The unaudited consolidated financial statements include the accounts of First Pulaski National Corporation (the "registrant") and its wholly-owned subsidiary, First National Bank of Pulaski (the "Bank") and the Bank's wholly-owned subsidiary First Pulaski Reinsurance Company.     
       The interim financial statements furnished under this item reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, as allowed under rules and regulations of the Securities and Exchange Commission for interim period presentation. The results for interim periods are not necessarily indicative of results to be expected for the complete fiscal year. Certain prior period amounts have been reclassified to conform to the current period classifications.

       The following analysis should be read in conjunction with the financial statements set forth in Part I, Item 1, immediately preceding this section.
       Reference is made to the report of the registrant on Form 10-K for the year ended December 31, 2004, which report was filed with the Securities and Exchange Commission on March 30, 2005. This Form 10-Q contains certain forward-looking statements regarding, among other things, the anticipated financial and operating results of the registrant. The words "anticipate," "could," "may", "intend", "believe", and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The registrant undertakes no obligation to publicly release any modifications, updates or revisions of these statements to reflect events or circumstances occurring after the day hereof, or to reflect the occurrence of unanticipated events.
       In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the registrant cautions investors that future financial and operating results may differ materially from those projected in forward-looking statements made by, or on behalf of, the registrant. Such forward-looking statements involve known and unknown risks and uncertainties, including, but not limited to, increased competition with other financial institutions, lack of sustained growth in the registrant's market area, volatility in interest rates, significant downturns in the businesses of one or more large customers, changes in the legislative or regulatory environment and loss of key personnel. These risks and uncertainties may cause the actual results or performance of the registrant to be materially different from any future results or performance expressed or implied by such forward-looking statements.

Critical Accounting Policies

       The accounting principles we follow and our methods of applying these principles conform to accounting principles generally accepted in the United States and with general practices within the banking industry. In connection with the application of those principles to the determination of our allowance for loan losses, we have made judgments and estimates that have significantly impacted our financial position and results of operations.
       The allowance for loan losses is maintained at a level that is considered to be adequate to reflect estimated credit losses for specifically identified loans as well as estimated probable credit losses inherent in the remainder of the loan portfolio at the balance sheet date. The allowance is increased by the provision for loan losses, which is charged against current period operating results and decreased by the amount of

       Total assets of the registrant grew by approximately $13.3 million, or 3.1 percent, in the first three months of 2005. The Bank continued to concentrate on quality loan growth in the first quarter of 2005, resulting in total net loans increasing almost $4.4 million, or 1.7 percent, during the first three months of 2005. This loan growth was funded primarily by an increase in deposits, both non-interest and interest-bearing.
       Net income decreased approximately $66,000 in the first three months of 2005 as compared to the same period of 2004. Net interest income fell approximately $36,000 in the first three months of 2005 as compared to the same period of 2004 as the net interest margin compressed. The net interest margin fell to 4.31 percent from 4.42 percent in the first quarter of 2005 as compared to the first quarter of 2004. Management expects the compression of the net interest margin to continue throughout 2005 as the interest rates paid on deposits are expected to increase faster than interest rates earned on loans and investment securities. Non-interest income also decreased approximately $197,000 in the first quarter of 2005 as compared to the first quarter of 2004, as gains on the sale of investment securities in the first quarter of 2005 was $16,136 compared to $207,674 in the prior year period. In addition, non-interest expenses decreased approximately $125,000 in the first qu arter of 2005 as compared to the first quarter of 2004.

       The registrant's total assets increased 3.1 percent to $440,262,143 during the three months ended March 31, 2005, from $426,929,185 at December 31, 2004. Loans and leases, net of allowance for credit losses, totaled $256,713,853 at March 31, 2005, a 1.7 percent increase compared to $252,334,031 at December 31, 2004. Investment securities decreased $1,121,581, or 0.8 percent, to $135,342,900 at March 31, 2005, from $136,464,481 at December 31, 2004.  At March 31, 2005, there was an unrealized loss on available-for-sale securities, net of tax, of $903,201, as compared to an unrealized gain on available-for-sale securities of $293,058 at December 31, 2004. The loss in market value of the securities portfolio that occurred in the first three months of 2005 was primarily a result of the higher interest rates prevalent, especially short and medium-term interest rates, at March 31, 2005 as compared to December 31, 2 004 and a deterioration of the credit quality of certain issuers of corporate bonds held by the Company.  Management anticipates that interest rates will continue to rise steadily throughout 2005 and additional unrealized losses will result in the investment security portfolio.
 

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PART I - FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (Continued)

(c) Liquidity

       Liquidity is the ability to fund increases in loan demand or to compensate for decreases in deposits and other sources of funds, or both. Maintenance of adequate liquidity is an essential component of the financial planning process. The objective of asset/liability management is to provide an optimum balance of liquidity and earnings. Cash and cash equivalents increased $4,132,124 between December 31, 2004 and March 31, 2005.  
       Marketable investment securities, particularly those of short maturities, are the principal source of asset liquidity. Securities maturing in one year or less amounted to $11,513,000 at March 31, 2005, representing 8.5 percent of the registrant's investment portfolio as compared to $19,644,000,or 12.6 percent one year earlier. These securities may be sold in response to changes in interest rates, changes in prepayment risk, the need to increase regulatory capital, or asset/liability strategy. Management classifies all of the Company's investment portfolio in the available-for-sale category and reports these securities at fair value. Management does not anticipate the sale of a material amount of investment securities in the foreseeable future.  
       Other sources of liquidity include maturing loans and federal funds sold. At March 31, 2005 the Bank had approximately $97.3 million in loans maturing within one year. The registrant had $9,890,000 in Federal funds sold on March 31, 2005, compared to $7,182,000 as of December 31, 2004.
       The registrant does not anticipate that there will be any unusual demands, commitments, or events that could adversely impact the liquidity of the registrant.

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PART I - FINANCIAL INFORMATION
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       Since these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to fund these commitments, the Bank has the ability to liquidate federal funds sold or securities available-for-sale, or on a short-term basis to borrow and purchase federal funds from other financial institutions as well as borrow from the Federal Home Loan Bank of Cincinnati. At March 31, 2005, the Bank had total borrowings of $4,276,159 and had approximately $30,400,000 of available additional borrowings from the Federal Home Loan Bank of Cincinnati and $25,000,000 in federal funds lines available from correspondent banks.
       The Bank originates residential mortgage loans for sale in the secondary market which it may be required to repurchase if a default occurs with respect to the payment of any of the first four installments of principal and interest after a loan is sold and the default continues for a period of 90 days. These loans are considered in the computation of the allowance for loan losses to cover future defaults.

(d) Capital Adequacy

       The Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC have established risk-based capital guidelines for U.S. banking organizations. These guidelines provide a uniform capital framework that is sensitive to differences in risk profiles among banks.
        Under these guidelines, total capital consists of Tier I capital (core capital, primarily stockholders' equity) and Tier II capital (supplementary capital, including certain qualifying debt instruments and credit loss reserve).
       Assets are assigned risk weights ranging from 0 to 100 percent depending on the level of credit risk normally associated with such assets. Off-balance sheet items (such as commitments to make loans) are also included in assets through the use of conversion factors established by regulators and are assigned risk weights in the same manner as on-balance sheet items. Banking institutions are expected to maintain a Tier I capital to risk-weighted assets ratio of at least 4.00 percent, a total capital (Tier I plus Tier II) to total risk-weighted assets ratio of at least 8.00 percent, and a Tier I capital to total assets ratio (leverage ratio) of at least 4.00 percent. To be "well capitalized," banking institutions must maintain a Tier I capital to risk-weighted assets ratio of at least 6.00 percent, a total capital (Tier I plus Tier II) to risk-weighted assets ratio of at least 10.00 percent, and a Tier I capital to total assets ratio (leverage ratio) of at l east 5.00 percent.
       At March 31, 2005 and December 31, 2004, both the registrant's and the Bank's capital ratios met regulatory minimum capital requirements. At March 31, 2005 and December 31, 2004, the registrant and the Bank were categorized as "well-capitalized".

  PART I - FINANCIAL INFORMATION
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(*) Average assets for the above calculations were as of the most recent quarter for each period noted.

       On December 21, 2004, the Board of Directors of the Company approved a plan authorizing the management of the Company, beginning on December 31, 2004, to repurchase up to $5,000,000 of the Company's common stock from shareholders desiring to liquidate their shares in either the open market or through privately negotiated transactions. See Item 2, Part II for a discussion of shares repurchased during the quarter ended March 31, 2005.

  PART I - FINANCIAL INFORMATION
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       The registrant's primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the registrant's assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity. Based upon the nature of the registrant's operations, the registrant is not subject to foreign currency exchange or commodity price risk.
       Interest rate risk management focuses on the earnings risk associated with changing interest rates, as well as the risk to the present value of the registrant's equity. Management seeks to maintain profitability in both immediate and long-term earnings through funds management and interest rate risk management. The registrant's rate sensitive position has an important impact on earnings and the present value of the registrant's equity. Management of the registrant meets regularly to analyze the rate sensitivity position, focusing on the spread between the cost of funds and interest yields generated primarily through loans and investments. Management also seeks to maintain stability in the net interest margin under varying interest rate environments. These goals are accomplished through the development and implementation of lending, funding and pricing strategies designed to maximize net interest income under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.
       Analysis of rate sensitivity and rate gap analysis are the primary tools used to assess the direction and magnitude of changes in net interest income resulting from changes in interest rates. Included in the analysis are cash flows and maturities of financial instruments, changes in market conditions, and pricing and deposit volume and mix. Since these assumptions are inherently uncertain, net interest income can not be precisely estimated nor can the impact of changes in interest rates be precisely predicted. Actual results will differ due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management's strategies, among other factors.
       Simulation modeling is used to evaluate both the level of interest rate sensitivity as well as potential balance sheet strategies. Important elements in this modeling process include the mix of floating rate versus fixed rate assets and liabilities; the repricing/maturing volumes and rates of the existing balance sheet; and assumptions regarding future volumes, maturity patterns and pricing under varying interest rate scenarios. The Bank's Asset/Liability policy strives to limit the decrease in net interest income over a +/-200 basis point rate shock to no more than 7.0 percent over the next twelve months as compared to the base scenario of no changes in interest rates and to limit the decrease in the current present value of the Bank's equity to no more than 25 percent over the same +/-200 basis point rate shock. As of March 31, 2005, a -200 basis point rate shock was estimated to decrease net interest income approximately $851,000, or 6.0%, over the next twelve months, as compared to the base scenario. A +200 basis point rate shock was projected to increase net interest income approximately $471,000, or 3.3 percent, over the next twelve months as compared to the base scenario. The Bank is slightly asset-sensitive in the one year or less time frame, contributing to the decrease in net interest income in the -200 basis point rate shock. Also, the interest rates paid on non-maturity deposit accounts are near their floor levels currently, so a -200 basis point rate shock takes these accounts to their floor interest rates, again contributing to the loss in net interest income in the -200 basis point rate shock. The -200 basis point rate shock was estimated to decrease the current present value of the Bank's equity by 2.1 percent and a +200 basis point rate shock was estimated to decrease the current present value of the Bank's equity less than 0.1%, both well within the policy guidelines. This simulation analysis assumes that NOW and savings accounts have a lower c orrelation to changes in market interest rates than do loans, investment securities and time deposits. The simulation analysis takes into account the call features of certain investment securities based upon the rate shock, as well as estimated prepayments on loans. The simulation analysis assumes no change in the Bank's asset/liability composition due to the inherent uncertainties of specific conditions and corresponding actions of management. Actual results would necessarily vary due to changing market conditions and management's response to those conditions.
       There have been no material changes in reported market risks during the quarter ended March 31, 2005.

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  PART I - FINANCIAL INFORMATION
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Item 4. Controls and Procedures

PART II - OTHER INFORMATION
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Item 1.  Legal Proceedings.

       The registrant and its subsidiaries are involved, from time to time, in ordinary routine litigation incidental to the banking business. Neither the registrant nor its subsidiaries is involved in any material pending legal proceedings.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

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Item 3.  Defaults upon Senior Securities.

     None

                                                                                FIRST PULASKI NATIONAL CORPORATION

Date:  May 16, 2005                                             /s/Tracy Porterfield                                       
                                                                                Tracy Porterfield, Chief Financial Officer