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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A
Amendment No. 1

(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,
2004

[  ]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 non-affiliates of the registrant at June 30, 2004 was
$70,928,493.

Of the registrant's only class of
common stock (no par value) there were 3,634,267 shares outstanding as of July
27, 2005 (net of Treasury Stock).

________________________

DOCUMENTS
INCORPORATED BY
REFERENCE:

Portions of the Proxy
Statement dated March 18, 2005 (Part III) filed by Electronic Submission



EXPLANATORY
NOTE

First
Citizens Bancshares, Inc. hereby amends its Form 10-K for the year ended
December 31, 2004, which was filed March 17, 2005 to reflect revisions to
certain disclosures and certifications as a result of the comment process with
the Securities and Exchange Commission. There have been no adjustments to the
financial statements for the periods covered by this Annual Report. A summary of
the revised disclosures and certifications is as follows:

- Part
    II, Item 8, Note 1- Summary of Significant Accounting and Reporting Policies
    has been revised to include an explanation of the basis of presentation for
    two 50% owned insurance subsidiaries.
- Part
    II, Item 8, Note 3 - Investment Securities has been revised to clarify
    the company's one derivative transaction, an interest rate swap that has
    been designated as a cash flow hedge.
- Part
    II, Item 9A, Controls and Procedures has been revised as requested by
    the Securities and Exchange Commission.
- Exhibit
    31.1 and 31.2 Section 302 Certifications have been revised as requested
    by the Securities and Exchange Commission.

In
addition to the items noted above, certifications and signatures have been
updated as appropriate.

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PART I

ITEM 1 - BUSINESS

GENERAL

First Citizens
Bancshares, Inc. (Bancshares or the "Company") 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, 2004 the Corporation had total assets
of $773 million compared to $726 million at December 31, 2003.



The Principal Executive
Officers are at One First Citizens Place, Dyersburg, Tennessee.   Our telephone number is 731-285-4410.  Our website is
www.firstcitizens-bank.com.  In accordance with the Securities Exchange
Act of 1934 and other related laws, Bancshares files reports with the United
States Securities Exchange Commission including annual and quarterly reports
(Forms 10-K and 10-Q) as well as current reports on Form 8-K and amendments to
those reports, if any.  We post our
website links to our annual, quarterly and current reports as soon as
reasonably practicable after filing with the SEC.  Such reports can be downloaded and/or viewed free of charge
through access to the links on our website.



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 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 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.





- 2 -

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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)
|                     | 2004          
|Total Assets         | $  773,204    
|Total Deposits       | 592,382       
|Total Net Loans      | 528,443       
|Total Equity Capital | 61,208        

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 consisted of 353 bank holding companies per the
September 30, 2004 Bank Holding Company Performance Report.

The following presents
comparisons of Bancshares with its peers as indicated on Bank Holding Company
Performance Reports for the periods indicated:

|                                                                                                                                           | 12/31/2004** | 12/31/
      2003 | 12/31/
      2002
|------------------------------------------------------------------------------------------------------------------------------------------ | ------------ | ----------------- | -----------------
|                                                                                                                                           | Bancshares   | Peer Group        | Bancshares       
|Net Interest Income/Average
      Assets                                                                                                   | 3.44%        | 3.70%             | 3.75%            
|Net Operating Income/Average
      Assets                                                                                                  | 1.08%        | 1.07%             | 1.07%            
|Net Loan
      Losses/Average Total Loans                                                                                                  | 0.16%        | 0.15%             | 0.09%            
|Primary Capital/Average Assets                                                                                                             | 7.05%        | 9.08%             | 7.88%            
|Cash Dividends/Net
      Income                                                                                                            | 50.83%       | 24.84%            | 52.26%           
|                                                                                                                                           |              |                   |                  
|                                                                                                                                           |              |                   |                  
|** Peer
      information for December 31, 2004 is
      compared to the September 30, 2004 Bank Holding Company Performance
      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-novo branches would afford Bancshares increased
economies of scale within the operation functions and better utilization of
human resources.  Any acquisition or
de-novo 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 originally added $115 million in assets housed in Tipton and Shelby
Counties in Tennessee to Bancshares' balance sheet.  The assets of the Southwest Region (previous Munford Union plus
Arlington and Oakland branches) were approximately $211 million as of December
31, 2004.  In addition, the acquisition
expanded Bancshares market into one of the fastest growing areas of the
state.  In June 2004, a de-novo branch
was opened in Oakland, Fayette County, Tennessee.  Branching will continue in 2005 with expansion into Collierville
in Shelby County, Tennessee.

- 3 -

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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, 2004,
Bancshares' total risked-based capital ratio was 10.86% significantly in excess
of 8% mandated by regulation.  The risk
based capital ratio was 11.14% for 2003 and 10.92% for 2002.  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 2004 was 6.95 percent, with total capital as a percentage of total
assets at 7.92 percent.



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



BANKING BUSINESS



First Citizens Bancshares,
Inc. (the "company"), headquartered in Dyersburg, Tennessee, is 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, Inc. Through a corporate
charter amendment, Nevada Investments II, Inc. changed its name to First
Citizens Investments, Inc. as of September 21, 2004.  First Citizens Investments, Inc. formed a wholly owned
subsidiary, First Citizens Holdings, Inc. as of September 17, 2004.   First Citizens Properties, Inc., which is a
wholly owned subsidiary of First Citizens Holdings, Inc., was also formed
September 17, 2004.  The formation of
these entities had no material impact on the consolidated financial statements
of First Citizens Bancshares, Inc.  The
bank also owns 50% of White and Associates/First Citizens Insurance LLC which
provides various insurance products to its customers and First Citizens/White
and Associates Insurance Company, Inc., which is a provider of credit
insurance. The activities of the Bank's subsidiaries consist of: brokerage,
investments, insurance related products, credit insurance and real estate
participation interests.



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 First Citizens Investments (formerly
named Nevada II) during third quarter 2003. Assets of Delta Finance, a finance
subsidiary owned by First Citizens National Bank, were sold fourth quarter
2003. The consumer 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 32 banking locations (18 branch banks and 14 free standing ATMs) in
seven Tennessee counties.  Subsidiaries
of the Bank consist of the following:



- First Citizens Financial
Plus, Inc., a bank service corporation wholly owned by First Citizens provides
licensed brokerage services that allow the bank to compete on a limited basis
with numerous non-bank entities that pose a continuing threat to our 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, which is accounted for using the equity method.  The insurance agency operates nine offices
in Northwest Tennessee.
- First Citizens/White and
Associates Insurance Company, is organized and existing under the laws of the
state of Arizona.  Its principal
activity is credit insurance.  First
Citizens holds a 50 percent ownership in the company and is accounted for using
the equity method.
- Nevada Investments II,
Inc. was organized and existing under laws of the state of Nevada and changed
its name to First Citizens Investments, Inc. in September 2004.  The principal activity of this entity is to
acquire and sell investment securities as well as collect the income from the
portfolio.  First Citizens Investments
owns the following:First
      Citizens Holdings, a wholly owned subsidiary of First Citizens
      Investments, acquires and sells certain investment securities, collects
      income from its portfolio, and owns the following subsidiary:First
          Citizens Properties, Inc., a real estate investment trust (REIT),
          whose principal activity is to invest in participation interests of
          real estate loans made by First Citizens National Bank. First Citizens
          Holdings owns 100% of the REIT as of December 31, 2004 but owns 98%
          after preferred stock was issued as a bonus to directors, executive
          officers and certain employees in January 2005.
- First
      Citizens Holdings, a wholly owned subsidiary of First Citizens
      Investments, acquires and sells certain investment securities, collects
      income from its portfolio, and owns the following subsidiary:First
          Citizens Properties, Inc., a real estate investment trust (REIT),
          whose principal activity is to invest in participation interests of
          real estate loans made by First Citizens National Bank. First Citizens
          Holdings owns 100% of the REIT as of December 31, 2004 but owns 98%
          after preferred stock was issued as a bonus to directors, executive
          officers and certain employees in January 2005.
- First
          Citizens Properties, Inc., a real estate investment trust (REIT),
          whose principal activity is to invest in participation interests of
          real estate loans made by First Citizens National Bank. First Citizens
          Holdings owns 100% of the REIT as of December 31, 2004 but owns 98%
          after preferred stock was issued as a bonus to directors, executive
          officers and certain employees in January 2005.

-4-

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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.



First Citizens builds
and implements strategic plans and commitments to address competitive factors
in the various markets it serves.  The
primary strategic focus is on obtaining and maintaining profitable customer
relationships in all markets.  The
markets demand competitive pricing but First Citizens competes on high quality
customer service that will attract and enhance loyal, profitable customers to
our bank.  Industry surveys have
consistently revealed that 65-70 percent of customers leave due to customer
service issues.  First Citizens is
committed to excellent customer service in all markets served as a means of
branding and distinguishing itself from other financial institutions.  Advertising and promotional activities such
as newspaper and radio ads are also utilized in accordance with defined
strategic plans.  For example,
advertising and promotions were increased in 2004 in the Southwest Region after
the announcement of two mergers of large regional banks in efforts to attract
new deposits.



In the markets it
serves, First Citizens offers a typical mix of interest-bearing transaction,
savings and time deposit products as well as traditional non-interest bearing
deposits accounts.  First Citizens is
the leader in deposit market share compared to competitors in the Dyer,
Lauderdale, Obion, Tipton and Weakley County, Tennessee markets.  Source of the following information is the
Deposit Market Share Report as of June 30, 2004 prepared annually by the
FDIC.  The following tabular analysis
presents the number of offices, deposits (in thousands), and market share
percentage for deposits:



Dyer, Lauderdale,
        Obion, Tipton & Weakley Counties Market(Banks
        only,
        Deposits Inside of Market)As
        of June 30, 2004Bank Name
      # of
        Offices
      Total   Deposits
      % of   
        Market   Share(In
        Thousands)First Citizens National Bank
      14
      $  
        474,873
      22.80%First State Bank

      14
      399,450

      19.18%Union Planters Bank, National Association

      14

      207,326
      9.95%BancorpSouth Bank

      5

      163,024
      7.83%Bank of Ripley

      5

      124,649
      5.98%Commercial Bank & Trust

      2

      106,508
      5.11%INSOUTH Bank

      3

      87,272
      4.19%Reelfoot Bank

      5

      82,715
      3.97%Security Bank
      6
      78,883
      3.79%First Tennessee Bank, National
        Association
      2
      66,150
      3.18%Bank of
        Gleason
      1
      60,021
      2.88%All

      Others

      14
      232,278
      11.14%Total

      85

      $ 
        2,083,149
      100.00%




First Citizens National
Bank also competes in the Shelby County and Fayette County Markets.  As the size and composition of the Shelby
County Market is much larger and more diverse, Shelby County is excluded from
the tabular presentation above. 
Locations are strategically placed in the high growth areas of Shelby
County to maximize growth in market share there.  As First Citizens is new to the Shelby County market, it holds
less than one percent of the total market share of deposits.  Fayette County is also excluded because
First Citizens entered that market in June 2004 and the most recent deposit
market information from the FDIC is from June 30, 2004.

- 5 -

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EMPLOYEES

At December 31, 2004,
Bancshares and its subsidiary employed a total of 264 full-time equivalent
employees (FTE) compared to 249 at December 31, 2003.  Increase in FTE is a result of staffing up for expansion into
Oakland and Collierville as well as management succession planning.  Planning has afforded Bancshares both the
physical resources and data processing technology to meet financial needs
generated by this growth.  First
Citizens is committed to hiring and retaining high quality employees to execute
strategic plans of the Company. Relationship with employees is satisfactory and
no collective bargaining issues exist.

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:

1. 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;
2. 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 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 for securities as collateral for loans to any borrower.



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.



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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%), whichever 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.

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 visa-versa. 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 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 provisions 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.

-7-

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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 are as follows:

- 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.

-8-

---

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 the followings properties:

- Main branch and
executive offices are in six-story building at One First Citizens Place
(formerly 200 West Court), Dyersburg, Tennessee.  This property also includes the Banking Annex, 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.
- The Downtown Drive-in
Branch is located at 113 South Church Street, Dyersburg, Tennessee, and is a
remote motor bank with six drive-thru lanes and a drive-up ATM lane.
- The Green Village Office
located at 620 U.S. 51 Bypass adjacent to the Green Village Shopping Center in
Dyersburg, Tennessee, is a full service banking facility.  This facility is equipped with seven
drive-up lanes, one of which is an ATM.
- The Newbern Branch, a
full service facility is located on North Monroe Street, Newbern,
Tennessee.  A separate facility located
in Newbern on the corner of Highway 51 and Ro-Ellen Road houses an ATM.
- The Industrial Park Branch located at 2211 St. John Avenue,
Dyersburg, Tennessee, is a full service banking facility that offers drive-thru
Teller and ATM services.
- The Ripley, Lauderdale County facility is located at 316
Cleveland Street in Ripley, Tennessee. 
This full service facility has four drive-up lanes and a twenty-four
hour access drive-up ATM.
- The Troy Branch is full service banking facility located on
Harper Street just west of Highway 51 in Troy, Tennessee.  This facility has three drive-up lanes and a
twenty-four hour access drive-up ATM.
- 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, Tennessee.  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.
- The Martin office is located at 200 University Avenue,
Martin, Tennessee, and is a full service banking facility with 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 Avenue and a second occupies space in the Student Center of The
University of Tennessee at Martin.
- The main banking location at Munford, Tennessee, Southwest
Region is located at 1426 Munford Avenue. 
A remote building located at 1483 Munford Avenue serves as a drive-thru
facility for the main bank.
- Atoka full service branch is located on the
  Atoka-Idaville
Road at 123 Atoka-Munford Avenue, Atoka, Tennessee.  The Atoka Branch also has an ATM.
- Millington Branch is a full service branch facility located
at 8170 Highway 51 N. Millington, Shelby County, Tennessee.  The Millington Branch has a drive-thru ATM.
- Full service Bartlett branch is located at 7580 Highway 70,
Bartlett, Shelby County, Tennessee.  A
drive-thru ATM is attached to the facility.
- Arlington branch located
at 5845 Airline Road, Arlington, Tennessee serves as a full service branch
facility and houses a drive thru ATM.
- In June 2004, a
temporary facility for a full-service Oakland branch was opened at 7285 Highway
64, Oakland, Fayette County, Tennessee. 
A drive-thru ATM is attached to the facility.  The permanent facility was opened in February 2005.
- Land was purchased for
construction of a new branch in Collierville, Tennessee in January 2005.  Through an operating lease, a temporary
facility will be opened by the end of first quarter 2005.  Construction of the permanent facility is
expected to commence in fourth quarter 2005.

All properties are owned
by First Citizens and there are no liens or encumbrances against any properties
owned by First Citizens. All of the properties described above are adequate and
appropriate facilities to provide banking services as noted and are adequate to
handle growth expected in the foreseeable future.  As growth continues or needs change, individual property
enhancements or additional properties will be evaluated if considered
necessary.

-9-

---

ITEM 3.     LEGAL PROCEEDINGS

Various legal claims
arise from time to time through the normal course of business of the Company
and its subsidiaries.  There is no
pending litigation that in the opinion of management will have a negative
material impact on Bancshares' consolidated financial statements.

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

During the fourth quarter of the year ending
December 31, 2004, 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, 2004,
there were 1,037 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. 
Range of stock prices for 2003 and 2004 by quarter is as follows:

Quarter Ended
    
    High
    LowMarch 31, 2003
    $  
      27.50
    $ 
      27.50June 30, 2003
    $  
      27.50
    $ 
      27.50September 30, 2003
    $  
      30.00
    $ 
      25.00December
      31, 2003
    $  
      30.88
    $ 
      27.50March 31,
      2004
    $  
      30.00
    $ 
      27.50June 30,
      2004
    $  
      30.00
    $ 
      28.00September 30,
      2004
    $  
      30.00
    $ 
      28.00December 31,
      2004
    $  
      31.00
    $ 
      28.50




Dividends paid per share
were $1.12 in 2004, $1.08 in 2003 and $1.04 in 2002.  Dividends by quarter for 2004 were declared as follows:



2004 DividendsDividendPer Share
    QuarterDeclared$  .28
    1st$  .28
    2nd$  .28
    3rd$  .28
    4thTotal
      $1.12===


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

The Company had no
publicly announced plans or programs for purchase of stock during the periods
presented.  The number of shares of
treasury stock repurchased in open-market transactions not pursuant to publicly
announced plans or programs and the average price paid by month is as follows:

No. of SharesPurchased
    Weighted      
      Average Price Paid Per Share2003January
    4,500
    $ 
      27.50February
    147
    27.50March
    2
    27.50April
    44
    27.50May
    2,010
    27.50June
    545
    27.50July
    966
    27.50August
    890
    27.50September
    -
    -October
    -
    -November
    -
    -December
    -
    -Total 2003
    9,104
    $
      27.50=====
    =====2004January
    2,535
    $ 
      28.00February
    -
    -March
    -
    -April
    474
    28.00May
    1
    28.50June
    1
    28.50July
    1,075
    29.22August
    -
    -September
    -
    -October
    -
    -November
    2,230
    31.00December
    249
    31.00Total 2004
    6,565
    $
      29.33=====
    =====




ITEM 6.     SELECTED FINANCIAL DATA

The following table
presents selected financial data for Bancshares for the twelve months ended
December 31, for the years indicated:

2004



2003



2002



2001



2000(Dollars in
      thousands, except per share data)Net Interest & Fee Income
    $   
      25,668



    $   
      25,354



    $   
      24,262



    $    19,917



    $    18,594Gross Interest Income
    $   
      39,017



    $    39,506



    $   
      38,970



    $    39,189



    $    38,137Income From Continuing Operations
    $     
      8,049



    $     
      7,820



    $     
      7,838



    $     
      5,761



    $     
      4,612Net Income per Common Share
    $     
       
      2.20



    $     
       
      2.14



    $     
       
      2.14



    $     
        1.56



    $     
        1.24Cash Dividends Declared per Common Share
    $     
       
      1.12



    $     
       
      1.08



    $     
       
      1.04



    $     
        1.00



    $     
        1.00Total Assets at Year End
    $  773,204



    $  726,104



    $  694,198



    $  537,991



    $  500,954Long Term Obligations (1)
    $   
      84,481



    $   
      83,314



    $   
      83,881



    $   
      63,075



    $   
      44,237Allowance for Loan Losses as a % Loans
    1.16%



    1.25%



    1.24%



    1.08%



    1.10%Allowance for Loan Losses as a % of
            Non-Performing Loans
    262.25%



    438.36%



    144.31%



    141.97%



    125.01%Loans 90 Days Past Due as a % of Loans
    0.44%



    0.04%



    0.37%



    0.33%



    0.47%


(1)    Long-Term
Obligations consist of FHLB advances and acquisition debts funded by a line of
credit with First Tennessee Bank and trust-preferred securities.

-11-

---

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

See Banking Business under Item 1 of
this report regarding details of subsidiaries of the bank and holding company
and what types of activities each engage in.

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.

Forward-looking statements are based
upon information currently available and represent management's expectations or
predictions of the future. Due to risks and uncertainties involved, actual
results could differ materially from such forward-looking statements. Examples
of such risks and uncertainties include but are not limited to:

- Changes in general economic and
    business conditions that are not anticipated and result in changes in loan
    and deposit demands and/or increases in loan delinquencies and defaults;
- Changes in market rates and prices
    may adversely impact the value of securities, loans, deposits and other
    financial instruments;
- Effect of changes in legislative or
    regulatory developments including changes in tax, banking, insurance,
    securities, or other financial service related laws.

EXECUTIVE
SUMMARY



Earnings
per share increased to $2.20 for the year ended December 31, 2004 from $2.14 per
share in 2003.  Pressures on net interest margin and digestion of the new
Arlington, Martin and Oakland branches suppressed earnings growth in 2004. 
Martin and Arlington were opened late in 2003 and are operating at a small
profit at the end of 2004.  Oakland was opened in June 2004 and is
projected to become profitable during 2005.  Temporary office of the
Collierville branch will open in March 2005 with plans to relocate upon
completion of construction of the permanent facility.  While there are no
plans to add additional branches at this time, we remain open to opportunities
that might present themselves.



Loans
are the single largest category of interest-earning assets at First Citizens and
produce the highest level of revenues.  At December 31, 2004, loans, net of
unearned income totaled $528 million, an increase of 10.2% from the $480 million
reported at year-end 2003.  Growth in the portfolio in 2004 resulted
primarily from an increase in Real Estate Construction, with moderate growth
reflected in the category of Real Estate Mortgages.  Asset quality remains
strong with non-performing loans at year-end 2004 averaging .10% below the
average level reported by peer group banks. Other Real Estate Owned declined 37%
over the prior twelve months, ending the year at $337 thousand.  Net
charge-offs in 2004 increased to $822 thousand compared to $410 thousand in
2003.  This increase does not reflect a significant increase in loans
charged-off, but rather a decrease in the recovery of loans previously
charged-off.



The
dividend payout ratio in 2004 was 50.83% and the dividend yield of 4.07%
continues to exceed peer group banks in the Southeast region by a significant
margin.  Our goal continues to be providing shareholder returns that exceed
peer group banks and is achieved by focusing efforts on deploying capital
resources in a manner that supports long-term shareholder value.  The
investments in the metropolitan Southwest markets afforded the company
opportunities to expand the customer base and extending the First Citizens brand
outside of Northwest Tennessee.  This prudent utilization of capital will
support future growth and development of both assets and earnings.



The
most significant factor critical to the success of our Company is not
quantitative, but rather the quality of the over 260 members of our staff. 
First Citizens focuses on attracting and retaining quality bankers and the
success of such efforts is measured by their tenure.  The average tenure of
the overall staff is more than nine years and the average tenure of officers
with the position of vice-president and higher is 19 years.

CRITICAL ACCOUNTING
POLICIES

The accounting and
reporting of First Citizens Bancshares and its subsidiaries conform to
accounting principles generally accepted in the United States and follow
general practices within its industry. 
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.  Accounting estimates are considered critical
if (1) management is required to make assumptions or judgments about items that
are highly uncertain at the time the estimate is made, and (2) different
estimates reasonably could have been used during the current period or changes
in such estimates are reasonably likely to occur from period to period, that
could have a material impact of the presentation of the Consolidated Financial
Statements.



The development,
selection and disclosure of critical accounting policies are discussed with the
Audit Committee of the Board of Directors. 
Due to the potential impact on the financial condition or results of
operations and the required subjective or complex judgments involved, management
believes its critical accounting policies to consist of the allowance for loan
losses, fair value of financial instruments, and goodwill and assessment of
impairment.



ALLOWANCE FOR LOAN
LOSSES



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.  The
Loan Portfolio Analysis included in this Management's Discussion and Analysis
provides further detail regarding how loans are monitored and evaluated in
relation to the determination of the allowance for loan losses.  Also, refer to footnote 1 of the Consolidated
Financial Statements included in Item 8 of this report.



FAIR VALUE OF FINANCIAL
INSTRUMENTS



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.



Fair values for the
majority of First Citizens' available-for-sale investment securities are based
on quoted market prices from actively traded markets.  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.).



Fair value of the only
derivative held by the company is determined using a combination of quoted
market rates for similar instruments and quantitative models that are based on
market inputs including rate, price and index scenarios to generate continuous
yield or pricing curves and volatility factors.  Third party vendors are used to obtain fair value of
available-for-sale securities and the cash flow hedge.



See also the Fair Value
of Financial Instruments footnote in the Consolidated Financial Statements
included in Item 8 of this report.



GOODWILL



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 likely 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.  See also the Fair Value
of Financial Instruments footnote in the Company's Financial Statements
included in Item 8 of this report 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-

---

RECENTLY ISSUED
ACCOUNTING STANDARDS



FASB Interpretation No.
46:In January 2003, the Financial Accounting
Standards Board (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.  Adoption of
Interpretation No. 46 had no material effect on the Corporation's consolidated
financial statements.  The Company
adopted this rule in January 2003. 
After adoption, First Citizens Statutory Trust II is deconsolidated and
trust preferred securities are included in liabilities on the consolidated
balance sheet and associated interest expense is included in the consolidated
statements of income.  In accordance
with this statement, the Company classifies trust preferred securities as
long-term debt in this report but the trust preferred securities are included
in the calculation of Tier 1 Capital as defined under financial institution
regulatory guidelines.

SFAS
No. 153: Exchanges of Nonmonetary Assets-an amendment
of APB Opinion No. 29' APB Opinion No. 29, Accounting for Nonmonetary
Transactions is based on the principle that exchange of nonmonetary assets
should be measured on fair value of assets exchanged.  SFAS No. 153 revises this statement to eliminate the exception
for nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges that do not have commercial substance that is
defined as significant change in future cash flows as a result of the
change.  This statement focuses the
exception to exchanges that lack commercial substance and was implemented to
help improve consistency between U. S. standards and standards issued by
International Accounting Standards Board (IASB).  The provisions of SFAS No. 153 are effective for non-monetary
exchanges occurring in fiscal periods beginning after June 15, 2005.  Adoption of this statement is not expected
to materially impact the Company's consolidated financial statements in 2005 or
beyond.

SFAS No.
123 (Revised
2004):SFAS No. 123 (Revised 2004) Share-Based
Payment was revised to address concerns of users and others, improve comparability
of reporting financial information by eliminating alternative accounting
methods, simplify U. S. generally accepted accounting principles, and converge
with international accounting standards. 
The Statement required public entities to measure the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award (with limited exceptions).  The cost is to be recognized over the period
during which an employee is required to provide service in exchange for the
award or the requisite service period (usually the vesting period).  No compensation cost is recognized for
equity instruments for which employees do not render the requisite service.  Employee share purchase plans will not result
in cost recognition if certain conditions are met as outlined in No. 123.  The effective date for the Company to adopt
this statement is the first interim or annual reporting period beginning after
June 15, 2005.  The Company currently
does not issue equity instruments in exchange for employee service, so adoption
of this statement in 2005 will have no material impact on the Company's
financial statements.



SARBANES-OXLEY ACT OF
2002



Congress enacted the
Sarbanes-Oxley Act of 2002, to impose 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.  Estimated costs of implementing requirements of the
Sarbanes-Oxley Act of 2002 during 2005 are approximately $200,000.  These costs primarily consist of fees for
the Corporate Governance Committee of the Board of Directors, additional
personnel expense, consulting and technology costs to improve internal control
documentation, and testing in compliance with Section 404.

RESULTS OF OPERATIONS

Asset quality remains
strong despite a slightly upward negative trend in non-performing loans that
occurred in the second half of 2004. 
Non-performing loans and other real estate as a percent of total loans
plus other real estate at December 31, 2004 were 0.12 % higher than at year-end
2003 and 0.10% less than peer as reported in the September 30, 2004 Bank
Holding Company Performance Report.  The
negative trend in non-performing loans is driven by a very small number of
customers with higher balance loans. 
These few customers are not considered indicative of overall credit
quality of the loan portfolio.  The
growth in the national economy as evidenced by increased GDP is expected to
continue in 2005 and has positively impacted local economy of our markets.  Thus, we expect at least slight improvement
in the overall credit quality of the portfolio in 2005.  The allowance for loan loss reserve as a
percent of non-performing assets was 229.54%, 316.97%, 99.21%, 88.08%, and
194.06% for the years 2004, 2003, 2002, 2001, and 2000, respectively.  Additions made to the reserve account as a percent
of net charge offs for 2004 was 90.44%. Other Real Estate Owned declined 37%
ending 2004 at $337 thousand.  The
provision for loan losses was down 3.9% based on overall quality of the
portfolio.  Net charge-offs in 2004 were
$822 thousand compared to $410 thousand in 2003.  The increase in net charge-offs is primarily
due to a decrease of $295 thousand or 58% of loans previously recovered.  Gross charge-offs increased $117 thousand or
12% from 2003 to 2004.  The reserve for
potential loan losses as a percent of total portfolio ended the year at 1.16
percent and is within the range of 1.10% to 1.25% that has been maintained the
last five years.  The Company has seen a
slightly negative trend in loan quality during the second half of 2004 but this
trend is not expected to grow as we move into 2005.



Bancshares reports
consolidated net income of $8.0 million for the year ended December 31, 2004
compared to $7.8 million per year for each of the two previous years.  Earnings per share increased to $2.20 per
share for 2004 compared to $2.14 per share in 2003 and 2002. While pressures
exerted by the squeeze to the net interest margins continue to be a factor,
earnings were also suppressed by investment in initiatives that should generate
higher levels of future earnings to shareholders.  As evidenced in the cash flow statement, purchases of premises
and equipment totaled $3.5 million and $5.3 million in 2004 and 2003,
respectively.  The opportunity cost on
the $3.5 million invested in fixed assets is approximately $227 thousand based
on the average loan yield of 6.48 percent as the funds likely would have been
invested in loans if fixed assets were not purchased.  Expansion costs of construction of new branches is evident in
2003 and 2004 with the Oakland branch construction started in 2004 with
expected completion in February 2005 as well as the two branches, Martin and
Arlington, that were completed during 2003. 
As of January 2005, Martin and Arlington are operating at a small profit
and Oakland is expected to become profitable during 2005. The accompanying
Summary Average Balance Sheet and Net Interest Income Schedule indicate the
yield on average earning assets was 3.80% for year 2004 compared to 4.12% for
2003.  Return on average assets was 1.08
percent, 1.10 percent and 1.28 percent for the years ending December 31, 2004,
2003 and 2002, respectively.  The
decrease in the return on average assets is directly attributable to the
significant growth of $47 million or 6.5% in assets during 2004 compared to
2.9% or $229 thousand increase in earnings. 
The earnings increase was significantly less than our growth rate due to
investment in new branches coupled with margin pressures in the current market
rate environment during 2004.  Return on
average equity is 13.56%, 13.88%, and 15.05% for 2004, 2003, and 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.



The effective tax rate
for the past three years is 29%.  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.



Shrinking margins are a
material concern with most financial institutions today.  Peer banks ($500 million to $1 billion
assets) including First Citizens National Bank have seen margins head downward
since the summer of 2002.  Liabilities
were not able to keep pace with the decline in earning assets, which was
experienced until the third quarter of 2004. 
Beginning in late June 2004, the Federal Open Market Committee (FOMC)
began removing accommodative monetary conditions through consistent 25 basis
point increases in federal fund rates. 
From June 2004 to February 2005, federal funds rates have increased from
1.00% to 2.50%. Although shorter-term rates have increased as the federal funds
rates have, the longer-term rates have not and thus, the yield curve has
continued to flatten during the second half of 2004 and into 2005.  The 10-year treasury note, a common
benchmark for long-term rates, has dropped from the 4.6% to 4.7% range in June
2004 to the 4.0% to 4.2% range as of year-end and subsequently.  As a result of the flattened yield curve and
competitive factors, pricing of deposits and short-term liabilities has
outpaced the increase in loan and investment rates.  Thus, margin pressures continue and are expected to continue in
2005.  Net interest income on tax
equivalent basis has increased $229 thousand over the prior twelve months,
primarily the result of asset growth. 
The Company's funds management committee has moved the interest
sensitivity position from a liability sensitive to a slightly asset sensitive
position.  Bancshares' balance sheet is
structured in a manner deemed to be fairly neutral but is slightly "asset
sensitive." Rising rate environment of 100 basis points over a 12-month period
would result in declining earnings of $244,000 or a decrease in net interest
income of 1.01%.  A declining rate of
100 basis points for the same 12-month period would improve net interest income
approximately $167,000.  The net yield
on average earnings assets was 3.80 percent at year-end 2004 compared to 4.12
percent for the same time period in 2003. 
Net yield on average earnings assets for 2002 was 4.48 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. 
Over the last three years, 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 $1.0 million
in 2004 and $1.7 million in 2003. 
Refinance activity is expected to slow during 2005 depending on activity
and economic conditions in newer markets served.

-13-

---

NON-INTEREST INCOME

The following table
compares non-interest income for the years ended December 31, 2004, 2003 and
2002:

December 31Changes
        in Non-Interest Income(In
        Thousands)Increase
        (Decrease)
      
      Increase
        (Decrease)Total
        2004
      Amount
      Percentage
      Total
        2003
      Amount
      Percentage
    
      Total
        2002Service Charges on
      Deposit Accounts
    $  5,559
    $  646
    13.15 %
    $  4,913
    $  1,273
    34.97 %
    $  3,640Trust Fees
    946
    160
    20.36
      %
    786
    (16)
    (2.00)%
    802Brokerage
    1,160
    282
    32.12
      %
    878
    (13)
    (1.46)%
    891Other
    1,729
    (510)
    (22.78)%
    2,239
    (116)
    (4.93)%
    2,355Total Non-interest
                 Income
    $  9,394
    $  578
    6.56 %
    $  8,816
    $  1,128
    14.67 %
    $  7,688======
    ======
    =======
    ======
    ======
    =======
    ======


Non-interest income
increased $578 thousand or 6.56 percent when comparing 2004 results to
2003.  In the year 2004, non-interest
income (fee income) contributed 19.4 percent to total revenue compared to 16.47
percent and 14.02 percent for the same periods in 2003 and 2002,
respectively.  Due to current interest
rate trends, fee incomes have been a critical source of revenue for the
Company.  The contribution to
non-interest income from Munford Union Bank for the post-acquisition 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 an increase in overdraft fees charged on
checking accounts as a strategic result of implementing a new overdraft
privilege product in the Southwest market. 
The decrease in other non-interest income is primarily related to
decreases in Bancshares' portion of income from its subsidiary, First
Citizens/White and Associates Insurance Company, LLC, and decrease in cash surrender value of certain
life insurance policies.   Income from
net increase in cash surrender value of bank owned life insurance totaled $443
thousand, $696 thousand, and $536 thousand for the years ended December 31,
2004, 2003 and 2002, respectively.  In
addition, Bancshares' portion of other non-interest income generated by First
Citizens/White and Associates Insurance Company, LLC for the years ending 2004,
2003 and 2002 totaled $315,000, $434,000, and $495,000, respectively and is
included in this category.  In 2004, First Citizens/White and Associates
Insurance Company, LLC brought suit to protect certain rights and earnings in
2004 were down due to related legal fees incurred.  Settlement of the subsidiary's litigation occurred early in 2005
in favor of the subsidiary and First Citizens' portion of the gain of
approximately $150,000 will be recorded in the first quarter of 2005.  Brokerage fees are up 32.12% in 2004 due to
expansion of brokerage services in our Southwest market and overall improvement
in financial markets.

NON-INTEREST EXPENSE

The following table compares
  non-interest expense for the years ended December 31, 2004, 2003 and 2002:

Change
      in Non-Interest ExpenseDecember
      31(In
      Thousands)Increase
      (Decrease)
    
    Increase
      (Decrease)Total
      2004
    Amount
    Percentage
    Total
      2003
    Amount
    Percentage
    Total
      2002Salaries & Employee
           Benefits
    $ 13,330
    $  777
    6.19%
    $ 12,553
    $  1,707
    15.74%
    $ 10,846Occupancy Expense
    3,903
    88
    2.31%
    3,815
    451
    13.41%
    3,364Other Operating
         Expense
    5,602
    (156)
    (2.71)%
    5,758
    633
    12.35%
    5,125Total Non-Interest
                 Expense
    $ 22,835
    $  709
    3.20%
    $ 22,126
    $  2,791
    14.43%
    $ 19,335======
    ======
    =======
    ======
    ======
    =======
    =====




The non-interest expense
category is dominated by salary and benefit expense and comprises 58 percent of
the total in year 2004, and 56 percent in years 2003 and 2002.  Employees receive incentives based on
accomplishing a certain Return on Equity level calculated excluding incentives
at the bank level as well as accomplishment of annual budget and business
development goals.  Incentive pay
totaled 11.24% of salaries and benefits compared to 10.93% in 2003 and 10.20%
in 2002.  The increase in employee
salaries and benefits is primarily due to hiring staff necessary to support growth
and expansion into new markets as well as management succession planning.  Staffing and management of new branches is
considered critical and is done prior to opening a new branch.  Strategic plans are to hire credible,
experienced personnel to manage the new branches.  A comparison of the efficiency ratio for the years 2004, 2003 and
2002 reflects ratios of 65.46 percent, 63.19 percent, and 59.24 percent,
respectively. The increase in efficiency ratio is also directly attributable to
the short-term impact of opening new branches which are not yet or barely
profitable.  The Company expects the
efficiency ratio to decrease as the new branches are digested and become more
profitable in 2005 and beyond.



-14-

---

The following table
compares assets per employee (in thousands) for Bancshares compared to
peer.  Peer information is obtained from
Uniform Bank Performance Reports (UBPR) for the period noted except for
December 31, 2004, which is compared to the most recent UBPR as of September
30, 2004.



December 31,
      Assets Per Employee
      Assets Per EmployeePeer Group2004*
      $ 
        2,903
      $ 
        3,6302003*
      $ 
        2,916
      $ 
        3,5402002*
      $ 
        2,712
      $ 
        3,4002001**
      $  2,637
      $  3,3502000**
      $  2,397
      $  2,860


*          Peer Group $500 million to $1
billion. Peer group changed upon acquisition in 2002.
  **        Peer Group $100 million to $500
million.

Comparison of assets per
employee for the Company compared to its peers reveals that the Company is more
heavily staffed than its counterparts. 
This is primarily a result of the growth through acquisitions and new
branches that has occurred over the last five years.  New branches have an inefficient assets per employee ratio and
thus, dilute the total assets per employee ratio as compared to peer.  The Company expects this comparison to
improve going forward, as the expansion is somewhat slowed until the new
Oakland and Collierville branches are up and profitable.  Although improvements are expected as the
new branches grow, our commitment to the highest level of customer service may
continue to cause the Company to be less than peer in this area due to the staff
required to provide such a high level of customer service.



The 2.31 percent and
13.41 percent increases in net occupancy expense for 2004 and 2003 reflect the
additional investments in new branches. 
Martin and Arlington were opened in 2003 and Oakland's temporary
facility was opened in 2004.  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.



Other operating expenses
for 2004 decreased slightly at 2.71 percent from December 31, 2003, which
reflects careful management of controllable expenses and increased economies of
scale after absorption of the Munford Union acquisition.  Management expects expenditures to increase
in the foreseeable future during the absorption of the Oakland branch opened in
2004 and Collierville to be opened in 2005. Efforts to divest the bank of other
real estate have been successful.  Other
real estate assets total for 2004 is $337 thousand compared to $535 thousand,
$1.8 million and $1.7 million as of December 31, 2003, 2002 and 2001,
respectively, and is inclusive of $648 thousand in other real estate held by
Munford Union at the time of the acquisition in 2002.  No impairment of goodwill has been recorded in 2004, 2003 or
2002.  Goodwill is 1.53% of total assets
and 19.32% of total capital as of December 31, 2004.

COMPOSITION OF DEPOSITS

The average daily
amounts of deposits and rates paid on such deposits are summarized for the
three years ended December 31,2004, 2003 and 2002:

|                                     | 2004                 | 2003        | 2002          
|------------------------------------ | -------------------- | ----------- | --------------
|                                     | AverageBalance       | AverageRate | AverageBalance
|                                     | (In
      Thousands)
|Non-Interest Bearing Demand Deposits | $  72,272            | 0.00%       | $  62,836     
|Savings Deposits                     | 181,164              | 0.71        | 168,149       
|Time Deposits                        | 311,671              | 2.36        | 313,562       
|Total Deposits                       | $ 565,107            | 1.53%       | $ 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 $475 million in deposits
accounting for 22.80 percent of total market share.  First State Bank, a competitor in markets of First Citizens was
second in market share accounting for 19.18 percent of total deposits.  Bancshares' average deposits for 2004 were
$565 million at an average rate of 1.53 percent as compared to $545 million at
an average rate of 1.76% for 2003 and $464 million at an average rate of 3.17%
for 2002.  First Citizens experienced a
decline in deposits during the second quarter of 2004 and implemented major
strategic action plans to grow deposits, primarily in the newer markets.  The success of these strategies resulted in
net growth of 5.67% from $560 million at year-end 2003 to $592 million at
year-end 2004.  In the current rate
environment, all markets have demanded a competitively priced interest-bearing
transaction account.  As a result
evidenced in our Statement of Cash Flows for 2004, transaction deposit accounts
increased approximately $20 million in 2004. 
One of our deposit products 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.  Wall Street accounts have significantly
grown the last two years and were in excess of $77 million for year 2004, $64 million
in 2003 and $46 million in 2002.  First
Citizens continues to offer free checking to
attract and retain deposit relationships.



Maturity distribution of
time deposits reflects that 41.9% 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 $71 million
or 21.9% of maturity distribution total.



Core deposits serve as a
source of liquidity for Bancshares.  The
short-term borrowings table below reflects the maximum amount of borrowings at
any month end during the respective years. 
Short-term borrowings are used to manage fluctuations in liquidity based
on seasonality of agricultural production loans.  As discussed previously, deposits declined during the second
quarter of 2004.  Thus, the maximum
amount of borrowings in any given month during 2004 was significantly higher
than previous years due to the pace of loan growth coupled with declining deposits.  The success of strategies implemented to
grow deposits resulted in positive growth of 5.67% for year 2004.  See also the Short Term Borrowings footnote
included in the Consolidated Financial Statements in Item 8 of this
report.



Long-term debt, primarily
Federal Home Loan Bank Borrowings reflects average volume for 2004 of $69
million at an average rate of 5.12 percent compared to 2003 of $83.5 million at
an average rate of 5.18% and $67 million in 2002 at an average rate of 5.36%.
The average maturity for long-term borrowing is 6 years.  FHLB borrowings have various call features
ranging from 1 to 5 years and the maturities range from 2008 to 2011.  Under the current and forecasted rate
environments, none of these borrowings are likely to be called and therefore
are not included in current liabilities on the Consolidated Balance Sheet
included in Item 8 of this report. 
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 $1.3
million (principal) since 2002.



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

-15-

---

SHORT TERM BORROWINGS

The following presents
short-term borrowing balances at year end, maximum borrowings at month end
during the year and average cost for the periods presented:

12/31/2004
      12/31/2003
  12/31/2002Amount Outstanding - End of Period
      $    1,000
      $       967
      $    1,000Maximum Amount of Borrowings at Any Month End
During the Year
      $  25,732
      $  15,544
      $  11,300Year-to-Date Daily Average
      9,656
      2,364
      3,048Weighted Average Cost
      1.43%
      1.14%
      1.61%


LONG TERM BORROWINGS

The following presents
average volumes, rates, maturities, and re-pricing frequencies for long-term
debt:



Average Volume
    Average
       Rate
    Average   Maturity
    Repricing
       FrequencyFHLB Borrowings
    $ 69,399
    5.12%
    6 years
  
  FixedCorrespondent Debt
    8,676
    3.50%
    8 years
  
  VariableTrust Preferred Debt
    5,155
    5.14%
    8 years
  Variable


MATURITY DISTRIBUTION OF TIME DEPOSITS IN AMOUNTS OF $100,000 AND OVER

Deposits over $100,000
increased $17.6 million or 12% from 2003 to 2004.  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, 2004.



December 31(In Thousands)2004
    2003Amount
    Percent
    Amount
    PercentMaturing in:3 months or less
    $  
      59,566
    36.89%
    $   50,484
    35.09%Over 3 through 12
      months
    76,450
    47.34
    61,598
    42.82Over 12
      months
    25,474
    15.77
    31,797
    22.10Total
    $
      161,490
    100.00%
    $ 143,879
    100.00%=======
    =======
    ========
    ======




-16-

---

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

The following presents
the year-to-date daily average balance sheet and net interest income analysis
for First Citizens National Bank:



Summary - Average Condensed Balance
      Sheet and Net Interest Income AnalysisAverage
      Balances and Interest Rates(In
      Thousands)2004
    2003
    2002Average
      OutstandingBalance
    Interest
      Earned/Paid
    Average
       Yield/Rate
    Average
      OutstandingBalance
    Interest
      Earned/Paid
    Average
       Yield/Rate
    Average
      OutstandingBalance
    Interest
      Earned/Paid
    Average
       Yield/RateASSETSINTEREST EARNING
      ASSETS:Loans (1) (2) (3)
    $ 513,678
    $ 33,302
    6.48%
    $ 474,956
    $ 34,055
    7.17%
    $ 411,890
    $ 32,698
    7.94%Investment Securities:Taxable
    117,835
    4,169
    3.54%
    109,170
    3,656
    3.35%
    100,344
    4,678
    4.66%Exempt (4)
    38,064
    2,226
    5.85%
    37,223
    2,477
    6.65%
    28,421
    2,019
    7.10%Interest Earning Deposits
    732
    3
    0.41%
    547
    6
    1.10%
    2,521
    23
    0.91%Federal
      Funds Sold
    5,041
    74
    1.47%
    13,479
    154
    1.14%
    13,987
    238
    1.70%Total Interest Earning Assets
    $ 675,350
    $ 39,774
    5.89%
    $ 635,375
    $  40,348
    6.35%
    $ 557,163
    $  39,656
    7.12%NON-INTEREST EARNING
      ASSETS:Cash and Due From Banks
    $  
      15,835
    
    
    $  
      16,807
    
    
    $  
      14,355Bank Premises and Equipment
    22,293
    
    
    19,950
    
    
    16,522Other Assets
    33,332
    
    
    39,537
    
    
    28,778Total Assets
    $ 746,810
    
    
    $ 711,289
    
    
    $ 616,818========

    
    

    ========

    


    ========
  LIABILITIES AND
      SHAREHOLDERS' EQUITYINTEREST-BEARING
      LIABILITIES:Savings Deposits
    $ 181,164
    $ 
      1,288
    0.71%
    $ 168,149
    $ 
      1,287
    0.76%
    $ 146,844
    $ 
      1,922
    1.31%Time Deposits
    311,671
    7,348
    2.36%
    313,562
    8,333
    2.66%
    267,681
    8,465
    3.16%Federal Funds
      Purchased and Other
          Interest Bearing Liabilities
    117,316
    4,713
    4.02%
    105,634
    4,532
    4.29%
    98,192
    4,321
    4.40%Total Interest Bearing Liabilities
    $ 610,151
    $13,349
    2.19%
    $ 587,345
    $ 14,152
    2.41%
    $ 512,717
    $ 14,708
    2.87%NON-INTEREST
      BEARING LIABILITIES:Demand Deposits
    $  
      72,272
    
    
    
    
    $  
      62,836
    
    

    
    $  
      49,005Other Liabilities
    5,036
    
    
    
    
    4,780
    
    

    
    3,040Total Liabilities
    $
      687,459
    
    
    
    
    $
      654,961
    
    

    
    $
      564,762Shareholders' Equity
    $  
      59,351
    
    
    
    
    $  
      56,328
    
    

    
    52,056TOTAL LIABILITIES
      AND 
         SHAREHOLDERS' EQUITY
    $ 746,810
    
    
    
    
    $ 711,289
    
    
    
    
    $ 616,818========
    
    
    
    
    ========
    
    

    
    ========NET INTEREST INCOME
    
    $ 26,425
    
    
    $ 26,196
    
    
    $ 24,948======

    


    ======

    


    ======
  NET YIELD ON AVERAGE
      EARNING ASSETS
    
    
    3.91%
    
    
    4.12%
    
    
    4.48%=====

    


    =====

    


    =====_____________________
      (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.


Interest earning assets
at year-end total $675,350 thousand at an average rate of 5.89% in 2004,
$635,375 thousand at an average rate of 6.35% in 2003, and $557,163 thousand at
an average rate of 7.12% in 2002. 
Interest bearing liabilities at year end total $610 thousand at a cost
of 2.19% in 2004, $587 thousand at a rate of 2.41% in 2003 and $513 thousand at
a rate of 2.87% in 2002.  Trends of
increasing balances on the balance sheets coupled with decreasing rates
continued in 2004 from 2002 and 2003 until federal funds rates began rising in
the second half of 2004.  The increase
in rates is expected to result in higher loan yields and higher cost of funds
in 2005.

-17-

---

VOLUME/RATE
  ANALYSIS

The following table is
an analysis of the impact of the changes in balances and rates on interest
income and interest expense changes from 2004 to 2003 as well as from 2003 to
2002:

|                                                                                              | 2004 Compared
      to 2003 | 2003 Compared
      to 2002
|--------------------------------------------------------------------------------------------- | --------------------------- | ---------------------------
|                                                                                              | Due to Changes in:          |                            
|                                                                                              | AverageVolume               | AverageRate                
|                                                                                              | (In
      Thousands)       
|Interest Earned On:                                                                           |                             |                            
|Loans                                                                                         | $ 
      2,510              | $ (3,263)                  
|Taxable
      Investments                                                                     | 307                         | 206                        
|Tax Exempt Investment Securities                                                              | 49                          | (300)                      
|Interest Bearing Deposits with
      Other Banks                                              | 1                           | (4)                        
|Federal Funds Sold and
      Securities Purchased
            Under Agreement to Resell       | (124)                       | 44                         
|TOTAL INTEREST EARNING ASSETS                                                                 | $ 
      2,743              | $ (3,317)                  
|Interest Paid On:                                                                             |                             |                            
|Savings
      Deposits                                                                        | 93                          | (92)                       
|Time
      Deposits                                                                           | (45)                        | (940)                      
|Federal Funds Purchased and
      Securities Sold Under
              Agreement to Repurchase | 469                         | (288)                      
|TOTAL INTEREST BEARING LIABILITIES                                                            | 517                         | (1,320)                    
|NET INTEREST EARNINGS                                                                         | $ 2,226                     | $ (1,997)                  
|                                                                                              | ======                      | ======                     

The above table
indicates that growth is the driver of increased net interest earnings in 2004
and the impact of the growth is diluted by trends in yields on earning assets
and cost of funds.  Margin pressures
continued in 2004 even when the federal funds rate began increasing in June
2004.  As long-term rates have not
followed the trend of rising short-term rates, the yield curve has flattened
and continues to shrink spreads.  Thus,
the change in rates is a negative factor for most categories in the above
table.

LOAN
PORTFOLIO ANALYSIS

The
  following compares the loan portfolio mix as of year-end for the last five
  years:

COMPOSITION OF LOANSDecember 31(In
    Thousands)2004
2003
2002
2001
2000Real Estate Loans:Construction
$   99,028
$   71,599
$   57,758
$   36,862
$   34,195Mortgage
321,957
305,077
285,759
225,743
197,040Commercial, Financial and 
     Agricultural Loans
72,330
70,658
67,732
64,496
63,703Installment Loans to Individuals
38,550
37,401
39,089
39,200
42,754Other Loans
4,147
3,372
3,142
2,725
3,267TOTAL LOANS
$ 536,012
$ 488,107
$ 453,480
$ 369,026
$ 340,959======
=======
=======
=======
=======


* Includes mortgage loans to be sold in secondary market.
Secondary market mortgages total $1.3 million, $2.4 million, $5.9 million, $4.0 million
and $1.2 million for 2004, 2003, 2003, 2001 and 2000, respectively.

-18-

---

CHANGES IN LOAN CATEGORIES

Loan growth was 9.81%
for the year ended December 31, 2004. 
The following details the breakdown of that growth by category for 2004
(in thousands):

Loan Category
    
    Increase  (Decrease)
    Percent   ChangeReal Estate Loans:Construction
    $ 
      27,429
    38.31 %Mortgage
    16,880
    5.53 %Commercial, Financial and
           Agricultural
    1,672
    2.37 %Installment Loans to Individuals
    1,149
    3.07 %Other Loans
    775
    22.98 %TOTAL LOANS
    $ 
      47,905
    9.81 %=======
    ========


Total loans at December
31, 2004 were $536 million compared to $488 million at December 31, 2003, and
$453 million at December 31, 2002. 
Loans for this discussion include loans that are sold in the secondary
mortgage market.  Loans to be sold in
the secondary mortgage market are separately classified in the Consolidated
Financial Statements included in Item 8 of this report.  Secondary market mortgages total $1.3
million, $2.4 million, $5.9 million, $4.0 million and $1.2 million for 2004,
2003, 2002, 2001 and 2000, respectively. 
See also Notes 4, 5 and 6 of the Consolidated Financial Statements
included in Item 8 of this report.  Interest
and fees earned on secondary mortgage loans are included in interest and fees
on loans as discussed in this report. Net loan growth in 2004 to 2003 consisted
primarily of growth centered in Real estate loan category of $44 million or
11.76%.  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 2003 was 7.64% including 9.7% growth in real estate loans.  Loan growth in 2004 and 2003 is a result
primarily of growth in the newer markets served.  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 $421 million or
78.5 percent of total portfolio volume recorded in real estate loans; $72
million or 13.4 percent in Commercial and Agricultural loans and $38 million or
7 percent of total portfolio in installment loans to consumers.  Portfolio quality remains strong with the
ratio of net charge offs to average net loans outstanding for the years of
2004, 2003, and 2002 at 0.16%, 0.08%, and 0.20%.  Non performing assets as a percent of total loans plus foreclosed
property at current year end represent 0.51% compared to 0.39% and 1.24% at
year end 2003 and 2002, respectively. 
The loan loss reserve as a percent of loans is 1.16% and is consistent
with the 1.15-1.25 percent range maintained over the past five years.  Overall, Loan demand over the next twelve months
is expected to continue to grow from 5-10 percent based on the expected
economic conditions of markets served and strategic objectives to grow and
maintain existing customer bases in markets served.



Unemployment rates for
year-end 2004, 2003 and 2002 in counties in which Bancshares does business are
as follows:

2004
        2003
        2002Dyer
        5.8%
        6.4%
        5.8%Lauderdale
        10.0%
        13.7%
        9.1%Obion
        5.9%
        7.4%
        5.2%Shelby
        6.2%
        5.4%
        4.5%Tipton
        6.5%
        7.0%
        5.8%Weakley
        5.5%
        7.5%
        6.1%Fayette
        12.0%
        N/A
        N/A


Unemployment rate for the state of Tennessee as of the end of
each quarter of 2004 were 5.0%, 4.8%, 5.1%, and 4.8%, consecutively.

The following data
details the internally classified loans by category as of December 31, 2004 (in
thousands):

Category
Total      
    Outstanding


    
Internally Classified
    Problem Loans% of CategoryResidential Real Estate
$   
172,369


    
$ 4,574
    2.65%Home Equity Lines
23,475


    
288
    1.23%Ag. Real Estate
32,703


    
214
    0.65%Commercial Real Estate
183,406


    
2,380
    1.30%Commercial Other
50,124


    
760
    1.52%Installment Loans


    
36,303
311
    0.86%




Internally classified
loans are those loans that have certain characteristics or circumstances that
warrant additional monitoring of credit quality and may require specific
reserve allocations as determined in accordance with SFAS No. 114.



Concentrations of credit
are defined in accordance with regulatory guidelines as 25 percent of gross
capital of the bank or $18,449,000 as of year-end 2004.  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.  Real estate loans account for approximately 78.5 percent of the
total loan portfolio.  Within real
estate loans, residential mortgage loans (including residential construction)
are the largest category comprising 38 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    PercentageAgricultural
  $   
32,703
6.10%
20.00%Land Acquisition
Development & 
    Commercial Construction
  46,309
8.64%
10.00%Commercial Permanent
  105,770
19.73%
30.00%Residential Construction
  27,080
5.05%
10.00%Residential Mortgage
  160,116
29.87%
40.00%


-19-

---

REPOSSESSED REAL PROPERTY:

The book value of
repossessed real property held by Bancshares at December 31, 2004 was $337
thousand compared to $535 thousand in 2003. 
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.

POLICY GUIDELINES

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 (LTV) limits, maximum loan amount, and 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)Securities*
    10
      Years
    80% (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%.** New
      farm equipment can be amortized over seven years.


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.



Bancshares' policy is
that no real estate loan will be made (except in accordance with 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%1-4
        Family Residential
      80%Improved Property
      80%Owner-occupied 1-4
        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 Years1-4
        Family Residential
      20 YearsImproved Property/Farmland
      20 YearsOwner-occupied 1-4
        Family and Home Equity*
      20 Years*
        Residential mortgages on 30-year amortizations are typically sold in the
        secondary market.


AVERAGE LOAN YIELDS

The average yield on loans of the
subsidiary bank for
the years indicated are as follows:

2004
    6.48%2003
    7.17%2002
    7.93%2001
    9.22%2000
    9.57%


The aggregate amount of
unused guarantees, commitments to extend credit and standby letters of credit
was approximately $94 million at year end. 
Other information in reference to commitments and standby letter of
credits is included in Note 18 of the Consolidated Financial Statements
included in Item 8 of this report.

LOAN
MATURITIES

Due in One
      Year or Less
    Due After One
      Year
      but Within     Five Years
    Due After Five Years(In
      Thousands)Real Estate
    $ 
      103,028
    $  228,902
    $  
      89,055Commercial, Financial and Agricultural
    40,387
    29,584
    2,359All Other Loans
    13,556
    28,746
    395Totals
    $  156,971
    $  287,232
    $   91,809=======
    =======
    =======


Loans with Maturities After One Year for which:
                                                                                                       
  (In Thousands)
Interest Rates are Fixed or Predetermined                                    
  $255,320
Interest Rates are Floating or Adjustable                                       123,721

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
(with a normal yield curve) 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. Approximately $300 million or
56 percent of loans will re-price immediately or over the next twelve months,
while $282 million or 53% of outstanding loans will mature after one year, but
within five years.  Only $92 million or approximately
17% of outstanding loans bear maturities of greater than five years.

-21-

---

NON-PERFORMING LOANS

Non-accrual, Restructured and Past Due Loans and
Foreclosed PropertiesDecember 31,(In Thousands)2004
2003
2002
2001
2000Non-accrual Loans
$  1,581
$  1,174
$  2,216
$  1,600
$  1,389Restructured Loans
--
--
--
--
--Other Real Estate
337
535
1,730
1,730
318Other Repossessed Assets
2
--
--
--
--Loans and Leases 90 Days Past Due and
Still 
    Accruing Interest
798
223
1,701
1,228
1,621Total
Non-Performing Loans and Other Assets
$  2,718
$  1,932
$  5,647
$  4,558
$  3,328======
======
=======
======
======Non-Performing Assets as a Percent of
Loans and Leases
    Plus Foreclosed Property at End of Year
0.51%
0.39%
1.25%
1.23%
0.56%Allowance as a Percent of:Non-Performing Assets
229.54%
316.97%
99.21%
88.08%
194.06%Gross Loans
1.16%
1.25%
1.24%
1.08%
1.10%Addition to Reserve as a
Percent of
Charge-Offs
90.44%
237.80%
179.00%
118.10%
103.29%Loans and Leases 90 days Past
Due as a Percent of Loans
      and leases at year end
0.44%
0.04%
0.37%
0.33%
0.47%Recoveries as a Percent of Gross Charge-Offs
20.66%
55.38%
51.34%
30.98%
19.69%


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 assets as a percent of total
loan portfolio at December 31, 2004, 2003 and 2002, were $2.7 million or 0.51%,
$1.9 million or .39%, $5.7 million or 1.25% of total loans plus foreclosed
property, respectively. Loans and leases 90 days past due and still accruing interest
total $798 thousand as of year-end 2004 compared to $223 thousand in 2003 and
$1.7 million in 2002.  The allowance for
loan loss as a percent of non-performing assets was 230%, 317%, and 99%, as of
December 31, 2004, 2003, and 2002, respectively.  The allowance as a percent of gross loans for the same time
periods was 1.16%, 1.25% and 1.24%. 
Although a slightly negative trend exists in comparing 2004 to 2003,
overall portfolio quality remains strong and the trend going forward is not
expected to continue at a materially negative direction.   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
past 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 of 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 judgment
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, 2004 if all loans reported as non-accrual had been current
in accordance with their original terms and had been outstanding throughout the
period is $94,000 compared to $84,000 for the same period in 2003.  Interest income on loans reported as ninety
days past due and on interest accrual status was $69,000 for 2004 and $65,000
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 Internally Classified 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 31,2004
2003
2002
2001
2000Average Net Loans Outstanding
$  513,678
$  411,890
$  359,296
$  330,468
$  323,047Balance of Reserve for Loan Losses at Beginning of Period
6,124
5,653
4,015
3,763
3,718Loan Charge-Offs
(1,036)
(919)
(1,743)
(2,017)
(1,701)Recovery of Loans Previously Charged Off
214
509
895
625
335Net Loans Charged Off
(822)
(410)
(848)
(1,392)
(1,366)Additions to Reserve Charged to Expense
937
975
1,518
1,644
1,411Changes incident to Mergers
-
(94)
968
--
--Balance at End of Period
$     6,239
$     6,124
$     5,653
$     4,015
$     3,763======
======
======
======
======Ratio of Net Charge-Offs to Average Net Loans Outstanding
0.16%
0.08%
0.20%
0.38%
0.40%


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 $1,036 thousand, (2) recovery of loans previously
charged off $214 thousand, and (3) additions to reserves totaling $937
thousand.  This compares to charge-offs
of $919 thousand, recoveries of $509 thousand and additions to reserve from
current earnings of $975 thousand in 2003.

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 contractual
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 banks legal lending limit are included in the
review.



In determining probable
losses on loans, management heavily weighs historical losses and how soon and
accurately management was able to identify such losses.  If significant differences are evident, then
justification is addressed.  If probable
losses are detected then appropriate assets are identified as impaired,
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 the following 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
adjusted to reflect the decline, if any, in its realizable value.  Such adjustments are charged directly to
expense.



The following table
identifies charge-offs and recoveries by category for the years presented:

Year Ending December 31,
(In Thousands)Charge-Offs:


    
2004
2003
    2002
2001
2000Domestic:Commercial, Financial
& Agricultural
$       
(459)
$     (139)
$    
(188)
$  
 (1,537)
$    (761)Real Estate - Construction
(115)
--
--
--
--Real Estate - Mortgage
(138)
(398)
(803)
(480)
(340)Installment Loans to
Individuals
& Credit Cards
(324)
(382)
(752)
(795)
(600)Total Charge-offs
$    
(1,036)
$     (919)
$  (1,743)
$   (2,017)
$   (1,701)Recoveries:Domestic:Commercial, Financial and Agricultural
$     66
$     142
$      
91
$      336
$        52Real Estate - Construction
3
--
--
--
--Real Estate - Mortgage
37
237
565
95
39Installment Loans to
Individuals
& Credit Cards
108
130
239
194
244Total Recoveries
214
509
895
625
335Net Charge-offs
$    (822)
$    (410)
$    (848)
$ (1,392)
($   1,366)=======
=======
=======
=======
=======


-24-

---

INVESTMENT SECURITIES ANALYSIS

The following presents
the composition of securities for the last five years:

December 31,
(In Thousands)2004
2003
2002
2001
2000U.S. Treasury & Government Agencies
$  101,105
$  102,117
$  101,415
$   74,335
$   82,707State & Political Subdivisions
39,352
38,719
35,906
17,798
13,959All Others
6,680
8,844
5,551
12,141
6,428TOTALS
$ 147,137
$ 149,680
$ 142,872
$ 104,274
$ 103,094=======
=======
=======
=======
======


MATURITY AND YIELD ON SECURITIES - DECEMBER 31, 2004

The following presents contractual maturities and yields by category for debt
securities:

Maturing
      Within One Year
    Maturing After One
      Year But Within Five Years
    Maturing After Five
       Years
      But WithinTen Years
    Maturing
      After Ten YearsAmount
    Yield
    Amount
    Yield
    Amount
    Yield
    Amount
    Yield
    TotalsU.S. Treasury and Government Agencies
    $     
      -
    0.00%
    $ 24,577
    3.37%
    $ 39,565
    3.84%
    $  36,964
    3.04%
    $ 101,106State and Political Subdivisions*
    166
    7.24
    7,210
    5.39
    13,485
    7.09
    18,490
    7.51
    39,351All Others
    -
    0.00
    1,065
    6.67
    5,571
    6.08
    --
    0.00
    6,636Total debt securities
    $ 166
    
    $ 32,852
    
    $ 58,621
    
    $ 55,454
    
    $ 147,093Equity securities
    
    
    
    
    
    
    
    
    44Total
    
    
    
    
    
    
    
    
    $147,137========________________________________
      * Yields on tax free investments are stated on a tax-equivalent basis
      calculated using a federal statutory rate of 34 percent.


HELD TO MATURITY AND AVAILABLE FOR SALE SECURITIES - DECEMBER 31, 2004

Held to Maturity
Available for Sale(In Thousands)Amortized Cost
Fair Value
Amortized Cost
Fair ValueU.S. Treasury Securities
$        -
$        -
$      
  534
$      
 531U.S. Government Agencies and
Corporation Obligations
-
-
101,229
100,574Securities Issued by States and
Political Subdivisions in the
U.S.:Taxable Securities
-
-
-
-Tax-exempt
Securities
785
810
36,626
38,567U.S. Securities:Other
Debt Securities
-
-
6,364
6,636Equity Securities
-
-
10
44Total
$    785
$    810
$ 144,763
$ 146,352=====
======
=======
=======


(1) In addition to
amounts presented above, the Bank also has $5.1 million in Federal Home Loan
Bank and Federal Reserve Bank stock, recorded at cost.  FHLB and FRB stocks are listed as a separate
line item on the Consolidated Balance Sheets included in Item 8 of this report.



(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 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 2004 had a fair market value of $113 million.  Total held-to-maturity and
available-for-sale investments at December 31, 2004, 2003 and 2002 were $147
million, $150 million, and $143 million. 
Contractual maturities within one year are $166,000 as of December 31,
2004 compared to $11 million or 8% of portfolio in 2003.  The average expected life is 4.2 years, 4.43
years, and 5.75 years for 2004, 2003 and 2002, respectively.  A review of peer data indicates the
portfolio yield has been less than peers as a result of above average
maturities, pay downs, and calls occurring in years 2003 and 2002 but in 2004,
investment yields are in line or slightly ahead of peer.  Tax Equivalent Yield on Investment
Securities was 4.09 percent compared to peer average of 4.05 percent as of
September 30, 2004, the most recent peer data available.



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 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 bank's investment portfolios are
managed through a portfolio advisory agreement with FTN Financial.

-25-

---

The company classifies
investments by intent into trading, available-for-sale and held-to-maturity
categories in accordance with generally accepted accounting principles.  The company held no securities in the
trading category for any period presented in this report and does not expect to
in 2005.  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.  U. S. Treasuries and Agencies
account for 69 percent of the investment portfolio with mortgage related investments
comprising the largest percentage of this category and approximately 50 percent
of total portfolio.  Precisely defined
mortgage related investments produce consistent cash flows and enable the
Company to defend against rising interest rates.  The Statement of Cash Flows included in Item 8 of this report
reflect above average maturities, pay-downs and calls in the investment
portfolio over the last three years. 
Current strategies are to promote a less option-oriented portfolio
structure accomplished through decreasing allocations to CMOs and New Issue
Callable Agencies and increasing allocations to bullet agency and municipal
sectors.



Also purchased were
certain derivative financial instruments as described in Note 3 of the
Consolidated Financial Statements, primarily to hedge interest rate
fluctuations.



The following table
allocates by category unrealized Gains/Losses within the available-for-sale
portfolio as of December 31, 2004 (in thousands):



UnrealizedGains
    Losses
    NetU.S. Treasury Securities and Obligations of 
            U.S. Government Agencies and Corporations
    $   
      232
    $    
      (890)
    $  
      (658)Obligations of States and Political
      Subdivisions
    2,058
    (117)
    1,941All Others
    327
    (21)
    306Totals
    $ 2,617
    $ 
      (1,028)
    $ 
      1,589======
    =======
    ======


-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 Rate Risk Management" subsection  2, 18 & 19
to the Consolidated Financial Statements.

AGGREGATE CONTRACTUAL OBLIGATIONS
AND OFF BALANCE SHEET ARRANGEMENTS

Contractual Obligations are due as follows:

Total
      < 1 Year
      1-3 Years
      3-5 Years
      > 5 YearsUnfunded Loan
        Commitments
      $ 89,266
      $
        89,266
      $     
        -
      $     
        -
      $     
        -Standby Letters of
        Credit
      5,158
      5,158
      -
      -
      -Long Term Debt*
      84,481
      528
      1,061
      11,120
      71,772Capital Lease Obligations
      --
      --
      --
      --
      --Operating Leases
      891
      469
      397
      25
      --Purchase Obligations
      --
      --
      --
      --
      --Other Long Term Liabilities
      --
      --
      --
      --
      --Total
      $ 85,372
      $ 997
      $
        1,458
      $
        11,145
      $
        71,772======
      ====
      ======
      ======
      ======


* Long-term debt is presented as principal only excluding
interest.

Information regarding
executive employee contracts is incorporated herein by reference to the Proxy
Statement dated March 18, 2005.



Except for unfunded loan
commitments and standby letters of credit, First Citizens does not materially
engage in off balance sheet activities and does not anticipate material changes
in volume going forward.

Notes 13 and 18 of the
Consolidated Financial Statements included in Item 8 of this report reflect
long term obligations and off balance sheet risk.



LIQUIDITY AND INTEREST
RATE SENSITIVITY



Liquidity is managed in
a manner to ensure the availability of ample funding to satisfy loan demand,
fund investment opportunities, and large deposit withdrawals.  The primary funding sources for Bancshares
includes customer core deposits, Federal Home Loan Bank borrowings, as well as
correspondent bank and other borrowings. 
Customer based sources accounted for 83.2 percent of funding for the
current year versus 83.1 percent for the prior year.  Borrowed funds from the Federal Home Loan Bank amounted to 9.9
percent ($71 million) in 2004 compared to 10.32 percent ($69 million) of total
funding for 2003.  The Bank had
additional borrowing capacity of approximately $18 million with Federal Home
Loan Bank at year-end 2004.  As of
December 31, 2004, First Citizens held $23 million in short term Certificates
of Deposit from the State of Tennessee. At year-end 2004, First Citizens held
$21 million in brokered Certificates of Deposit, representing 3.5% of total
deposits.  This compares to $15 million
or 2.6% of total deposits at year-end 2003.



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, federal funds purchased, securities sold under agreements
to repurchase, Brokered certificates of deposit and others.  Bancshares has a line of credit for $13
million earmarked for acquisitions and other financial needs of the holding
company with approximately $4.4 million available at year-end 2004.  Bancshares has a crisis contingency
liquidity plan to defend against any material downturn in the liquidity
position.



Loan growth was
approximately 10 percent compared to deposit growth of 5.67% in 2004.  During second and third quarters 2004, loan
growth was primarily funded through short-term borrowings with
correspondents.  Most of the 5.67%
deposit growth occurred during fourth quarter of 2004 as a result of successful
implementation of strategic plans to grow deposits coupled with typical
seasonal increases in deposits.  The
trend of loan growth outpacing deposit growth is expected to continue in 2005
and will exert pressure on liquidity especially during seasonal fluctuations of
deposits.  Management will continue to
focus strategic activities on growing deposits as well as carefully monitoring
and managing liquidity levels and sources.



When evaluating
liquidity, comparison is made between funding needs and the current level of
liquidity, plus liquidity that would likely be available from other sources.
This comparison should determine whether funds management practices are
adequate. Management should be able to manage unplanned changes in funding
sources, as well as react to changes in market conditions that could hinder the
bank's ability to quickly liquidate assets with minimal loss.  Funds management practices should ensure
that Bancshares does not maintain liquidity 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 liquidity position of First Citizens National Bank as of December 31,
2004 and 2003 in comparison to the OCC Liquidity Benchmarks.

OCC Liquidity Benchmark
      Actual 12/31/2004
      Actual 12/31/2003Short Term Liabilities/Total Assets > 20%
    
    16.41%
    15.63%On Hand Liquidity to Total Liabilities < 8%
  
  7.91%
  11.05%Loan to Deposits < 80%
  
  90.39%
  86.94%Wholesale Funds/Total Sources > 15%
  
  16.53%
  14.92%Non Core Funding Dependence > 20%
  
  51.52%
  59.29%


-27-

---



There are no known
trends or uncertainties that are likely to have a material effect on
Bancshares' liquidity or capital resources. There currently exist no
recommendations by regulatory authorities, which, if implemented, would have
such an effect.  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 key to measurement of the interest sensitivity gap. Minimizing this gap is
a continual challenge and a primary objective of the asset/liability management
program.



The following condensed
gap report provides an analysis of interest rate sensitivity of earning assets
and costing liabilities. Interest rate risk is separated and analyzed according
to the following categories of risk: (1) re-pricing (2) yield curve (3) option
risk (4) price risk and (5) basis risk. Trading assets are utilized
infrequently and are addressed in the investment policy.  Any unfavorable trends reflected in interest
rate margins will cause an immediate adjustment to the bank's gap position or
asset/liability management strategies. 
The following data schedule reflects a summary of Bancshares' interest
rate risk using simulations. The projected 12-month exposure is based on 5
different rate movements (flat, rising, or declining).  In a rising rate cycle, non-maturity
deposits will not re-price until a 100 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 2004
(In Thousands)

Tier
Capital                       
  $52,684

Projected 12 Month Exposure

Net InterestIncome Levels
      Rate Movesin Basis Pts.
      CurrentPosition
      PossibleScenarios
      Variance
      % of Net IntIncome
      PolicyStandard %Declining 2
      (200)
      $ 24,282
      $ 23,788
      ($  494)
      -2.03%
      20.00%Declining 1
      (100)
      24,282
      24,448
      166
      0.68%
      10.00%Most Likely-Base
      0
      24,282
      24,282
      0
      0.00%
      0.00%Rising 1
      100
      24,282
      24,037
      ($   245)
      -1.01%
      -10.00%Rising 2
      200
      24,282
      22,914
      ($ 1,368)
      -5.63%
      -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.



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
-----------------------------------
12/31/04
(In Thousands)

VARIABLEBALANCE
<
  3 MON
  YEARSBAL
3-12
 MONTHSBAL
1-3
  YEARSBAL
3-5
  YEARS BAL
5-10
  YEARSBAL
10+BAL
NON
  SENSITIVEBAL
TOTALAssets:Total Cash and Due From
$               
-
$               
-
$               
-
$               
-
$               
-
$               
-
$               
-
$     18,384
$      18,384Total Investments
-
7,319
26,862
39,800
25,980
37,993
12,665
1,574
152,193Total Fed Funds Sold
-
15,002
-
-
-
-
-
-
15,002Total Net Loans
179,870
133,202
166,295
161,430
49,985
12,656
12,444
(6,239)
529,773Total Other Assets
-
-
-
-
-
-
-
57,852
57,852Total Assets
$    179,080
$    155,523
$    193,157
$    201,230
$      
75,965
$      50,649
$      
25,109
$    71,571
$    773,204=========
=========
=========
=========
=========
=========
=========
=========
=========Liabilities:Total Demand
$               
-
$               
-
$               
-
$               
-
$               
-
$               
-
$               
-
$     74,596
$      74,596Total Savings
77,037
-
27,296
47,796
20,501
97,537
-
-
193,130Total Time
-
100,432
151,640
55,693
15,369
1,522
-
-
324,656Total Deposits
77,037
100,432
178,936
103,489
35,870
99,059
-
74,596
592,382Total Borrowings
37,227
39,189
4,077
775
12,921
59,130
-
-
116,092Other Liabilities
-
-
-
-
-
-
-
3,522
3,522Total Other Liabilities
37,227
39,189
4,077
775
12,921
59,130
-
3,522
119,614Total Liabilities
114,264
139,621
183,013
104,264
48,791
158,189
-
78,118
711,996Total Equity
-
-
-
-
-
-
-
61,208
61,208Total Liability/Equity
$ 114,264
$ 139,621
$ 183,013
$ 104,264
$     
48,791
$ 158,189
$               
-
$ 139,326
$ 773,204======
======
======
======
======
======
======
======
======Period Gap
65,606
15,902
10,144
96,966
27,174
(107,540)
25,109
(67,755)
-Cumulative Gap
65,606
81,508
91,652
188,618
215,792
108,252
133,361
65,606
-RSA/RSL
157.42%
111.39%
105.54%
193.00%
155.69%
32.02%
0.00%
51.37%
0.00%


-29-

---

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
TOTALAssets:Total Cash and Due From
$               
-
$               
-
$               
-
$               
-
$               
-
$               
-
$               
-
$     17,500
$     17,500Total Investments
-
8,449
15,765
55,764
32,229
33,092
6,597
2,695
154,591Total Fed Funds Sold
-
16,777
-
-
-
-
-
-
16,777Total Net Loans
159,044
133,758
118,555
62,639
12,786
1,221
104
(6,124)
481,983Total Other Assets
-
-
-
-
-
-
-
55,253
55,253Total Assets
$    159,044
$    158,984
$    134,320
$    118,403
$      
45,015
$      34,313
$       
6,701
$    69,324
$    726,104=========
=========
=========
=========
=========
=========
=========
=========
=========Liabilities:Total Demand
$               
-
$               
-
$               
-
$               
-
$               
-
$               
-
$               
-
$     68,031
$      68,031Total Savings
63,836
-
27,245
47,487
20,240
20,240
-
-
179,048Total Time
-
94,409
131,925
53,348
32,166
1,683
-
-
313,531Total Deposits
63,836
94,409
159,170
100,835
52,406
21,923
-
68,031
560,610Total Borrowings
25,921
3,177
5,413
483
8,145
59,856
-
-
102,995Other Liabilities
-
-
-
-
-
-
-
4,553
4,553Total Other Liabilities
25,921
3,177
5,413
483
8,145
59,856
-
4,553
107,548Total Liabilities
89,757
97,586
164,583
101,318
60,551
81,779
-
72,584
668,158Total Equity
-
-
-
-
-
-
-
57,946
57,946Total Liability/Equity
$   
89,757
$   
97,586
$ 164,583
$ 101,318
$     
60,551
$   81,779
$               
-
$ 130,530
$ 726,104======
======
======
======
======
======
======
======
======Period Gap
69,287
61,398
(30,263)
17,085
(15,536)
(47,466)
6,701
(61,206)
-Cumulative Gap
69,287
130,685
100,422
117,507
101,971
54,505
61,206
-
-RSA/RSL
177.19%
162.92%
81.61%
116.86%
74.34%
41.96%
0.00%
53.11%
0.00%


-30-

---

NOTES TO THE GAP REPORT



The gap report reflects
the interest sensitivity positions during a flat rate environment.  Time frames could change depending on
whether rates rise or fall.

Re-pricing over-rides
maturities in various time frames.

Demand deposits,
considered to be core, are placed in the last time frame due to lack of
interest sensitivity.

Savings accounts, also
considered core, are split into time frames greater than 12 months.  In a flat rate environment, savings accounts
tend not to re-price or liquidate and become price sensitive only after a major
increase in the 6-month CD rate.  These
accounts are placed in this category instead of the variable position due to
history and characteristics.

Simulations are utilized
to reflect the impact of multiple rate scenarios on net interest income.  Decisions should be made that increase net
interest income, while always considering the impact on interest rate risk.  Overall, the bank manages the gap between
rate sensitive liabilities to expand and contract with the rate cycle
phase.  The bank's Asset/Liability
Management Committee (ALCO) is responsible for implementing and monitoring
procedures to improve net interest income through volume increases and better
pricing techniques. Long term fixed rate positions will be held to a minimum by
increasing variable rate loans.  The
over 5 year fixed rate loans should be held to less than 25% of assets, unless
they are funded with Federal Home Loan Bank matched funds.  These maximum limits are the high points and
the ALCO will strive to keep the amount below this point.

> Subsidiaries as well as
> the Parent Company will adhere to providing above average margins and reviewing
> the various material risks.  The Product
> Development Committee will review new products and services for risk.

1. Bancshares expects to
benefit from a steady rate increase. 
First Citizens' Liquidity could be negatively impacted should interest
rates drop prompting an increase in loan demand.  Although rates are not expected to decrease in the near term,
adequate lines of credit are available to handle liquidity needs should this
occur.

The
following presents return on equity and assets for the years presented:

2004
2003
2002
2001
2000Percentage of Net Income to:Average Total Assets
1.08%
1.09%
1.27%
1.10%
0.95%Average Shareholders' Equity
13.56%
13.88%
15.05%
11.91%
10.16%Percentage of Dividends Declaredto Net Income
50.83%
50.49%
48.66%
64.31%
81.09%Percentage of Average
Equityto Average Assets
7.95%
7.91%
8.43%
9.29%
9.26%


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

|2004  | 2003  | 2002  | 2001  | 2000 
|----- | ----- | ----- | ----- | -----
|7.92% | 7.86% | 9.25% | 9.35% | 9.24%



Total capital increased
5.63% to $61.2 million during 2004 from $58 million as of December 31,
2003.  Growth in capital during 2004 is
from undistributed net income. 
Adjustments to capital resulting from changes in market value of
available for sale securities and cash flow hedge, quantified as comprehensive
income, are made quarterly and diluted the growth in 2004 by $523
thousand.  Bancshares has historically
maintained capital in excess of minimum levels established by regulation and
reflects continuous improvement when comparing previous years.  The risk based capital ratio of 10.86
percent at December 31, 2004 was significantly in excess of the 8 percent
mandated by regulation.  This ratio has
been maintained in the 10-12 percent range over the past three years.  Total capital as a percentage of total
assets was 7.92%, 7.86% and 9.25% at December 31, 2004, 2003 and 2002.  The decrease in the total capital to total
asset percentage is a direct result of asset growth over last three years
subsequent to the Munford Union Bank acquisition and the investment of $5
million of capital towards the purchase price of Munford Union Bank.



Risk-based capital
focuses primarily on broad categories of credit risk and incorporates elements
of transfer, interest rate and market risks. The calculation of risk-based
capital ratio is accomplished by dividing qualifying capital by weighted risk
assets in accordance with financial institution regulatory guidelines.  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 shareholders'
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 payout
ratio is 50.83 percent in 2004 compared to 50.49 percent and 48.66 percent for
the prior two years.  The projected
payout ratio for 2005 is in the range of 47-50 percent.  Dividend payout for Southeast Bank Group for
2004 was 41.43%.  The dividend yield in
2004 assuming a $31.00 market price is 4.07 percent compared to 3.92 percent in
2003.  The dividend yield is well in
excess of the Southeast Bank Group peer average of 2.50-2.60 percent the last
two years.  As of year-end 2004, there
are approximately $4.2 million of retained earnings available for the payment
of future dividends from First Citizens National Bank to Bancshares.  Banking regulations require certain capital
levels to be maintained and may limit 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.



Bancshares has
repurchased 67,760 shares of its common stock and the treasury stock has
weighted average cost basis of $24.02 per share.  Approximately 6,600 treasury shares were repurchased during 2004
at a weighted average cost of $29.33 per share.  Also, 630 shares of treasury stock were sold in 2004 for $31.00
per share.  In recent periods, management
has determined to not seek shares to repurchase, encouraging interested buyers
to deal directly with those shareholders wishing to sell.  There are no publicly announced plans or
programs to repurchase shares in place during the periods presented.

-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
      Milan, Tennessee
      Paris, Tennessee
      Trenton, Tennessee
      Union City, Tennessee


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





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, 2004 and 2003, and the related consolidated statements of income,
comprehensive income, stockholders' equity, and cash flows for each of the
three years ended December 31, 2004. 
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 the standards
of the Public Company Accounting Oversight Board (United States).  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, 2004 and
2003, and their results of operations and cash flows for the three years ended
December 31, 2004, in conformity with accounting principles generally accepted
in the United States of America.





/s/ CARMICHAEL, DUNN, CRESWELL & SPARKS PLLC

Dyersburg, Tennessee

February
3, 2005



**Carmichael,
Dunn, Creswell & Sparks PLLC is registered with the PCAOB under its legal
name:  Dunn, Creswell, Sparks, Smith,
Horne & Downing PLLC**





-32-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS 
DECEMBER 31, 2004 AND 2003

2004

2003(In Thousands)ASSETSCash and Due From Banks
$            18,384

$            17,500Federal Funds Sold
15,002

16,777Cash and Cash Equivalents
33,386

34,277Investment SecuritiesHeld to
Maturity - Amortized Cost - Fair Value of $810 at December 31, 2004
       and $861 at December 31, 2003
785

825Available
for Sale, Market
146,352

148,855Loans (including unearned income of
$350 and $120 as of December 31, 2004
      and 2003, respectively)
534,682

485,713Less: Allowance for loan losses
6,239

6,124Net Loans
528,443

479,589Loans Held for Sale
1,330

2,394Federal Home Loan Bank and Federal
Reserve Bank stocks, at Cost
5,056

4,911Premises and Equipment
23,587

21,738Accrued Interest Receivable
4,559

4,160Goodwill
11,825

12,218Other Intangible Assets
625

710Other Real Estate
337

535Other Assets
16,919

15,892TOTAL ASSETS
$        773,204

$        726,104========

========LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:DepositsDemand
$             74,596

$             68,031Time
324,656

313,531Savings
193,130

179,048Total Deposits
592,382

560,610Securities Sold Under Agreements to
Repurchase
30,611

19,681Federal Funds Purchased and Other Short
Term Borrowing
1,000

-Long- term Debt
84,481

83,314Other Liabilities
3,522

4,553TOTAL LIABILITIES
711,996

668,158Shareholders' Equity:Common Stock, No
Par Value - 10,000,000 Authorized; 3,717,593 Issuedand
Outstanding at December 31, 2004 and 3,717,593 Issued andOutstanding at December 31, 2003
3,718

3,718Surplus
15,331

15,331Retained Earnings
43,001

39,043Accumulated Other Comprehensive
Income
785

1,308Total
Common Stock and Retained Earnings
62,835

59,400Less - 67,760 Treasury Shares, at Cost at
December 31, 2004 and 61,825
     Shares at Cost at December 31, 2003
1,627

1,454TOTAL
SHAREHOLDERS' EQUITY
61,208

57,946TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$  773,204

$   726,104==========

=========


-33-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

|                                                          | 2004                                 |  | 2003              |  | 2002             
|--------------------------------------------------------- | ------------------------------------ |  | ----------------- |  | -----------------
|Interest Income                                           | (In Thousands Except Per Share Data)
|Interest and Fees on
      Loans                          | $   
      33,302                    |  | $   
      34,055 |  | $   
      32,698
|Interest and Dividends on
      Investment Securities:    |                                      |  |                   |  |                  
|Taxable                                                   | 3,872                                |  | 3,383             |  | 4,407            
|Tax-exempt                                                | 1,469                                |  | 1,635             |  | 1,333            
|Dividends                                                 | 297                                  |  | 273               |  | 271              
|Other Interest Income                                     | 77                                   |  | 160               |  | 261              
|Total Interest Income                                     | 39,017                               |  | 39,506            |  | 38,970           
|                                                          |                                      |  |                   |  |                  
|Interest Expense                                          |                                      |  |                   |  |                  
|Interest on Deposits                                      | 8,636                                |  | 9,620             |  | 10,387           
|Interest on Long-term
      Debt                          | 4,247                                |  | 4,140             |  | 3,844            
|Other Interest Expense                                    | 466                                  |  | 392               |  | 477              
|Total Interest Expense                                    | 13,349                               |  | 14,152            |  | 14,708           
|Net Interest Income                                       | 25,668                               |  | 25,354            |  | 24,262           
|Provision for Loan
      Losses                           | 937                                  |  | 975               |  | 1,518            
|Net Interest Income
      After Provision for Loan Losses | 24,731                               |  | 24,379            |  | 22,744           
|                                                          |                                      |  |                   |  |                  
|Other Income                                              |                                      |  |                   |  |                  
|Income From Fiduciary
      Activities                    | 946                                  |  | 786               |  | 802              
|Service Charges on
      Deposit Accounts                 | 5,559                                |  | 4,913             |  | 3,640            
|Brokerage Fees                                            | 1,160                                |  | 878               |  | 891              
|Securities Gains
      (Losses) - Net                     | 210                                  |  | 81                |  | 189              
|Other Income                                              | 1,519                                |  | 2,158             |  | 2,166            
|Total Other Income                                        | 9,394                                |  | 8,816             |  | 7,688            
|                                                          |                                      |  |                   |  |                  
|Other Expenses                                            |                                      |  |                   |  |                  
|Salaries and Employee
      Benefits                      | 13,330                               |  | 12,553            |  | 10,846           
|Net Occupancy Expense                                     | 1,551                                |  | 1,542             |  | 1,299            
|Depreciation                                              | 1,625                                |  | 1,445             |  | 1,392            
|Data Processing
      Expense                             | 727                                  |  | 828               |  | 673              
|Legal and Professional
      Fees                         | 293                                  |  | 71                |  | 186              
|Stationary and Office
      Supplies                      | 276                                  |  | 333               |  | 280              
|Amortization of
      Intangibles                         | 85                                   |  | 85                |  | 50               
|Advertising and
      Promotions                          | 444                                  |  | 410               |  | 319              
|Other Expenses                                            | 4,504                                |  | 4,859             |  | 4,290            
|Total Other Expenses                                      | 22,835                               |  | 22,126            |  | 19,335           
|Net Income Before
      Income Taxes                      | 11,290                               |  | $ 
      11,069   |  | $ 
      11,097  
|Provision for Income
      Tax Expense                    | 3,241                                |  | 3,249             |  | 3,259            
|Net Income                                                | $  
      8,049                      |  | $  
      7,820   |  | $  
      7,838  
|                                                          | =====                                |  | =====             |  | =====            
|Earnings Per Common Share:                                |                                      |  |                   |  |                  
|Net
      Income                                          | $ 2.20                               |  | $ 2.14            |  | $ 2.14           
|                                                          | =====                                |  | =====             |  | =====            
|Weighted Average
      Shares Outstanding                 | 3,652                                |  | 3,668             |  | 3,703            
|                                                          | =====                                |  | =====             |  | =====            

-34-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2004, 2003, and 2002



|                                                                                                                        | 2004                 |  | 2003                    |  | 2002            
|----------------------------------------------------------------------------------------------------------------------- | -------------------- |  | ----------------------- |  | ----------------
|                                                                                                                        | (In
      Thousands)
|Net Income For Year                                                                                                     | $   
      8,049     |  | $   
      7,820        |  | $   
      7,838
|                                                                                                                        |                      |  |                         |  |                 
|Other Comprehensive
      Income, Net of Tax                                                                            |                      |  |                         |  |                 
|Unrealized
      Gains (Losses)
      on Available-for-Sale Securities and Cash Flow Hedge:                             |                      |  |                         |  |                 
|Unrealized
      Gains (Losses) Arising During the Period                                                               | (523)                |  | (373)                   |  | 1,118           
|Total Comprehensive Income                                                                                              | $   
      7,526     |  | $   
      7,447        |  | $   
      8,956
|                                                                                                                        | =====                |  | =====                   |  | =====           
|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,
      2004                                                                                      |                      |  |                         |  |                 
|                                                                                                                        |                      |  |                         |  |                 
|Unrealized Gains (Losses) on
      Available-for-Sale Securities and Cash Flow Hedge:                                   |                      |  |                         |  |                 
|Unrealized Gains
      (Losses) Arising During the Period                                                               | $   
      (662)     |  | $   
      265          |  | $   
      (397)
|Reclassification
      Adjustments for Gains Included in 
               Net Income                                     | (210)                |  | 84                      |  | (126)           
|Net
      Unrealized Gains (Losses)                                                                                     | $   
      (872)     |  | $    
      349         |  | $  
       (523)
|                                                                                                                        | =====                |  | =====                   |  | =====           
|Year Ended December 31,
      2003                                                                                      |                      |  |                         |  |                 
|                                                                                                                        |                      |  |                         |  |                 
|Unrealized Gains (Losses) on
      Available-for-Sale Securities and Cash Flow Hedge:                                   |                      |  |                         |  |                 
|Unrealized Gains
      (Losses) Arising During the Period                                                               | $   
      (541)     |  | $     
      217        |  | $   
      (324)
|Reclassification
      Adjustments for Gains Included in 
               Net Income                                     | (81)                 |  | 32                      |  | (49)            
|Net
      Unrealized Gains (Losses)                                                                                     | $   
      (622)     |  | $    
      249         |  | $   
      (373)
|                                                                                                                        | =====                |  | =====                   |  | =====           
|Year Ended December 31,
      2002                                                                                      |                      |  |                         |  |                 
|                                                                                                                        |                      |  |                         |  |                 
|Unrealized Gains (Losses) on
      Available-for-Sale Securities and Cash Flow Hedge:                                   |                      |  |                         |  |                 
|Unrealized Gains
      (Losses) Arising During the Period                                                               | $   
      2,052     |  | $   
      (821)        |  | $   1,231       
|Reclassification
      Adjustments for Gains Included in 
               Net Income                                     | (189)                |  | 76                      |  | (113)           
|Net
      Unrealized Gains (Losses)                                                                                     | $   
      1,863     |  | $   
      (745)        |  | $   1,118       
|                                                                                                                        | =====                |  | =====                   |  | =====           

-35-

---

FIRST CITIZENS BANCSHARES, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2004, 2003, and 2002
(In Thousands Except Per Share Data)

|                                                                                                                                                                                        | Common StockShares       
  At Par | Surplus      | RetainedEarnings | Accumulated
    Other
  ComprehensiveIncome | TreasuryStock | Total
  
  Stockholders'
  Equity
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------ | ---------------- | ------------------------------------------- | ------------- | ---------------------------------
|Balance at January 1,
    2002                                                                                                                                                          | 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 and Cash Flow Hedge,
    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 and Cash Flow Hedge,
    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)                    
|                                                                                                                                                                                        |                                    |              |                  |                                             |               |                                  
|Net Income,
    Year Ended December 31,
    2004                                                                                                                                        |                                    |              |                  | 8,049                                       |               |                                  
|Adjustment of Unrealized Gain (Loss) on Securities
           Available-for-Sale and Cash Flow Hedge,
    Net of Applicable Deferred
           Income Taxes $349 During the Year       |                                    |              |                  |                                             | (523)         |                                  
|Cash
    Dividends Paid -
    $1.12 per Share                                                                                                                                           |                                    |              |                  | (4,091)                                     |               |                                  
|Treasury
    Stock Transactions - Net                                                                                                                                                   | --                                 | --           | -                | --                                          | --            | (173)                            
|Balance, December 31,
    2004                                                                                                                                                          | 3,718                              | $   3,718    | $  
    15,331   | $  43,001                                   | $    
    785 | $
    (1,627)                    
|                                                                                                                                                                                        | ======                             | ======       | =======          | ======                                      | =======       | ======                           

-36-

---

FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2004, 2003, and 2002

2004

2003

2002(In Thousands)Operating ActivitiesNet Income
$     8,049

$     7,820

$     7,838Adjustments to Reconcile Net Income to Net
Cash Provided
   by Operating Activities:Provisions for
Loan Losses
937

975

1,518Provision for
Depreciation
1,625

1,445

1,392Provision for
Amortization - Intangibles
85

85

50Deferred
Income Taxes
145

(264)

233Realized
Investment Security (Gains) Losses
(210)

(81)

(189)Net (Increase) Decrease in Loans Held for Sale
1,064

3,465

(1,837)(Increase) Decrease in Accrued Interest Receivable
(399)

443

(755)Increase
(Decrease) in Accrued Interest Payable
(101)

77

(514)Net (Increase) Decrease in Other Assets
(590)

(9)

1,823Net Increase (Decrease) in Other Liabilities
129

(888)

1,464NET CASH PROVIDED BY OPERATING ACTIVITIES
$   10,734

$  13,068

$   11,023Investing ActivitiesProceeds of Maturities of
Held-to-Maturity Investment Securities
$         
40

$      
145

$    1,420Proceeds of Sales and Maturities of
Available-for-Sale 
     Investment Securities
49,450

77,181

76,693Purchases of Available-for-Sale
Investment Securities
(48,464)

(85,423)

(87,978)Acquisition of Subsidiary, Net of Cash
and Cash Equivalents 
    Received
-

-

(10,173)Increase in Loans - Net
(49,782)

(38,596)

(12,499)Purchase of Premises and Equipment
(3,474)

(5,317)

(1,350)NET CASH
PROVIDED BY INVESTING ACTIVITIES
$  (52,230)

$   
(52,010)

$   
(33,887)Financing ActivitiesNet Increase (Decrease) in Demand
Deposits, NOW Accounts,
      and  Savings Accounts
$  20,647

$      7,142

$   (57,234)Increase in Time Deposits - Net
11,125

21,826

84,426Increase in Long-Term Borrowing

2,000

-
16,437Payment of Principal on Long-Term Debt
(833)

(567)

(289)Cash Dividends Paid
(4,091)

(3,951)

(3,815)Net Increase (Decrease) in Short-Term
Borrowings
11,930

1,237

188Treasury Stock Transactions - Net
(173)

(151)

(349)NET CASH PROVIDED BY
FINANCING ACTIVITIES
$   40,605

$   
25,536

$   
39,364INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
(891)

(13,406)

16,500Cash and Cash Equivalents at Beginning of
Year
34,277

47,683

31,183CASH AND CASH EQUIVALENTS AT END OF
YEAR
$   33,386





$   34,277





$   47,683======





======





======Supplemental
    Cash Flow Information:
Interest
    Paid
$  13,450





$    
14,075





$  
15,222=======





=======





=======Income
    Taxes Paid
$    2,982





$     
3,260





$   
3,184=======





=======





=======Supplemental
    noncash disclosures:
Transfers from loans to foreclosed assets
$      
440





$     
1,868





$   
1,523=======





=======





=======


-37-

---

FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004 and 2003



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 23) at the equity in the
underlying assets.



First
Citizens National Bank has a 50% ownership in two insurance subsidiaries both of
which are accounted for using the equity method. One is White and
Associates/First Citizens Insurance, LLC which is a general insurance agency
offering a full line of insurance products. The other is First Citizens/White
and Associates Insurance Company whose principal activity is credit insurance.
The investment in these subsidiaries is included in Other Assets on the Balance
Sheets presented in this report and earnings from these subsidiaries are
recorded in Other Income on the Income Statements presented in this report.



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 13 of Notes to the
Consolidated Financial Statements.



All
significant inter-company balances and transactions are eliminated in
consolidation.  Certain balances have been
reclassified to conform to current year presentation.

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 include those investments that 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 HELD FOR SALE

Mortgage loans
originated and intended for sale in the secondary market are carried at the
lower of aggregate cost or market, as determined by outstanding commitments
from investors.  Net unrealized losses,
if any, are recorded as a valuation allowance and charged to earnings.  Servicing rights are not retained when
mortgage loans are sold.

LOANS

Loans that
management has the intent and ability to hold for the foreseeable future or
until maturity or payoff are reflected on the balance sheets at the unpaid
principal amount less the allowance for loan losses and unearned interest and
fees.



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 uncollectability 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 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 scheduled payments
of principal or interest when due according to 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 circumstances surrounding the
loan and the borrower, including the length of delay, reasons for the delay,
borrower's prior payment record, and amount of the shortfall in relation to
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 fair value of
the collateral if the loan is collateral dependent.



Large
groups of smaller balance homogeneous 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 estimated useful lives.

REAL ESTATE ACQUIRED BY FORECLOSURE

Real estate acquired
through foreclosure is reflected in other assets and 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. 
Interest income on loans is discontinued at the time the loan is 90 days
delinquent unless the loan is well secured and in process of collection.  Loans may be placed on non-accrual status at
an earlier date if collection of principal or interest is considered
doubtful.  All interest accrued but not
received for loans placed on non-accrual status is reversed against interest
income.  Interest received on such loans
is accounted for on the cash-basis or cost-recovery method until qualifying to
return to accrual status.  Loans are
returned to accrual status when all principal and interest amounts
contractually due are brought current and future payments are reasonably
assured.

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 - CASH
RESERVE REQUIREMENTS

The Corporation's bank
subsidiary maintains cash reserve balances as required by the Federal Reserve
Bank. Average required balances during 2004 and 2003 were $811,818 and
$1,825,161, respectively.

NOTE 3 - 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:

Amortized Cost
Gross
UnrealizedGains
Gross
UnrealizedLosses
Fair ValueAs of December 31, 2004 (in thousands):Securities Held-to-Maturity:Obligations of States and Political
Subdivisions
$         
785
$           
25
$               
-
$         
810========
========
=========
========Securities Available-for-Sale:U.S. Treasury Securities and Obligations
of 
      U.S. Government Agencies and Corporations
$   101,763
$        
232
$        (890)
$   101,105Obligations of States and Political
Subdivisions
36,626
2,058
(117)
38,567All Others
6,374
327
(21)
6,680$  144,763
$      2,617
$    (1,028)
$  146,352=======
========
========
========As of December 31, 2003 (in thousands):Securities Held-to-Maturity:Obligations of States and Political
Subdivisions
$         
825
$           
36
$               
-
$         
861========
========
=========
========Securities Available-for-Sale:U.S. Treasury Securities and Obligations
of 
      U.S. Government Agencies and Corporations
$   102,248
$        
406
$        (537)
$   102,117Obligations of States and Political
Subdivisions
35,511
2,418
(35)
37,894All Others
8,401
470
(27)
8,844$  146,160
$      3,294
$      
(599)
$  148,855=======
========
========
========




-40-

---

The table below
summarizes maturities of debt securities held-to-maturity and available-for-sale
as of December 31, 2004 and 2003:

December 31, 2004Securities
Held to Maturity
Securities
Available for SaleAmortized Cost
Fair Value
Amortized Cost
Fair ValueAmounts Maturing In:
(In Thousands)One Year or Less
$   
45
$     
45
$       
120
$       
121After One Year Through
Five Years
565
582
32,202
32,286After Five Years Through
Ten Years
175
183
50,724
58,447After Ten Years
--
--
61,707
55,454$   785
$   
810
$ 144,753
$ 146,308Equity Securities
--
--
10
44Total Securities
$   785
$    
810
$ 144,763
$  146,352======
======
========
========




December 31, 2003(in thousands)Securities
Held to Maturity
Securities
Available for SaleAmortized Cost
Fair Value
Amortized Cost
Fair ValueAmounts Maturing In:
(In Thousands)One Year or Less
$     
30
$     
30
$   11,002
$    
11,169After One Year Through
Five Years
245
253
99,521
100,858After Five Years Through
Ten Years
550
578
11,491
11,733After Ten Years
--
--
24,136
25,048$   825
$   
861
$ 146,150
$  148,808Equity Securities
--
--
10
47Total Securities
$   825
$    
861
$ 146,160
$   148,855======
======
========
========


-41-

---

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

At December 31, 2004
and 2003, investment securities were pledged to secure government, public and
trust deposits as follows:

December 31
      Amortized
        Cost
      Fair Value2004
      $
        112,859
      $
        113,1412003
      112,953
      114,188


The following table presents information on securities with gross unrealized
losses at December 31, 2004, 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
TotalGross UnrealizedLosses
Fair Value
Gross UnrealizedLosses
Fair Value
Gross UnrealizedLosses
Fair ValueSecurities Available-for-Sale
(In Thousands)U.S. Treasury Securities
and Obligations of
        U.S. Government Corporations and
Agencies

$    314
$ 39,820
$    576
$  29,769
$      890
$ 69,589Obligations of States and
Political Subdivisions
115
5,357
2
518
117
5,875Other Debt Securities

-
-
21
979
21
979Total Securities
Available-for-Sale

$   429
$ 45,177
$   599
$ 31,266
$   1,028
$ 76,443======
======
======
======
======
======


In
reviewing the investment portfolio for other-than-temporary impairment of
individual securities, consideration is given to (1) the length of time in
which fair value has been less than cost and the extent of the unrealized loss,
(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, 2004, the Company had 76 debt securities noted with unrealized
losses with 24 of those securities having been in an unrealized loss position
for greater than 12 months.  Most of the
76 securities are U. S. government agency or mortgage-backed securities which
have declined in value or remained in an unrealized loss position from 2003 due
to the flattening of the yield curve that occurred in the second half of 2004
when the Federal Reserve began removing accommodative monetary conditions by
raising federal funds rates.  In
analyzing 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 unrealized losses on securities noted and the analysis performed
relating to the securities, management currently believes that declines in
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 has one derivative
transaction, which is an interest rate swap that was purchased in June 2000.
Since a Federal Home Loan Bank Variable LIBOR Borrowing has been designated as
the hedged item and in doing so, the Company has effectively fixed the cost of
this liability. As a floating rate liability was hedged, there are no
significant fluctuations in its market value but there are fluctuations in the
cash flows. Thus, the swap is designated as a cash flow hedge, hedging the
"benchmark interest rate." The market value gain or loss of the swap
is adjusted through other comprehensive income. The purpose of the transaction
was to reduce exposure to interest rate risk. Volume of the transaction is $1.5
million and the term is 10 years.



During the year ended
December 31, 2004, the value of the derivative decreased by approximately
$43,000 due to market interest rate fluctuations, resulting in a negative other
comprehensive income attributable to derivatives of approximately $159,000, net
of deferred tax benefit, which is reflected in accumulated other comprehensive
income at December 31, 2004.

-42-

---

NOTE 4 - LOANS

Loans outstanding at December 31, 2004
and 2003, were comprised of the following:

2004
      2003(In Thousands)Commercial, Financial and Agricultural
      $   72,330
      $   70,658Real Estate - Construction
      99,028
      71,599Real Estate - Mortgage
      320,627
      302,683Installment
      38,550
      37,401Other Loans
      4,147
      3,372534,682
      485,713Less: Allowance for Loan Losses
      6,239
      6,124Net Loans
      $ 528,443
      $ 479,589======
      ======


In conformity with
Statement No. 114 of the Financial Accounting Standards Board, the Corporation
has recognized loans with carrying values of $2,075,575 at December 31, 2004,
and $1,423,466 at December 31, 2003, as being impaired.  The balance maintained in the Allowance for
Loan Losses related to these loans was $390,862 at December 31, 2004, and
$456,202 at December 31, 2003.  Average
investment in impaired loans in 2004 and 2003 were $1.75 million and $1.36
million, respectively. Interest income on impaired loans was immaterial to the
consolidated financial statements for the three years ended December 31, 2004,
2003 and 2002.

NOTE 5 - ALLOWANCE FOR LOAN LOSSES

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

2004
    2003
    2002(In Thousands)Balance - Beginning of
      Period
    $  6,124
    $  5,653
    $ 
      4,015Addition Incident to
      Merger
    -
    (94)
    968Provision for Loan
      Losses
    937
    975
    1,518Loans
      Charged to Allowance
    (1,036)
    (919)
    (1,743)Recovery
      of Loan Previously Charged Off
    214


  
    509
    895Net charge-offs


  
    (822)
    (410)
    (848)Balance - End of Period


  
    $ 
      6,239
    $ 
      6,124
    $ 
      5,653======
    ======
    ======


-43-

---

NOTE 6 - SECONDARY MORTGAGE
MARKET ACTIVITIES

Mortgage loans
originated and intended for sale in the secondary market are carried at the
lower of aggregate cost or market, as determined by outstanding commitments
from investors.  Net unrealized losses,
if any, are recorded as a valuation allowance and charged to earnings.  There were no such losses for any of the
three years ended December 31, 2004, 2003 and 2002.  There has been no material difference between cost and fair
market values of loans held for sale for any of the periods presented.



Servicing rights are not
retained on any mortgage loans held for sale. 
Secondary mortgage fees included interest and fees on loans were
$1,040,000, $1,684,000 and $902,000 for the years ended December 31, 2004,
2003, and 2002, respectively.

NOTE 7 - PREMISES AND
EQUIPMENT

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

Useful Livesin Years
      2004
      2003(In
        Thousands)Land
      
      $  
        4,279
      $  
        3,810Buildings
      5 to 50
      20,172
      20,289Furniture and
        Equipment
      3 to 20
      15,016
      13,40039,467
      37,499Less:
        Accumulated Depreciation
      15,880
      15,761Net Fixed Assets
      
      $ 23,587
      $ 21,738=======
      =======




NOTE 8 - GOODWILL AND
OTHER INTANGIBLE ASSETS

Upon adoption of SFAS
142 in January 2002, the Company ceased to amortize goodwill ($25 thousand per
month).  Impairment testing is performed
during the first quarter of each year. 
Based on impairment testing in 2003, 2004 and 2005, there has been no
impairment of goodwill recorded for any periods presented in these consolidated
financial statements and notes or subsequently.  There was no activity in goodwill during the years end December
31, 2004 and 2003, except for a reclassification adjustment made in third quarter
2004.  During the third quarter 2004, goodwill
totaling $392,000 was reclassified as a deferred tax asset to correct an error
made on the accounting for the Munford Union Bank acquisition in 2002.  The acquisition accounting did not include
an amount for deferred taxes related to Munford Union Bank being an S
Corporation prior to acquisition.  As
this entry was a reclassification on the balance sheet, there was no impact on
total assets, equity or net income for the periods presented.    Total goodwill as of December 31, 2004 is
$11.8 million or 1.53% of total assets or 19.32% of total capital.

Other identifiable
intangibles consist of core deposit intangibles being amortized over a 10-year
period as follows:



2004
      2003Core Deposit Intangible
      $     
845
      $     845Accumulated Amortization
      (220)
      (134)Net Core Deposit Intangible
      $     
625
      $     711======
      ======




Amortization expense for
the past three years has been $84,500, $84,500 and$50,500 for 2004, 2003 and
2002, respectively.  Estimated
amortization expense for each of the next five years is $84,500 per year.

NOTE 9 - REPOSSESSED
REAL PROPERTY

The carrying value
of repossessed real property on the balance sheets of the Corporation is
$337,000 at December 31, 2004, and $535,000 at December 31, 2003. The value of
repossessed real property is reflected on the balance sheets in "Other
Assets."

NOTE 10 - BANK OWNED
LIFE INSURANCE

The largest component of Other
Assets as noted on the Consolidated Balance Sheets as of December 31, 2004 and
2003 is the cash surrender value of bank owned life insurance policies (BOLI).  The cash surrender values of
BOLI are $14.1 million and 13.3 million as of December 31, 2004 and 2003.  BOLI are used as a fringe benefit to
employees in the position of Vice President and higher after one year of
service.  BOLI are initially recorded at
the amount of premiums paid and are adjusted to cash surrender values.  Changes in cash surrender values are
recorded in other non-interest income and are based on premiums paid less
expenses plus accreted interest income. 
The net increase in cash surrender values resulted in non-interest
income of $443 thousand, $695 thousand and $536 thousand for the three years
ended December 31, 2004, 2003 and 2002, respectively.

-44-

---

NOTE 11 - 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:

2004
      2003(In Thousands)Time Deposits
      $   161,490
      $   143,879Savings Deposits
      94,937
      98,323




NOW accounts, included in
savings deposits on the balance sheets, totaled $63,788,000 at December 31,
2004, and $65,214,000 at December 31, 2003.



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, 2004 and 2003, were $17,463,314 and $12,466,462,
respectively.



Time deposits maturing in
years subsequent to December 31, 2004, are as follows:



(In Thousands)On or before December 31, 2005
$ 253,571On or during year ended December 31, 2006
22,030On or during year ended December 31,
2007
34,219On or during year ended December 31,
2008
7,847On or during year ended December 31,
2009
6,989Total
$  324,656=======


NOTE 12 - SHORT-TERM BORROWINGS

The Bank has three
sources of short-term borrowings, which consist of cash management advances
from the Federal Home Loan Bank (FHLB), Treasury, Tax and Loan (TT&L) option
note, and federal funds purchased from correspondent banks.  Short-term borrowings are used to manage
seasonal fluctuations in liquidity.



Cash management advances
from FHLB are secured 1-4 family first mortgages under the blanket collateral
pledge agreement that also collateralizes long-term advances from FHLB and have
maturities of 90 days or less.  See the
long-term debt footnote in regards to maximum borrowing capacity with FHLB as
of December 31, 2004.  There were no
borrowings outstanding against this line as of December 31, 2004.



First Citizens National
Bank is an Option B bank in regards to TT&L and up to $1 million in
collected TT&L payments collected can be retained as a short-term option
note.  This option note is callable upon
demand by the TT&L.  The current
balance of this line was $1,000,000 as of December 31, 2004.



The Bank has federal
fund lines of credit with three correspondent banks totaling $34,500,000.  There were no outstanding federal funds
purchased as of December 31, 2004.



The following tabular
analysis presents year-end balances of short-term borrowings, maximum month-end
balance, year-to-date daily average, and weighted average cost for 2004, 2003
and 2002:



12/31/2004
    12/31/2003
    12/31/2002Amount
      Outstanding - End of Period
  
    $ 
        1,000
  $ 
           967
    $ 
        1,000Maximum
      Amount of Borrowings 
          at Any Month End During the Year

    $ 
      25,732
    $ 
      15,544
    $ 
      11,300Year-to-Date
      Daily Average
    $    9,656
    $    2,364
    $    3,048Weighted
      Average Cost
    1.43%
    1.14%
    1.61%




-45-

---

NOTE 13 - 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%).  
Responsibilities of the Company concerning the debentures and 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 I capital subject to the provision that
the amount of the securities included in Tier I Capital cannot exceed
twenty-five percent (25%) of total Tier I capital.



First Citizens
Bancshares, Inc. 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 National Bank with a book value totaling 143% of the total outstanding
advances on the line. 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 at 100
basis points below the base rate of First Tennessee Bank. At December 31, 2004,
the outstanding balance on this line is $8.676 million.



The purpose of issuance
of the trust-preferred securities and line of credit with First Tennessee Bank
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
$70,630,000 at December 31, 2004, and $69,147,000 at December 31, 2003, 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. Obligations
are secured by the Bank's entire portfolio of fully disbursed, one to four
family residential mortgages.  The Bank
had additional borrowing capacity of approximately $18 million as of December
31, 2004.



Annual average volume,
rates and maturities of long-term debt for the years 2004 and 2003 are as
follows:



AverageVolume
      Average   Interest Rate
      Average 
         
        Maturity(In
        Thousands)2004First Citizens
        Bancshares, Inc.
      $ 13,831
      4.11%
      8 yearsFirst Citizens
        National Bank
      69,404
      5.12%
      6 years2003First Citizens
        Bancshares, Inc.
      $ 14,051
      3.85%
      9 yearsFirst Citizens
        National Bank
      83,571
      5.18%
      7 years


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

Years
        Ending December 31,2005
      $          5282006
      5162007
      5452008
      7,5642009
      3,555Thereafter
      71,773

      $   84,481
    =======


-46-

---

NOTE 14 - INCOME TAXES

Provision for income taxes is comprised of the following:

2004
    2003
    2002(In Thousands)Federal
      Income Tax Expense (Benefit)Current
    $  2,569
    $  2,811
    $  3,190Deferred
    217
    (226)
    (198)State
      Income Tax Expense (Benefit)Current
    411
    704
    302Deferred
    44
    (40)
    (35)$ 
      3,241
    $  3,249
    $  3,259======
    ======
  =====


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:

2004
    2003
    2002(In Thousands)Tax Expenses at
      Statutory Rate


  
    $  3,839
  $  3,763
    $  3,773Increase (Decrease)
      Resulting From:State Income Taxes, Net Federal Income Tax Benefit


  
    300
  438
    176Tax Exempt Interest


  
    (540)
  (556)
    (460)Effect of Life
      Insurance


  
    (150)
  (190)
    (182)ESOP Dividends


  
    (168)
    (259)
    (175)Other Items


  
    (40)
  53
    127$  3,241
  $  3,249
    $  3,259======
  ======
    ======


In
assessing the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.  The ultimate
realization of the deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible.  Management considers
the scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment.  Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely than
not that the Company will realize the benefit of these deductible differences.  However, the amount of deferred tax assets
considered realizable could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced.  The net deferred tax liabilities, which are
included in "other liabilities" in the accompanying consolidated balance
sheets, include the following components:

2004
      2003(In Thousands)Deferred Tax Liabilities:Depreciation
      $   (1,416)
      $   (1,153)FHLB Stock Dividends
      (636)
      (572)Net Unrealized Gain
(Loss) on Available-for-Sale Securities
      (630)
      (1,078)Prepaid Expenses
      (99)
      -Other
      (55)
      (10)Total Deferred Tax Liabilities
      (2,836)
      (2,813)Deferred Tax Assets:Allowance for
Loan Losses
      1,999
      1,937Other
      199
      -Total Deferred Tax Assets
      2,198
      1,937Net Deferred Tax Liabilities
      $       (638)
      $      
(876)=========
      =========


-47-

---

NOTE 15 - REGULATORY MATTERS

First Citizens
Bancshares, Inc. is subject to various regulatory capital requirements
administered by 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.



As of December 31, 2004,
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 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
    RatioDecember 31, 2004:

    (In Thousands)Total Capital to Risk
      Weighted Assets:First
      Citizens Bancshares
    $ 58,923
    10.9%

    $ 43,389
    8.0%
    N/A
    N/AFirst
      Citizens National Bank
    $ 66,496
    12.3%

    $ 43,305
    8.0%
    $ 54,131
    10.0%Tier I Capital to Risk
      Weighted Assets:First
      Citizens Bancshares
    $ 52,684
    9.7%

    $ 21,695
    4.0%
    N/A
    N/AFirst
      Citizens National Bank
    $ 60,274
    11.1%

    $ 21,652
    4.0%
    $ 32,478
    6.0%Tier I Capital to
      Average Assets:First
      Citizens Bancshares
    $ 52,684
    7.0%

    $ 30,317
    4.0%
    N/A
    N/AFirst
      Citizens National Bank
    $ 60,274
    8.0%

    $ 30,273
    4.0%
    $ 37,842
    5.0%December 31, 2003:Total Capital to Risk
      Weighted Assets:First
      Citizens Bancshares
    $ 54,655
    11.1%

    $ 39,275
    8.0%
    N/A
    N/AFirst
      Citizens National Bank
    $ 70,707
    14.4%

    $ 39,162
    8.0%
    $ 48,952
    10.0%Tier I Capital to Risk
      Weighted Assets:First
      Citizens Bancshares
    $ 48,531
    9.9%

    $ 19,637
    4.0%
    N/A
    N/AFirst
      Citizens National Bank
    $ 56,292
    11.5%

    $ 19,581
    4.0%
    $ 29,371
    6.0%Tier I Capital to
      Average Assets:First
      Citizens Bancshares
    $ 48,531
    6.8%

    $ 28,461
    4.0%
    N/A
    N/AFirst
      Citizens National Bank
    $ 56,292
    7.9%

    $ 28,417
    4.0%
    $ 35,521
    5.0%


NOTE 16 - 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 that exceeded
the net earnings of the current year plus retained profits of the preceding two
years.  As of December 31, 2004,
approximately $4.2 million of retained earnings were available for future
dividends from the subsidiary to the parent corporation.

NOTE 17 - RELATED PARTY
TRANSACTIONS

The Company has loans
and deposits with executive officers, directors and their affiliates.  The Company also enters into contracts with
certain related parties from time to time such as for construction of a
branch.  All related party transactions
are entered into under substantially the same terms as unrelated third party
transactions.  All material contracts
are awarded based on competitive bids.



Activity
in loans to executive officers, directors and their affiliates is as follows
for the three years ended December 31, 2004, 2003 and 2002:



2004
    2003
    2002Balance at
      Beginning of Period
    $  14,419
    $  11,068
    $   
      9,367New Loans
    12,725
    14,021
    7,641Repayments
    (12,462)
    (10,670)
    (5,940)Balance at End of Period
    $  14,682
    $  14,419
    $  11,068======
    ======
    =====




There were no
charged-off, restructured or non-current loans to related parties for any of
the periods presented.  Loans to related
parties are made on substantially the same terms as third party transactions.



Indebtedness
shown represents amounts owed by directors and executive officers of First
Citizens Bancshares, Inc. and First Citizens National Bank and by business 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.



In
2004, payments totaling $1.55 million were paid to related parties for
completion of the Martin branch construction and for site development and
construction of the Oakland branch.



-48-

---

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, 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,
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,
and is based on management's credit evaluation of the counter party. At
December 31, 2004 and 2003, First Citizens National Bank had outstanding loan
commitments of $89,266,000 and $88,096,000, respectively.  As of year-end 2004, variable rate commitments
were $66,614,000 and fixed rate commitments were $22,652,000.  As of year-end 2003, variable rate
commitments were $65,507,000 and fixed rate commitments were $22,589,000.  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 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 deemed necessary. At December 31, 2004 and 2003, outstanding standby
letters of credit totaled $5,158,000 and $4,596,000, 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, 2004 and 2003, however, the
Bank had no loans sold with recourse.

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.



-49-

---

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 discounted cash flow analyses, which
apply interest rates currently being offered on certificates to a schedule of
aggregated monthly maturities on time deposits.



2004
2003Carrying
Fair
Carrying
FairFinancial Assets

  

Amount
Value
Amount
Value(In Thousands)Cash and Cash
Equivalents
$  
3,386
$ 33,386
$ 34,277
$ 34,277Investment Securities
147,137
147,162
149,680
149,716Loans
534,682



  


485,713

Less: Allowance for Loan Losses
  
(6,239)
---
(6,124)
---Loans,
Net of
Allowance
528,443
529,976
479,589
486,901Loans
Held for Sale
,330
1,330
2,394
2,394Accrued Interest Receivable
11,825
11,825
4,160
4,160Federal Reserve Bank and Federal Home
Loan
    Bank Stock
5,056
5,146
4,911
4,911Other Assets
46,027
46,027
16,426
16,426Financial Liabilities

Deposits
$ 592,382
$ 593,256
$ 560,610
$ 565,116Short-term Borrowings
31,611
31,796
19,681
19,681Long-term Debt
  
84,481
  88,764
83,314
  92,923Other Liabilities
3,522
3,522
4,553
4,553Unrecognized Financial Instruments
Commitments to Extend Credit
$ 
89,266

$ 
89,266

$ 
88,096

$ 
88,096Standby Letters of Credit

5,158

5,158
4,596
4,596




NOTE 21 - 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 12 and 13. 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 pre-acquisition contingencies.
The assets and liabilities of Munford Union Bank have been adjusted to fair
value as of the date of acquisition resulting in the recording of goodwill in
the amount of $8.8 million on the books of Munford Union Bank. A core deposit
intangible asset was also established in the amount of $845,000, which is being
amortized over a ten-year period. The goodwill is being tested annually for
impairment. In the event of impairment, the adjustments to goodwill will not be
deductible.



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



Fair Value
    Amortization Period
    2003 Accumulated Amortization
    Annual Estimate
      AccumulatedAmortizationCash and Due from
      Banks

    $    3,855
    --Federal Funds Sold

    5,295
    --Investments

    31,877
    5
    5.38
    3.40Net Loans

    69,998
    7
    329.33
    208.00Premises and Equipment

    3,337
    3,5, 39
    (31.35)
    (19.80)Goodwill

    8,808
    --
    --
    --Core Deposit
      Intangible

    845
    10
    133.80
    84.50Other Assets

    2,012
    
    
    --
    --Total Assets

    $ 126,027
    
    
    437.16
    276.10=======
    
    
    =======
    =======Deposits

    100,942
    5
    386.02
    243.80Other Liabilities

    5,762
    5
    6.65
    4.20Capital

    19,323
    0
    --
    --Total Liabilities and Capital

    $ 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:

Statement of Income
      2002Interest Income
      $   38,970Interest Expense
      14,708Net Interest Income
      24,262Provision for Loan Losses
      1,518Net Interest Income
after Provision for Loan Losses
      22,744Other Income
      7,688Other Expenses
      19,335Net Income Before Income Taxes
      11,097Provision
      for Income Taxes

      3,259Net Income
      $    7,838=======Earnings Per Share
      $      2.14=======Weighted
      Average Shares Outstanding

      3,668=======


-51-

---

NOTE
22 - EMPLOYEE STOCK OWNERSHIP AND 401(K) PLANS

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 25 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 2004, 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 $967,706 in
2004, $866,421 in 2003, and $640,000 in 2002.



Munford Union Bank
also maintained a 401(k) employee benefit plan to which it contributed four
percent (4%) of pre-tax earnings annually. In the year 2002, 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.



NOTE 23 - CONDENSED FINANCIAL
INFORMATION

FIRST CITIZENS BANCSHARES, INC.
(Parent Company Only)
Balance Sheets
  December 31, 2004 and 2003
(In Thousands)

2004
2003ASSETSCash
$        237
$        167Investment in Subsidiaries
74,034
70,933Due from Subsidiaries
415
622Other Assets
368
380TOTAL ASSETS
$    75,054
$    72,102========
========LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESLong-term Debt
$      13,831
$      14,145Accrued Expenses
15
11TOTAL LIABILITIES
$13,846
$14,156STOCKHOLDERS' EQUITY
61,208
57,946TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$     75,054
$     72,102========
========


-52-

---

FIRST CITIZENS BANCSHARES, INC.
(Parent Company Only)
Condensed Income Statements
December 31, 2004 and 2003
(In Thousands)

|INCOME                                                                               | 2004        | 2003       
|------------------------------------------------------------------------------------ | ----------- | -----------
|Dividends from Bank
Subsidiary                                                       | $    4,851  | $    5,165 
|Other Income                                                                         | 39          | 32         
|TOTAL
INCOME                                                                         | 4,890       | 5,197      
|                                                                                     |             |            
|EXPENSES                                                                            
|Interest Expense                                                                     | 569         | 543        
|Other Expenses                                                                       | 164         | 168        
|TOTAL EXPENSES                                                                       | 733         | 711        
|                                                                                     |             |            
|Income Before Income Taxes and Equity in
Undistributed Net Income of Bank Subsidiary | 4,157       | 4,486      
|Income Tax Expense (Benefit)                                                         | (266)       | (260)      
|                                                                                     | 4,423       | 4,746      
|Equity in Undistributed Net Income of
Bank Subsidiary                                | 3,626       | 3,074      
|NET INCOME                                                                           | $    
8,049 | $     7,820
|                                                                                     | ========    | ========   

-53-

---

FIRST CITIZENS BANCSHARES, INC.
(Parent Company Only)
Condensed Statements of Cash Flows
December 31, 2004 and 2003
(In Thousands)

|Operating Activities                                                              |                |                 
|--------------------------------------------------------------------------------- | -------------- | ----------------
|Net Income                                                                        | $     8,049    | $     7,820     
|Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities: |                |                 
|Undistributed Income of
Subsidiary                                                | (3,626)        | (3,074)         
|(Increase) Decrease in Other
Assets                                               | 4              | (788)           
|Increase (Decrease) in
Other Liabilities                                          | 14             | (169)           
|NET CASH
PROVIDED BY OPERATING ACTIVITIES                                         | $   
    4,441 | $   
      3,789
|                                                                                  |                |                 
|Investing Activities                                                             
|Investment in Subsidiaries                                                        | 207            | (60)            
|                                                                                 
|Financing Activities                                                             
|Payment of Dividends and Payments in Lieu
of Fractional Shares                    | (4,091)        | (3,949)         
|Payment of Principal on Long Term Debt                                            | (314)          | (121)           
|Treasury Stock Transactions - Net                                                 | (173)          | (151)           
|NET CASH
PROVIDED BY FINANCING ACTIVITIES                                         | (4,578)        | (4,221)         
|                                                                                  |                |                 
|INCREASE (DECREASE) IN CASH                                                       | 70             | (492)           
|Cash at Beginning of Year                                                         | 167            | 659             
|CASH AT END OF YEAR                                                               | $        
237  | $        
167   
|                                                                                  | ========       | ========        

-54-

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NOTE 24 - QUARTERLY SELECTED FINANCIAL DATA (UNAUDITED)

InterestIncome
    
    Net InterestIncome
    NetIncome
    Earnings 
      Per ShareBasic
    Earnings
      Per ShareDiluted2004First Quarter
      $   9,416
      $   6,265
      $   1,967
      $  0.54
      $  0.54Second Quarter
      9,662
      6,518
      2,021
      0.55
      0.55Third Quarter
      9,779
      6,451
      1,966
      0.54
      0.54Fourth Quarter
      10,160
      6,434
      2,095
      0.57
      0.57Total
      $ 39,017
      $ 25,668
      $   8,049
      $  2.20
      $  2.20====
      =====
      =====
      ====
      ====2003First 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
      $  2.14====
      =====
      =====
      ====
      ====


-55-

---

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

Not applicable.

ITEM
9A.   CONTROLS AND PROCEDURES

The Company, under
supervision of and with the participation of its management, including the
Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this Annual Report.  Disclosure controls and procedures are
defined in accordance with Rule 13a-15(e) under the Securities Exchange
Act.  As of the end of the periodcovered
by this Annual Report, disclosure controls and procedures are considered to be
effective. There have been no changes in internal control during the quarter
ending December 31, 2004, that have materially affected, or is reasonably likely
to materially affect, the Company's internal control over financial reporting.

PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information appearing in
Bancshares' 2005 Proxy Statement regarding directors, officers and audit
committee expert is incorporated herein by reference in response to this Item.



A description of The
Code of Ethics (Conduct) for Bancshares included in the 2005 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, 2004:

Name
      Age
      Position and OfficeStallings Lipford
      75
    
      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
  
      64
      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
  
      63
      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
  
      44
      Appointed
Vice President and successor designee to the President of Bancshares and First
Citizens in June 2004. Mr. Agee is a Certified Public Accountant and served as
Executive Vice President and Chief Financial Officer of First Citizens National
Bank from August 1999 to June 2004. 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.-56-  Barry Ladd
    
      64
      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
  
      50
      Vice President and Secretary to the Board of
First Citizens Bancshares.  Appointed
Executive Vice President and Chief Operations Officer and Secretary of the
Board of both First Citizens National Bank and Bancshares in August 1999.  Ms. Long served as Senior Vice President and
Chief Operations Officer and Secretary to First Citizens prior to this
appointment.  She served as Senior Vice
President and Administrative Officer previous to November 1997, Vice President
and Loan Operations Manager (1992-1996). 
Employed by First Citizens on July 19, 1974.John S. Bomar
  
      56
      Appointed Regional President and Chief
Executive Officer for the Southwest Region. 
Mr. Bomar served as President of Munford Union Bank from 1994 until
acquisition by First Citizens in 2002. 
Mr. Bomar served as Executive Vice President of Munford Union Bank from
1982 until promoted to President in 1994.Laura Beth Butler
  
      29
      Appointed Senior Vice President
and Chief Financial Officer of First Citizens National Bank and Bancshares June
2004.  Ms. Butler is a Certified Public
Accountant and prior employment consisted of positions as Senior Audit Manager
of the Banking practice of a local accounting firm from 2000 to 2004 and as a
Staff Accountant with KPMG, LLP from 1998 to 1999.


ITEM 11. EXECUTIVE COMPENSATION

The information required under this Item is set forth in the
2005 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' 2005 Proxy Statement for the Annual Meeting of Shareholders to be
held April 20, 2005, 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.

-57-

---

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 16, 2005                          /s/ 
KATIE WINCHESTER                                                                                   
                                 
CHAIRMAN

Date: March 16, 2005                 /s/    LAURA BETH BUTLER                                   
                                              
               SENIOR
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 July 27, 2005.

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


-58-

---

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, 2004 and 2003
      33Consolidated Statements of
        Income for the years ended December 31, 2004, 2003
            and 2002
      34Consolidated Statements of
        Changes in Shareholders' Equity and Other
            Comprehensive Income for the years ended December 31,
        2004, 2003 and 2002
      35-36Consolidated Statements of Cash
        Flows for the years ended December 31,
           2004, 2003, and 2002
      37Notes to Consolidated Financial
        Statements
      38-55


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

Reports of Form 8-K Change in Board Membership dated and filed in October 2004.

(c)    Exhibits

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

Exhibit Number
      
      Description3.1.1.1
      
      Charter of First Citizens Bancshares, Inc.*3.1.1.2
      
      Bylaws of First Citizens Bancshares, Inc.*21.1.1.1
      
      Subsidiaries of the Registrant31.1.1.1
      
      Certification Pursuant to Section 302 of
        the Sarbanes-Oxley Act31.1.1.2
      
      Certification Pursuant to Section 302 of
        the Sarbanes-Oxley Act32.1.1.1
      
      Certification Pursuant to Section 906 of
        the Sarbanes-Oxley Act32.1.1.2
      
      Certification Pursuant to Section 906 of
        the Sarbanes-Oxley Act


* Incorporated by reference to Registrants Annual Report on Form
10-K/A for the year ended December 31, 2004.

-59-

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