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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,
2003

[  ]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 [ ]  No [ x ]

________________________

The aggregate market value of
voting stock held by nonaffiliates of the registrant at June 30, 2003 was
$70,555,980.

Of the registrant's only class of
common stock (no par value) there were 3,655,768 shares outstanding as of
December 31, 2003 (net of Treasury Stock).

________________________

DOCUMENTS
INCORPORATED BY
REFERENCE:

Portions of the Proxy
Statement dated March 14, 2004 (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 one bank holding company.  At December 31, 2003 the Corporation had total assets of 
$726
million compared to $694 million at December 31, 2002.

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 subsidiary, First Citizens National Bank, 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 West, 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.  The subsidiary bank is 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 bank. 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 bank operates under the day-to-day management of  its officers and
directors; and formulates its 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
First Citizens National Bank. 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)
|                     | 2003          
|Total Assets         | $  726,104    
|Total Deposits       | 560,610       
|Total Net Loans      | 481,983       
|Total Equity Capital | 57,946        

Individual bank performance is compared to industry standards through utilization of the
Federal Reserve Board's Division of Banking Supervision and Regulation. First
Citizens Bancshares is grouped with peers in the $500 million assets to $1
billion. The group consists of 347 banks.

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

|                                                                                                                                     | As of December 31,
|------------------------------------------------------------------------------------------------------------------------------------ | ------------------
|                                                                                                                                     | *
      2003      
|                                                                                                                                     | Bancshares        
|Average Assets/Net Interest Income                                                                                                   | 3.75%             
|Average Assets/Net Operating Income                                                                                                  | 1.07              
|Net loan losses/Average total loans                                                                                                  | 0.09              
|Primary Capital/Average Assets                                                                                                       | 7.88              
|Cash Dividends/Net Income**                                                                                                          | 52.26             
|                                                                                                                                     |                   
|** Performance as of
      12/31/03 is
      compared to peer group ratios as of 09/30/03 (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.
Bancshares' objective in acquiring other banking institutions would be for asset growth and diversification into other market areas.  Acquisitions
and de-nova branches would afford
Bancshares increased economies of scale within the operation functions and better utilization of human resources.  Any acquisition
or de-nova branching 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 $115 million in assets
housed in Tipton and Shelby Counties in Tennessee to
Bancshares' balance sheet. It is expected that assets of the Southwest Region
(previous Munford Union) will exceed $190 million by year-end 2004. 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
one-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
Federal Reserve'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.

SARBANES-OXLEY ACT OF 2002

Congress recently passed the
Sarbanes-Oxley Act of 2002. The legislation imposes new duties on public
companies and executives, directors, auditors, plan administrators, attorneys as
well as securities analysts. It creates a new regulatory system for the audit
profession and sets new standards for auditor independence. It expands criminal
and civil liabilities. This new act should contribute to broad restoration of
trust in the integrity of disclosure and account practices that inform our
capital markets. First Citizens Bancshares has and will continue to implement
all necessary and applicable steps required by this act. The current services
provided by our external auditor include: quarterly reviews, year-end audit, and
preparation of the annual tax return. The tax return is the only non-audit
service provided by our external audit firm.

RECENTLY ISSUED
ACCOUNTING STANDARDS

FASB 46:
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46), which establishes guidance for determining
when an entity should consolidate another entity that meets the definition of a
variable interest entity. FIN 46 requires a variable interest entity to be
consolidated by a company if that company will absorb a majority of the expected
losses, will receive a majority of the expected residual returns, or both.
Transferors to qualified special-purpose entities (QSPEs) and certain other
interests in a QSPE are not subject to the requirements of FIN 46. On December
17, 2003, the FASB revised FIN 46 (FIN 46R) and deferred the effective date of
FIN 46 to no later than the end of the first reporting period that ends after
March 15, 2004, however, for special-purpose entities the Corporation would be
required to apply FIN 46 as of December 31, 2003. The Interpretation had no
effect on the Corporation's Consolidated financial statements.

FASB 149: 
Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. This statement amends SFAS NO. 133, accounting for derivative
instruments and hedging activities and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133.  This Statement is effective for contracts
entered into or modified after June 30, 2003, except in certain circumstances,
and for hedging relationships designated after June 30, 2003.   This statement will not have a material
impact on financials.

FASB
150:  Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity (Issued 5/03) - This statement establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity.  It
requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances).  Many of those instruments were previously
classified as equity.  Some of the
provisions of this statement are consistent with the current definition of
liabilities in FASB Concepts Statement No. 6, Elements of Financial Statements.  Remaining provisions of this statement are
consistent with the Board's proposal to revise that definition to encompass
certain obligations that a reporting entity can or must settle by issuing its
own equity shares, depending on the nature of the relationship established
between the holder and the issuer. 
While the Board still plans to revise that definition through an
amendment to concepts Statement 6, the Board decided to defer issuing that amendment until it has concluded its
deliberations on the next phase of this project. That next phase will deal
with certain compound financial instruments including putable shares,
convertible bonds, and dual-indexed financial instruments.  This statement will not have a material
impact on the financial statements of Bancshares.

FASB
132:(Revised 2003), Employers' Disclosures about Pensions and
Postretirement Benefits.  This statement
requires additional disclosures about the assets, obligations and cash flows of
defined benefit pension and postretirement plans, as well as the expense
recorded for such plans.  This statement
has no effect on the Company's consolidated financial statements.

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, 2003, Bancshares' risk-based capital ratio was
11.14% significantly in excess of 8%
mandated by regulation. The risk based capital ratio for 2002 was 10.92% and
13.81% for 2001. Our strategic plan directs the company to leverage capital by
growing assets. This strategic directive was accomplished in 2002 with the
acquisition of Munford Union Bank assets totaling $115 million. 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 2003 was 6.56 percent,
with total capital as a percentage of total assets at 7.98%.

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.

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BANKING BUSINESS

First Citizens Bancshares, Inc.
(the "company") headquartered in Dyersburg, Tennessee, the bank holding company
for First Citizens National Bank ("the Bank"), First Citizens Capital Assets
and First Citizens (TN) Statutory Trust II. 
First Citizens National Bank is a diversified financial service
institution, which provides banking and other financial services to its
customers. The bank operates two wholly owned subsidiaries: Financial Plus,
Inc. and Nevada Investments II. The bank 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.
The Munford Union Bank and its two wholly owned subsidiaries (Nevada
Investments III and IV) were merged into First Citizens National Bank and
Nevada Investments during second quarter 2003. Nevada I was merged into Nevada
II during the 3rd quarter 2003. Assets of Delta Finance, a finance
subsidiary owned by First Citizens National Bank was sold 4th
quarter 2003.  The finance company was
dissolved in December 2003.

First Citizens provides 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 farmland.  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 bank has a total of 43 banking locations (18
branch banks and 25 free standing ATMs) in six Tennessee counties. First
Citizens owns and operates four subsidiaries that provide 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 three locations
in West Tennessee.
- Delta Finance provided consumer finance services
consisting primarily of consumer and residential real estate loans out of three
office locations in West Tennessee. Assets of Delta Finance were sold 4th
quarter 2003.  The corporation was
dissolved in December 2003.
- 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/White and Associates Insurance Company,
organized and existing under the laws of the state of Arizona.  The principal activity of company is credit
insurance.  First Citizens holds a 50
percent ownership in the company.
- Nevada II, organized and existing under laws of the
state of Nevada. The principal activity of Nevada II is to acquire and sell
investment securities as well as collect the income from the portfolio. Nevada
I was merged into Nevada II during the year 2003.

COMPETITIVE ENVIRONMENT

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 bank (The Bank)  competes 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,
credit unions and other enterprises.

In 1998 federal
legislation allowed credit unions to expand their membership criterion. Expanded
membership criterion coupled with an existing tax free status provided a
competitive advantage when compared with that of banks.

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The following tabular analysis sets forth the competitive position of First Citizens
when compared with other financial institutions in the service area for the period ending June 30,
2003.

Dyer, Lauderdale,
        Obion, Tipton & Weakley Counties Market(Banks Only)(in
        thousands)Bank Name
      # of
        Offices
      Total   
        Deposits  06/30/03
      % of   
        Market   
        Share   06/30/03First Citizens National Bank
      14
      $  
        495,341
      23.42
      %First State Bank
      16
      388,238
      18.35Union Planters Bank, National Association
      16
      221,278
      10.46BancorpSouth Bank
      5
      160,181
      7.57Bank of Ripley
      5
      122,722
      5.80Commercial Bank & Trust Co.
      2
      95,177
      4.50INSOUTH Bank
      3
      100,698
      4.76Reelfoot Bank
      5
      90,789
      4.29Security Bank
      6
      85,053
      4.02First Tennessee Bank, National
        Association
      2
      61,585
      2.91Bank of
        Gleason
      1
      60,327
      2.85Weakley County
        Bank
      3
      51,128
      2.42Bank of Halls
      2
      40,599
      1.92Greenfield Banking
        Company
      2
      40,045
      1.89Brighton Bank
      2
      35,428
      1.67Bank of
        Friendship
      2
      22,680
      1.07Lauderdale County Bank
      2
      31,578
      1.49Gates Banking & Trust Co.
      1
      26,735
      1.26Bank Tennessee
      1
      16,419
      0.79Farmers Bank
      1
      11,740
      0.56Bank of Mason
      1
      8,775
      0.42Total
      90
      $ 
        2,115,388
      100.00
      %


EMPLOYEES

At December 31, 2003 Bancshares and its subsidiary employed
a total of 249 fulltime equivalent employees compared to 256 December 2002. The
decrease in FTE was primarily attributed to the closing of Delta Finance.
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.  Relationship
with employees is satisfactory and no collective bargaining issues exist.

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
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.

USA
PATRIOT ACT OF 2001.  On October 26,
2001, President Bush signed into law the United and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001.  Also known as the "Patriot Act,"
the law enhances the powers of the federal government and law enforcement
organizations to combat terrorism, organized crime and money laundering.   The Patriot Act significantly amends and
expands the application of the Bank Secrecy Act, including enhanced measures
regarding customer identity, new suspicious activity reporting rules and
enhanced anti-money laundering programs. 
Under the Act, each financial institution is required to establish and
maintain anti-money laundering programs, which include, at a minimum, the
development of internal policies, procedures, and controls; the designation of
a compliance officer; an ongoing employee training program; and an independent
audit function to test programs.  In
addition, the Act requires the bank regulatory agencies to consider the record
of a bank or banking holding company in combating money laundering activities
in their evaluation of bank and bank holding company merger or acquisition
transactions.  Regulations proposed by
the U.S. Department of Treasury to effectuate certain provision of the Patriot
Act provide that all transaction or other correspondent accounts held by a U.S.
financial institution on behalf of any foreign bank must be closed within
ninety days after the final regulations are issued, unless the foreign bank has
provided the U.S. financial institution with a means of verification that the
institution is not a shell bank. First Citizens National Bank implemented
policies and procedures in compliance with stated regulations of the Patriot
Act.

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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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, 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 located at 620
U.S. 51 Bypass adjacent to the Green Village Shopping Center is a full service
banking facility. The 6400 square foot facility services approximately 35,000
deposit account transactions on a monthly basis.  Other services offered include Commercial and retail lending.
This facility is equipped with seven drive up 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
Ro-Ellen 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 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.

-9-

---

MARTIN:

The Martin office located at 200 University Ave., Martin,
TN. 38237 contains 4,025 square feet and is a full service banking
facility.  The building is located on 1.08 acres of land and has four
drive-thru service lanes with the fourth lane serving as an ATM. Two other 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.

MUNFORD:

The main banking location at Munford, TN., Southwest Region
is located at 1426 Munford Avenue.  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
square feet.
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.

ARLINGTON:

Arlington branch located at 5845 Airline Rod., Arlington,
TN.  38002 has approximately 5,237 sq.
feet and serves a full service branch facility. The branch is located on
approximately 1 acre of land has houses a drive thru ATM.

All
properties are owned by First Citizens and there are no liens or encumbrances
against any properties owned by First Citizens.

ITEM 3.     LEGAL PROCEEDINGS

There
are pending routine legal issues involved with a bank subsidiary. However, the
outcome of these issues is not expected to have a material adverse effect to
the financial position of the subsidiary or the bank.

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

During the fourth quarter of the year ending
December 31, 2003, 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, 2003 there were
1,010
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
    $ 
      25.00March 31, 2003
    $  
      27.50
    $ 
      27.50June 30, 2003
    $  
      27.50
    $ 
      27.50September 30, 2003
    $  
      30.00
    $ 
      25.00December 31, 2001
    $   25.00
    $ 
      19.00December 31, 2002
    $  
      30.00
    $ 
      19.00December 31, 2003
    $  
      30.88
    $ 
      27.50


Dividend pay-outs per share were
  $1.08 in 2003, $1.04 in 2002 and $1.00 in 2001.

Dividends -
        2003DividendPer Share
    QuarterDeclared.27
    1st.27
    2nd.27
    3rd.27
    4thTotal
      $1.08


Future dividends will depend on Bancshares'
earnings, financial condition, regulatory capital levels 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.

2003



2002



2001



2000



1999(Dollars in
      thousands, except per share data)Net Interest & Fee Income
    $   
      25,354



    $   
      24,262



    $    19,917



    $    18,594



    $    19,305Gross Interest Income
    39,506



    38,970



    39,189



    38,137



    36,085Income From Continuing Operations
    7,820



    7,838



    5,761



    4,612



    5,799Income Per Share from Continuing Operation
    $ 
      2.14



    $ 
      2.14



    $  1.56



    $  1.24



    $  1.58Net Income per Common Share
    $ 
      2.14



    $ 
      2.14



    $  1.56



    $  1.24



    $  1.58Cash Dividends Declared per Common Share
    $ 
      1.08



    $ 
      1.04



    $  1.00



    $  1.00



    $  0.90Long Term Obligations (1)
    83,314



    83,881



    63,075



    44,237



    11,264Total Assets at Year End
    $  726,104



    $  694,198



    $  537,991



    $  500,954



    $  472,670Allowance for Loan Losses as a % Loans
    1.25%



    1.24%



    1.08%



    1.10%



    1.14%Allowance for Loan Losses as a % of
            Non-Performing Loans
    438.36%



    144.31%



    141.97%



    125.01%



    445.26%Loans 90 Days Past Due as a % of Loans
    0.04%



    0.37%



    0.33%



    0.47%



    0.10%


(1)    Long-term
obligations consist of
Federal Home Loan Bank Borrowings and acquisition debts funded through First
Tennessee Bank.

-11-

---

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

First
  Citizens Bancshares, Inc. (the "company") headquartered in
  Dyersburg, Tennessee, the bank holding company for First Citizens National
  Bank ("the Bank"), First Citizens Capital Assets and First Citizens (TN) Statutory
Trust II.  First Citizens National Bank
is a diversified financial services institution, which provides banking and
other financial services to its customers. The bank operates two wholly owned
subsidiaries: Financial Plus, Inc. and Nevada Investments II. The bank 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. The Munford Union Bank and its two
wholly owned subsidiaries (Nevada Investments III and IV) were merged into
First Citizens National Bank and Nevada Investments during second quarter 2003.
Nevada I was merged into Nevada II during the 3rd quarter 2003.
Delta Finance's loans were sold during the 4th quarter 2003 and
later the company was dissolved.

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.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting of First Citizens Bancshares
and its subsidiaries conform with accounting principles generally accepted in
the United States.  The preparation of
these financial statements requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. The company's estimates are based on historical experience,
information supplied from professionals, regulators and others believed to be
reasonable under the facts and circumstances. 
Actual results could differ from those estimates.

First Citizens considers its more critical accounting
policies to consist of the allowance for loan losses and the estimation of fair
market value of investments and tangible assets.

The allowance for loan losses on loans represents
management's best estimate of inherent losses in the existing loan
portfolio.  Management's policy is to
maintain the allowance for loan losses at a level sufficient to absorb
reasonably estimated and probable losses within the portfolio.  The company believes the loan loss reserve
estimate is a critical accounting estimate because:  changes can materially affect bad debt expense on the income
statement, changes in the borrower's cash flows can impact the reserve, and
management has to make estimates at the balance sheet date and also into the
future in reference to the reserve. 
While management uses the best information available to establish the
allowance for loan losses, future adjustments may be necessary if economic or
other conditions change materially. 
Reference footnote 1 in Company's Financial Statements.

Accounting principles generally accepted in the United
States require that certain assets and liabilities be carried on the balance
sheet at fair value.  Furthermore, the
fair value of financial instruments is required to be disclosed as a part of
the notes to the consolidated financial statements for other assets and
liabilities.  Fair values are volatile
and may be influenced by a number of factors, including market interest rates,
prepayment speeds, discount rates, the shape of yield curves and the credit
worthiness of counter parties. 
Following is a discussion of the estimation of fair value for First
Citizens more significant assets and liabilities:

> Available for Sale Investment Securities and Trading Account
> Assets.  Fair values for the majority of
> First Citizens available for sale investment securities are based on quoted market prices.  In instances where quoted market prices are
> not available, fair values are based on the quoted prices of similar
> instruments with adjustment for relevant distinctions (e.g., size of issue,
> interest rate, etc.).
> 
> The Company's policy is to review goodwill for impairment at
> the reporting unit level on an annual basis unless an event occurs that would
> impair the goodwill amount.  Goodwill
> represents the excess of the cost of an acquired entity over fair value
> assigned to assets and liabilities. 
> Management believes accounting estimates associated with determining
> fair value as part of the goodwill test is a critical accounting estimate
> because estimates and assumptions are made based on prevailing market factors,
> historical earnings and multiples and other contingencies.  Reference footnote 23 in the Company's
> Financial Statements for additional policy information.

Management has discussed these critical accounting policies
with the Audit Committee, and the Audit Committee has reviewed the Company's
applicable disclosures in the discussion and analysis of operations.

-12-

---

RESULTS OF OPERATIONS

Asset quality remains excellent.  Non-performing loans as a percent of total portfolio at December
31, 2003 were .29% down from .86% at the end of 2002 and 41% the level of peer
group banks who reported average non-performing assets of .71%. The allowance
for loan loss reserve as a percent of non-performing assets was 316.97%,
99.21%, 88.08%, 194.06%, and 303.51% for the years 2003, 2002, 2001, 2000 and
1999 respectively.  Additions made to
the reserve account as a percent of net charge offs for 2003 was 237.80%. Other
Real Estate Owned declined 54% ending 2003 at $534,725.  The provision for loan losses was down 36%
supported by a reduction in net loan charge-offs from $848 thousand in 2002 to
$410 thousand in 2003.  The reserve for
potential loan losses as a percent of total portfolio ended the year at 1.25
percent.

Bancshares recorded net income of $7.8 million for the year
ended December 31, 2003 compared to $7.8 million for the same time period in
2002. Earnings per share also remained stable at $2.14 per share. While
pressures exerted by the squeeze to the net interest margins were a factor,
earnings were also suppressed by investment in initiatives that should generate
higher levels of future earnings to shareholders. Premises and equipment
increased to $21.7 million at year end 2003 from $14.7 million at year end
2001.   Construction of two additional
branches were completed during 2003, one in Martin, TN., and the second in
Arlington, TN.  As of January 2004, both
locations are operating at a profit. The accompanying Summary Average Balance
Sheet and Net Interest Income Schedule indicates the yield on average earning
assets was 4.12% for year 2003 compared to 4.47% at December 31, 2002.  Earnings per share reported for 2002 and 2001
respectively were $2.14 and $1.56 per share. 
Return on average assets was 1.10% and 1.28% for the years ending
12/31/03 and 12/31/02.  Total assets at
December 31, 2003 and 2002 were $726 million and $694 million (inclusive of
$115 million in assets added as a result of the purchase of Munford Union Bank
in 2002). Asset growth from the Munford transaction has been strong, increasing
20% since being acquired in June 2002. Return on average equity is reflected as
13.88%, 15.05%, 11.91%, 10.16% and 13.27% for the five years included in the
statement. A review of three most current years ratios indicates a significant
change from year 2001 to 2002 as a result of the following events:  (1) Posted record earnings in 2002 as
compared to 2001; (2) Posted a pretax profit of $191,000 in 2002 resulting from
the sale of the bank's credit card portfolio; and (3) A reduction in net charge
off loans and bad debt expense in year 2002. A Strategic Plan objective
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 declared from
the bank to Bancshares 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 effective tax rate for the current year is 29% compared
to 29% and 28% for the years 2002 and 2001. 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 result
from ESOP debt, and other factors incidental to the financial services
business. The primary reason for the increase in rates after 2001 was state
income taxes.

Shrinking margins are a material concern with most financial
institutions today.  Peer banks ($500
million to $2 billion assets) including First Citizens National Bank have seen
margins head downward since the summer of 2002.  Liabilities can no longer keep pace with the decline in earning
assets.  No change in this trend is
expected until there is an increase in prime rate and a corresponding rise in
floating loan yields. Net interest income increased $1.1 million or
approximately 4.50 percent over the prior twelve months, primarily the result
of asset growth. Declining interest rates from September 2000 through December
2002 had a positive impact on net interest margins causing a reduction in cost
of funds.  The company's funds
management committee has moved the interest sensitivity position from a
liability sensitive to an asset sensitive position.  Bancshares' balance sheet is structured in a manner deemed to be
"asset sensitive" and any reasonable increase in interest rates would translate
into improved earnings for the company. 
Rising rate environment of 100 basis points over a 12 month period would result in improved earnings of $1.4
million or an increase in net income of 6.05%. 
A declining rate of 100 basis points for the same 12 month period would
negatively impact net interest income approximately $550 thousand. The net
yield on average earnings assets was 4.12 percent at 12/31/03 compared to 4.47
percent for the same time period in 2002. 
Net yield on average earnings assets for 2001 was 4.35 percent. Net
yield on average earning assets for 2002 was favorable when compared to the
other two reportable years due to cost of funds dropping 161 basis points while
earning assets dropped only 137 basis points. Secondary mortgage activity
exceeded prior record levels as consumers opted to take advantage of the low
rate environment by refinancing existing home mortgages.  Gross income and fees recorded from this
activity totaled $1.7 million in 2003. Refinance activity first quarter of 2004
is projected to slow with future activity dependent on economic conditions and
expansions into new markets.

-13-

---

NON-INTEREST INCOME

The following table reflects restated non-interest income for
the years ending December 31, 2003, 2002, and 2001:

December 31Change from
        Prior Year(in
        thousands)Increase
        (Decrease)
      
      Increase
        (Decrease)Total
        2003
      Amount
      Percentage
      Total
        2002
      Amount
      Percentage
    
      Total
        2001Service Charges on
       Deposit Accounts
    $  4,913
    $  1,273
    34.97 %
    $  3,640
    $     426
    13.25 %
    $  3,214Trust Fees
    786
    (16)
    (1.99)%
    802
    (57)
    (6.63)%
    779Brokerage
    878
    (13)
    (1.45)%
    891
    131
    (17.23)%
    760Other
    2,239
    (116)
    (4.92)%
    2,355
    713
    43.42 %
    1,642Total Non-interest
                 income
    $  8,816
    $  1,128
    14.67 %
    $  7,688
    $  1,293
    20.21 %
    $  6,395======
    ======
    =======
    ======
    ======
    =======
    ======


Non-interest income increased $1.1 million or 14.67 percent
when comparing 2003 results to 2002.  In
the year 2003 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 of 2002 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 in the 2002 balance. 
The most significant increase in non-interest income was derived from
overdraft fees charged on checking accounts. In addition, Bancshares' portion
of non-interest income generated by First Citizens/White and Associates
Insurance Company, LLC for the years ending 2003, 2002 and 2001 totaled
$434,000, $495,000, and $400,000 and is included in this category. Other one
time events with a significant impact to net interest income were (1) the
collection of a Bank Owned Life Insurance Policy totaling $141,000 (2) Sale of
Other Real Estate in 4th quarter at a profit of $103,000 and, (3)
Sale of the bank's credit card portfolio in midyear 2002 resulting in a one
time payment of $191 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 years 2003 and 2002
and 53 percent in 2001.  The increase of
15.73% in this category for 2003 reflects an increase in number of full time
equivalent staff from 204 at December 31, 2001 to 256 at the end of 2003.
Employee incentives paid as a result of accomplishing a 1.25% Return on Assets
at the bank level as well as accomplishment of 2003 budget and business
development goals totaled 10.93% of salaries and benefits compared to 10.20% in
2002 and 10.00% for 2001. The increase in staff is attributed to expansion into
new markets as well as additional staff necessary to support expansion within
mortgage lending and brokerage divisions. A comparison of the efficiency ratio
for the years 2003, 2002 and 2001 reflects ratios of 63.19 percent, 59.24
percent, 62.64 percent respectively.

The 13.40 percent and 13.99 percent increase in net
occupancy expense for 2003 and 2002 reflects the increase in numbers of
locations (5) brought about by the Munford Union acquisition 2002, and new
branches in Martin and Arlington opened in 2003.  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 new branches.

-14-

---

Other operating expenses increasing 12.35% from December 31,
2002, reflects additional marketing and operating expense associated with
expansion into new markets. Management expects expenditures at these levels in
the foreseeable future. Efforts to divest the bank of other real estate have
been successful.  Other real estate
assets total for 2003 is $535 thousand compared to $1.8 million at December 31,
2002 compared to $1.7 million at December 31, 2001 and is inclusive of $648
thousand other real estate held by Munford Union at the time of the acquisition
in 2002. Impaired goodwill expense is zero for the reportable periods of 2003
and 2002 compared to $269 thousand for 2001. 
Goodwill is 1.68% of total assets and 21.08% of capital.

December 31,
      Assets Per Employee
      Assets Per EmployeePeer Group*2003
      $ 
        2,916
      $ 
        3,400*2002
      $ 
        2,712
      $ 
        3,530*2001
      $  2,637
      $  3,350**2000
      $  2,397
      $  2,860**1999
      $  2,328
      $  2,540


**      Peer Group $100 million to $500 million
  *        Peer Group $500 million to $1
  billion

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,          
|------------------------------------ | ----------------------------
|                                     | 2003                        
|                                     | AverageBalance              
|                                     | (Dollars
      in thousands)
|Non-Interest Bearing Demand Deposits | $  62,836                   
|Savings Deposits                     | 168,149                     
|Time Deposits                        | 313,562                     
|Total Deposits                       | $ 544,547                   
|                                     | ========                    

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 $495 million in deposits
accounting for 23.42 percent of total market share.  First State Bank, a competitor in markets of First Citizens was
second in market share accounting for 18.35 percent of total deposits.
Bancshares' average deposits for 2003 were $544,547 thousand at an average rate
of 1.76% compared to $463,530 thousand for 2002 at an average rate of 3.17% and
$389,940 thousand for 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. Also an incentive 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 $64 million for
year 2003 and $46 million in year 2002 and $46 million at year end 2001.

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. 
Customers are given an overdraft privilege limits 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 so along 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 funds fee assessed.

Maturity distribution of time deposits reflects that 78% of
total time deposits in the amount of $100,000 or more will reprice 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
account for $31.7 million or 22.09% of maturity distribution total.

Core deposits serve as a source of liquidity for
Bancshares.  The short-term borrowings
table reflects borrowings at year-end of $14.5 million and $10.3 million at
December 31, 2003 and 2002 compared to $33.4 million for the same time period
in 2001.  Long-term debt, primarily
Federal Home Loan Bank Borrowings reflects average volume at year-end 2003 of
$83.5 million at an average rate of 5.18% compared to $67 million in 2002 at an
average rate of 5.36%. The average maturity for long-term borrowing is 7
years.  FHLB borrowings have various
call features ranging from 1 to 5 years and the maturities range from 2008 to
2011.  Under the current rate
environment none of these borrowings are likely to be called.  Federal Home Loan Bank borrowings are
comprised of fixed rate positions ranging from 2.85% to 6.55%.  Correspondent debt and Trust Preferred debt
were affiliated with the Munford Union acquisition and are variable. Debt
associated with this acquisition was reduced approximately $1 million
(principal) since 2002.

Correspondent debt is tied to prime rate less 100 basis
points and trust preferred debt is tied to libor plus 360 basis points.
Liquidity management and long term borrowings are discussed within the
Liquidity section of this report.

-15-

---

SHORT TERM BORROWINGS

As of December 312003
      2002
      2001Amount outstanding - end of period
      $           --
      $           --
      $           --Weighted Average Rate of Outstanding
      N/A
      N/A
      N/AMaximum Amount of Borrowings at Month End
      $  14,550
      $  10,276
      $  33,391Average Amounts Outstanding for Period
      1,758
      4,477
      4,727Weighted Average Rate of Average Amounts
      1.53%
      2.02%
      3.75%


LONG TERM BORROWINGS

Average Volume
    Average
       Rate
    Average   Maturity
    Repricing
       FrequencyFHLB Borrowings
    83,571
    5.18%
    7 years
  
  FixedCorrespondent Debt
    9,051
    3.21%
    9 years
  
  VariableTrust Preferred Debt
    5,000
    5.02%
    9 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 bank on December 31, 2003.  The
overall total increased slightly from prior year. Deposits totaling $32 million
acquired as a result of the Munford Union acquisition in June 2002 are included
in the 2002 and 2003 totals.

|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                                                                       
|                                                                            



-16-

---

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

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                        | Monthly Average
      Balances and Interest Rates
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                        | 2003                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                        | Average
      OutstandingBalance                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                        | (Dollars in
      Thousands)                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                        | ASSETS                                           
|Interest-earning
      assets:                                                                                                                                                                                                                                                                                                                                                                                                          |                                                  
|Total
      loans (1) (2) (3)                                                                                                                                                                                                                                                                                                                                                                                                           | $ 474,956                                        
|Investment securities:                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                  
|Taxable                                                                                                                                                                                                                                                                                                                                                                                                                                 | 109,170                                          
|Exempt (4)                                                                                                                                                                                                                                                                                                                                                                                                                              | 37,223                                           
|Interest Earning Deposits                                                                                                                                                                                                                                                                                                                                                                                                               | 547                                              
|Federal funds sold                                                                                                                                                                                                                                                                                                                                                                                                                      | 13,479                                           
|Total interest earning assets                                                                                                                                                                                                                                                                                                                                                                                                           | 635,375                                          
|Non-Interest earning assets:                                                                                                                                                                                                                                                                                                                                                                                                            |                                                  
|Cash and Due From Banks                                                                                                                                                                                                                                                                                                                                                                                                                 | 16,807                                           
|Bank Premises and Equipment                                                                                                                                                                                                                                                                                                                                                                                                             | 19,950                                           
|Other Assets                                                                                                                                                                                                                                                                                                                                                                                                                            | 39,537                                           
|Total Assets                                                                                                                                                                                                                                                                                                                                                                                                                            | $ 711,289                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                        | ========                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                        | LIABILITIES AND
       SHAREHOLDERS' EQUITY      
|Interest-bearing
      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                     |                                                  
|Savings deposits                                                                                                                                                                                                                                                                                                                                                                                                                        | $ 168,149                                        
|Time
      deposits                                                                                                                                                                                                                                                                                                                                                                                                                     | 313,562                                          
|Federal
      funds purchased and Other
          Interest Bearing Liabilities                                                                                                                                                                                                                                                                                                                                                          | 105,634                                          
|Total interest-bearing liabilities                                                                                                                                                                                                                                                                                                                                                                                                      | 587,345                                          
|Noninterest- bearing
      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                 |                                                  
|Demand deposits                                                                                                                                                                                                                                                                                                                                                                                                                         | 62,836                                           
|Other
      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                 | 4,780                                            
|Total liabilities                                                                                                                                                                                                                                                                                                                                                                                                                       | 654,961                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                  
|Shareholders' equity                                                                                                                                                                                                                                                                                                                                                                                                                    | 56,328                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                  
|Total liabilities and
      shareholders'
            equity                                                                                                                                                                                                                                                                                                                                                                            | $ 711,289                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                        | ========                                         
|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.

-17-

---

A summary of average interest earnings assets and interest
bearing liabilities is set forth in the preceding table together with average
yields on earning assets and average cost on interest bearing liabilities.

Interest earning assets at year-end 2003 total $635,375
thousand at an average rate of 6.35% compared to 2002 total of $557,163
thousand at an average rate of 7.11% and 2001 total of $465,756 thousand at an
average rate of 8.48%.  Interest bearing
liabilities total $587,345 thousand interest expense of $14,152 thousand
compared to $512,717 thousand interest expense of $14,708 thousand in year 2002
and $430,201 thousand interest expense of $19,272 thousand in 2001.

|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      
|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 reduction in the Federal Funds rate to the current level
of 1% has served to materially reduce funding costs.  Initially, this reduction in rates supported improvement in the
net interest margin.  As rates have continued
to fall, the benefits of lower funding costs have been offset by reduced
returns on loans and investments placing pressure on net interest margins. The significance of the impact to earnings is evident by the
increase in earnings attributed to changes in interest rates when comparing
2002 to 2001 (increase in income of $1,078 thousand) and 2003 to 2002 (decrease
in income of $2,429 thousand).  The
significant changes to average volume in Interest Earnings Assets and
Liabilities in 2002 is a result of 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                                         

-18-

---

CHANGES IN LOAN CATEGORIES

December 31,
        2003 as Compared to December 31, 2002(in
        thousands)Loan Category
    
    Amount
      of         Increase (Decrease)
    %
      of              Increase (Decrease)Real Estate
    $ 
      16,244
    5.68 %Commercial, Financial and
           Agricultural
    2,926
    4.31 %Installment Loans to Individuals
    (1,688)
    (4.31)%Other Loans
    (2,361)
    (7.14)%TOTAL LOANS
    $ 
      34,627
    7.63 %=======
    ========


Total loans at December 31, 2003 were $488 million
compared to $453 million at December 31, 2002 and $369,026 at December 31,
2001.  Net loan growth in 2003 from 2002
consisted primarily of growth centered in Real estate loan category of $16 million or 5.68%.  Construction and permanent financing of one to four family
residential loans has been the focus of the banks' marketing program over the
past two years with residential loan rates at the lowest point in many
years.  Loan growth in 2002 from 2001
(excluding acquisitions) increased only $14 million or 3.91 percent when
comparing the current period to December 2001. 
Weak loan growth in other areas of the portfolio can be attributed to
the slowing economy, a tightening in consumer credit underwriting standards and
a rise in unemployment rates in certain markets in which the bank operates. In
spite of economic conditions, overall loan portfolio quality remains high with
approximately $376 million or 77 percent of total portfolio volume recorded in
real estate loans; $76 million or 15 percent in Commercial and Agricultural
loans with installment loans to individuals comprising 8 percent of total
portfolio, unchanged from year-end 2002. Portfolio quality is excellent with
the ratio of net charge offs to average net loans outstanding for the years of
2003, 2002 and 2001 at .08%, .20% and .38%. Non performing assets as a percent
of total loans plus foreclosed property at year end represent .39% compared to
1.24% at year end 2002. The loan loss reserve as a percent of total loans was well in excess of
policy guidelines of one percent at year-end 2003.  The reserve at December 31, 2002 was 1.24 percent compared to
1.08 percent at year-end 2001. 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 position the
company to take advantage of improved economic conditions that are sure to
come.

Unemployment rates for year-end 2003, 2002 and 2001 in
  counties in which Bancshares does business are as follows:

Actual Labor ForceEstimate 2003
        Annual
          Average 
          Labor ForceEstimate 2002Dyer
        6.4%
        5.8%Lauderdale
        13.7%
        9.1%Obion
        7.4%
        5.2%Shelby
        5.4%
        4.5%Tipton
        7.0%
        5.8%Weakley
        7.5%
        6.1%


Unemployment rate for the state of Tennessee for the four
quarters of 2003 were 5.1%, 5.4%, 5.1%, and 4.9%.

The First Citizens loan portfolio is made up of quality
credits and is well diversified with a concentration of credits as of the most
recent Loan Review Quarterly report in the following category of loans:

Category
Outstanding
Problem Loans
Problem Loans% of CategoryResidential Real Estate
$   
145,507
$ 4,210
2.89%Home Equity
20,173
194
0.96%Agriculture Real Estate
25,630
243
0.95%Commercial Real Estate
172,437
3,214
1.86%Commercial other
49,457
1,230
2.49%


Concentrations of credit of $15,337,250 or more represent
25% of Gross Capital funds.   As of this
date there are no concentrations of credit within the portfolio that represent
one certain industry or a specific type of loans within these categories.  Hotel loans (the only specific loan type
which would approximate a concentration of credit) included in the categories
above represents approximately $12.7 million, $2.6 million below the
concentration level. The largest category of loans is residential mortgage
loans, comprising 77 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%


-19-

---

REPOSSESSED REAL PROPERTY:

The book value of repossessed real property held by
Bancshares at December 31, 2003 was $535 thousand. Repossessed real property at
the end of December 31, 2002 and 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 ratios and maturities related to various
collateral are as follows:

Collateral
    
    Maximum  Amortization
    Maximum LTVReal Estate
    Various 
      (see discussion)
    Various 
      (see discussion)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)* 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.

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 80% LTV at origination must have either
private mortgage insurance or other readily marketable collateral pledged in
support of the credit.

-20-

---

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 65% 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


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

|2003  | 2002  | 2001  | 2000  | 1999 
|----- | ----- | ----- | ----- | -----
|7.17% | 7.93% | 9.22% | 9.57% | 9.10%

The aggregate amount of unused
guarantees, commitments to extend credit and standby letters of credit was
approximately $92 million at year end. 
Other information in reference to commitments and standby letter of
credits is included in Note 18 of the financial statements.

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
    $   
      83,832
    $  199,066
    $  
      90,704Commercial, Financial and Agricultural
    37,561
    29,218
    9,544All Other Loans
    10,610
    27,041
    531Totals
    $  132,003
    $  252,928
    $ 103,176=======
    =======
    =======


Loans with Maturities After One Year for which:                                                                                                    
  (in thousands)
Interest Rates are Fixed or Predetermined                                    
  $239,059
Interest Rates are Floating or Adjustable                                       117,045

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 asset sensitive since assets reprice at a much faster
rate than liabilities.  This means that
in a rising rate environment of one to two percent net income would improve,
while a flat rate or a lower rate environment would result in diluted 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. Fifty one percent of average
loans within the loan portfolio will re-price either immediately with a change
in interest rates or within 12 months, while $239 million or 49% of average
outstanding loans will mature after one year, but within five years.  Only $103 million or approximately 21% 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 consist of non-accrual loans, restructured loans, foreclosed properties,
and loans and leases 90 days past due and still accruing interest.  Non performing loans as a percent of total
loan portfolio at December 31, 2003, December 31, 2002, and December 31, 2001
were $1.9 million or .39%, $5.7 million or 1.25%, and $4.6 million or 1.23% of
loans. Loans and leases 90 days past due and still accruing interest total $223
thousand compared to $1.7 million at 12/31/02 and $1.2 million at
12/31/01.   The allowance for loan loss
as a percent of non-performing assets was 317%, 99%, 88% as of December 31,
2003, 2002, 2001. The allowance as a percent of gross loans for the same time
periods was 1.25%, 1.24%, and 1.08%.   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, 2003 if all loans reported as non-accrual had
been current in accordance with their original terms and had been outstanding
throughout the period is $84,000. Interest income on loans reported as ninety
days past due and on interest accrual status was $16,000 for 2003. 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 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 (1)Loans charged off of $919
thousand(2) Recovery of loans previously charged off $509 thousand and (3) Additions
to reserves totaling $975 thousand. This compares to charge offs of $1.7
million, recoveries of $895 thousand and additions to reserve from current
earnings of $1.6 million in 2002.  For
the year ending December 2001 charge-offs were $2 million, recoveries of $625
thousand and additions to reserves of $1.6 million.

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, our allowance determination policy
reflects historical losses on pools of loans and the relationship to actual
previously predicted losses. If significant differences are evident, then
justification is addressed.  If probable
losses are detected then appropriate assets are identified as impaired, they
will be analyzed, and specific allocations funded in order to avoid
extraordinary charges to reserve. It is 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 are assessed quarterly and
adjustments made to allowance based on upward or downward trends to these
elements. National economic conditions are 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.

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.

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.

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
$   350,000Real Estate - Construction
--Real Estate - Mortgage
350,000Installment Loans to individuals
200,000Lease financing
--Total
$  900,000


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:
2003
2002
2001
2000Domestic:Commercial, Financial and Agricultural
$     139
$     188
$    1,537
$    761Real Estate - Construction
--
--
--
--Real Estate - Mortgage
398
803
480
340Installment Loans to individuals
& credit cards
382
752
795
600Lease financing
--
--
--
--Total
$     919
$   1,743
$   2,017
$   1,701Recoveries:Domestic:Commercial, Financial and Agricultural
$     142
$      
91
$      336
$        52Real Estate - Construction
--
--
--
--Real Estate - Mortgage
237
565
95
39Installment Loans to individuals
& credit cards
130
239
194
244Lease financing
--
--
--
--Total
$     
509
$     
895
$      625
$      335Net Charge-offs
$    (410)
$    (848)
$   1,392
($   1,366)


-24-

---

COMPOSITION OF INVESTMENT SECURITIES

|                                    | December 31,
(in thousands)
|----------------------------------- | ---------------------------
|                                    | 2003                       
|U.S. Treasury & Government Agencies | $  102,117                 
|State & Political Subdivisions      | 38,719                     
|All Others                          | 8,844                      
|TOTALS                              | $ 149,680                  
|                                    | =======                    

MATURITY AND YIELD ON SECURITIES

|                                                                                                                              | December 31, 2003
      (in thousands)
|----------------------------------------------------------------------------------------------------------------------------- | --------------------------------------
|                                                                                                                              | Maturing
      Within One Year        
|                                                                                                                              | Amount                                
|U.S. Treasury and Government Agencies                                                                                         | $ 9,525                               
|State and Political Subdivisions*                                                                                             | 1,211                                 
|All Others                                                                                                                    | 510                                   
|Totals                                                                                                                        | $ 11,246                              
|                                                                                                                              | ======                                
|________________________________
      * Yields on tax free investments are stated herein on a taxable equivalent
      basis

HELD TO MATURITY AND AVAILABLE FOR SALE SECURITIES

|December 31, 2003                                                  
|-------------------------------------------------------------------
|(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:                                                   
|Other
Debt Securities                                              
|Equity Securities
(1) (including Federal Reserve
           stock) 
|Foreign securities:                                                
|Debt Securities                                                    
|                                                                   
|Total                                                              

(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
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, 2003, 2002 and 2001 were $150 million, $143 million, and 104 million.  Maturities within one year were 11 million
or 8% of portfolio compared to 27% or $39 million in 2002.  Remaining investment maturities are $138
million or 92% of the portfolio in the year 2003 compared to $104 million or 73%
of the portfolio in year 2002.  The
average life, maturity and yield of the investments were 4.43 years, 5.75
years, and 4.42 years respectively.  A
review of peer data indicates the portfolio yield is less than peers as a
result of above average maturities, pay downs, and calls occurring in years
2003 and 2002.

-25-

---

Principally to reduce our state excise tax expense, we
placed our investment portfolios in Nevada incorporated during 2000. Nevada III
and IV were formed in 2002 to house investments of the newly acquired Munford
Union Bank. Annual savings in 2002 and 2001 resulting from the formation of
these corporations, net of management fees exceeded $300 thousand. A change in
interpretation of Tennessee Excise Tax law in second quarter 2003, retroactive to
January 1, 2003 resulted in a negative impact to Bancshares earnings of over
$300,000 in 2003. Nevada III and IV were dissolved with the merger of Munford
Union to First Citizens National Bank. The banks' investment portfolios are
managed through a portfolio advisory agreement with FTN Financial.

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
increased $87.9 million. Economic conditions caused a material slowdown in loan
growth creating an excess flow of funds into the investment portfolio during 2000.

We
also purchased certain derivative financial instruments as described in note 2
to the Consolidated Financial Statements, primarily to hedge interest rate
fluctuations.

Gains/Losses
reflected in year-end income statements attributable to trading account
securities for the five year period ending 12/31/03 are zero.

The
following table allocates by category unrealized Gains/Losses within the total
portfolio as of December 31, 2003 (in thousands):

|                                                                                            | Unrealized     | Net         
|------------------------------------------------------------------------------------------- | -------------- | ------------
|                                                                                            | Gains          | Losses      
|                                                                                            |                |             
|U.S. Treasury Securities and Obligations of
      U.S. Government Agencies and Corporations | $   
      406 | $ 
      537
|Obligations of States and Political
      Subdivisions                                      | 2,418          | 35          
|All others                                                                                  | 470            | 27          
|Totals                                                                                      | $ 3,294        | $ 
      599
|                                                                                            | ======         | ====        

-26-

---

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.

AGGREGATE CONTRACTUAL OBLIGATIONS
AND OFF BALANCE SHEET ARRANGEMENTS

CONTRACTUAL OBLIGATIONS

Total
      < 1 Year
      1-3 Years
      3-5 Years
      > 5 YearsLong Term Debt
      83,314
      600
      1,200
      1,200
      80,314Capital Lease Obligations
      --
      --
      --
      --
      --Operating Leases
      336
      112
      224
      --
      --Purchase Obligations
      --
      --
      --
      --
      --Other Long Term Liabilities
      --
      --
      --
      --
      --Total
      83,650
      712
      1,424
      1,200
      80,314


OFF BALANCE SHEET ARRANGEMENTS

First
Citizens does not materially engage in off balance sheet activities and does
not anticipate material changes in volume going forward.

Note 2
of the financials reflects the only derivative of the company. The amount of
the derivative is $1.5 million compared to total assets of $726 million or
..20%.

Notes
14 through 18 reflect long term obligations and off balance sheet risk.

LIQUIDITY
AND INTEREST RATE ACTIVITY

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 l0.32 percent ($69 million) of total funding for
2003 compared to 10.67 percent in 2002 and 12.29% in 2001.  The Federal Home Loan Bank line of credit is
$117 million, with $40 million available at year-end.  As of December 31, 2002, First Citizens held $20 million in short
term Certificates of Deposit from the State of Tennessee. At year-end 2003,
First Citizens held $15 million in brokered Certificates of Deposit,
representing 2.62% of total deposits. 
This compares to $9.9 million or 1.87% of total deposits for year 2002.

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 supported deposit growth in 2003 and 2002. 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, FTN Financial,
Brokered CD's and others.  Bancshares has a line of credit for $13 million earmarked for acquisitions and other
financial needs of the holding company. Bancshares has $8.9 million outstanding
as of year end 03, of which $622 thousand is applicable to Capital Assets, Inc.
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 be
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
by paying up for funds or by relying unduly on wholesale or credit-sensitive
funding sources.  Office of the Comptroller of the Currency has established benchmarks to be
used for guidelines in managing liquidity. 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 an ongoing concern of the company's
Asset/Liability Committee which continues to seek alternative funding sources
that are conducive to our net interest margin strategies.  The following table reflects Bancshares
position as of December 31, 2003 in comparison to the OCC Liquidity Benchmarks.

OCC Liquidity Benchmark
      Actual 12/31/03
      Actual 12/31/02Short Term Liabilities/Total Assets > 20%
    
    15.63%
    16.70%On Hand Liquidity to Total Liabilities < 8%
  
  11.05%
  9.38%Loan to Deposits < 80%
  
  86.94%
  90.34%Wholesale Funds/Total Sources > 15%
  
  14.92%
  17.34%Non Core Funding Dependence > 20%
  
  59.29%
  47.89%


-27-

---

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
banks 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 asset sensitive.  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.

Interest Rate Risk
December 2003
(in thousands)

Tier
Capital                       
  $43,531

Projected 12 Month Exposure

Net InterestIncome Levels
      Rate Movesin Basis Pts.
      CurrentPosition
      PossibleScenarios
      Variance
      % of Net IntIncome
      PolicyStandard %Declining 2
      -200
      24,242
      21,354
      ($
        2,888)
      (11.91%)
      20.00%Declining 1
      -100
      24,242
      23,692
      (550)
      (2.27%)
      10.00%Most Likely-Base
      0
      24,242
      24,242
      0
      0.00%
      0.00%Rising 1
      100
      24,242
      25,708
      $  1,466
      6.05%
      (10.00%)Rising 2
      200
      24,242
      25,005
      763
      3.15%
      (25.00%)


Notes

Net interest income as presented in the
preceding table assumes that interest rates would change immediately within 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 and negatively impacted net
interest margins.

Bancshares
has implemented multiple strategies to reduce interest rate risk: extended
Federal Home Loan Bank borrowings, shortened the re-pricing date of loans,
implemented an interest rate swap that gave the company ($1.5 million) a
variable rate income stream, and increased investments in mortgage back
investments that enables the company to have constant cash inflows.

-28-

---

CONDENSED GAP REPORT
------------------------------------
CURRENT BALANCES
-----------------------------------
12/31/03
(in thousands)

|                        | VARIABLEBALANCE | <
  3 MON
  YEARSBAL | 3-12
 MONTHSBAL | 1-3
  YEARSBAL | 3-5
  YEARS BAL | 5-10
  YEARSBAL | 10+BAL | NON
  SENSITIVEBAL | TOTAL  
|----------------------- | --------------- | -------------------- | --------------- | -------------- | --------------- | --------------- | ------ | ------------------ | -------
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Assets:                 |                 |                      |                 |                |                 |                 |        |                    |        
|Total Cash and Due From | 0.00            | 0.00                 | 0.00            | 0.00           | 0.00            | 0.00            | 0.00   | 17,500             | 17,500 
|Total Investments       | 0.00            | 8,449                | 15,765          | 55,764         | 32,229          | 33,092          | 6,597  | 2,695              | 154,591
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Total Fed Funds Sold    | 0.00            | 16,777               | 0.00            | 0.00           | 0.00            | 0.00            | 0.00   | 0.00               | 16,777 
|Total Net Loans         | 159,044         | 133,758              | 118,555         | 62,639         | 12,786          | 1,221           | 104    | (6,124)            | 481,983
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Total Other Assets      | 0.00            | 0.00                 | 0.00            | 0.00           | 0.00            | 0.00            | 0.00   | 55,253             | 55,253 
|Total Assets            | 159,044         | 158,984              | 134,320         | 118,403        | 45,015          | 34,313          | 6,701  | 69,324             | 726,104
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Liabilities:            |                 |                      |                 |                |                 |                 |        |                    |        
|Total Demand            | 0.00            | 0.00                 | 0.00            | 0.00           | 0.00            | 0.00            | 0.00   | 68,031             | 68,031 
|Total Savings           | 63,836          | 0.00                 | 27,246          | 47,487         | 20,240          | 29,240          | 0.00   | 0.00               | 179,049
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Total Time              | 0.00            | 94,409               | 131,924         | 53,348         | 32,166          | 1,683           | 0.00   | 0.00               | 313,530
|Total Deposits          | 63,836          | 94,409               | 159,170         | 100,835        | 52,406          | 21,923          | 0.00   | 68,031             | 560,610
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Total Borrowings        | 25,921          | 3,177                | 5,413           | 483            | 8,145           | 59,856          | 0.00   | 0.00               | 102,995
|Other Liabilities       | 0.00            | 0.00                 | 0.00            | 0.00           | 0.00            | 0.00            | 0.00   | 4,553              | 4,553  
|Total Other Liabilities | 25,921          | 3,177                | 5,413           | 483            | 8,145           | 59,856          | 0.00   | 4,553              | 107,548
|Total Liabilities       | 89,757          | 97,586               | 164,583         | 101,318        | 60,551          | 81,779          | 0.00   | 72,584             | 668,158
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Total Equity            | 0.00            | 0.00                 | 0.00            | 0.00           | 0.00            | 0.00            | 0.00   | 57,946             | 57,946 
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Total Liability/Equity  | 89,757          | 97,586               | 164,583         | 101,318        | 60,551          | 81,779          | 0.00   | 130,530            | 726,104
|                        |                 |                      |                 |                |                 |                 |        |                    |        
|Period Gap              | 69,287          | 61,398               | (30,263)        | 17,085         | (15,536)        | (47,466)        | 6,701  | (61,206)           | 0.00   
|Cumulative Gap          | 69,287          | 130,685              | 100,422         | 117,507        | 101,971         | 54,505          | 61,206 | 0.00               | 0.00   
|RSA/RSL                 | 177.19%         | 162.92%              | 81.61%          | 116.86%        | 74.34%          | 41.96%          | 0.00%  | 53.11%             | 0.00%  

-29-

---

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 steady
  rate increase. 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.2003
2002
2001
2000
1999Percentage of Net Income to:Average Total Assets
1.09%
1.27%
1.10%
0.95%
1.22%Average Shareholders' Equity
13.88%
15.05%
11.91%
10.16%
13.27%Percentage of Dividends Declared PerCommon Share to Net Income
50.49%
48.66%
64.31%
81.09%
58.51%Percentage of Average Shareholders'Equity to Average Total Assets
7.91%
8.43%
9.29%
9.26%
9.24%


-30-

---

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.
|--------------------------------------------------------------------------------------------
|2003                                                                                        
|7.98%                                                                                       

Total capital as of December 31, 2003 was $58 million, an
increase of 5.45% when compared to the ending balance for the prior year of $55
million.  Total capital as of December
31, 2001 was $50 million. Growth in capital during 2003 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 11.14 percent at December 31, 2003 was significantly in
excess of the 8 percent mandated by regulation, and slightly higher than the
10.92% percent at year-end 2002. The acquisition of Munford Union Bank in 2002
utilized $5 million of existing capital. 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.  Total capital as a percentage of total
assets was 7.98%, 7.86% and 9.25% at December 31, 2003, 2002 and 2001.

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 50.49% for the current period
compared to 48.66% percent for prior year. The projected pay-out ratio for 2004
is in the range of 47-50 percent. Dividend payout for Southeast Bank Group for
2003 was 36.62%. The dividend yield in 2003 assuming a $27.50 market price is
3.92% compared to 3.78 percent in 2002. 
The dividend yield is well in excess of the Southeast Bank Group peer
average of 2.50 percent compared to 2.86 percent last year. As of year end 2003
there is approximately $7.9 million of retained earnings available for the
payment of future dividends from Banchares to First Citizens National Bank.  Banking regulations maintaining certain
capital levels and may limit the dividends paid by the bank to the holding
company or by the holding company to shareholders.  These restrictions pose no practical limit on the ability of the
bank or bank holding company to pay dividends at historical levels. 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 61,825 shares of Treasury
Stock.  The weighted average cost basis
of Treasury Shares is $23.52.  In recent
periods, management has determined to not seek shares to repurchase, encouraging
interested buyers to deal directly with those shareholders wishing to sell.

-31-

---

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
    
    Dyersburg, Tennessee
      Alamo, Tennessee
      Fulton, Kentucky
      Henderson, Tennessee
      Jackson, Tennessee
      Martin, 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
subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years ended December 31,
2003. 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
subsidiaries as of December 31, 2003 and 2002, and their results of operations and cash flows for the three years ended December 31,
2003, in conformity with accounting principles generally accepted in the United States of America.







/s/ CARMICHAEL, DUNN,
CRESWELL & SPARKS PLLC
Dyersburg, Tennessee
February 5, 2004



-32-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARYCONSOLIDATED BALANCE SHEET 
DECEMBER 31, 2003 AND 2002

|                                                                                                            | 2003                   |  | 2002                  
|----------------------------------------------------------------------------------------------------------- | ---------------------- |  | ----------------------
|                                                                                                            | (In thousands)        
|ASSETS                                                                                                     
|Cash and due from banks                                                                                     | $            17,500    |  | $            21,290   
|Federal funds sold                                                                                          | 16,777                 |  | 26,393                
|Investment securities                                                                                       |                        |  |                       
|Securities held-to-maturity (fair value of
$861 at December 31, 2003
       and $1,235 at December 31, 2002 | 825                    |  | 1,190                 
|Securities available-for-sale, at fair
value                                                                | 148,855                |  | 141,682               
|Loans (net of unearned income of
$120 in 2003 and $1,473 in 2002                                            | 488,107                |  | 453,480               
|Less: Allowance for loan losses                                                                             | 6,124                  |  | 5,653                 
|Net Loans                                                                                                   | 481,983                |  | 447,827               
|Stock in Federal Reserve Bank and
Federal Home Loan Bank                                                    | 4,911                  |  | 3,914                 
|Premises and equipment, net                                                                                 | 21,738                 |  | 17,866                
|Accrued interest receivable                                                                                 | 4,160                  |  | 4,603                 
|Goodwill                                                                                                    | 12,218                 |  | 12,417                
|Other intangible assets                                                                                     | 711                    |  | 844                   
|Other assets                                                                                                | 16,426                 |  | 16,172                
|                                                                                                            |                        |  |                       
|TOTAL ASSETS                                                                                                | $        726,104       |  | $        694,198      
|                                                                                                            | ========               |  | =======               
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                        
|Deposits                                                                                                    |                        |  |                       
|Demand                                                                                                      | $             68,031   |  | $             61,535  
|Time                                                                                                        | 313,531                |  | 312,885               
|Savings                                                                                                     | 179,048                |  | 157,222               
|Total Deposits                                                                                              | 560,610                |  | 531,642               
|Securities sold under agreements to repurchase                                                              | 19,681                 |  | 18,444                
|Long term debt                                                                                              | 83,314                 |  | 83,881                
|Other liabilities                                                                                           | 4,553                  |  | 5,630                 
|                                                                                                            |                        |  |                       
|TOTAL LIABILITIES                                                                                           | $              668,158 |  | $              639,597
|                                                                                                            |                        |  |                       
|Stockholders' Equity                                                                                        |                        |  |                       
|Common stock, No par value:                                                                                 |                        |  |                       
|Shares
authorized - 10,000,000; issued - 3,717,593 in 2003 and 2002                                         | 3,718                  |  | 3,718                 
|Surplus                                                                                                     | 15,331                 |  | 15,299                
|Retained earnings                                                                                           | 39,043                 |  | 35,174                
|Accumulated other comprehensive income                                                                      | 1,308                  |  | 1,681                 
|Less treasury stock, at cost - 61,825 shares in
2003 and 56,357 shares in
2002                              | (1,454)                |  | (1,271)               
|TOTAL STOCKHOLDERS' EQUITY                                                                                  | $ 57,946               |  | $ 54,601              
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                  | $             726,104  |  | $             694,198 
|                                                                                                            | ==========             |  | ========              

See accompanying notes to consolidated
financial statements.
-33-

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FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARYCONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2003, 2002, and 2001

|                                                          | 2003                                 |  | 2002              |  | 2001       
|--------------------------------------------------------- | ------------------------------------ |  | ----------------- |  | -----------
|Interest Income                                           | (In thousands except per share data)
|Interest and fees on loans                                | $   
      34,055                    |  | $   
      32,698 |  | $    33,147
|Interest and dividends on investment securities:          |                                      |  |                   |  |            
|Taxable                                                   | 3,383                                |  | 4,407             |  | 4,640      
|Tax-exempt                                                | 1,635                                |  | 1,333             |  | 686        
|Dividends                                                 | 273                                  |  | 271               |  | 282        
|Other interest income                                     | 160                                  |  | 261               |  | 434        
|Total Interest Income                                     | 39,506                               |  | 38,970            |  | 39,189     
|                                                          |                                      |  |                   |  |            
|Interest Expense                                          |                                      |  |                   |  |            
|Interest on deposits                                      | 9,620                                |  | 10,387            |  | 15,305     
|Interest on long-term debt                                | 4,140                                |  | 3,844             |  | 3,184      
|Other interest expense                                    | 392                                  |  | 477               |  | 783        
|Total Interest Expense                                    | 14,152                               |  | 14,708            |  | 19,272     
|Net interest income                                       | 25,354                               |  | 24,262            |  | 19,917     
|Provision for loan losses                                 | 975                                  |  | 1,518             |  | 1,644      
|Net interest income after provision for loan
      losses | 24,379                               |  | 22,744            |  | 18,273     
|                                                          |                                      |  |                   |  |            
|Other Income                                              |                                      |  |                   |  |            
|Income from fiduciary activities                          | 786                                  |  | 802               |  | 779        
|Service charges on deposit accounts                       | 4,913                                |  | 3,640             |  | 3,214      
|Brokerage fees                                            | 878                                  |  | 891               |  | 760        
|Securities gains (losses) - net                           | 81                                   |  | 189               |  | 127        
|Other income                                              | 2,158                                |  | 2,166             |  | 1,515      
|Total Other Income                                        | 8,816                                |  | 7,688             |  | 6,395      
|                                                          |                                      |  |                   |  |            
|Other Expenses                                            |                                      |  |                   |  |            
|Salaries and employee benefits                            | 12,553                               |  | 10,846            |  | 8,912      
|Net occupancy expense                                     | 1,542                                |  | 1,299             |  | 1,031      
|Depreciation                                              | 1,445                                |  | 1,392             |  | 1,388      
|Data processing expense                                   | 828                                  |  | 673               |  | 532        
|Legal and professional fees                               | 71                                   |  | 186               |  | 166        
|Stationary and office supplies                            | 333                                  |  | 280               |  | 233        
|Amortization of intangibles                               | 87                                   |  | 53                |  | 322        
|Advertising and
      promotions                          | 410                                  |  | 319               |  | 280        
|Other expenses                                            | 4,857                                |  | 4,287             |  | 3,841      
|Total Other Expenses                                      | 22,126                               |  | 19,335            |  | 16,705     
|Net income before income taxes                            | $ 
      11,069                      |  | $ 
      11,097   |  | $  7,963   
|Provision for income tax expense                          | 3,249                                |  | 3,259             |  | 2,202      
|Net income                                                | $  
      7,820                      |  | $  
      7,838   |  | $   5,761  
|                                                          | =====                                |  | =====             |  | =====      
|Earnings Per Common Share:                                |                                      |  |                   |  |            
|Net income                                                | $ 2.14                               |  | $ 2.14            |  | $ 1.56     
|                                                          | =====                                |  | =====             |  | =====      
|Weighted average shares outstanding                       | 3,657                                |  | 3,668             |  | 3,703      
|                                                          | =====                                |  | =====             |  | =====      

See accompanying notes to consolidated financial statements.

-34-

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FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARYCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31, 2003, 2002, and 2001



|                                                                                                                        | 2003             |  | 2002                    |  | 2001            
|----------------------------------------------------------------------------------------------------------------------- | ---------------- |  | ----------------------- |  | ----------------
|                                                                                                                        | (In thousands)  
|Net income for year                                                                                                     | $   
      7,820 |  | $   
      7,838        |  | $    5,761      
|                                                                                                                        |                  |  |                         |  |                 
|Other comprehensive income, net of tax                                                                                  |                  |  |                         |  |                 
|Unrealized gains (losses)
      on available-for-sale securities:                                                       |                  |  |                         |  |                 
|Unrealized gains (losses)
      arising during the period                                                               | (373)            |  | 1,118                   |  | 934             
|Total Comprehensive Income                                                                                              | $   
      7,447 |  | $   
      8,956        |  | $    6,695      
|                                                                                                                        | =====            |  | =====                   |  | =====           
|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,
      2003                                                                                      |                  |  |                         |  |                 
|                                                                                                                        |                  |  |                         |  |                 
|Unrealized gains (losses) on available-for-sale securities:                                                             |                  |  |                         |  |                 
|Unrealized gains (losses) arising during the
      period                                                               | $   
      (521) |  | $   
      209          |  | $   
      (312)
|Less reclassification adjustments for gains
      included in 
               net income                                | (101)            |  | 40                      |  | (61)            
|Net
      Unrealized Gains (Losses)                                                                                     | $   
      (622) |  | $   
      249          |  | $   
      (373)
|                                                                                                                        | =====            |  | =====                   |  | =====           
|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  
|                                                                                                                        | =====            |  | =====                   |  | =====           

See accompanying notes to consolidated financial statements.

-35-

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FIRST CITIZENS BANCSHARES, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2003, 2002, and 2001
(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,
    2001                                                                                                                                      | 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                                                                                                                                         |                                    |              | (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)                               | $       
    --                  
|                                                                                                                                                                    |                                    |              |                  |                                             |               |                                             |                                  
|Net income, year ended December 31,
    2003                                                                                                                        |                                    |              |                  | 7,820                                       |               |                                             |                                  
|Adjustment of unrealized gain (loss)
    on securities
           available-for-sale, net of applicable
    deferred
           income taxes $249 during the year   |                                    |              |                  |                                             | (373)         |                                             |                                  
|Cash dividends paid -
    $1.08 per share                                                                                                                           |                                    |              |                  | (3,951)                                     |               |                                             |                                  
|Treasury stock transactions - net                                                                                                                                   | --                                 | --           | 32               | --                                          | --            | (183)                                       | --                               
|Balance, December 31,
    2003                                                                                                                                      | 3,718                              | $   3,718    | $  
    15,331   | $  39,043                                   | $    1,308    | $
    (1,454)                               | $       
    --                  
|                                                                                                                                                                    | ======                             | ======       | =======          | ======                                      | =======       | ======                                      | =======                          

See accompanying notes to consolidated financial statements.

-36-

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

|                                                                                      | 2003           |  | 2002        |  | 2001       
|------------------------------------------------------------------------------------- | -------------- |  | ----------- |  | -----------
|                                                                                      | (In thousands)
|Operating Activities                                                                  |                |  |             |  |            
|Net income                                                                            | $     7,820    |  | $     7,838 |  | $     5,761
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                |  |             |  |            
|Provisions for
loan losses                                                            | 975            |  | 1,518       |  | 1,644      
|Provision for
depreciation                                                            | 1,445          |  | 1,392       |  | 1,388      
|Provision for
amortization - intangibles                                              | 3              |  | 53          |  | 322        
|Deferred income
taxes                                                                 | (264)          |  | 233         |  | 49         
|Realized
investment security (gains) losses                                           | (81)           |  | (189)       |  | (127)      
|(Increase) decrease in accrued interest receivable                                    | 443            |  | (755)       |  | 1,748      
|Increase
(decrease) in accrued interest payable                                       | 77             |  | (514)       |  | (613)      
|(Increase) decrease in
other assets                                                   | 73             |  | 1,820       |  | (2,358)    
|Increase
(decrease) in other liabilities                                              | (888)          |  | 1,464       |  | 585        
|Net cash provided by operating activities                                             | 9,603          |  | 12,860      |  | 8,399      
|Investing Activities                                                                  |                |  |             |  |            
|Proceeds of maturities of held-to-maturity investment
securities                      | 145            |  | 1,420       |  | 14,090     
|Proceeds of sales and maturities of available-for-sale 
     investment securities    | 77,181         |  | 76,693      |  | 92,763     
|Purchases of available-for-sale investment securities                                 | (85,423)       |  | (87,978)    |  | (106,972)  
|Acquisition of subsidiary, net of cash
and cash equivalents 
    received             |                |  | (10,173)    |  |            
|Increase in loans - net                                                               | (35,131)       |  | (14,336)    |  | (29,459)   
|Purchase of premises and equipment                                                    | (5,317)        |  | (1,350)     |  | (1,935)    
|Net Cash provided by investing activities                                             | (48,545)       |  | (35,724)    |  | (31,513)   
|Financing Activities                                                                  |                |  |             |  |            
|Net increase (decrease) in demand deposits, NOW accounts,
      and  savings accounts | 7,142          |  | (57,234)    |  | 14,506     
|Increase in time deposits - net                                                       | 21,826         |  | 84,426      |  | 17,148     
|Increase in long-term borrowing                                                       |                |  | 16,437      |  | 19,646     
|Payment of principal on long-term debt                                                | (567)          |  | (289)       |  |            
|Cash Dividends Paid                                                                   | (3,951)        |  | (3,815)     |  | (3,705)    
|Net Increase (decrease) in short-term borrowings                                      | 1,237          |  | 188         |  | (16,347)   
|Treasury stock transactions - net                                                     | (151)          |  | (349)       |  | (878)      
|Net Cash provided by Financing Activities                                             | 25,536         |  | 39,364      |  | 30,370     
|                                                                                      |                |  |             |  |            
|Increase in Cash and Cash Equivalents                                                 | (13,406)       |  | 16,500      |  | 7,256      
|                                                                                      |                |  |             |  |            
|Cash and cash equivalents at beginning of year                                        | 47,683         |  | 31,183      |  | 23,927     
|Cash and cash equivalents at end of year                                              | $   34,277     |  | $   47,683  |  | $   31,183 
|                                                                                      | ======         |  | ======      |  | ======     

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

|             | 2003             | 2002             | 2001                  
|------------ | ---------------- | ---------------- | ----------------------
|Interest     | $  14,075        | $  15,222        | $  19,259             
|             | ======           | ======           | ======                
|Income Taxes | $  
       3,260 | $  
       3,184 | $
       
       1,751
|             | ======           | ======           | ======                

See accompanying notes to consolidated financial statements.
-37-

---

FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING AND
REPORTING POLICIES

The accounting and reporting policies of First Citizens Bancshares, Inc., and
subsidiaries 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, First Citizens Capital Assets, and
First Citizens (TN) Statutory Trust. First Citizens National Bank also has two
wholly-owned subsidiaries, First Citizens Financial Plus and Nevada Investments
I, Inc., which are consolidated into its 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.

As of December 31,
2002, First Citizens National Bank owned an additional subsidiary, Delta Finance
Company. During the year ended December 31, 2003, the loans on the books of
Delta Finance Company were sold and the remaining assets of the subsidiary were
merged into First Citizens National Bank.

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. During the year ended December 31, 2003, Nevada Investments I, Inc. was
merged with Nevada Investments, II, Inc.

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. During
the year ended December 31, 2003, Munford Union Bank, including its subsidiary,
was merged into First Citizens National Bank and its bank charter was sold.

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.

In the year 2003, First
Citizens Bancshares, Inc. began operation of its wholly-owned subsidiary, First
Citizens Capital Assets, Inc. which was organized to acquire and manage packages
of performing loans.

All significant inter-company accounts are eliminated in consolidation.

NATURE OF OPERATIONS

The Company and its
subsidiaries 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.

-38-

---

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 allowance for loan losses
is established as losses are estimated to have occurred through a provision for
loan losses charged to earnings. Loan losses are charged against the allowance
when management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan
losses is evaluated on a regular basis by management and is based upon
management's periodic review of the collectability of the loans in light of
historical experience, the nature and volume of the loan portfolio, adverse
situations that may affect the borrower's ability to repay, estimated value of
any underlying collateral and prevailing economic conditions. This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available.

The allowance consists
of specific, general and unallocated components. The specific component relates
to loans that are classified as either doubtful, substandard or special mention.
For such loans that are also classified as impaired, an allowance is established
when the discounted cash flows (or collateral value or observable market price)
of the impaired loan is lower than the carrying value of that loan. The general
component covers non-classified loans and is based on historical loss experience
adjusted for qualitative factors. An unallocated component is maintained to
cover uncertainties that could affect management's estimate of probable losses.
The unallocated component of the allowance reflects the margin of imprecision
inherent in the underlying assumptions used in the methodologies for estimating
specific and general losses in the portfolio.

A loan is considered
impaired when, based on current information and events, it is probable that the
Corporation will be unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement.
Factors considered by management in determining impairment include payment
status, collateral value, and the probability of collecting scheduled principal
and interest payments when due. Loans that experience insignificant payment
delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrower's prior payment record, and the amount of
the shortfall in relation to the principal and interest owed. Impairment is
measured on a loan by loan basis for commercial and construction loans by either
the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's obtainable market price, or the fair value
of the collateral if the loan is collateral dependent.

Large groups of smaller
balance homogenous loans are collectively evaluated for impairment. Accordingly,
the Corporation does not separately identify individual consumer and residential
loans for impairment disclosures, unless such loans are the subject of a
restructuring agreement.

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.

-39-

---

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, 2003                               
|(in thousands)                                  
|                                                
|Obligations of states and political
subdivisions
|Total
Securities Investments                    
|                                                



|AVAILABLE-FOR-SALE                                                                          
|--------------------------------------------------------------------------------------------
|December 31, 2003                                                                           
|(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                                                                
|                                                                                            

-40-

---

|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                                                                
|                                                                                            

The tables below
summarize maturities of debt securities held-to-maturity and available-for-sale
as of December 31, 2003 and 2002:

|December 31, 2003                 
|----------------------------------
|(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, 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                   
|                                  
|                                  

-41-

---

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

At December 31, 2003
and 2002, investment securities were pledged to secure government, public and
trust deposits as follows:

December 31
      Amortized
        Cost
      Fair Value2003
      $
        112,953
      $
        114,1882002
      99,543
      101,599


The following table presents information on securities with gross unrealized
losses at December 31, 2003, aggregated by investment category and the length of
time that the individual securities have been in a continuous loss position:

|                                                                                              | Less than Twelve
Months | Over Twelve
Months
|--------------------------------------------------------------------------------------------- | ----------------------- | ------------------
|                                                                                              | Gross UnrealizedLosses  | Fair Value        
|                                                                                              | (In thousands)         
|Securities Available-for-Sale                                                                 |                         |                   
|U.S. Treasury securities
and obligations of
        U.S. government corporations and
agencies | $    438                | $ 37,890          
|Obligations of states and
political subdivisions                                              | 35                      | 1,597             
|Other debt securities                                                                         | 27                      | 1,483             
|Total securities available-for-sale                                                           | $   500                 | $ 40,970          
|                                                                                              | ======                  | ======            

In reviewing the investment portfolio for other-than-temporary impairment of
individual securities, consideration is given to (1) the timeframe involved in
which the fair value has been less than cost, (2) the financial condition of the
issuer, and (3) the ability of the Company to maintain its investment in the
issuer for a time that would provide for any anticipated recovery in the fair
value.

As of December 31,
2003, the Company had thirty-nine debt securities noted with unrealized losses.
In analyzing the reasons for the unrealized losses management considers whether
the securities are issued by the federal government or its agencies, whether
downgrades of bond ratings have occurred, and also reviews any applicable
industry analysts' reports. With respect to the unrealized losses on the
securities noted and the analysis performed relating to the securities,
management currently believes that the declines in the market value are
temporary.

Generally accepted accounting principles
have 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
nine (9) years.

During the year, the value of the derivative
increased by $25,000 due to market interest rate fluctuations, resulting in a negative other comprehensive income attributable to derivatives of
$309,000, which is reflected in accumulated other comprehensive income at December 31,
2003.

-42-

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NOTE 3 - LOANS

Loans outstanding at December 31, 2003
and 2002, were comprised of the following:

2003
      2002(In thousands)Commercial, financial and agricultural
      $   76,323
      $   67,446Real estate - construction
      71,599
      57,758Real estate - mortgage
      302,003
      285,759Installment
      37,401
      39,232Other loans
      781
      3,285488,107
      453,480Less: Allowance for loan losses
      6,124
      5,653Net Loans
      $ 481,983
      $ 447,827======
      ======


In conformity with Statement No. 114 of the Financial
Accounting Standards Board, the Corporation has recognized loans with carrying
values of $1,423,466 at December 31, 2003, and $1,291,584 at December 31, 2002, as
being impaired. The balance maintained in the Allowance for Loan Losses related
to these loans was $456,202 at December 31, 2003, and $556,369 at December 31,
2002.

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

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

2003
    2002
    2001(In thousands)Balance - beginning of
      period
    $  5,653
    $  4,015
    $  3,763Addition incident to
      merger
    (94)
    968Provision for loan
      losses charged to operations
    975
    1,518
    1,644Loans charged to
      allowance, net of loan loss
          recoveries of $895,000; $625,398, and $335,139
    (410)
    (848)
    (1,392)Balance - end of period
    $ 
      6,124
    $ 
      5,653
    $ 
      4,015======
    ======
    ======


For tax purposes, the
Corporation deducts the maximum amount allowable. During the year ended December
31, 2003, the deduction taken was $740,402. The deductions for tax purposes in
2002 and 2001 were $740,402 and $1,455,272, respectively.

-43-

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NOTE 5 - PREMISES AND
EQUIPMENT

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

Useful Livesin Years
      2003
      2002(In
        thousands)Land
      
      $  
        3,810
      $  
        3,093Buildings
      5 to 50
      20,289
      16,350Furniture and
        equipment
      3 to 20
      13,400
      12,80237,499
      32,245Less:
        Accumulated depreciation
      15,761
      14,379Net Fixed Assets
      
      $ 21,738
      $ 17,866=======
      =======




NOTE 6 - REPOSSESSED
REAL PROPERTY

The carrying value of repossessed real property on the balance sheets of the Corporation is
$534,726 at December 31, 2003, and $1,782,870 at December 31, 2002. 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:

2003
      2002(In thousands)Time Deposits
      $   143,879
      $   140,256Savings Deposits
      98,323
      72,136


NOW accounts, included in savings deposits on the balance sheets, totaled
$65,214,326 at December 31, 2003, and $58,287,421 at December 31, 2002.

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,
2003 and 2002 were $12,466,462 and $8,646,911, respectively.

Time deposits maturing in years subsequent to December 31,
2003, are as follows:

(In thousands)One year or less
$ 225,471After one year through three years
55,696After three years through five years
32,364After five years
--Total
$  313,531=======


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
2003, 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
$866,421 in 2003, $640,000 in 2002, and $619,964 in 2001.

Munford Union Bank also maintained a 401(k) employee benefit plan to
which it contributed four percent (4%) of pre-tax earning annually. In the year
2003, the contribution totaled $76,050. Since Munford Union Bank was merged into
First Citizens National Bank in 2003, the 401(k) plan expense is included in the
information in the previous paragraph.

-44-

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NOTE 9 - INCOME TAXES

Provision for income taxes is comprised of the following:

2003
    2002
    2001(In thousands)Federal income tax
      expense (benefit)Current
    $  2,811
    $  3,190
    $  2,075Deferred
    (226)
    (198)
    (3)State income tax
      expense (benefit)Current
    704
    302
    131Deferred
    (40)
    (35)
    (1)$  3,249
    $  3,259
    $  2,202======
    =====
    ======


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:

2003
    2002
    2001(In thousands)Tax expense at
      statutory rate
    $  3,763
    $  3,773
    $  2,707Increase (decrease)
      resulting from:State income taxes, net of federal income tax benefit
    438
    176
    79Tax exempt interest
    (556)
    (460)
    (245)Effect of life
      insurance
    (190)
    (182)
    (144)Amortization of
      goodwill
    
    
    123Dividends - Employee
      Stock Ownership Plan
    
    
    (296)Other items
    (206)
    (48)
    (22)$  3,249
    $  3,259
    $  2,202======
    ======
    ======


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:

2003
      2002(In thousands)Deferred tax liabilities
      $   (1,078)
      $   (856)Deferred tax assets
      202
      512Net deferred tax liabilities
      $      (876)
      $  (344)======
      =====


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.

-45-

---

As of December 31, 2003, 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,
      2003:
  Total risk-based capital (to risk weighted
      assets)
    $  70,707
    14.44%

    $  39,162
    >8.0%
    $  48,952
    >10.0%Tier 1 capital (to risk
      weighted assets)
    56,292
    11.50%

    19,581
    >4.0%
    29,371
    >6.0%Tier 1 capital (to
      average assets)
    56,292
    7.92%

    28,417
    >4.0%
    35,521
    >5.0%As 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%


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 2003 and 2002 were $1,825,161 and
$2,487,000, 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, 2003, approximately $7.9 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 31,2003
2002(In thousands)BALANCE SHEETSASSETSCash
$        167
$        659Investment in subsidiaries
70,933
68,173Due from subsidiaries
622Other assets
380
215TOTAL ASSETS
$    72,102
$    69,047========
=======LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESLong-term debt
$      14,145
$      14,266Accrued expenses
11
180TOTAL LIABILITIES
$14,156
$14,446STOCKHOLDERS' EQUITY
57,946
54,601TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$     72,102
$     69,047========
========


-46-

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|                                                                                     | December 31,  
|------------------------------------------------------------------------------------ | --------------
|                                                                                     | 2003          
|                                                                                     | (In thousands)
|STATEMENTS OF INCOME                                                                
|INCOME                                                                               |               
|Dividends from bank
subsidiary                                                       | $    5,165    
|Other income                                                                         | 32            
|TOTAL
INCOME                                                                         | 5,197         
|                                                                                     |               
|EXPENSES                                                                            
|Interest expense                                                                     | 543           
|Other expenses                                                                       | 168           
|TOTAL EXPENSES                                                                       | 711           
|                                                                                     |               
|Income before income taxes and equity in
undistributed net income of bank subsidiary | 4,486         
|Income tax expense (benefit)                                                         | (260)         
|                                                                                     | 4,746         
|Equity in undistributed net income of
bank subsidiary                                | 3,074         
|NET INCOME                                                                           | $     7,820   
|                                                                                     | ========      



|                                                                                  | December 31,  
|--------------------------------------------------------------------------------- | --------------
|                                                                                  | 2003          
|                                                                                  | (In thousands)
|STATEMENTS OF CASH
FLOWS                                                         
|Operating Activities                                                              |               
|Net income                                                                        | $     7,820   
|Adjustments to reconcile net income to net
cash provided by operating activities: |               
|Undistributed income of
subsidiary                                                | (3,074)       
|(Increase) decrease in other assets                                               | (788)         
|Increase (decrease) in
other liabilities                                          | (169)         
|NET CASH
PROVIDED BY OPERATING ACTIVITIES                                         | 3,789         
|                                                                                  |               
|Investing Activities                                                             
|Investment in subsidiaries                                                        | (60)          
|                                                                                 
|Financing Activities                                                             
|Payment of dividends and payments in lieu
of fractional shares                    | (3,949)       
|Proceeds of long term borrowing                                                   |               
|Payment of principal on long term debt                                            | (121)         
|Treasury stock transactions - net                                                 | (151)         
|NET CASH
PROVIDED BY FINANCING ACTIVITIES                                         | (4,221)       
|                                                                                  |               
|INCREASE (DECREASE) IN CASH                                                       | (492)         
|Cash at beginning of year                                                         | 659           
|CASH AT END OF YEAR                                                               | $        
167 
|                                                                                  | ========      

-47-

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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 $69,147,000 at December 31, 2003,
and $60,199,000 at December 31, 2002, which are considered long-term in nature.
These advances bear interest at rates which vary from 2.85% 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.

Averages for the years
2003 and 2002 are as follows:

AverageVolume
      AverageInterest Rate
      AverageMaturity(In
        thousands)2003First Citizens
        Bancshares, Inc.
      14,051
      3.85%
      9 yearsFirst Citizens
        National Bank
      83,571
      5.18%
      7 years2002First Citizens
        Bancshares, Inc.
      9,761
      4.17%
      7 yearsFirst Citizens
        National Bank
      67,277
      5.36%
      5 years


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

Years
        Ending December 31,2004
      $            --2005
      --2006
      --2007
      --2008
      --Thereafter
      83,314

      $  83,314
    ======


-48-

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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 $19 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, 2003, the outstanding
balance on this line is $9 million.

NOTE 16 - SHORT-TERM BORROWINGS

At December 31, 2003 and
2002, First Citizens National Bank had outstanding balances in short-term
borrowings as follows:

2003
      2002(In thousands)Outstanding balance - end of period
      $           --
      $           --Weighted Average Interest Rate
      N/A
      N/AMaximum Amount of Borrowings at Month End
      14,550
      10,276Average Balances Outstanding for Period
      1,758
      4,477Average Weighted Average Interest Rates
      1.53%
      2.02%


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
2003
2002
2001(In thousands)Other real estate acquired insatisfaction of loans
$ 1,868
$ 1,523
$ 1,340




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,
2003 and 2002, First Citizens National Bank had outstanding loan commitments of
$88,096,000 and $90,174,000, 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,
2003 and 2002, outstanding standby letters of credit totaled $4,596,000 and
$1,477,000, 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,
2003 and 2002, however, the Bank had no loans sold.

-49-

---

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.
The carrying values of Federal Reserve Bank and Federal Home Loan Bank stock
approximate fair value based on the redemption provisions of each bank.

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,
2003 and 2002.

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.

-50-

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OTHER ASSETS AND LIABILITIES

Financial
instruments included in other assets and other liabilities are short-term and
are therefore valued at their carrying 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:

2003
2002Carrying
Fair
Carrying
FairFinancial Assets
  
Amount
Value
Amount
Value(In thousands)Cash and cash equivalents
$ 34,277
$ 34,277
$ 47,683
$ 47,683Investment securities
149,680
149,716
142,872
142,917Loans
488,107
  

453,480
Less: Allowance for loan losses
  
(6,124)
---
(5,653)
---Loans, net of allowance
481,983
486,901
447,827
458,861Accrued interest receivable
4,160
4,160
4,603
4,603Federal Reserve Bank and Federal Home
Loan
    Bank stock
4,911
4,911
3,914
3,914Other assets
16,426
16,426
16,172
16,172Financial Liabilities
Deposits
560,610
565,116
531,642
539,662Short-term borrowings
19,681
19,681
18,444
18,444Long-term debt
  
83,314
  92,923
83,881
  100,661Other liabilities
4,553
4,553
5,630
5,630Unrecognized Financial Instruments
Commitments to extend credit
88,096
88,096
90,174
90,174Standby letters of credit
4,596
4,596
1,477
1,477


NOTE 21 - COMMITMENTS AND CONTINGENCIES

During the year
ended December 31, 2000, the Board of Directors approved a stock repurchase plan
whereby the Company is authorized to acquire up to a maximum of $5,000,000 of
its outstanding capital stock over a five (5) year period. The stock repurchase
plan is designed to enable First Citizens Bancshares, Inc. to meet the
requirements of the Employee Stock Ownership Plan and reduce the number of
shares outstanding in order to enhance earnings per share.

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.

-51-

---

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 | 2003 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                                 | 5.38                          | 3.40                                         
|Net loans                     | 68,542     | 1,456        | 69,998     | 7                                 | 329.33                        | 208.00                                       
|Premises and
      equipment  | 3,535      | (198)        | 3,337      | 3,5,39                            | (31.35)                       | (19.80)                                      
|Goodwill                      | --         | 8,808        | 8,808      | --                                | --                            | --                                           
|Core deposit
      intangible | --         | 845          | 845        | 10                                | 133.80                        | 84.50                                        
|Other assets                  | 2,012      | --           | 2,012      |                                   | --                            | --                                           
|Total Assets                  | $ 115,099  | $ 10,928     | $ 126,027  |                                   | 437.16                        | 276.10                                       
|                              | =======    | =======      | =======    |                                   | =======                       | =======                                      
|Deposits                      | 99,723     | 1,219        | 100,942    | 5                                 | 386.02                        | 243.80                                       
|Other liabilities             | 5,741      | 21           | 5,762      | 5                                 | 6.65                          | 4.20                                         
|Capital                       | 9,635      | 9,688        | 19,323     |                                   | --                            | --                                           
|Total Liabilities and Capital | $ 115,099  | $ 10,928     | $ 126,027  |                                   | 392.67                        | 248.00                                       
|                              | =======    | =======      | =======    |                                   | =======                       | =======                                      
|Net Expense                   |            |              |            |                                   | 44.49                         | 28.10                                        
|                              |            |              |            |                                   | =======                       | =======                                      

Pro forma balance
sheets and statements of income 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======
      ======


-52-

---

NOTE
23 - GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in reported
balances of goodwill for the two years reflected on the Statement of Condition
are as follows:

Year Ended
        December 312003
      2002Balance at beginning of year
      $   12,417
      $   2,764Reclassification from unidentifiable asset
      --
      --Impairment
      --
      --Acquired goodwill
      
      9,653Sale of Munford Union's Charter
      (199)
      --Balance end of year
      $   12,929
      $ 12,417======
      ======


Beginning in the year
2002, goodwill is no longer amortized but rather is tested annually for
impairment. The effects of the application of this new accounting principle is
as follows:

Years Ended December
31,2003
2002
2001(In thousands)Reported net income
$ 7,820
$ 7,838
$ 5,761Amortization of
goodwill
--
--
269Adjusted net income
$ 7,820
$ 7,838
$ 6,030====
====
====Basic earnings per
shareReported
net income
$ 2.14
$ 2.14
$ 1.56Amortization of goodwill
--
--
..07Adjusted
net income
$ 2.14
$ 2.14
$ 1.63====
====
====Diluted earnings per
shareReported
net income
$ 2.14
$ 2.14
$ 1.56Amortization of goodwill
--
--
..07Adjusted
net income
$ 2.14
$ 2.14
$ 1.63====
====
====


Intangible assets
subject to amortization are reflected in the following table:

|                         | Year Ended December
31, 2003 | Year Ended December
31, 2002
|------------------------ | ---------------------------- | ----------------------------
|                         | Gross CarryingAmount         | Accumulated Amortization    
|Core deposit intangibles | $  
  845                    | $  
  134                   
|Other intangible assets  | --                           | --                          
|Total                    | $   845                      | $   134                     
|                         | ======                       | ======                      

Estimated amortization for
the following five years:

Year
      Amount2004
      $ 842005
      $ 842006
      $ 842007
      $ 842008
      $ 84


-53-

---

NOTE 24 - QUARTERLY SELECTED FINANCIAL DATA (UNAUDITED)

InterestIncome
    
    Net InterestIncome
    NetIncome
    Earnings 
      Per ShareBasic
    Earnings
      Per ShareDiluted2003First Quarter
      $ 10,038
      $   6,304
      $   1,976
      $  0.54
      $  0.54Second Quarter
      10,115
      6,408
      1,645
      0.45
      0.45Third Quarter
      9,777
      6,365
      2,047
      0.56
      0.56Fourth Quarter
      9,576
      6,277
      2,152
      0.59
      0.59Total
      $ 39,506
      $ 25,354
      $   7,820
      $  2.14
      $  2.142002First Quarter
      $   8,801
      $   5,469
      $   1,767
      $  0.48
      $  0.48Second Quarter
      9,307
      5,956
      1,743
      0.47
      0.47Third Quarter
      10,529
      6,459
      2,129
      0.58
      0.58Fourth Quarter
      10,333
      6,378
      2,199
      0.61
      0.61Total
      $ 38,970
      $ 24,262
      $   7,838
      $  2.14
      $  2.14


As detailed in Note 22, on June 1, 2002, the
Corporation acquired all of the outstanding capital stock of Metropolitan
Bancshares, Inc. and its subsidiary Munford Union Bank. The transaction resulted
in significant increases in interest income, net interest income and net income
for the third quarter of 2002.

NOTE 25 - AMOUNTS
RECEIVABLE FROM RELATED PARTIES

Year Ended December 31,
2003(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)
  

$ 11,068
$ 14,021


$ 10,670


$ -0-
$ 14,419
$ -0-=====


=====
=====


=====


=====


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

$ 11,068
$ 14,021


$ 10,670


$ -0-
$ 14,419
$ -0-=====
  

=====
  

=====
  

=====
  

=====
  

=====


|                                 |  | Year Ended December 31,
2002
|-------------------------------- |  | ----------------------------
|                                 |  | (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)            |  | $

9,367                    
|                                 |  | =====                       
|Aggregate indebtedness           |  |                             
|to First Citizens                |  |                             
|National Bank of                 |  |                             
|Directors and Executive Officers |  |                             
|Of First Citizens                |  |                             
|National Bank (26)               |  | $ 9,367                     
|                                 |  | =====                       

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.

-54-

---

ITEM
9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Not applicable.

ITEM
9A.   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.

PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information appearing in Bancshares'
2004 Proxy Statement
regarding directors and officers is incorporated herein by reference in response
to this Item.

A description of The Code of Ethics
(Conduct) for Bancshares included in the 2004 Proxy Statement 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, 2003:

Name
      Age
      Position and OfficeStallings Lipford
      74
      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
      63
      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
      62
      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
      43
      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.-55-  Barry Ladd
      63
      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
      49
      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.


ITEM 11. EXECUTIVE COMPENSATION

The information required under this Item is set forth in the
2004 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' 2004 Proxy Statement for the Annual Meeting of Shareholders to be held April
21, 2004, 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 13 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, "Amounts Receivable from Certain Persons."

ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES

The Audit Committee information is incorporated by the
reference to the Proxy Statement.

-56-

---

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 12, 2004                          /s/ 
STALLINGS LIPFORD                                                                                   
                                 
CHAIRMAN

Date: March 12, 2004                 /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 persons
on behalf of the Registrant and in the capacities
indicated on March 14, 2004.

/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


-57-

---

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

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

Financial Statements:
      Page NumberReports of Independent
        Accountants
      32Consolidated Balance Sheets as
        of December 31, 2002 and 2003
      33Consolidated Statements of
        Income for the years ended December 31, 2001, 2002
            and 2003
      34Consolidated Statements of
        Changes in Shareholders' Equity and Other
            Comprehensive Income for the years ended December 31,
        2001, 2002 and 2003
      35-36Consolidated Statements of Cash
        Flows for the years ended December 31,
           2001, 2002, and 2003
      37Notes to Consolidated Financial
        Statements
      38-54


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
      
      Description3.1
      
      Charter of First Citizens Bancshares, Inc.*3.2
      
      Bylaws of First Citizens Bancshares, Inc.*21.1
      
      Subsidiaries of the Registrant23.1
      
      Consent of Accountants31.1
      
      Certification Pursuant to Section 302 of
        the Sarbanes-Oxley Act31.2
      
      Certification Pursuant to Section 302 of
        the Sarbanes-Oxley Act32.1
      
      Certification Pursuant to Section 906 of
        the Sarbanes-Oxley Act32.2
      
      Certification Pursuant to Section 906 of
        the Sarbanes-Oxley Act


* Incorporated by reference to Registrants Annual Report on Form
10-K for the year ended December 31, 2003.

-58-

---