FIRST FARMERS & MERCHANTS CORP - 10-Q Quarterly Report

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2004

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

For the transition period from ___________ to ___________

Commission File Number: 0-10972

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

Tennessee
(State or other jurisdiction of incorporation or organization)

62-1148660
(I.R.S. Employer Identification No.)

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

(931) 388-3145
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes __X__ No _____

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. __5,840,000 shares as of August 2, 2004__

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

The following unaudited consolidated financial statements of the Registrant and its subsidiary are included in this Report:

Consolidated balance sheets - June 30, 2004, and December 31, 2003.

Consolidated statements of income - For the three months and six months ended June 30, 2004, and June 30, 2003.

Consolidated statements of cash flows - For the six months ended June 30, 2004, and June 30, 2003.

Selected notes to consolidated financial statements.

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS



	(Dollars in Thousands)		June 30,		December 31
			(Unaudited)		(1)
ASSETS	Cash and due from banks	$	46,748	$	26,137
	Interest-bearing deposits in banks		298		297
	Federal funds sold		-		12,000
	Total cash and cash equivalents		47,046		38,434
	Securities
	Available for sale (amortized cost $246,269
	and $243,038 respectively)		246,458		249,653
	Held to maturity (fair value $86,330
	and $84,199 respectively)		81,354		79,138
	Total securities		327,812		328,791
	Loans, net of deferred fees		420,108		424,504
	Allowance for possible loan losses		(8,764)		(10,123)
	Net loans		411,344		414,381
	Bank premises and equipment, at cost
	less allowance for depreciation		12,749		12,997
	Core deposit and other intangibles		12,515		13,042
	Other assets		24,150		21,168
	TOTAL ASSETS	$	835,616	$	828,813

LIABILITIES	Deposits
	Noninterest-bearing	$	132,153	$	112,334
	Interest-bearing (including certificates of deposit
	over $100,000: 2004 - $64,893; 2003 - $71,968)		579,663		604,099
	Total deposits		711,816		716,433
	Federal funds purchased and securities sold
	under agreements to repurchase		14,505		1,820
	Dividends payable		1,694		1,635
	Other short term liabilities		632		648
	Accounts payable and accrued liabilities		5,616		5,992
	TOTAL LIABILITIES		734,263		726,528

SHAREHOLDERS'	Common stock - $10 par value, 8,000,000 shares
EQUITY	authorized; issued and outstanding -
	5,840,000		58,400		58,400
	Additional paid-in capital		4,320		4,320
	Retained earnings		38,517		35,498
	Accumulated other comprehensive income		116		4,067
	TOTAL SHAREHOLDERS' EQUITY		101,353		102,285

	TOTAL LIABILITIES AND
	SHAREHOLDERS' EQUITY	$	835,616	$	828,813
(1) Derived from audited financial statements.
The accompanying notes are an integral part of the consolidated financial statements.

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
	(Dollars In Thousands Except Per Share Data)		Three Months Ended				Six Months Ended
	(Unaudited)		June 30,				June 30,
			2004		2003		2004		2003

INTEREST INCOME	Interest and fees on loans	$	5,825	$	7,356	$	11,875	$	15,026
	Income on investment securities
	Taxable interest		2,664		2,767		5,374		5,643
	Exempt from federal income tax		631		716		1,256		1,462
	Dividends		128		50		155		75
			3,423		3,533		6,785		7,180
	Other interest income		26		51		56		129
	TOTAL INTEREST INCOME		9,274		10,940		18,716		22,335

INTEREST EXPENSE	Interest on deposits		2,060		2,992		4,246		6,296
	Interest on other short term borrowings		8		8		11		15
	TOTAL INTEREST EXPENSE		2,068		3,000		4,257		6,311

	NET INTEREST INCOME		7,206		7,940		14,459		16,024
	PROVISION FOR POSSIBLE LOAN LOSSES		(677)		350		(677)		760

	NET INTEREST INCOME AFTER
	PROVISION FOR LOAN LOSSES		7,883		7,590		15,136		15,264

NONINTEREST INCOME	Trust department income		534		442		1,057		909
	Service fees on deposit accounts		1,868		1,814		3,581		3,588
	Other service fees, commissions, and fees		113		134