SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Annual Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002

Commission file number 0-10972

Securities registered pursuant to Section 12(g) of the Act:

(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 the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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. X_

The aggregate market value of the voting stock held by non-affiliates of First Farmers and Merchants Corporation at March 1, 2003, was $219,000,000.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the issuer's common stock, as of March 1, 2003. 2,920,000 shares

This filing contains 86 pages.

DOCUMENTS INCORPORATED BY REFERENCE

PART I

Item 1. Business.

A discussion of the general development of the business is incorporated herein by reference to Notes to Consolidated Financial Statements which are a part of the Annual Report to Stockholders which is included in this filing.

FFMC has no employees. Its subsidiary, the Bank had approximately three hundred twelve (312) full time employees and fifty-two (52) part time employees. Five of the Bank's officers also were officers of FFMC. Employee benefit programs provided by the Bank include a deferred profit sharing plan, an annual profit sharing plan, a salary continuation plan, a deferred compensation plan, an executive split dollar life insurance plan, training programs, group life and health insurance, and paid vacations.

Item 2. Properties.

A discussion of the properties owned by the company is incorporated herein by reference to Notes to Consolidated Financial Statements which are a part of the Annual Report to Stockholders which is included in this filing. Other real estate owned by the Bank as of December 31, 2002, included: (1) a one-tenth interest in approximately one hundred acres known as Town Center, located in the southern part of the town of Spring Hill, in northern Maury County, Tennessee on US Highway 31, (2) forty nine improved lots in a residential subdivision on Weakley Creek Road in Lawrenceburg, Lawrence County, Tennessee, (3) a .23 acre residential lot located twelve miles south of Franklin in a subdivision in Spring Hill, Williamson County, Tennessee, (4) a .241 acre residential property located one to two miles southwest of downtown Columbia, Maury County, Tennessee, (5) a rural residential property three miles east of downtown Lewisburg, Marshall County, Tennessee, (6) a 12.687 acre rural residential property located fif teen miles southwest of Centerville, Hickman County, Tennessee, (7) a residential property located in Lawrenceburg, Lawrence County, Tennessee, and (8) 17 acres of rural property located near Pulaski, Giles County, Tennessee. The properties are not depreciated.

Item 3. Legal Proceedings.

There are no material pending legal proceedings known to the Board of Directors in which any director or executive officer or principal stockholder of the Corporation and the Bank or any business in which such persons are participants as a material interest adverse to the Corporation and its subsidiary.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted to the security holders during the fourth quarter of the fiscal year ended December 31, 2002.

PART II

Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters.

A discussion of the registrant's common stock and related security holder matters is incorporated herein by reference to Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations which are a part of the Annual Report to Stockholders which is included in this filing.

Item 6. Selected Financial Data.

The selected financial data is incorporated herein by reference to Consolidated Financial Statements, Notes to Consolidated Financial Statements, and Management's Discussion and Analysis of Financial Condition and Results of Operation which are a part of the Annual Report to Stockholders which is included in this filing.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Management's discussion and analysis of financial condition and results of operations is incorporated herein by reference to Management's Discussion and Analysis of Financial Condition and Results of Operations which are a part of the Annual Report to Stockholders which is included in this filing.

Item 8. Financial Statements and Supplementary Data.

Financial statements and supplementary data are incorporated herein by reference to Consolidated Financial Statements, Notes to Consolidated Financial Statements, and Management's Discussion and Analysis of Financial Condition and Results of Operation which are a part of the Annual Report to Stockholders which is included in this filing.

Item 9. Disagreements on Accounting and Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Reference is made to First Farmers and Merchants Corporation's definitive Proxy Statement (incorporated herein by reference) pursuant to Regulation 14 A, Solicitation of Proxies, which involves the election of Directors. The present terms of Directors and officers extend to April 15, 2003.

The following is a list as of March 1, 2003, showing the names and ages of all executive officers of First Farmers and Merchants Corporation ("FFMC"), the nature of any family relationships between them, and all positions and offices with the Corporation held by each of them:

Item 11. Executive Compensation and Transactions.

Reference is made to First Farmers and Merchants Corporation's definitive Proxy Statement (incorporated herein by reference) pursuant to Regulation 14 A, Solicitation of Proxies, which involves the election of Directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Reference is made to First Farmers and Merchants Corporation's definitive Proxy Statement (incorporated herein by reference) pursuant to Regulation 14 A, Solicitation of Proxies, which involves the election of Directors.

Item 13. Certain Relationships and Related Transaction.

Reference is made to First Farmers and Merchants Corporation's definitive Proxy Statement (incorporated herein by reference) pursuant to Regulation 14 A, Solicitation of proxies, which involves the election of directors.

Signatures

Pursuant to the requirements of Section 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, thereunto duly authorized.

FIRST FARMERS AND MERCHANTS CORPORATION

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of First Farmers and Merchants Corporation and Subsidiary for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof , each of the undersigned certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S. C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(Registrant)

I certify that:

I certify that:

.

ANNUAL REPORT ON FORM 10-K

ITEM 14(a)(1) and (2) ITEM 14(d)

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

YEAR ENDED DECEMBER 31, 2002

FIRST FARMERS AND MERCHANTS CORPORATION

COLUMBIA, TENNESSEE

FORM 10-K -- ITEM 14(a)(1) and (2)

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARY

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

The following consolidated financial statements of First Farmers and Merchants Corporation and Subsidiary, included in the annual report of the registrant to its security holders for the year ended December 31, 2002, are incorporated by reference in Item 8:

The following financial statement schedules of First Farmers and Merchants Corporation and Subsidiary are included in Item 14(d):

None

All other schedules to the consolidated financial statements required by Article 9 of Regulation S-X and all other schedules to the financial statements of the registrant required by Article 5 of Regulation S-X are not required under the related instructions or are inapplicable and therefore, have been omitted.

EXHIBIT INDEX

FIRST FARMERS AND MERCHANTS CORPORATION

FIRST FARMERS AND MERCHANTS CORPORATION

The Bank is committed to providing quality services in diverse markets and a dynamic interest rate environment. Our customers are enjoying the quality service of a community bank and the safety and strength of a regional bank. Commercial banking in the marketing area served by the Bank is highly competitive. Although the Bank has the largest market share in the area in terms of total deposits, the Bank faces substantial competition from nineteen (19) other banks, two (2) savings and loan associations, and several credit unions located in its marketing area.

The accompanying tables plus the discussion and financial information are presented to aid in understanding First Farmers and Merchants Corporation's current financial position and results of operations. The emphasis of this discussion will be on the years 2002, 2001, and 2000; however, financial information for prior years will also be presented when appropriate. This discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements included elsewhere in this material.

First Farmers and Merchants Corporation's financial condition depends on the quality and nature of its assets, its liability and capital structure, the market and economic conditions, and the quality of its personnel.

During 2002, First Farmers and Merchants National Bank saw a 3.8% decline in net loans. Without the loans acquired in the acquisition of two locations of the Community Bank, an Alabama banking corporation, in Pulaski, Giles County, Tennessee in the first quarter, net loans declined 8.5%. Deposits grew 9.4%, half of which was related to deposits acquired in Pulaski.

Net income was down 19.7%. During the first quarter of 2002, the Bank changed the classification of specific commercial loans with documentation and structural deficiencies and retail loans with certain historical performance characteristics. Bank management determined that this change was necessary to reflect potential increased loss inherent to such loans. The effect of the change, which has been recognized currently as a change in accounting estimate, was to increase the provision for loan losses and decrease income before provision for income taxes by $4.4 million, $2.6 million, net of tax, or $.90 per share, for the year ended December 31, 2002.

The Corporation reported net income of $8.5 million for 2002 compared to $10.6 million in 2001 and $8.3 million in 2000. On a per common share basis, net income was $2.92 for 2002 versus $3.63 for 2001 and $2.85 for 2000. The decline in 2002's earnings resulted primarily from the Bank's change in the accounting estimate of the provision for loan losses.

The return on beginning equity for 2002 was 9.49% compared to 13.29% for 2001 and 11.55% for 2000. The return on average assets was .96% for 2002 versus 1.36% for 2001 and 1.30% for 2000.

The net interest margin is defined as the difference between the revenue from earning assets, primarily interest income, and interest expense related to interest-bearing liabilities. The maintenance of the gross interest margin at a level which, when coupled with noninterest revenues, is sufficient to cover additions to the allowance for loan losses, noninterest expenses and income taxes, and yield an acceptable profit is critical for success in the banking industry. The net interest margin is a function of the average balances of earning assets and interest-bearing liabilities and the yields earned and rates paid on those balances.

Management activities are planned to maintain a satisfactory spread between the yields on earning assets and the related cost of interest-bearing funds. The gross interest spread is determined by comparing the taxable equivalent gross interest margin to average earning assets before deducting the allowance for loan losses. This ratio reflects the overall profitability of earning assets, including both those funded by interest-bearing sources and those which incur no interest cost (primarily noninterest-bearing demand deposits). This ratio is most often used when analyzing a banking institution's overall gross margin profitability compared to that of other financial institutions. The incremental interest spread compares the difference between the yields on earning assets and the cost of interest-bearing funds. This calculation and similar ratios are used to assist in pricing decisions for interest related products. Table A entitled Distribution of Assets, Liabilities, and Stockholders' Equity, Interest Rates and Interest Differential presents for each of the last three years by major categories of assets and liabilities, the average daily balances, the components of the gross interest margin (on a taxable equivalent basis), the yield or rate, and the incremental and gross interest spread.

Table B sets forth, for the periods indicated, a summary of changes in interest earned and interest paid separated into the amount generated by volume changes and the amount generated by changes in the yield or rate.

Two graphs are included at this point in the material mailed to our stockholders. The first graph illustrates in thousands of dollars, the categories of average earning assets and the portion each category is of the total for the last three years. The second graph illustrates in thousands of dollars, the categories of average funding of earning assets and the portion each category is of the total for the last three years. The following tables illustrate the data in these graphs.

Average earning assets increased 13.2% in 2002, 10.8% without an acquisition that occurred in the first quarter, compared to a 20.2% increase in 2001 and a 7.4% increase in 2000. An acquisition in the second quarter of 2001 is the reason for the large increase in 2001. As a financial institution, the Bank's primary earning asset is loans. At December 31, 2002, average net loans represented 64% of average earning assets. Average net loans were up 10.9% in 2002, 32% of which was a result of the 2002 acquisition, compared to a 32.3% increase in 2001, 80% of which was a result of the 2001 acquisition, and a 9.7% increase in 2000.

Average investments, including federal funds sold, 32% of average earning assets at December 31, 2002, increased 17.2% from year end 2001 compared to a 2.9% increase at the end of 2001 from year end 2000, and a 4.3% increase at the end of 2000 from year end 1999. In the first quarter of 2002, the Bank acquired two offices in Pulaski, Tennessee from an Alabama bank. Net loans of approximately $24 million and certain other assets were acquired. The Bank completed an acquisition of Peoples and Union Bank of Lewisburg, Tennessee, in the second quarter of 2001 acquiring $111 million in net loans, $19 million in investment securities, and certain other assets. Average total assets increased during the last three years as evidenced by 14.34% growth during 2002, 21.5% growth during 2001, and 6.7% growth from 1999 to 2000. A portion of the growth in 2002 and 2001 was due to acquisitions in each year.

The bank's average deposits grew during the last three years reflecting a 15.5% growth during 2002, 3.8% from the Pulaski acquisition. Deposit liabilities of $35 million were assumed in the transaction. Deposits grew 22.3% during 2001, 79% of this growth is related to the Lewisburg acquisition. Deposit liabilities of $148 million were assumed in the transaction. Deposits experienced a 6.1% growth from 1999 to 2000. Interest rates continued to decline in 2002. Some customers moved money to interest-bearing transaction accounts until rates settled down. Interest-bearing transaction accounts increased 30.9% during 2002 compared to a 6.8% increase in 2001 and a 1.2% increase during 2000. Time deposits under $100,000 declined 3.9% during 2002. Time deposits over $100,000 increased 5.1% in 2002. Average savings deposits increased over 58.8% during 2002. Savings deposits have been strong historically providing a core, low cost, source of funding. However, the acquisitions contributed to this increase. The Bank's noninterest-bearing deposits have remained consistently strong and were 14.0% of average total deposits in 2002, 2001, and 2000. This strong core of noninterest-bearing funds contributed to the maintenance of the low cost of funds for the periods.

At December 31, 2002, the Bank had approximately $93.9 million of cash and due from banks, securities and other short-term investments maturing within one year compared to $70.9 million as of a year earlier. In the normal course of business, the Bank has established lines of credit for short-term borrowings for the management of daily liquidity needs. At December 31, 2002, the unused lines of credit were $45 million.

The Bank uses an earnings simulation model to evaluate the impact of different interest rate scenarios on the gross margin. Each month, the Asset/Liability Committee monitors the relationship of rate sensitive earning assets to rate sensitive interest-bearing liabilities (interest rate sensitivity) which is the principal factor in determining the effect that fluctuating interest rates will have on future net interest income. Rate sensitive earning assets and interest-bearing liabilities are those which can be repriced to current market rates within a defined time period. The committee measures near-term (next twelve months) risk to net interest income due to changes in interest rates. The model incorporates the Bank's assets and liabilities, together with forecasted changes in the balance sheet mix and assumptions that reflect the current interest rate environment to simulate the effect of possible changes in interest rates on net interest income. As a policy, budgeted financial goals are monitore d on a monthly basis by the Asset/Liability Committee where the actual dollar change in net interest income given different interest rate movements is reviewed. A negative dollar change in net interest income for a twelve month period of less than 4.5% of net interest income given a three hundred basis point shift in interest rates is considered an acceptable rate risk position. At December 31, 2002, if interest rates were to fall 300 basis points (3.0%) over the next twelve months, net interest income would be $778 thousand less than currently projected without interest rate movements. This would be a decline in net interest income of 2.2% which is within policy guidelines established by the Board of Directors.

Another tool used to monitor the Bank's overall interest rate sensitivity is a gap analysis. Table C, Rate Sensitivity of Earning Assets and Interest-Bearing Liabilities, shows the Bank's rate sensitive position at December 31, 2002, as measured by gap analysis (the difference between the earning asset and interest-bearing liability amounts scheduled to be repriced to current market rates in subsequent periods). TABLE A - Distribution of Assets, Liabilities, and Stockholders' Equity, Interest Rates and Interest Differential provides details of the largest component of interest-bearing liabilities.

The net interest margin, on a tax equivalent basis, at December 31, 2002, 2001, and 2000 was 4.42%, 4.30%, and 4.19% respectively.

As with most commercial banking institutions, the loan portfolio is the largest component of earning assets and consequently provides the highest amount of revenues. The loan portfolio also contains, as a result of credit quality, the highest exposure to risk. When analyzing potential loans, management assesses both interest rate objectives and credit quality objectives in determining whether to make a given loan and the appropriate pricing for that loan. The Bank maintains a diversified portfolio in order to spread its risk and reduce its exposure to economic downturns which may occur in different segments of the economy or in particular industries. The composition of the loan portfolio is disclosed in detail in Note 3 in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

The lending activities of the Bank are subject to written underwriting standards and policies established by the Bank's Board of Directors and management which include loan review procedures and approvals. Applications for loans are taken by designated employees at eighteen of the Bank's offices. Depending primarily on the

The Bank has a Credit Administrator who is responsible for assisting loan officers in structuring new loans, reviewing problem loans, monitoring their status from period to period, and assisting in their resolution. This review process also includes semiannual reviews by an outside party to assess the quality of the loan portfolio independently. Management has concluded that this independent review has served to strengthen underwriting practices. The Credit Administrator's analysis and review also includes a formal review that is prepared quarterly to assess the risk in the loan portfolio and to determine the adequacy of the allowance for loan losses. A review of all relationships aggregating $250 thousand and greater was completed in 2002. After this review, loans totaling $7.6 million, or 1.5 % of the portfolio, were classified as other assets especially mentioned. This compares to loans totaling $12.5 million so classified at December 31, 2001. Loans totaling $35.1 million, 7.0 % of the portfolio, were classified as substandard. This compares to loans totaling $17.8 million so classified at December 31, 2001. Loans totaling $.668 million, or .1 % of the portfolio, were classified as doubtful. This compares to $.5 million so classified at December 31, 2001. Management asserts that the allowance for loan losses is adequate at December 31, 2002.

On September 3, 2002, the Bank voluntarily entered into a written agreement with the Office of the Comptroller of the Currency. The agreement relates to asset quality and management and board oversight of the lending function. Management believes that the financial ramifications related to the agreement have been fully recorded.

Loans having recorded investments of $11.5 million at December 31, 2002, have been identified as impaired in accordance with the provisions of SFAS 114. They represent 2.3% of gross loans. Commercial loans comprised $1.5 million of the total, with loans secured by real estate accounting for $9.4 million, and installment loans $.5 million. Interest received on these loans during 2002 was $982,000, during 2001 was $345,000, and during 2000 was $584,000. The gross interest income that would have been recorded if the loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination, if held for part of the period, was $489,000, $348,000, and $801,000 for the years ended December 31, 2002, 2001, and 2000 respectively. Please refer to Note 1 and Note 3 in the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS that are included elsewhere in this material for more information on the Bank's policy regarding loan impairment.

Cash dividends declared in 2002 were 37% of net income. The Corporation plans to resume an average payout ratio over 20% while continuing to maintain a capital to asset ratio reflecting financial strength and adherence to regulatory guidelines.

A bar graph on this page, in the materials sent to our stockholders, illustrates the average equity of the Corporation for the last eight years. The following table is the data illustrated by this graph in thousands of dollars.