
|Wall Street                    | 46,372.00 | 1.32      | 0.00               | 0.00      | 0.00              | 0.00      
|Dogwood                        | 0.00      | 0.00      | 0.00               | 0.00      | 1,666.40          | 0.70      
|Total Savings                  | 46,372.00 | 1.32      | 0.00               | 0.00      | 26,469.71         | 1.01      
|CD 1-3 Months                  | 0.00      | 0.00      | 38,518.33          | 1.50      | 5,402.04          | 1.84      
|CD 3-6 Months                  | 0.00      | 0.00      | 33.83              | 1.84      | 18,288.88         | 2.20      
|CD 6-12 Months                 | 0.00      | 0.00      | 20,065.53          | 2.08      | 45,826.34         | 2.33      
|CD 13 Months                   | 0.00      | 0.00      | 1,426.98           | 2.19      | 5,037.85          | 2.32      
|CD 1-2 Years                   | 0.00      | 0.00      | 16,325.96          | 3.57      | 42,643.22         | 2.62      
|CD 2-5 Years                   | 0.00      | 0.00      | 319.92             | 6.00      | 3,346.92          | 6.27      
|CD 5 + Years                   | 0.00      | 0.00      | 396.58             | 5.69      | 1,342.64          | 5.72      
|Total CD                       | 0.00      | 0.00      | 77,087.13          | 2.15      | 121,887.89        | 2.54      

-30-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/02
(in thousands)

|                          | O/N
  BAL | O/N
 RATE | 0-3
 MONTHS 
 BAL | 0-3
 RATE | 3-12
 MONTHS 
BAL | 3-12
 RATE
|------------------------- | --------- | --------- | ----------------- | --------- | ----------------- | ----------
|IRA Savings               | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|IRA 1-2 Years             | 0.00      | 0.00      | 4,574.91          | 2.67      | 9,001.72          | 2.51      
|IRA 2-5 Years             | 0.00      | 0.00      | 244.55            | 6.51      | 351.67            | 5.55      
|IRA 5 + Years             | 0.00      | 0.00      | 497.97            | 5.90      | 360.79            | 5.22      
|Total IRA                 | 0.00      | 0.00      | 5,317.42          | 3.15      | 9,714.18          | 2.72      
|Christmas Club            | 0.00      | 0.00      | 0.00              | 0.00      | 163.09            | 1.00      
|Total Time                | 0.00      | 0.00      | 82,404.55         | 2.21      | 131,765.15        | 2.55      
|Total Deposits            | 46,372.00 | 1.32      | 82,404.55         | 2.21      | 158,234.86        | 2.29      
|Fed Funds Purchased - Bal | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|Fed Funds Purchased       | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|TT&L                      | 1,000.00  | 1.25      | 0.00              | 0.00      | 0.00              | 0.00      
|Securities Sold - Sweep   | 9,381.65  | 1.00      | 0.00              | 0.00      | 0.00              | 0.00      
|Securities Sold - Fixed   | 0.00      | 0.00      | 1,756.12          | 2.72      | 2,686.55          | 2.16      
|FHLB Short Term           | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|FHLB Long Term Fixed      | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|FHLB Libor                | 0.00      | 0.00      | 1,500.00          | 1.47      | 0.00              | 0.00      
|FHLB Long Term-Callable   | 0.00      | 0.00      | 75.00             | 6.19      | 0.00              | 0.00      
|Note Payable-Finance-FCNB | 0.00      | 0.00      | 14,264.19         | 3.44      | 0.00              | 0.00      
|Note Payable-Finance GE   | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|Total Borrowing           | 10,381.65 | 1.02      | 17,595.31         | 3.21      | 2,686.55          | 2.16      
|Other Liabilities         | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|Total Other Liabilities   | 10,381.65 | 1.02      | 17,595.31         | 3.21      | 2,686.55          | 2.16      
|Total Liabilities         | 56,753.65 | 1.27      | 99,999.85         | 2.39      | 160,921.41        | 2.29      
|                          |           |           |                   |           |                   |           
|Equity:                   |           |           |                   |           |                   |           
|Retained Earnings         | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|Stock, Surplus, PIC       | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|Unrealized Gains/(Losses) | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|YTD NET INCOME            | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|Total Equity              | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|                          |           |           |                   |           |                   |           
|Total Liability/Equity    | 56,753.65 | 1.27      | 99,999.85         | 2.39      | 160,921.41        | 2.29      
|                          |           |           |                   |           |                   |           
|Period Gap                | 0.00      | 0.00      | 84,288.75         | 0.00      | 29,121.56         | 0.00      
|Cumulative Gap            | 0.00      | 0.00      | 27,535.10         | 0.00      | 56,656.66         | 0.00      
|RSA/RSL                   | 0.00      | 0.00      | 1.84              | 0.00      | 1.18              | 0.00      
|                          |           |           |                   |           |                   |           
|Off Balance Sheet:        |           |           |                   |           |                   |           
|Total Off Balance Sheet   | 0.00      | 0.00      | 0.00              | 0.00      | 0.00              | 0.00      
|                          |           |           |                   |           |                   |           
|Period Gap                | 0.00      | 0.00      | 84,288.75         | 0.00      | 29,121.56         | 0.00      
|Cumulative Gap            | 0.00      | 0.00      | 27,535.10         | 0.00      | 56,656.66         | 0.00      
|RSA/RSL                   | 0.00      | 0.00      | 1.84              | 0.00      | 1.18              | 0.00      

-31-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/02
(in thousands)

|                               | 1-3 
  YEARS
  BAL | 1-3
   YEARS
 RATE | 3-5
  YEARS
   BAL | 3-5
  YEARS
 RATE | 5-10
  YEARS
  BAL | 5-10
  YEARS
 RATE
|------------------------------ | ------------------ | ------------------ | ------------------ | ----------------- | ------------------ | ------------------
|Assets:                        |                    |                    |                    |                   |                    |                   
|Cash and Due From              | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Cash and Due From        | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|US Treasury                    | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|US Agency                      | 4,498.31           | 5.27               | 1,000.00           | 3.30              | 0.00               | 0.00              
|MBS                            | 26,532.44          | 5.44               | 0.00               | 0.00              | 0.00               | 0.00              
|Agency                         | 31,030.75          | 5.41               | 1,000.00           | 3.30              | 0.00               | 0.00              
|Municipals                     | 3,952.30           | 4.54               | 4,891.22           | 4.77              | 11,328.80          | 5.50              
|Corp & Others                  | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Equities                       | 0.00               | 0.00               | 4,451.00           | 6.00              | 0.00               | 0.00              
|Unrealized G/L                 | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Investments              | 34,983.05          | 5.31               | 10,342.22          | 5.16              | 11,328.80          | 5.50              
|Fed Funds Sold                 | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Fed Funds Sold-Balance         | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Fed Funds Sold           | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Commercial Variable            | 2,694.09           | 5.01               | 0.00               | 0.00              | 0.00               | 0.00              
|Commercial Fixed               | 10,379.71          | 7.60               | 4,166.41           | 7.37              | 2,662.66           | 7.04              
|Contra Loans - Troy            | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Floor                          | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Unearned                       | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Commercial               | 13,073.80          | 7.07               | 4,166.41           | 7.37              | 2,662.86           | 7.04              
|Real Estate Variable           | 23,048.44          | 6.51               | 10,165.41          | 5.48              | 0.00               | 0.00              
|Real Estate Fixed              | 108,407.48         | 7.38               | 0.00               | 0.00              | 0.00               | 0.00              
|Home Equity +1                 | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Home Equity +2                 | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Home Equity                    | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Secondary Mortgage             | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Real Estate              | 131,455.92         | 7.23               | 10,165.41          | 5.48              | 0.00               | 0.00              
|Installment Variable           | 41.03              | 6.77               | 41.50              | 5.53              | 0.00               | 0.00              
|Installment Fixed              | 13,432.13          | 8.54               | 0.00               | 0.00              | 0.00               | 0.00              
|Finance Company - 78s          | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Installment              | 13,473.16          | 8.53               | 41.50              | 5.53              | 0.00               | 0.00              
|Credit Cards                   | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Overdrafts                     | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Other Loans              | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Loans                    | 158,002.87         | 7.33               | 14,373.32          | 6.03              | 2,662.66           | 7.04              
|Loan Loss Reserve              | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Net Loans                | 158,002.87         | 7.33               | 14,373.32          | 6.03              | 2,662.66           | 7.04              
|Building, Furniture & Fixtures | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Other Real Estate              | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Other Assets                   | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Assets                   | 192,985.92         | 6.96               | 24,715.54          | 5.66              | 13,991.47          | 5.80              
|                               |                    |                    |                    |                   |                    |                   
|Liabilities:                   |                    |                    |                    |                   |                    |                   
|Demand                         | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Total Demand                   | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Regular                        | 11,685.20          | 1.00               | 5,842.60           | 1.00              | 5,842.60           | 1.00              
|NOW                            | 23,267.81          | 1.00               | 11,633.90          | 1.00              | 11,633.90          | 1.00              
|Business                       | 321.60             | 0.70               | 160.80             | 0.70              | 160.80             | 0.70              
|IMF                            | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|First Rate                     | 7,166.00           | 1.10               | 0.00               | 0.00              | 0.00               | 0.00              
|Wall Street                    | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|Dogwood                        | 3,332.80           | 0.70               | 1,666.40           | 0.70              | 1,666.40           | 0.70              
|Total Savings                  | 45,773.41          | 0.99               | 19,303.71          | 0.97              | 19,303.71          | 0.97              
|CD 1-3 Months                  | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|CD 3-6 Months                  | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|CD 6-12 Months                 | 0.00               | 0.00               | 0.00               | 0.00              | 0.00               | 0.00              
|CD 13 Months                   | 431.99             | 2.15               | 0.00               | 0.00              | 0.00               | 0.00              
|CD 1-2 Years                   | 20,283.98          | 2.90               | 0.00               | 0.00              | 0.00               | 0.00              
|CD 2-5 Years                   | 24,249.57          | 4.16               | 340.28             | 4.31              | 0.00               | 0.00              
|CD 5 + Years                   | 1,449.01           | 6.10               | 32,421.80          | 5.45              | 226.77             | 3.95              
|Total CD                       | 46,414.55          | 3.65               | 32,762.08          | 5.44              | 226.77             | 3.95              

-32-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/02
(in thousands)

|                                   | 1-3 
  YEARS
  BAL | 1-3
   YEARS
 RATE | 3-5
  YEARS
    BAL | 3-5
  YEARS
 RATE | 5-10
  YEARS
BAL | 5-10
  YEARS
 RATE
|---------------------------------- | ------------------ | ------------------ | ------------------- | ----------------- | ---------------- | ------------------
|IRA Savings                        | 0.00               | 0.00               | 0.00                | 0.00              | 1,980.16         | 1.24              
|IRA 1-2 Years                      | 6,230.97           | 3.29               | 2,643.79            | 6.64              | 410.23           | 4.09              
|IRA 2-5 Years                      | 3,754.45           | 3.96               | 104.10              | 4.23              | 0.00             | 0.00              
|IRA 5 + Years                      | 1,284.17           | 5.88               | 2,691.64            | 4.60              | 212.26           | 3.95              
|Total IRA                          | 11,269.59          | 3.81               | 5,439.54            | 5.58              | 2,602.65         | 1.91              
|Christmas Club                     | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Total Time                         | 57,684.13          | 3.68               | 38,201.62           | 5.46              | 2,829.42         | 2.07              
|Total Deposits                     | 103,457.54         | 2.49               | 57,505.33           | 3.95              | 22,133.12        | 1.11              
|Fed Funds Purchased - Bal          | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Fed Funds Purchased                | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|TT & L                             | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Securities Sold - Sweep            | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Securities Sold - Fixed            | 3,880.68           | 3.96               | 738.60              | 4.80              | 0.00             | 0.00              
|FHLB Short Term                    | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|FHLB Long Term Fixed               | 0.00               | 0.00               | 0.00                | 0.00              | 1,199.13         | 3.85              
|FHLB Libor                         | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|FHLB Long Term-Callable            | 24.65              | 6.55               | 0.00                | 0.00              | 65,200.51        | 5.19              
|Note Payable-Finance-FCNB          | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Note Payable-Finance GE            | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Total Borrowings                   | 3,905.33           | 3.98               | 738.60              | 4.80              | 66,399.64        | 5.16              
|Other Liabilities                  | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Total Other Liabilities            | 3,905.33           | 3.98               | 738.60              | 4.80              | 66,399.64        | 5.16              
|Total Liabilities                  | 107,362.88         | 2.55               | 58,243.93           | 3.96              | 88,532.76        | 4.15              
|                                   |                    |                    |                     |                   |                  |                   
|Equity:                            |                    |                    |                     |                   |                  |                   
|Retained Earnings                  | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Stock, Surplus, PIC                | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Unrealized Gains/(Losses) Mortgage | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|YTD NET INCOME                     | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|Total Equity                       | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|                                   |                    |                    |                     |                   |                  |                   
|Total Liability/Equity             | 107,362.88         | 2.55               | 58,243.93           | 3.96              | 88,532.76        | 4.15              
|                                   |                    |                    |                     |                   |                  |                   
|Period Gap                         | 85,623.04          | 0.00               | (33,528.39)         | 0.00              | (74,541.29)      | 0.00              
|Cumulative Gap                     | 142,279.70         | 0.00               | 108,751.31          | 0.00              | 34,210.02        | 0.00              
|RSA/RSL                            | 1.80               | 0.00               | 0.42                | 0.00              | 0.16             | 0.00              
|                                   |                    |                    |                     |                   |                  |                   
|Off Balance Sheet:                 |                    |                    |                     |                   |                  |                   
|Total Off Balance Sheet            | 0.00               | 0.00               | 0.00                | 0.00              | 0.00             | 0.00              
|                                   |                    |                    |                     |                   |                  |                   
|Period Gap                         | 85,623.04          | 0.00               | (33,528.39)         | 0.00              | (74,541.29)      | 0.00              
|Cumulative Gap                     | 142,279.70         | 0.00               | 108,751.31          | 0.00              | 34,210.02        | 0.00              
|RSA/RSL                            | 1.80               | 0.00               | 0.42                | 0.00              | 0.16             | 0.00              

-33-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/02
(in thousands)

|                               | 10-15 
  YEARS
  BAL | 10-15
   YEARS
 RATE | 15+
  YEARS
    BAL | 15+
  YEARS
 RATE | NON-
  SENSITIVE
BAL | TOTAL
  BAL
|------------------------------ | -------------------- | -------------------- | ------------------- | ----------------- | -------------------- | -----------
|Assets:                        |                      |                      |                     |                   |                      |            
|Cash and Due From              | 0.00                 | 0.00                 | 0.00                | 0.00              | 21,290.00            | 21,290.00  
|Total Cash and Due From        | 0.00                 | 0.00                 | 0.00                | 0.00              | 21,290.00            | 21,290.00  
|US Treasury                    | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 1,405.00   
|US Agency                      | 242.60               | 7.34                 | 3,191.99            | 7.34              | 0.00                 | 29,700.09  
|MBS                            | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 69,062.01  
|Agency                         | 242.60               | 7.34                 | 3,191.99            | 7.34              | 0.00                 | 98,762.10  
|Municipals                     | 8,005.85             | 6.28                 | 3,507.56            | 6.50              | 0.00                 | 34,074.00  
|Corp & Others                  | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 5,239.00   
|Equities                       | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 4,451.00   
|Unrealized G/L                 | 0.00                 | 0.00                 | 0.00                | 0.00              | 3,391.00             | 3,391.00   
|Total Investments              | 8,248.45             | 6.31                 | 6,699.55            | 6.90              | 3,391.00             | 147,322.10 
|Fed Funds Sold                 | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 26,393.00  
|Fed Funds Sold-Balance         | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|Total Fed Funds Sold           | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 26,393.00  
|Commercial Variable            | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 35,216.00  
|Commercial Fixed               | 2,739.94             | 7.09                 | 91.56               | 8.75              | 0.00                 | 38,065.75  
|Contra Loans - Troy            | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 271.00     
|Floor                          | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 107.00     
|Unearned                       | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|Total Commercial               | 2,739.94             | 7.09                 | 91.56               | 8.75              | 0.00                 | 73,659.75  
|Real Estate Variable           | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 94,618.19  
|Real Estate Fixed              | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 226,018.08 
|Home Equity +1                 | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 12,216.44  
|Home Equity +2                 | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 3,755.04   
|Home Equity                    | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 15,971.48  
|Secondary Mortgage             | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 5,858.76   
|Total Real Estate              | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 342,466.51 
|Installment Variable           | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 789.24     
|Installment Fixed              | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 35,809.36  
|Finance Company - 78s          | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|Total Installment              | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 36,598.60  
|Credit Cards                   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|Overdrafts                     | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 755.04     
|Total Other Loans              | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 755.04     
|Total Loans                    | 2,739.94             | 7.09                 | 91.56               | 8.75              | 0.00                 | 453,479.90 
|                               |                      |                      |                     |                   |                      |            
|Loan Loss Reserve              | 0.00                 | 0.00                 | 0.00                | 0.00              | (5,653.00)           | (5,653.00) 
|Total Net Loans                | 2,739.94             | 7.09                 | 91.56               | 8.75              | (5,653.00)           | 447,826.90 
|Building, Furniture & Fixtures | 0.00                 | 0.00                 | 0.00                | 0.00              | 17,866.00            | 17,866.00  
|Other Real Estate              | 0.00                 | 0.00                 | 0.00                | 0.00              | 1,781.00             | 1,781.00   
|Other Assets                   | 0.00                 | 0.00                 | 0.00                | 0.00              | 31,719.00            | 31,719.00  
|                               |                      |                      |                     |                   |                      |            
|Total Other Assets             | 0.00                 | 0.00                 | 0.00                | 0.00              | 51,366.00            | 51,366.00  
|Total Assets                   | 10,988.39            | 6.50                 | 6,791.11            | 6.92              | 70,394.00            | 694,198.00 
|                               |                      |                      |                     |                   |                      |            
|Liabilities:                   |                      |                      |                     |                   |                      |            
|Demand                         | 0.00                 | 0.00                 | 0.00                | 0.00              | 61,535.00            | 61,535.00  
|Total Demand                   | 0.00                 | 0.00                 | 0.00                | 0.00              | 61,535.00            | 61,535.00  
|Regular                        | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 29,213.01  
|NOW                            | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 58,169.52  
|Business                       | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 804.00     
|IMF                            | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|First Rate                     | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 14,332.00  
|Wall Street                    | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 46,372.00  
|Dogwood                        | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 8,332.00   
|Total Savings                  | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 157,222.53 
|CD 1-3 Months                  | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 43,920.37  
|CD 3-6 Months                  | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 18,322.71  
|CD 6-12 Months                 | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 65,891.87  
|CD 13 Months                   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 6,896.82   
|CD 1-2 Years                   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 79,253.16  
|CD 2-5 Years                   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 28,256.69  
|CD 5 + Years                   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 35,836.79  
|Total CD                       | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 278,378.41 

-34-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/02
(in thousands)

|                          | 10-15 
  YEARS
  BAL | 10-15
   YEARS
 RATE | 15+
  YEARS
    BAL | 15+
  YEARS
 RATE | NON-
  SENSITIVE
BAL | TOTAL
  BAL
|------------------------- | -------------------- | -------------------- | ------------------- | ----------------- | -------------------- | -----------
|IRA Savings               | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 1,980.16   
|IRA 1-2 Years             | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 22,861.62  
|IRA 2-5 Years             | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 4,454.77   
|IRA 5 + Years             | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 5,046.82   
|Total IRA                 | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 34,343.37  
|Christmas Club            | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 163.09     
|Total Time                | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 312,884.87 
|Total Deposits            | 0.00                 | 0.00                 | 0.00                | 0.00              | 61,535.00            | 531,642.40 
|Fed Funds Purchased - Bal | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|Fed Funds Purchased       | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|TT & L                    | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 1,000.00   
|Securities Sold - Sweep   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 9,381.65   
|Securities Sold - Fixed   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 9,061.95   
|FHLB Short Term           | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|FHLB Long Term Fixed      | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 1,199.13   
|FHLB Libor                | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 1,500.00   
|FHLB Long Term-Callable   | 433.39               | 6.52                 | 1,184.13            | 6.58              | 0.00                 | 66,917.68  
|Note Payable-Finance-FCNB | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 14,264.19  
|Note Payable-Finance GE   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|Total Borrowings          | 433.39               | 6.52                 | 1,184.13            | 6.58              | 0.00                 | 103,324.60 
|Other Liabilities         | 0.00                 | 0.00                 | 0.00                | 0.00              | 4,630.00             | 4,630.00   
|Total Other Liabilities   | 433.39               | 6.52                 | 1,184.13            | 6.58              | 4,630.00             | 107,954.60 
|Total Liabilities         | 433.39               | 6.52                 | 1,184.13            | 6.58              | 66,165.00            | 639,597.00 
|                          |                      |                      |                     |                   |                      |            
|Equity:                   |                      |                      |                     |                   |                      |            
|Retained Earnings         | 0.00                 | 0.00                 | 0.00                | 0.00              | 35,174.00            | 35,174.00  
|Stock, Surplus, PIC       | 0.00                 | 0.00                 | 0.00                | 0.00              | 17,746.00            | 17,746.00  
|Unrealized Gains/(Losses) | 0.00                 | 0.00                 | 0.00                | 0.00              | 1,681.00             | 1,681.00   
|YTD NET INCOME            | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|Total Equity              | 0.00                 | 0.00                 | 0.00                | 0.00              | 54,601.00            | 54,601.00  
|                          |                      |                      |                     |                   |                      |            
|Total Liability/Equity    | 433.39               | 6.52                 | 1,184.13            | 6.58              | 120,766.00           | 694,198.00 
|                          |                      |                      |                     |                   |                      |            
|Period Gap                | 10,555.60            | 0.00                 | 5,606.98            | 0.00              | (50,372.00)          | 0.00       
|Cumulative Gap            | 44,765.02            | 0.00                 | 50,372.00           | 0.00              | 0.00                 | 0.00       
|RSA/RSL                   | 25.35                | 0.00                 | 5.74                | 0.00              | 0.58                 | 0.00       
|                          |                      |                      |                     |                   |                      |            
|Off Balance Sheet:        |                      |                      |                     |                   |                      |            
|Total Off Balance Sheet   | 0.00                 | 0.00                 | 0.00                | 0.00              | 0.00                 | 0.00       
|                          |                      |                      |                     |                   |                      |            
|Period Gap                | 10,555.00            | 0.00                 | 5,606.98            | 0.00              | (50,372.00)          | 0.0        
|Cumulative Gap            | 44,765.02            | 0.00                 | 50,372.00           | 0.00              | 0.00                 | 0.00       
|RSA/RSL                   | 25.35                | 0.00                 | 5.74                | 0.00              | 0.58                 | 0.00       

-35-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/02
(in thousands)

TOTAL
  RATEAssets:Cash and Due From
0.00Total Cash and Due From
0.00US Treasury
3.63US Agency
3.75MBS
5.57Agency
5.02Municipals
5.47Corp & Others
7.08Equities
6.00Unrealized G/L
0.00Total Investments
5.10Fed Funds Sold
1.25Fed Funds Sold-Balance
0.00Total Fed Funds Sold
1.25Commercial Variable
4.72Commercial Fixed
6.90Contra Loans - Troy
(0.50)Floor
4.25Unearned
0.00Total Commercial
5.82Real Estate Variable
5.97Real Estate Fixed
7.25Home Equity +1
4.38Home Equity +2
5.09Home Equity
4.54Secondary Mortgage
4.25Total Real Estate
6.72Installment Variable
5.71Installment Fixed
8.24Finance Company - 78s
0.00Total Installment
8.19Credit Cards
0.00Overdrafts
1.31Total Other Loans
1.31Total Loans
6.69Loan Loss Reserve
0.00Total Net Loans
6.77Building, Furniture & Fixtures
0.00Other Real Estate
0.00Other Assets
0.00Total Other Assets
0.00Total Assets
5.50Liabilities:Demand
0.00Total Demand
0.00Regular
1.00NOW
1.00Business
0.70IMF
0.00First Rate
1.10Wall Street
1.32Dogwood
0.70Total Savings
1.09CD 1-3 Months
1.54CD 3-6 Months
2.20CD 6-12 Months
2.26CD 13 Months
2.28CD 1-2 Years
2.89CD 2-5 Years
4.43CD 5 + Years
5.48Total CD
2.96


-36-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/02
(in thousands)

TOTAL
RATEIRA Savings
1.24IRA 1-2 Years
3.26IRA 2-5 Years
4.23IRA 5 + Years
5.07Total IRA
3.54Christmas Club
1.00Total Time
3.02Total Deposits
2.10Fed Funds Purchased - Bal
0.00Fed Funds Purchased
0.00TT & L
1.25Securities Sold - Sweep
1.00Securities Sold - Fixed
3.26FHLB Short Term
0.00FHLB Long Term Fixed
3.85FHLB Libor
1.47FHLB Long Term-Callable
5.22Note Payable-Finance-FCNB
3.44Note Payable-Finance GE
0.00Total Borrowings
4.31Other Liabilities
0.00Total Other Liabilities
4.13Total Liabilities
2.44Equity:Retained Earnings
0.00Stock, Surplus, PIC
0.00Unrealized Gains/(Losses)
0.00YTD NET INCOME
0.00Total Equity
0.00Total Liability/Equity
2.25Period Gap
0.00Cumulative Gap
0.00RSA/RSL
0.00Off Balance Sheet:
0.00Total Off Balance Sheet
0.00Period Gap
0.00Cumulative Gap
0.00RSA/RSL
0.00


-37-

---

NOTES TO THE GAP REPORT



> Subsidiaries as well as the Parent Company
> will adhere to providing above average margins and reviewing the
> various material risks. New products and services will be reviewed for
> risk by the Product Development Committee.

1. Bancshares could benefit from a flat or declining rate
  environment. If interest rates rise rapidly, net
interest income could be adversely impacted. First Citizens'
Liquidity could be negatively impacted should interest rates drop
prompting an increase in loan demand. Adequate lines of credit are
available to handle liquidity needs should this occur.

RETURN
    ON EQUITY AND ASSETS
    FIRST CITIZENS BANCSHARES, INC.2002
2001
2000
1999
1998Percentage of Net Income to:Average Total Assets
1.27%
1.10%
0.95%
1.22%
1.02%Average Shareholders' Equity
15.05%
11.91%
10.16%
13.27%
11.22%Percentage of Dividends Declared PerCommon Share to Net Income
48.66%
64.31%
81.09%
58.35%
57.51%Percentage of Average Shareholders'Equity to Average Total Assets
8.43%
9.29%
9.36%
9.24%
9.85%


-38-

---

Total Capital (excluding Reserve for Loan
Losses) as a percentage of total assets is presented in the following table for
years indicated:

|CAPITAL
      RESOURCES/TOTAL ASSETS - YEAR END TOTALS
      FIRST CITIZENS BANCSHARES, INC.
|--------------------------------------------------------------------------------------------
|2002                                                                                        
|7.86%                                                                                       

Total capital as of December 31, 2002 was $54.6 million, an
increase of 9.62% when compared to the ending balance for the prior year of
$49.8 million. Growth in capital during 2002 was supported by undistributed net
income and adjustments to capital resulting from increases in market value
within the Available for Sale segment of the investment portfolio. Adjustments
to capital resulting from changes in market value, quantified as comprehensive
income, are made quarterly. Bancshares has historically maintained capital in
excess of minimum levels established by regulation and reflects continuous
improvement when comparing previous years. The risk based capital ratio of 10.92
percent at December 31, 2002 was significantly in excess of the 8 percent
mandated by regulation but less than the 13.81 percent at year-end 2001. The
acquisition was accomplished through purchase accounting with no stock issuance
and is in keeping with the strategic objective of leveraging Bancshares' capital
through growth in assets. The tier I leverage ratio at year-end 2002 was 6.76
percent, with total capital as a percentage of total assets net of loan loss
reserves at 7.86 percent.

Risk-based
capital focuses primarily on broad categories of credit risk and incorporates
elements of transfer, interest rate and market risks. The calculation of
risk-based capital ratio is accomplished by dividing qualifying capital by
weighted risk assets. The minimum risk-based capital ratio is 8.00%. At least
one-half or 4.00% must consist of core capital (Tier 1), and the remaining 4.00%
may be in the form of core (Tier 1) or supplemental capital (Tier 2). Tier 1
capital/core capital consists of common stockholders equity, qualified perpetual
preferred stock and minority interests in consolidated subsidiaries. Tier 2
capital/supplementary capital consists of the allowance for loan and lease
losses, perpetual preferred stock, term subordinated debt, and other debt and
stock instruments.

The dividend pay-out ratio is 48.66 percent for the current
period versus 64.31 percent for the prior year. In spite of the fact that
dividend pay-outs per share were increased, improved earnings reduced the
pay-out ration. The projected pay-out ration for 2003 is in the range of 47-50
percent. The dividend yield in 2002 assuming a $27.50 market price was 3.78
percent, well in excess of the Southeast Bank Group peer average of 2.86
percent. The board of Bancshares approved a five-year stock repurchase program
in 2001, which provides for the repurchase of up to $1 million in company stock
per year. This program has resulted in the accumulation of 56,357 shares of
Treasury Stock. The weighted average cost basis of Treasury Shares is $22.56.

-39-

---

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

CARMICHAEL,
DUNN, CRESWELL & SPARKS PLLCCertified Public Accountants

185 N. Church Avenue
        Post Office Box 574
        Dyersburg, TN  38024
        731-285-7900 phone
        731-285-6221 fax
        http://www.cpainfo.net
      American Institute of Certified
        Public Accountants
        Tennessee Society of Certified Public Accountants
        Private Companies Practice Section - AICPA
        SEC Practice Section - AICPA
    
    Alamo, Tennessee
      Dyersburg, Tennessee
      Fulton, Kentucky
      Henderson, Tennessee
      Jackson, Tennessee
      McKenzie, Tennessee
      Paris, Tennessee
      Trenton, Tennessee
      Union City, Tennessee


INDEPENDENT AUDITORS' REPORT





Board of Directors
First Citizens Bancshares, Inc.
Dyersburg, Tennessee 38024

We have audited the accompanying consolidated balance sheets of First Citizens Bancshares, Inc., and its subsidiary as of December 31,
2002 and 2001, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years ended December 31,
2002. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 financial position of First Citizens Bancshares, Inc., and its subsidiary as of December 31,
2002 and 2001, and their results of operations and cash flows for the three years ended December 31,
2002, in conformity with accounting principles generally accepted in the United States of America.







/s/ CARMICHAEL, DUNN,
CRESWELL & SPARKS PLLC
Dyersburg, Tennessee
February 5, 2003



-40-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARYCONSOLIDATED BALANCE SHEET 
DECEMBER 31, 2002 AND 2001

|                                                                                                              | 2002                   |  | 2001                  
|------------------------------------------------------------------------------------------------------------- | ---------------------- |  | ----------------------
|                                                                                                              | (In thousands)        
|ASSETS                                                                                                       
|Cash and due from banks                                                                                       | $            21,290    |  | $            15,296   
|Federal funds sold                                                                                            | 26,393                 |  | 15,887                
|Investment securities                                                                                         |                        |  |                       
|Securities held-to-maturity (fair value of
$1,235 at December 31, 2002
       and $2,648 at December 31, 2001 | 1,190                  |  | 2,615                 
|Securities available-for-sale, at fair
value                                                                  | 141,682                |  | 101,659               
|Loans (net of unearned income of
$1,473 in 2002 and $1,738 in 2001                                            | 453,480                |  | 369,026               
|Less: Allowance for loan losses                                                                               | 5,653                  |  | 4,015                 
|Net Loans                                                                                                     | 447,827                |  | 365,011               
|Premises and equipment, net                                                                                   | 17,866                 |  | 14,571                
|Accrued interest receivable                                                                                   | 4,603                  |  | 3,848                 
|Intangible Assets                                                                                             | 13,261                 |  | 3,636                 
|Other assets                                                                                                  | 20,086                 |  | 15,468                
|                                                                                                              |                        |  |                       
|TOTAL ASSETS                                                                                                  | $        694,198       |  | $        537,991      
|                                                                                                              | ========               |  | =======               
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                          
|Deposits                                                                                                      |                        |  |                       
|Demand                                                                                                        | $             61,535   |  | $             41,917  
|Time                                                                                                          | 312,885                |  | 228,459               
|Savings                                                                                                       | 157,222                |  | 133,132               
|Total Deposits                                                                                                | 531,642                |  | 403,508               
|Securities sold under agreements to repurchase                                                                | 18,444                 |  | 17,827                
|Long term debt                                                                                                | 83,881                 |  | 63,075                
|Other liabilities                                                                                             | 5,630                  |  | 3,772                 
|                                                                                                              |                        |  |                       
|TOTAL LIABILITIES                                                                                             | $              639,597 |  | $              488,182
|                                                                                                              |                        |  |                       
|Stockholders' Equity                                                                                          |                        |  |                       
|Common stock, No par value:                                                                                   |                        |  |                       
|Shares
authorized - 10,000,000; issued - 3,717,593 in 2002 and 2001                                           | 3,718                  |  | 3,718                 
|Surplus                                                                                                       | 15,299                 |  | 15,298                
|Retained earnings                                                                                             | 35,174                 |  | 31,151                
|Accumulated other comprehensive income                                                                        | 1,681                  |  | 563                   
|Less treasury stock, at cost - 56,357 shares in
2002 and 42,368 shares in 2001                                | (1,271)                |  | (921)                 
|TOTAL STOCKHOLDERS' EQUITY                                                                                    | $ 54,601               |  | $ 49,809              
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                    | $             694,198  |  | $             537,991 
|                                                                                                              | ==========             |  | ========              

See accompanying notes to consolidated
financial statements.
-41-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2002, 2001, and 2000

|                                                          | 2002                                 |  | 2001        |  | 2000      
|--------------------------------------------------------- | ------------------------------------ |  | ----------- |  | ----------
|Interest Income                                           | (In thousands except per share data)
|Interest and fees on loans                                | $   
      32,698                    |  | $    33,147 |  | $   31,631
|Interest and dividends on investment securities:          |                                      |  |             |  |           
|Taxable                                                   | 4,407                                |  | 4,640       |  | 5,496     
|Tax-exempt                                                | 1,333                                |  | 686         |  | 633       
|Dividends                                                 | 271                                  |  | 282         |  | 236       
|Other interest income                                     | 261                                  |  | 434         |  | 141       
|Total Interest Income                                     | 38,970                               |  | 39,189      |  | 38,137    
|                                                          |                                      |  |             |  |           
|Interest Expense                                          |                                      |  |             |  |           
|Interest on deposits                                      | 10,387                               |  | 15,305      |  | 15,664    
|Interest on long-term debt                                | 3,844                                |  | 3,184       |  | 2,435     
|Other interest expense                                    | 477                                  |  | 783         |  | 1,444     
|Total Interest Expense                                    | 14,708                               |  | 19,272      |  | 19,543    
|Net interest income                                       | 24,262                               |  | 19,917      |  | 18,594    
|Provision for loan losses                                 | 1,518                                |  | 1,644       |  | 1,411     
|Net interest income after provision for loan
      losses | 22,744                               |  | 18,273      |  | 17,183    
|                                                          |                                      |  |             |  |           
|Other Income                                              |                                      |  |             |  |           
|Income from fiduciary activities                          | 802                                  |  | 779         |  | 883       
|Service charges on deposit accounts                       | 3,640                                |  | 3,214       |  | 2,711     
|Brokerage fees                                            | 891                                  |  | 760         |  | 950       
|Securities gains (losses) - net                           | 189                                  |  | 127         |  | (20)      
|Other income                                              | 2,166                                |  | 1,515       |  | 1,548     
|Total Other Income                                        | 7,688                                |  | 6,395       |  | 6,072     
|                                                          |                                      |  |             |  |           
|Other Expenses                                            |                                      |  |             |  |           
|Salaries and employee benefits                            | 10,846                               |  | 8,912       |  | 8,751     
|Net occupancy expense                                     | 1,299                                |  | 1,031       |  | 1,058     
|Depreciation                                              | 1,392                                |  | 1,388       |  | 1,431     
|Data processing expense                                   | 673                                  |  | 532         |  | 449       
|Legal and professional fees                               | 186                                  |  | 166         |  | 98        
|Stationary and office supplies                            | 280                                  |  | 233         |  | 229       
|Amortization of intangibles                               | 53                                   |  | 322         |  | 320       
|Executive payments                                        | --                                   |  | --          |  | 809       
|Other expenses                                            | 4,606                                |  | 4,121       |  | 3,501     
|Total Other Expenses                                      | 19,335                               |  | 16,705      |  | 16,646    
|Net income before income taxes                            | $ 
      11,097                      |  | $  7,963    |  | $  6,609  
|Provision for income tax expense                          | 3,259                                |  | 2,202       |  | 1,997     
|Net income                                                | $  
      7,838                      |  | $   5,761   |  | $   4,612 
|                                                          | =====                                |  | =====       |  | =====     
|Earnings Per Common Share:                                |                                      |  |             |  |           
|Net income                                                | $ 2.14                               |  | $ 1.56      |  | $ 1.24    
|                                                          | =====                                |  | =====       |  | =====     
|Weighted average shares outstanding                       | 3,668                                |  | 3,703       |  | 3,709     
|                                                          | =====                                |  | =====       |  | =====     

See accompanying notes to consolidated financial statements.

-42-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARYCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31, 2002, 2001, and 2000



|                                                                                                                        | 2002             |  | 2001                    |  | 2000            
|----------------------------------------------------------------------------------------------------------------------- | ---------------- |  | ----------------------- |  | ----------------
|                                                                                                                        | (In thousands)  
|Net income for year                                                                                                     | $   
      7,838 |  | $    5,761              |  | $   4,612       
|                                                                                                                        |                  |  |                         |  |                 
|Other comprehensive income, net of tax                                                                                  |                  |  |                         |  |                 
|Unrealized gains (losses)
      on available-for-sale securities:                                                       |                  |  |                         |  |                 
|Unrealized gains (losses)
      arising during the period                                                               | 1,118            |  | 934                     |  | 1,665           
|Total Comprehensive Income                                                                                              | $   
      8,956 |  | $    6,695              |  | $   6,277       
|                                                                                                                        | =====            |  | =====                   |  | =====           
|Required disclosures of related tax effects
      allocated to each
           component of other comprehensive income: |                  |  |                         |  |                 
|                                                                                                                        | Before-taxAmount |  | Tax (Expense)or Benefit |  | Net of taxAmount
|Year Ended December 31,
      2002                                                                                      |                  |  |                         |  |                 
|                                                                                                                        |                  |  |                         |  |                 
|Unrealized gains (losses) on available-for-sale securities:                                                             |                  |  |                         |  |                 
|Unrealized gains (losses) arising during the
      period                                                               | $   
      2,030 |  | $   
      (812)        |  | $   
      1,218
|Less reclassification adjustments for gains
      included in 
               net income                                | (167)            |  | 67                      |  | (100)           
|Net
      Unrealized Gains (Losses)                                                                                     | $   
      1,863 |  | $   
      (745)        |  | $   
      1,118
|                                                                                                                        | =====            |  | =====                   |  | =====           
|Year Ended December 31,
      2001                                                                                      |                  |  |                         |  |                 
|                                                                                                                        |                  |  |                         |  |                 
|Unrealized gains (losses) on available-for-sale securities:                                                             |                  |  |                         |  |                 
|Unrealized gains (losses) arising during the
      period                                                               | $    1,345       |  | $   
      (538)        |  | $    807        
|Less reclassification adjustments for gains
      included in 
               net income                                | 212              |  | (85)                    |  | 127             
|Net
      Unrealized Gains (Losses)                                                                                     | $    1,557       |  | $    (623)              |  | $    934        
|                                                                                                                        | =====            |  | =====                   |  | =====           
|Year Ended December 31, 2000                                                                                            |                  |  |                         |  |                 
|                                                                                                                        |                  |  |                         |  |                 
|Unrealized gains (losses) on available-for-sale securities:                                                             |                  |  |                         |  |                 
|Unrealized gains (losses) arising during the
      period                                                               | $    2,772       |  | $   
      (1,109)      |  | $    1,663      
|Less reclassification adjustments for gains
      included in 
               net income                                | 3                |  | (1)                     |  | 2               
|Net
      Unrealized Gains (Losses)                                                                                     | $    2,775       |  | $   
      (1,110)      |  | $    1,665      
|                                                                                                                        | =====            |  | =====                   |  | =====           

See accompanying notes to consolidated financial statements.

-43-

---

FIRST CITIZENS BANCSHARES, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2002, 2001, and 2000
(In thousands except per share data)

|                                                                                                                                                                      | Common StockShares       
  At Par | Surplus      | RetainedEarnings | Accumulated
    Other
  ComprehensiveIncome | TreasuryStock | Obligation of Employee Stock Ownership Plan | Total
  
  Stockholders'
  Equity
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------ | ---------------- | ------------------------------------------- | ------------- | ------------------------------------------- | ---------------------------------
|Balance at January 1,
    2000                                                                                                                                        | 3,705                              | $ 
    3,705 | $   
    15,034  | $ 28,298                                    | $
    (2,036) | $ 
    (204)                                | $ 
    (1,117)                   
|Net income, year ended December 31,
    2000                                                                                                                          |                                    |              |                  | 4,612                                       |               |                                             |                                  
|Adjustment of unrealized gain (loss)
    on securities
           available-for-sale, net of applicable
    deferred
           income taxes ($1,110) during the year |                                    |              |                  |                                             | 1,753         |                                             |                                  
|Cash dividends paid -
    $1.00 per share                                                                                                                             |                                    |              |                  | (3,741)                                     |               |                                             |                                  
|Sale of common stock                                                                                                                                                  | 13                                 | 13           | 287              |                                             |               |                                             |                                  
|Treasury stock transactions - net                                                                                                                                     |                                    |              | (19)             |                                             |               | 157                                         |                                  
|Principal payments - ESOP                                                                                                                                             |                                    |              |                  |                                             |               |                                             | 309                              
|Unrealized loss - derivatives                                                                                                                                         |                                    |              |                  |                                             | (88)          |                                             |                                  
|Prior period adjustment of unearned
    interest, 
          net of tax                                                                                               | --                                 | --           | --               | (74)                                        | --            | --                                          | --                               
|Balance, December 31, 2000                                                                                                                                            | 3,718                              | 3,718        | 15,302           | 29,095                                      | (371)         | (47)                                        | (808)                            
|                                                                                                                                                                      |                                    |              |                  |                                             |               |                                             |                                  
|Net income, year ended December 31,
    2001                                                                                                                          |                                    |              |                  | 5,761                                       |               |                                             |                                  
|Adjustment of unrealized gain (loss)
    on securities
           available-for-sale, net of applicable
    deferred
           income taxes ($623) during the year   |                                    |              |                  |                                             | 934           |                                             |                                  
|Cash dividends paid -
    $1.00 per share                                                                                                                             |                                    |              |                  | (3,705)                                     |               |                                             |                                  
|Treasury stock transactions - net                                                                                                                                     |                                    |              | (4)              |                                             |               | (874)                                       |                                  
|Principal payments - ESOP                                                                                                                                             | --                                 | --           | --               | --                                          | --            | --                                          | 808                              
|Balance, December 31, 2001                                                                                                                                            | 3,718                              | 3,718        | 15,298           | 31,151                                      | 563           | (921)                                       | --                               
|                                                                                                                                                                      |                                    |              |                  |                                             |               |                                             |                                  
|Net income, year ended December 31,
    2002                                                                                                                          |                                    |              |                  | 7,838                                       |               |                                             |                                  
|Adjustment of unrealized gain (loss)
    on securities
           available-for-sale, net of applicable
    deferred
           income taxes ($745) during the year   |                                    |              |                  |                                             | 1,118         |                                             |                                  
|Cash dividends paid -
    $1.04 per share                                                                                                                             |                                    |              |                  | (3,815)                                     |               |                                             |                                  
|Treasury stock transactions - net                                                                                                                                     | --                                 | --           | 1                | --                                          | --            | (350)                                       | --                               
|Balance, December 31,
    2002                                                                                                                                        | 3,718                              | $   3,718    | $  
    15,299   | $  35,174                                   | $    1,681    | $
    (1,271)                               | $       
    --                  
|                                                                                                                                                                      | ======                             | ======       | =======          | ======                                      | =======       | ======                                      | =======                          

See accompanying notes to consolidated financial statements.

-44-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARYCONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31, 2002, 2001, and 2000

|                                                                                      | 2002           |  | 2001        |  | 2000       
|------------------------------------------------------------------------------------- | -------------- |  | ----------- |  | -----------
|                                                                                      | (In thousands)
|Operating Activities                                                                  |                |  |             |  |            
|Net income                                                                            | $     7,838    |  | $     5,761 |  | $     4,612
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                |  |             |  |            
|Provisions for
loan losses                                                            | 1,518          |  | 1,644       |  | 1,411      
|Provision for
depreciation                                                            | 1,392          |  | 1,388       |  | 1,431      
|Provision for
amortization - intangibles                                              | 53             |  | 322         |  | 320        
|Deferred income
taxes                                                                 | 233            |  | 49          |  | 921        
|Realized
investment security (gains) losses                                           | (189)          |  | (127)       |  | 20         
|(Increase) decrease in accrued interest receivable                                    | (755)          |  | 1,748       |  | (243)      
|Increase
(decrease) in accrued interest payable                                       | (514)          |  | (613)       |  | 480        
|Increase in
other assets                                                              | 1,820          |  | (2,358)     |  | (2,738)    
|Increase
(decrease) in other liabilities                                              | 1,464          |  | 585         |  | (380)      
|Net cash provided by operating activities                                             | 12,860         |  | 8,399       |  | 5,834      
|Investing Activities                                                                  |                |  |             |  |            
|Proceeds of maturities of held-to-maturity investment
securities                      | 1,420          |  | 14,090      |  | 3,640      
|Proceeds of sales and maturities of available-for-sale 
     investment securities    | 76,693         |  | 92,763      |  | 7,213      
|Purchases of available-for-sale investment securities                                 | (87,978)       |  | (106,972)   |  | (13,165)   
|Acquisition of subsidiary, net of cash
and cash equivalents 
    received             | (10,173)       |  |             |  |            
|Increase in loans - net                                                               | (14,336)       |  | (29,459)    |  | (16,948)   
|Purchase of premises and equipment                                                    | (1,350)        |  | (1,935)     |  | (2,038)    
|Net Cash provided by investing activities                                             | (35,724)       |  | (31,513)    |  | (21,298)   
|Financing Activities                                                                  |                |  |             |  |            
|Net increase (decrease) in demand deposits, NOW accounts,
      and  savings accounts | (57,234)       |  | 14,506      |  | 3,559      
|Increase in time deposits - net                                                       | 84,426         |  | 17,148      |  | 1,476      
|Increase in long-term borrowing                                                       | 16,437         |  | 19,646      |  | 32,165     
|Payment of principal on long-term debt                                                | (289)          |  |             |  |            
|Proceeds from Sale of Common Stock                                                    |                |  |             |  | 300        
|Cash Dividends Paid                                                                   | (3,815)        |  | (3,705)     |  | (3,741)    
|Net Increase (decrease) in short-term borrowings                                      | 188            |  | (16,347)    |  | (11,916)   
|Treasury stock transactions - net                                                     | (349)          |  | (878)       |  | 138        
|Net Cash provided by Financing Activities                                             | 39,364         |  | 30,370      |  | 21,981     
|                                                                                      |                |  |             |  |            
|Increase in Cash and Cash Equivalents                                                 | 16,500         |  | 7,256       |  | 6,517      
|                                                                                      |                |  |             |  |            
|Cash and cash equivalents at beginning of year                                        | 31,183         |  | 23,927      |  | 17,410     
|Cash and cash equivalents at end of year                                              | $   47,683     |  | $   31,183  |  | $  23,927  
|                                                                                      | ======         |  | ======      |  | ======     

Cash payments made for interest and income taxes
during the years presented are as follows:

|             | 2002      | 2001      | 2000    
|------------ | --------- | --------- | --------
|Interest     | $  15,222 | $  19,259 | $ 19,063
|Income Taxes | 3,184     | 1,751     | 2,337   
|             |           |           |         

See accompanying notes to consolidated financial statements.
-45-

---

FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002 and 2001



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND
REPORTING POLICIES

The accounting and reporting policies of First Citizens Bancshares, Inc., and Subsidiary conform to generally accepted accounting principles. The significant policies are described as follows:

BASIS OF PRESENTATION

The consolidated financial statements include all accounts of First Citizens Bancshares, Inc., and its
subsidiaries First Citizens National Bank, Munford Union Bank, and First
Citizens (TN) Statutory Trust. First Citizens National Bank also has three wholly-owned subsidiaries, First Citizens Financial Plus, Delta Finance Company and Nevada Investments I, Inc. which are consolidated into its financial statements.
Munford Union Bank owns all of the outstanding capital stock of Nevada
Investments III which is included in the consolidated financial statements. First Citizens Bancshares, Inc.'s investment in
these subsidiaries is reflected on the Parent Company balance sheet (Note 13) at the equity in the underlying assets.

During the year ended December 31, 2000, First Citizens National Bank organized, as a wholly-owned subsidiary, Nevada Investments I, Inc., a Nevada corporation. Subsequently, Nevada Investments II, Inc. was organized in the State of Nevada as a wholly-owned subsidiary of Nevada Investments I, Inc. First Citizens National Bank contributed all of its securities investments to these Nevada corporations as contributed
capital.

As of June 1, 2002, First Citizens Bancshares, Inc. acquired all of the
outstanding capital stock of Metropolitan Bancshares, Inc., parent company of
Munford Union Bank, in a transaction accounted for as a purchase. Metropolitan
Bancshares, Inc. was subsequently dissolved transferring all of its assets to
First Citizens Bancshares, Inc. Munford Union Bank then organized its
subsidiary, Nevada Investments III, to hold and manage the investment
securities of Munford Union Bank. Munford Union Bank transferred all of its
investment securities to Nevada Investments III as contributed capital.

Also, during the year ended December 31, 2002, the Company organized the
First Citizens (TN) Statutory Trust as a wholly-owned subsidiary. The purpose
and activities of this subsidiary are further discussed in Note 14 of Notes to
the Consolidated Financial Statements.

All significant inter-company accounts are eliminated in consolidation.

NATURE OF OPERATIONS

The Company and its subsidiary provide commercial banking services of a wide variety to individuals and corporate customers in the mid-southern United States with a concentration in
west Tennessee. The Company's primary products are checking and savings deposits and residential, commercial, and consumer lending.

BASIS OF ACCOUNTING

The consolidated financial statements are presented using the accrual basis of accounting.

USE OF ESTIMATES

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.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties.

CASH EQUIVALENTS

Cash equivalents include amounts due from banks which do not bear interest and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.

-46-

---

SECURITIES

Investment securities are classified as follows:

Held-to-maturity, which includes those investment securities which the Company has the intent and the ability to hold until maturity;

Trading securities, which includes those investment securities which are held for short-term resale; and

Available-for-sale, which includes all other investment securities.

Securities, which are held-to-maturity, are reflected at cost, adjusted for amortization of premiums and accretion of discounts using methods which approximate the interest method. Securities, which are available-for-sale, are carried at fair value, and unrealized gains and losses are recognized as direct increases or decreases in stockholders' equity. Trading securities, where applicable, are carried at fair value, and unrealized gains and losses on these securities are included in net income.

Realized gains and losses on investment securities transactions are determined based on the specific identification method and are included in net income.

LOANS

Loans are reflected on the balance sheets at the unpaid principal amount less the allowance for loan losses and unearned income.

Loans are generally placed on non-accrual status when, in the judgment of management, the loans have become impaired. Unpaid interest on loans placed on non-accrual status is reversed from income and further accruals of income are not usually recognized. Subsequent collections related to impaired loans are usually credited first to principal and then to previously uncollected interest.

ALLOWANCE FOR LOAN LOSSES

The provision for loan losses which is charged to operations is based on management's assessment of the quality of the loan portfolio, current economic conditions, and other relevant factors. In management's judgment, the provision for loan losses will maintain the allowance for loan losses at an adequate level to absorb probable loan losses, which may exist in the portfolio.

PREMISES AND EQUIPMENT

Bank premises and equipment are stated at cost less accumulated depreciation. The provision for depreciation is computed using straight-line and accelerated methods for both financial reporting and income tax purposes. Expenditures for maintenance and repairs are charged against income as incurred. Cost of major additions and improvements are capitalized and depreciated over their estimated useful lives.

REAL ESTATE ACQUIRED BY FORECLOSURE

Real estate acquired through foreclosure is reflected in other assets and is recorded at the lower of fair value less estimated costs to sell or cost. Adjustments made at the date of foreclosure are charged to the allowance for loan losses. Expenses incurred in connection with ownership, subsequent adjustments to book value, and gains and losses upon disposition are included in other non-interest expenses.

Adjustments to net realizable value are made annually subsequent to acquisition based on appraisal.

INCOME TAXES

First Citizens Bancshares, Inc. uses the accrual method of
accounting for federal income tax reporting. Deferred tax assets or liabilities
are computed for significant differences in financial statement and tax bases of
assets and liabilities, which result from temporary differences in financial
statement and tax accounting.

-48-

---

INTEREST INCOME ON LOANS

Interest income on commercial and real estate loans is
computed on the basis of daily principal balance outstanding using the accrual
method. Interest on installment loans is credited to operations by the
level-yield method.

NET INCOME PER SHARE OF COMMON STOCK

Net income per share of common stock is computed by dividing
net income by the weighted average number of shares of common stock outstanding
during the period, after giving retroactive effect to stock dividends and stock
splits.

INCOME FROM FIDUCIARY ACTIVITIES

Income from fiduciary activities is recorded on the accrual
basis.

ADVERTISING AND PROMOTIONS

The Company's policy is to charge advertising and promotions
to expense as incurred.



NOTE 2 - INVESTMENT
SECURITIES

The following tables reflect amortized cost, unrealized gains,
unrealized losses, and fair value of investment securities for the balance sheet
dates presented, segregated into held-to-maturity and available-for-sale
categories:

|HELD-TO-MATURITY                                
|------------------------------------------------
|December 31, 2002                               
|(in thousands)                                  
|                                                
|Obligations of states and political
subdivisions
|Total
Securities Investments                    
|                                                



|AVAILABLE-FOR-SALE                                                                          
|--------------------------------------------------------------------------------------------
|December 31, 2002                                                                           
|(in thousands)                                                                              
|                                                                                            
|U.S. Treasury securities and
obligations of U.S.
       government corporations and agencies
|Obligations of states and political
subdivisions                                            
|Other debt securities                                                                       
|Total
Securities Investments                                                                
|                                                                                            

-49-

---

|HELD- TO- MATURITY                                                                          
|--------------------------------------------------------------------------------------------
|December 31, 2001                                                                           
|(in thousands)                                                                              
|                                                                                            
|U.S. Treasury securities and
obligations of U.S.
       government corporations and agencies
|Obligations of states and political
subdivisions                                            
|Total
Securities Investments                                                                
|                                                                                            



|AVAILABLE-FOR-SALE                                                                          
|--------------------------------------------------------------------------------------------
|December 31, 2001                                                                           
|(in thousands)                                                                              
|                                                                                            
|U.S. Treasury securities and
obligations of U.S.
       government corporations and agencies
|Obligations of states and political
subdivisions                                            
|Mortgage-backed securities                                                                  
|Corporate debt securities                                                                   
|Total
Debt Securities                                                                       
|Equity Investments                                                                          
|Total
Securities Investments                                                                
|                                                                                            

The tables below
summarize maturities of debt securities held-to-maturity and available-for-sale
as of December 31, 2002 and 2001:

|December 31, 2002                 
|----------------------------------
|(in thousands)                    
|                                  
|                                  
|Amounts Maturing In:              
|One Year or less                  
|After one year through
five years 
|After five years through
ten years
|After ten years                   
|                                  
|                                  



|December 31, 2001                 
|----------------------------------
|(in thousands)                    
|                                  
|                                  
|Amounts Maturing In:              
|One Year or less                  
|After one year through
five years 
|After five years through
ten years
|After ten years                   
|                                  
|                                  

-50-

---

|Securities gains (losses) presented in the consolidated
statements of income consist of the following:
|------------------------------------------------------------------------------------------------------
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      

During the year 2000, First Citizens Bancshares, Inc. adopted
Statement No. 133 of the Financial Accounting Standards Board which provided a
period of time subsequent to adoption during which securities could be
transferred from held-to-maturity to available-for-sale. Securities with a book
value of $1,340,000 were transferred to the available-for-sale category and sold
at a later time in the year.

At December 31, 2002
and 2001, investment securities were pledged to secure government, public and
trust deposits as follows:

December 31
      Amortized
        Cost
      Fair Value2002
      $
        99,543
      $
        101,5992001
      75,346
      76,383


At December 31, 2002, the Company has unrealized gains on securities available-for-sale totaling
$3,360,000, resulting in accumulated other comprehensive income in the amount of
$2,016,000.

Generally accepted accounting principles has established accounting and reporting standards for derivative financial instruments, including certain derivative instruments embedded in other contracts and for hedging activities. These standards require that derivatives be reported either as assets or liabilities on the balance sheets and be reflected at fair value. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation. The company utilized the derivative as a cash flow hedge, hedging the "benchmark interest rate." A Federal Home Loan Bank Variable Libor Borrowing has been designated as hedged and in doing so, the Company has effectively fixed the cost of this liability.

Nevada Investments II, Inc., exchanged a fixed investment cash flow for a variable cash flow that fluctuates with the Libor rate. The new variable investment is then matched with a variable borrowing cash flow generating a positive interest rate spread of 250 basis points. The purpose of this transaction was to increase the Company's earnings, and the amount of the asset involved and the risk associated with this transaction is within the Company's Funds Management Policy. The hedge matures in ten (10) years.

During the year, the value of the derivative decreased by
$243,000 due to market interest rate fluctuations, resulting in a negative other comprehensive income attributable to derivatives of
$334,000, which is reflected in accumulated other comprehensive income at December 31,
2002.

NOTE 3 - LOANS

Loans outstanding at December 31, 2002
and 2001, were comprised of the following:

2002
      2001(In thousands)Commercial, financial and agricultural
      $   67,446
      $   64,496Real estate - construction
      57,758
      36,862Real estate - mortgage
      285,759
      225,743Installment
      39,232
      39,200Other loans
      3,285
      2,725453,480
      369,026Less: Allowance for loan losses
      5,653
      4,015Net Loans
      $ 447,827
      $ 365,011======
      ======


In conformity with Statement No. 114 of the Financial
Accounting Standards Board, the Corporation has recognized loans with carrying
values of $1,291,584 at December 31, 2002, and $1,600,000 at December 31, 2001, as
being impaired. The balance maintained in the Allowance for Loan Losses related
to these loans was $556,369 at December 31, 2002, and $694,700 at December 31,
2001.

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

An analysis of the allowance for loan losses during the three
years ended December 31 is as follows:

2002
    2001
    2000(In thousands)Balance - beginning of
      period
    $  4,015
    $  3,763
    $  3,718Addition incident to
      merger
    968Provision for loan
      losses charged to operations
    1,518
    1,644
    1,411Loans charged to
      allowance, net of loan loss
          recoveries of $625,398; $895,000, and $308,669
    (848)
    (1,392)
    (1,366)Balance - end of period
    $ 
      5,653
    $ 
      4,015
    $ 
      3,763======
    ======
    ======


For tax purposes, the
Corporation deducts the maximum amount allowable. During the year ended December
31, 2002, the deduction taken was $740,402. The deductions for tax purposes in
2001 and 2000 were $1,455,272 and $1,820,429, respectively.

-51-

---

NOTE 5 - PREMISES AND
EQUIPMENT

The fixed assets used in the
ordinary course of business are summarized as follows:

Useful Livesin Years
      2002
      2001(In
        thousands)Land
      
      $  
        3,093
      $  
        2,193Buildings
      5 to 50
      16,350
      14,330Furniture and
        equipment
      3 to 20
      12,802
      11,32032,245
      27,843Less:
        Accumulated depreciation
      14,379
      13,272Net Fixed Assets
      
      $ 17,866
      $ 14,571=======
      =======




NOTE 6 - REPOSSESSED
REAL PROPERTY

The carrying value of repossessed real property on the balance sheets of the Corporation is
$1,782,870 at December 31, 2002, and $1,757,392 at December 31, 2001. The value of repossessed real property is reflected on the balance sheets in "other assets."

NOTE 7 - DEPOSITS

Included in the deposits shown on the balance sheets are the following time deposits and savings deposits in denominations of $100,000 or more:

2002
      2001(In thousands)Time Deposits
      $   140,256
      $   96,023Savings Deposits
      72,136
      69,712


NOW accounts, included in savings deposits on the balance sheets, totaled
$58,287,421 at December 31, 2002, and $38,524,682 at December 31, 2001.

First Citizens National Bank routinely enters into deposit relationships with its directors, officers, and employees in the normal course of business. These deposits bear the same terms and conditions as those prevailing at the time for comparable transactions with unrelated parties. Balances of executive officers and directors on deposit as of December 31,
2002 and 2001 were $8,646,911 and $7,094,407, respectively.

Time deposits maturing in years subsequent to December 31,
2002, are as follows:

(In thousands)One year or less
$ 249,969After one year through three years
47,711After three years through five years
23,362After five years
492Total
$  321,534=======


NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN

First Citizens National Bank maintains the First Citizens National Bank of Dyersburg Employee Stock Ownership Plan and the First Citizens National Bank 401(k) Plan as employee benefits. The 401(k) plan was adopted October 1, 2000. The plans provides for a contribution annually not to exceed twenty-five percent of the total compensation of all participants and affords eligibility for participation to all full-time employees who have completed at least one year of service. During the year
2002, the Company contributed amounts equal to three percent (3%) of total eligible compensation to the 401(k) plan and seven percent (7%) of eligible compensation to the employee stock ownership plan. Contributions to the plans totaled
$640,000 in 2002, $619,964 in 2001, and $629,820 in 2000.

Munford Union Bank also maintains a 401(k) employee benefit plan to
which it contributes four percent (4%) of pre-tax earning annually. In the year
2002, the contribution totaled $76,050.

-52-

---

NOTE 9 - INCOME TAXES

Provision for income taxes is comprised of the following:

2002
    2001
    2000(In thousands)Federal income tax
      expense (benefit)Current
    $  3,190
    $  2,075
    $  1,555Deferred
    (198)
    (3)
    210State income tax
      expense (benefit)Current
    302
    131
    193Deferred
    (35)
    (1)
    39$  3,259
    $  2,202
    $  1,997======
    =====
    ======


The ratio of applicable income taxes to net income before income taxes differed from the statutory rates of 34%. The reasons for these differences are as follows:

2002
    2001
    2000(In thousands)Tax expense at
      statutory rate
    $  3,773
    $  2,707
    $  2,247Increase (decrease)
      resulting from:State income taxes, net of federal income tax benefit
    176
    79
    152Tax exempt interest
    (460)
    (245)
    (215)Effect of life
      insurance
    (182)
    (144)
    (115)Amortization of
      goodwill
    
    123
    123Dividends - Employee
      Stock Ownership Plan
    
    (296)Other items
    (48)
    (22)
    (195)$  3,259
    $  2,202
    $  1,997======
    ======
    ======


Deferred tax liabilities have been provided for taxable temporary differences related to depreciation, accretion of securities discounts, and other minor items. Deferred tax assets have been provided for deductible temporary differences related primarily to the allowance for loan losses and adjustments for loss on repossessed real estate. The net deferred tax
liabilities, which are included in "other liabilities" in the accompanying consolidated balance sheets, include the following components:

2002
      2001(In thousands)Deferred tax liabilities
      $   (856)
      $   (497)Deferred tax assets
      512
      387Net deferred tax liabilities
      $  (344)
      $  (110)======
      =====


NOTE 10 - REGULATORY MATTERS

First Citizens Bancshares, Inc., is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company and the consolidated financial statements. The regulations require the Bank to meet specific capital adequacy guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's 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 Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier I capital (as defined in the regulations) to total average assets (as defined), and minimum ratios of Tier I and total risk-based capital (as defined) to risk-weighted assets (as defined). To be considered adequately capitalized (as defined) under the regulatory framework for prompt corrective action, the Bank must maintain minimum Tier I leverage, Tier I risk-based, and total risk-based ratios as set forth in the table. The Bank's actual capital amounts and ratios are also presented in the table.

-53-

---

As of December 31, 2002, the most recent notification from the Bank's primary regulatory authorities categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution's category.

Actual
    For CapitalAdequacy Purposes
    To
      Be Well Capitalized
      Under Prompt CorrectiveAction ProvisionsAmount
    Ratio
    Amount
    Ratio
    Amount
    RatioAs of December 31,
      2002:
  Total risk-based capital (to risk weighted
      assets)
    $  50,979
    10.92%

    $  37,335
    >8.0%
    $  46,669
    >10.0%Tier 1 capital (to risk
      weighted assets)
    45,326
    9.71%

    18,668
    >4.0%
    28,002
    >6.0%Tier 1 capital (to
      average assets)
    45,326
    6.76%

    26,839
    >4.0%
    33,549
    >5.0%As of December 31, 2001:Total risk-based capital (to risk weighted
      assets)
    $  49,656
    14.04%

    $  28,294
    >8.0%
    $  35,367
    >10.0%Tier 1 capital (to risk
      weighted assets)
    45,610
    12.90%

    14,147
    >4.0%
    21,220
    >6.0%Tier 1 capital (to
      average assets)
    45,610
    8.63%

    21,135
    >4.0%
    26,418
    >5.0%


NOTE 11 - RESTRICTIONS ON
CASH AND DUE FROM BANK ACCOUNTS

The Corporation's bank
subsidiary maintains cash reserve balances as required by the Federal Reserve
Bank. Average required balances during 2002 and 2001 were $2,487,000 and
$5,023,000, respectively.

NOTE 12 - RESTRICTIONS ON
CAPITAL AND PAYMENTS OF DIVIDENDS

The Corporation is subject to capital adequacy requirements
imposed by the Federal Reserve Bank. In addition, the Corporation's National
Bank Subsidiary is restricted by the Office of the Comptroller of the Currency
from paying dividends in any years which exceeded the net earnings of the current year plus retained profits of the preceding two
years. As of December 31, 2002, approximately $10.8 million of retained earnings
was available for future dividends from the subsidiary to the parent corporation.

NOTE 13 - CONDENSED FINANCIAL
INFORMATION

FIRST CITIZENS BANCSHARES, INC.
(Parent Company Only)

December 31,2002
2001(In thousands)BALANCE SHEETSASSETSCash
$        659
$        148Investment in subsidiaries
68,173
49,588Other assets
215
75TOTAL ASSETS
$    69,047
$    49,811========
=======LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESLong-term debt
$      14,266
$Accrued expenses
180
2TOTAL LIABILITIES
$14,446
$2STOCKHOLDERS' EQUITY
54,601
49,809TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$     69,047
$     49,811========
========


-54-

---

|                                                                                     | December 31,  
|------------------------------------------------------------------------------------ | --------------
|                                                                                     | 2002          
|                                                                                     | (In thousands)
|STATEMENTS OF INCOME                                                                
|INCOME                                                                               |               
|Dividends from bank
subsidiary                                                       | $    10,165   
|Other income                                                                         | 25            
|TOTAL
INCOME                                                                         | 10,190        
|                                                                                     |               
|EXPENSES                                                                            
|Interest expense                                                                     | 443           
|Other expenses                                                                       | 178           
|TOTAL EXPENSES                                                                       | 621           
|                                                                                     |               
|Income before income taxes and equity in
undistributed net income of bank subsidiary | 9,569         
|Income tax expense (benefit)                                                         | (228)         
|                                                                                     | 9,797         
|Equity in undistributed net income of
bank subsidiary                                | (1,959)       
|NET INCOME                                                                           | $     7,838   
|                                                                                     | ========      



|                                                                                  | December 31,  
|--------------------------------------------------------------------------------- | --------------
|                                                                                  | 2002          
|                                                                                  | (In thousands)
|STATEMENTS OF CASH
FLOWS                                                         
|Operating Activities                                                              |               
|Net income                                                                        | $     7,838   
|Adjustments to reconcile net income to net
cash provided by operating activities: |               
|Undistributed income of
subsidiary                                                | 1,959         
|(Increase) decrease in other assets                                               | (88)          
|Increase (decrease) in
other liabilities                                          | 178           
|NET CASH
PROVIDED BY OPERATING ACTIVITIES                                         | 9,887         
|                                                                                  |               
|Investing Activities                                                             
|Investment in subsidiaries                                                        | (19,478)      
|                                                                                 
|Financing Activities                                                             
|Payment of dividends and payments in lieu
of fractional shares                    | (3,815)       
|Proceeds of long term borrowing                                                   | 14,555        
|Payment of principal on long term debt                                            | (289)         
|Treasury stock transactions - net                                                 | (349)         
|NET CASH
PROVIDED BY FINANCING ACTIVITIES                                         | 10,102        
|                                                                                  |               
|INCREASE (DECREASE) IN CASH                                                       | 511           
|Cash at beginning of year                                                         | 148           
|CASH AT END OF YEAR                                                               | $        
659 
|                                                                                  | ========      

-55-

---

NOTE 14 - LONG TERM
DEBT

In March, 2002, First Citizens
Bancshares, Inc. formed a new wholly-owned subsidiary, First Citizens (TN)
Statutory Trust under the provisions of the Business Act of Delaware. The
subsidiary was formed for the purpose of issuing preferred securities and
conveying the proceeds to First Citizens Bancshares, Inc. in exchange for
long-term, subordinated debentures issued by First Citizens Bancshares, Inc.
The debentures are the only assets of the trust.

On March 26, 2002, the Company, through
its Trust subsidiary, issued 5,000 floating rate Preferred Trust Securities in
denominations of $1,000 for a total of $5,000,000, which mature thirty (30)
years from the date of issuance. Interest is payable on March 26, June 26,
September 26 and December 26 of each year during the term. The interest rate is
calculated quarterly equal to the three month LIBOR interest rate plus 3.6%,
provided that prior to March 26, 2007, the interest rate cannot exceed eleven
percent (11%). The responsibilities of the Company concerning the debentures
and the related documents constitute a full and unconditional guarantee by the
Company of the Trust issuer's preferred securities.

Although for accounting presentation,
the Preferred Trust Securities are treated as debt, the outstanding balance
qualifies as Tier 1 capital subject to the provision that the amount of the
securities included in Tier 1 Capital cannot exceed twenty-five percent (25%)
of total Tier 1 capital.

The purpose of the issuance of the
above described securities was to assist in the funding of the purchase of the
Munford Union Bank. First Citizens Bancshares, Inc. will be dependent on the
profitability of its subsidiaries and their ability to pay dividends in order
to service its long term debt.

First Citizens National Bank has secured advances from
the Federal Home Loan Bank in the amounts of $60,199,000 at December 31, 2002,
and $60,575,000 at December 31, 2001. 
At December 31, 2002, $60,574,621 is considered long-term in nature.
These advances bear interest at rates which vary from 3.97% to 6.55% and mature
in the years 2008 through 2011. The obligations are secured by the Bank's
entire portfolio of fully disbursed, one to four family residential mortgages.

At December 31, 2001, Delta Finance Company, a subsidiary of First
Citizens National Bank, was obligated to General Appliance and Furniture
Company, Inc. on an unsecured note payable in the amount of $1,000,000, which
bore interest at the rate of five and three-quarter percent (5.75%) per annum
and matured March 1, 2002.

Delta Finance Company was also obligated to White and Associates/First
Citizens Insurance, LLC on an unsecured note with an outstanding principal
balance of one million, five hundred thousand dollars ($1,500,000). The debt
bore interest at the rate 5.98 percent per annum and matured on March 1,
2002.

As of December 31, 2002, Munford Union Bank was indebted to the Federal
Home Loan Bank in the amount of $9,393,203. These obligations bear interest at rates
which range from 2.85% to 7.55% and mature in years from 2003 to 2019.

Averages for the years
2002 and 2001 are as follows:

AverageVolume
      AverageInterest Rate
      AverageMaturity(In
        thousands)2002First Citizens
        Bancshares, Inc.
      9,761
      4.17%
      7 yearsFirst Citizens
        National Bank
      67,277
      5.36%
      5 yearsDelta Finance
        Company
      0
      0%2001First Citizens
        National Bank
      59,424
      5.36%
      3
        yearsDelta Finance
        Company
      2,233
      5.88%
      1
        year


Maturities of principal
on the above referenced long-term debt for the following five years are as shown:

Years
        Ending December 31,2003
      $            --2004
      --2005
      --2006
      --2007
      --Thereafter
      83,881

      $  83,881
    ======


-56-

---

NOTE 15 - REVOLVING LINE OF CREDIT

First Citizens
Bancshares, Inc. has approved a two-year line of credit with First Tennessee
Bank National Association in the amount of $13 million, secured by common stock
of First Citizens Bancshares, Inc. having a total market value of $17 million.
The purpose of the line of credit is for use in various financial strategies
including the acquisition of Munford Union Bank. Interest on the outstanding
balance is payable on a quarterly basis, calculated a 100 basis points below
the base rate of First Tennessee Bank. At December 31, 2002, the outstanding
balance on this line is $9.1 million.

NOTE 16 - SHORT-TERM BORROWINGS

At December 31, 2002 and
2001, First Citizens National Bank had outstanding balances in short-term
borrowings as follows:

2002
      2001(In thousands)Outstanding balance - end of period
      $           --
      $           --Weighted Average Interest Rate
      N/A
      N/AMaximum Amount of Borrowings at Month End
      10,276
      33,391Average Balances Outstanding for Period
      4,477
      4,727Average Weighted Average Interest Rates
      2.02%
      3.75%


NOTE 17 - NON-CASH INVESTING AND
FINANCING ACTIVITIES

During the periods presented, the Corporation
engaged in the following non-cash investing and financing activities:



Investing
2002
2001
2000(In thousands)Other real estate acquired insatisfaction of loans
$ 1,523
$ 1,340
$ 804




NOTE 18 - FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK

First Citizens National 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. These instruments involve, to varying degrees, elements of credit risk, which are not recognized in the statement of financial position.

The Bank's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The same policies are utilized in making commitments and conditional obligations as are used for creating on-balance sheet instruments. Ordinarily, collateral or other security is not required to support financial instruments with off-balance sheet risk.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's credit-worthiness is evaluated on a case-by-case basis, and collateral required, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the counter party. At December 31,
2002 and 2001, First Citizens National Bank had outstanding loan commitments of
$90,174,000 and $65,140,000, respectively. Of these commitments, none had an original maturity in excess of one year.

Standby letters of credit and financial guarantees are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are issued primarily to support public and private borrowing arrangements, and the credit risk involved is essentially the same as that involved in extending loans to customers. The Bank requires collateral to secure these commitments when it is deemed necessary. At December 31,
2002 and 2001, outstanding standby letters of credit totaled $1,477,000 and
$1,032,000, respectively.

In the normal course of business, First Citizens National Bank extends loans, which are subsequently sold to other lenders, including agencies of the U. S. government. Certain of these loans are conveyed with recourse creating off-balance sheet risk with regard to the collectibility of the loan. At December 31,
2002 and 2001, however, the Bank had no loans sold.

-57-

---

NOTE 19 - SIGNIFICANT
CONCENTRATIONS OF CREDIT RISK

First Citizens National Bank grants agribusiness, commercial, residential, and personal loans to customers throughout a wide area of the mid-southern United States. A large majority of the Bank's loans, however, are concentrated in the immediate vicinity of the Bank or
west Tennessee. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their obligations is dependent upon the agribusiness and industrial economic sectors of that geographic area.

NOTE 20 - DISCLOSURE
OF FAIR VALUE OF FINANCIAL INSTRUMENTS

The following assumptions were made and methods applied to estimate the fair value of each class of financial instruments reflected on the balance sheets of the Corporation:

CASH AND CASH EQUIVALENTS

For instruments, which qualify as cash equivalents, as described in Note 1 of Notes to Consolidated Financial Statements, the carrying amount is assumed to be fair value.

INVESTMENT SECURITIES

Fair value for investment securities is based on quoted market price, if available. If quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

LOANS RECEIVABLE

Fair value of variable-rate loans with no significant change in credit risk subsequent to loan origination is based on carrying amounts. For other loans, such as fixed rate loans, fair values are estimated utilizing discounted cash flow analyses, applying interest rates currently offered for new loans with similar terms to borrowers of similar credit quality. Fair values of loans which have experienced significant changes in credit risk have been adjusted to reflect such changes.

The fair value of accrued interest receivable is assumed to be its carrying value.

DEPOSIT LIABILITIES

Demand Deposits

The fair values of deposits which are payable on demand, such as interest-bearing and non-interest-bearing checking accounts, passbook savings, and certain money market accounts are equal to the carrying amount of the deposits.

Variable-Rate Deposits

The fair value of variable-rate money market accounts and certificates of deposit approximate their carrying value at the balance sheet date.

Fixed-Rate Deposits

For fixed-rate certificates of deposit, fair values are estimated using discounted cash flow analyses which apply interest rates currently being offered on certificates to a schedule of aggregated monthly maturities on time deposits.

SHORT-TERM BORROWINGS

Carrying amounts of short-term borrowings, which include securities sold under agreement to repurchase, approximate their fair values at December 31,
2002 and 2001.

LONG-TERM DEBT

The fair value of the Corporation's long-term debt is estimated using the discounted cash flow approach, based on the institution's current incremental borrowing rates for similar types of borrowing arrangements.

-58-

---

OTHER LIABILITIES

Other liabilities consist primarily of accounts payable, accrued interest payable, and accrued taxes. These liabilities are short-term and their carrying values approximate their fair values.

Unrecognized financial instruments are generally extended for short periods of time, and as a result, the fair value is estimated to approximate the face or carrying amount.

The estimated fair values of the Corporation's financial instruments are as follows:

2002
2001Carrying
Fair
Carrying
FairFinancial Assets
  
Amount
Value
Amount
Value(In thousands)Cash and cash equivalents
$ 47,683
$ 47,683
$ 31,183
$ 31,183Investment securities
142,872
142,917
104,274
104,307Loans
453,480
  

369,026
Less: Allowance for loan losses
  
(5,655)
---
(4,015)
---Loans, net of allowance
447,827
458,861
365,011
377,781Accrued interest receivable
4,603
4,603
3,848
3,848Financial Liabilities
Deposits
531,642
539,662
403,508
405,909Short-term borrowings


17,827
17,827Long-term debt
  
83,881
  100,661
63,075
  78,686Other liabilities
5,630
5,936
3,772
3,772Unrecognized Financial Instruments
Commitments to extend credit
90,174
90,174
65,140
65,140Standby letters of credit
1,477
1,477
1,032
1,032


NOTE 21 - COMMITMENTS AND CONTINGENCIES

The Board of
Bancshares approved a stock buy-back program in year 2000 that provided for the
purchase of $1 million per year of company stock over a five-year period. A
total of 56,357 shares have been accumulated to date. In January of 2003, the
board reaffirmed the buy-back decision, but opted to make shares acquired
through this program available to shareholders desiring to increase their
holdings or to new investors. Increased demand for Bancshares stock and the
opportunity to utilize capital to fund the expansion of First Citizens National
Bank into new markets drove this change in strategy.

NOTE 22 - MERGERS AND ACQUISITIONS

As of June 1, 2002, First Citizens Bancshares, Inc. acquired all of the
outstanding capital stock of Metropolitan Bancshares, Inc. in Munford,
Tennessee, in a transaction accounted for as a purchase. Metropolitan
Bancshares, Inc. was the parent company of Munford Union Bank. Metropolitan
Bancshares, Inc. was subsequently dissolved resulting in Munford Union Bank
becoming a wholly-owned subsidiary of First Citizens Bancshares, Inc. The
acquisition adds existing Munford markets, brings new management to the Company
and creates additional net income for the first Citizens operations due
principally to economies of scale. The Company also acquired a significant new
potential market for its products and services. Operating results for Munford
Union Bank for the period beginning on June 1, 2002 and ending on December 31,
2002 are included in the consolidated financial statements.

The purchase was consummated at a price of approximately $19,300,000.
The purchase amount was funded by a dividend from First Citizens National Bank
in the amount of $5 million and the Preferred Trust Securities and revolving
line of credit discussed in notes 14 and 15. The Company did not issue any
additional shares of stock in the transaction. First Citizens Bancshares, Inc.
acquired no research and development assets and incurred no preacquisition
contingencies. The assets and liabilities of Munford Union Bank have been
adjusted to fair value as of the date of acquisition resulting in the recording
of goodwill in the amount of $8.8 million on the books of Munford Union Bank. A
core deposit intangible asset was also established in the amount of $845,000
which is being amortized over a ten year period. The goodwill is being tested
annually for impairment. In the event of impairment, the adjustments to
goodwill will not be deductible.

The following table reflects the condensed balance sheet of Munford
Union Bank and the fair values assigned to assets and liabilities at the date
of purchase:

|                              | Book Value | Adjustment   | Fair Value | Adjustment AmortizationPeriod/Yrs | 2002 Accumulated Amortization | Annual Estimate
      AccumulatedAmortization
|----------------------------- | ---------- | ------------ | ---------- | --------------------------------- | ----------------------------- | ---------------------------------------------
|Cash and due from
      banks | $    3,855 | $        
-- | $    3,855 | --                                |                               |                                              
|Federal funds sold            | 5,295      | --           | 5,295      | --                                |                               |                                              
|Investments                   | 31,860     | 17           | 31,877     | 5                                 | 1.98                          | 3.40                                         
|Net loans                     | 68,542     | 1,456        | 69,998     | 7                                 | 121.33                        | 208.00                                       
|Premises and
      equipment  | 3,535      | (198)        | 3,337      | 3,535                             | (11.55)                       | (19.80)                                      
|Goodwill                      | --         | 8,808        | 8,808      | --                                | --                            | --                                           
|Core deposit
      intangible | --         | 845          | 845        | 10                                | 49.29                         | 84.50                                        
|Other assets                  | 2,012      | --           | 2,012      | --                                | --                            | --                                           
|Total Assets                  | $ 115,099  | $ 10,928     | $ 126,027  | 8                                 | 161.06                        | 276.10                                       
|                              | =======    | =======      | =======    | =======                           | =======                       | =======                                      
|Deposits                      | 99,723     | 1,219        | 100,942    | 5                                 | 142.22                        | 243.80                                       
|Other liabilities             | 5,741      | 21           | 5,762      | 5                                 | 2.45                          | 4.20                                         
|Capital                       | 9,635      | 9,688        | 19,323     | --                                | --                            | --                                           
|Total Liabilities and Capital | $ 115,099  | $ 10,928     | $ 126,027  | 5                                 | 144.67                        | 248.00                                       
|                              | =======    | =======      | =======    | =======                           | =======                       | =======                                      
|Net Expense                   |            |              |            |                                   | 16.39                         | 28.10                                        
|                              |            |              |            |                                   | =======                       | =======                                      

-59-

---

Pro forma statements of
condition and results of operations of the Company calculated as though the
acquisition of Munford Union Bank had been accomplished at the beginning of the
year ended December 31, 2002, are as follows:

Statements of Condition
      2002
      2001Cash and due from banks
      $   21,290
      $   19,151Federal funds sold
      26,393
      16,182Investments
      147,323
      136,151Net loans
      447,827
      435,009Premises and equipment
      17,866
      17,908Intangible assets
      13,261
      13,289Other assets
      20,238
      21,402Total Assets
      $ 694,198
      $ 659,092======
      ======Deposits
      $ 531,642
      $ 504,450Other liabilities
      107,955
      104,833Capital
      54,601
      49,809Total
Liabilities and Capital
      $ 694,198
      $ 659,092======
      ======




Results of Operation
      2002
      2001Interest income
      $   38,970
      $   43,860Interest expense
      14,708
      20,977Net interest income
      24,262
      22,883Provision for loan losses
      1,518
      2,122Net interest income after provision for
loan losses
      22,744
      20,761Other income
      7,688
      6,716Other expenses
      19,335
      18,135Net income before income taxes
      11,097
      9,342Provision for income taxes
      3,259
      2,599Net
income
      $    7,838
      $    6,743======
      ======Earnings per share
      $      2.14
      $      1.82======
      ======Weighted average shares outstanding
      $    3,668
      $    3,703======
      ======


NOTE
23 - EXECUTIVE PAYMENTS

In the acquisition of First Volunteer Corporation, as of January 1, 1999, First Citizens Bancshares, Inc. assumed the obligation for separation payments to two (2) executives of First Volunteer Corporation if the executives elected to terminate service with the Company. These separation payments are equal to approximately three (3) times the executives' annual compensation, plus an amount sufficient to pay applicable federal income taxes related to the separation payments. During the year ended December 31, 2000, these executives exercised their option to receive these payments. The expense was $809,000 and is reflected on the consolidated statement of income.

NOTE 24 - PRIOR PERIOD ADJUSTMENT

During the year ended December 31, 2000, Delta Finance Company identified a difference in the unearned interest on loans in the amount of $125,753 between the amount reflected on the detailed loan trial balance and the amount shown on the company's general ledger. The discrepancy was traced to a data processing system malfunction in the year 1997. The company recorded a prior period adjustment, which after deducting applicable income taxes, totaled approximately $74,000.

NOTE 25 - AMOUNTS
RECEIVABLE FROM RELATED PARTIES

Year Ended December 31,
2002(In thousands)Column A
  

Column B
  

Column C
  

Column D
  



Column EBalance at








Balance atBeginning








End ofof Period


Additions


Deductions


PeriodAmountsAmounts


Written




NotCollected


Off


Current


CurrentAggregate indebtedness
to First Citizens
National Bank of
Directors and Executive Officers
Of First Citizens
Bancshares, Inc. (26)
  

$ 9,367
$ 7,641


$ 5,940


$ -0-
$ 11,068
$ -0-=====


=====
=====


=====


=====


=====Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive OfficersOf First CitizensNational Bank (26)
  

$ 9,367
$ 7,641


$ 5,940


$ -0-
$ 11,068
$ -0-=====
  

=====
  

=====
  

=====
  

=====
  

=====




|                                 |  | Year Ended December 31,
2001
|-------------------------------- |  | ----------------------------
|                                 |  | (In thousands)              
|Column A                         |  | Column B                    
|                                 |  | Balance at                  
|                                 |  | Beginning                   
|                                 |  | of Period                   
|                                 |  |                             
|                                 |  |                             
|                                 |  |                             
|Aggregate indebtedness           |  |                             
|to First Citizens                |  |                             
|National Bank of                 |  |                             
|Directors and Executive Officers |  |                             
|Of First Citizens                |  |                             
|Bancshares, Inc. (26)            |  | $ 8,858                     
|                                 |  | =====                       
|Aggregate indebtedness           |  |                             
|to First Citizens                |  |                             
|National Bank of                 |  |                             
|Directors and Executive Officers |  |                             
|Of First Citizens                |  |                             
|National Bank (26)               |  | $ 8,858                     
|                                 |  | =====                       

Indebtedness shown represents amounts owed by directors and
executive officers of First Citizens Bancshares, Inc., and First Citizens
National Bank and by businesses in which such persons are general partners or
have at least 10% or greater interest and trust and estates in which they have a
substantial beneficial interest. All loans have been made on substantially the
same terms, including interest rates and collateral as those prevailing at the
time for comparable transactions with others and do not involve other than
normal risks of collectibility.

-60-

---

ITEM
9.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Bancshares had no disagreements regarding accounting
procedures.

PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information appearing in Bancshares'
2002 Proxy Statement
regarding directors and officers is incorporated herein by reference in response
to this Item.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following information relates to the principal executive officers of Bancshares and its
subsidiaries as
of December 31, 2002:

Name
      Age
      Position and OfficeStallings Lipford
      73
      Chairman of the Board of Bancshares and First Citizens.  Mr. Lipford joined First
        Citizens in 1950.  He became a member of the Board of Directors in 1960 and President in
        1970.  He was made Vice Chairman of the Board in 1982.  He served as Vice Chairman of the
        Board of Bancshares from September, 1982 to February, 1984.  He served as President & CEO
        of Bancshares from 1983 to 1992.Katie Winchester
      62
      Vice Chairman of the Board since Fall 2000. President and CEO of Bancshares and First Citizens; employed by First Citizens in 1961; served as Executive Vice President and Secretary of the Board from 1986 to 1992.  She was appointed CEO of Bancshares and First Citizens in 1996; and President of Bancshares and First Citizens in 1992.  Ms. Winchester was elected to the Board of both First Citizens and Bancshares in 1990.Ralph Henson
      61
      Vice President of Bancshares; Executive Vice President of Loan Administration of First Citizens. Employed by First Citizens in 1964. Mr. Henson served First Citizens as Senior Vice President and Senior Lending Officer until his appointment as Executive Vice President of Loan Administration in February, 1993.  Appointed to Board of Directors in 1997.Jeffrey Agee
      42
      Vice President and Chief Financial Officer of Bancshares.  Appointed Executive Vice President and
        Chief Financial Officer of First Citizens National Bank in August 1999. Mr. Agee served as Senior Vice President and
        Chief Financial Officer of First Citizens prior to this appointment. Employed by First Citizens in 1982.  Served First Citizens previous to April, 1994 as Vice President and Accounting Officer. Appointed Senior Vice President and Chief Financial Officer of First Citizens, April 17, 1996.-61-  Barry Ladd
      62
      Appointed Executive Vice President and Chief Administrative Officer of First Citizens and Bancshares in 1996.  Senior Vice President and Senior Lending Officer of First Citizens from April 20, 1994 to January 17, 1996.  Employed by First Citizens in 1972.  Mr. Ladd served First Citizens as Vice President and Lending Officer previous to his appointment as Senior Vice President. Appointed to Board of Directors in 1996.Judy Long
      48
      Vice President and Secretary to the Board of First Citizens Bancshares.  Appointed Executive Vice President and Chief Operations Officer and Secretary of the board of both First Citizens National Bank and Bancshares in August 1999.  Ms. Long served as Senior Vice President and Chief Operations Officer and Secretary to First Citizens prior to this appointment.  She served as Senior Vice President and Administrative Officer previous to November 1997; Vice President and Loan Operations Manager (1992-1996). Employed by First Citizens on July 19, 1974.John S. Bomar
      54
      President and CEO Munford Union
        Bank since June 2002. Served as President of Munford Union Bank and
        Metropolitan Bancshares from 1994 to May 2002. Executive Vice President
        from 1982 to 1994 of Munford Union Bank and Metropolitan Bancshares.
        Employed by Munford Union Bank in 1982. Member of the Board of Directors
        of First Citizens Bancshares, First Citizens National Bank and Munford
        Union Bank.




ITEM 11. EXECUTIVE COMPENSATION

The information required under this Item is set forth in the
2002 Proxy Statement, and is incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

Ownership of Bancshares' common stock by
certain beneficial owners and by management is set forth in Bancshares' 2002 Proxy Statement for the Annual Meeting of Shareholders to be held April
16, 2003, in the sections entitled Voting Securities and Election of Directors and
is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

Officers, Directors and principal shareholders
of Bancshares (and their associates) have deposit accounts and other
transactions with First Citizens National Bank. These relationships are covered
in detail on page 10 of the Proxy Statement under "Certain Relationships
and Related Transactions" and incorporated herein by reference. Additional
information concerning indebtedness to Bancshares and First Citizens by
Directors and/or their affiliates is included herein under Part III, Page 45 - "Amounts Receivable from Certain Persons".

ITEM 14. CONTROLS AND
PROCEDURES

A review of the
effectiveness of internal controls in place over operations and accounting
activities of Bancshares and its' subsidiaries is performed on an ongoing basis
throughout the fiscal year. Review of system controls is accomplished primarily
through completion of control function questionnaires, observation and
discussion with department of business unit managers. Controls and procedures
for all operation and accounting functions are documented and approved by
executive management. As of this report date, effectiveness of internal
disclosure controls are considered to be effective with no material deficiencies
that could adversely affect Bancshares ability to report accurate and
comprehensive financial information to investors. There was no internal fraud of
any nature known to management.

-62-

---

SIGNATURES

Pursuant to the requirements of Sections 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,
hereunto duly authorized.





First Citizens Bancshares, Inc.
(Registrant)





Date: March 14, 2003                          /s/ 
STALLINGS LIPFORD                                                                                   
                                 
CHAIRMAN

Date: March 14, 2003                 /s/    JEFF AGEE                                   
                                              
               VICE PRESIDENT &
PRINCIPAL 
                                                                                                           
FINANCIAL OFFICER

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following personson behalf of the Registrant and in the capacities
indicated on March 15, 2003.

/s/
        EDDIE ANDERSON
      
      /s/
        BARRY T. LADD
      
      /s/
        P. H. WHITE, JR.Director
      
      Director
      
      Director/s/
        JOHN S. BOMAR
      
      /s/
        JOHN M. LANNOM
      
      /s/
        DWIGHT STEVEN WILLIAMSDirector
      
      Director
      
      Director/s/
        JAMES WALTER BRADSHAW
      
      /s/
        STALLINGS LIPFORD
      
      /s/
        KATIE WINCHESTERDirector
      
      Director
      
      Director/s/
        JAMES DANIEL CARPENTER
      
      /s/
        MILTON MAGEE
      
      /s/
        BILLY S. YATESDirector
      
      Director
      
      Director/s/
        WILLIAM C. CLOAR
      
      /s/
        L. D. PENNINGTONDirector
      
      Director/s/
        RICHARD W. DONNER
      
      /s/
        ALLEN SEARCYDirector
      
      Director/s/
        BENTLEY F. EDWARDS
      
      /s/
        GREEN SMITHEAL, IIIDirector
      
      Director/s/
        JULIUS M. FALKOFF
      
      /s/
        WILLIAM F. SWEATDirector
      
      Director/s/
        LARRY W. GIBSON
      
      /s/
        DAVID R. TAYLORDirector
      
      Director/s/
        RALPH E. HENSON
      
      /s/
        LARRY S. WHITEDirector
      
      Director


-63-

---

CERTIFICATION PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of First Citizens
Bancshares, Inc. (the "Company") for the year ended December 31, 2002,
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), each of the undersigned Chief Executive Officer and Chief
Financial Officer of the Company, certifies to the best knowledge and belief of
the signatory, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 that:

I, Katie Winchester, Chief Executive Officer and Jeffrey Dean Agee, Chief
Financial Officer of First Citizens Bancshares, Inc. certify that:

1. I have reviewed this annual report on Form 10-K of First Citizens
      Bancshares, Inc.;
2. Based on my knowledge, this
      report does not contain any untrue statement of a material fact or omit to
      state a material fact necessary to make the statements made, in light of
      the circumstances under which such statements were made, not misleading
      with respect to the period covered by this report;
3. Based on my knowledge, the
      financial statements and other financial information included in this
      report, fairly represent in all material respects the financial condition,
      results of operations and cash flows of Bancshares as of, and for, the
      periods presented in this report;
4. Bancshares other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures as defined in Exchange Act Rules 13a and 15d-114
      for First Citizens Bancshares and we have:designed such disclosure
          controls and procedures to ensure that material information relating
          to Bancshares including its consolidated subsidiaries, is made known
          to us by others within those entities, particularly during the period
          in which this report is being prepared;
        evaluated the effectiveness
          of Bancshares disclosure controls and procedures as of a date within
          90 days prior to the filing date of this report (Evaluation date of
          December 31, 2002); and
        presented in this report
          our conclusions about the effectiveness of the disclosure controls and
          procedures based on our evaluation as of the evaluation date December
          31, 2002;
5. designed such disclosure
          controls and procedures to ensure that material information relating
          to Bancshares including its consolidated subsidiaries, is made known
          to us by others within those entities, particularly during the period
          in which this report is being prepared;
6. evaluated the effectiveness
          of Bancshares disclosure controls and procedures as of a date within
          90 days prior to the filing date of this report (Evaluation date of
          December 31, 2002); and
7. presented in this report
          our conclusions about the effectiveness of the disclosure controls and
          procedures based on our evaluation as of the evaluation date December
          31, 2002;
8. Bancshares other certifying
      officers and I have disclosed, based on our most recent evaluation, to
      Bancshares auditors and the audit committee of Bancshares Board of
      Directors:all significant
          deficiencies in the design or operation of internal controls which
          could adversely affect Bancshares ability to record, process,
          summarize and report financial data and have identified for the
          Bancshares auditors any material weaknesses in internal controls; and
        any fraud, whether or not
          material, that involves management or other employees who have a
          significant role in Bancshares internal controls; and
9. all significant
          deficiencies in the design or operation of internal controls which
          could adversely affect Bancshares ability to record, process,
          summarize and report financial data and have identified for the
          Bancshares auditors any material weaknesses in internal controls; and
10. any fraud, whether or not
          material, that involves management or other employees who have a
          significant role in Bancshares internal controls; and
11. Bancshares other certifying
      officers and I have indicated in this report whether or not there were
      significant changes in internal controls or other factors that could
      significantly affect internal controls subsequent deficiencies and
      material weaknesses.

/s/ Katie S. Winchester                                 /s/    Jeffrey Dean
Agee                                           
Chief Executive
Officer                                    
Chief Financial Officer
                                           
Date: March 14,
2003                                        
Date: March 14, 2003

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ITEM 15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)    Documents filed as a part of this report:

Financial Statements
               
Reports of Independent Auditors
               
Consolidated Balance Sheets as of December 31, 2001 & 2002
               
Consolidated Statements of Income for the years ended December 31, 2000, 2001
& 2002
               
Consolidated Statements of Changes in Shareholders' Equity and Other
Comprehensive Income for the years ended December 31,
                        
2000, 2001, & 2002 
               
Consolidated Statements of Cash Flows for the years ended December 31, 2000,
2001, & 2002
               
Notes to Consolidated Financial Statements
        All other schedules have been omitted
because of the absence of conditions under which they are required or because
the required
        information is given in the above
listed financial statements or notes thereto.

(b)    Reports on Form 8-K

None

(c)    Exhibits

The following Exhibits are filed
herewith or incorporated herein by reference:

Exhibit Number
      
      Description
      Page3.1
      
      Charter of First Citizens Bancshares, Inc.*3.2
      
      Bylaws of First Citizens Bancshares, Inc.*10.1
      
      Executive Employment Agreements
      121.1
      
      Subsidiaries of the Registrant
      123.1
      
      Consent of Accountants
      199.1
      
      Certification Pursuant to Section 906 of
        the Sarbanes-Oxley Act
      1


* Incorporated by reference to Registrants Annual Report on Form
10-K for the year ended December 31, 2001.

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