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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 SEPTEMBER 30, 2002

o   TRANSITION REPORT UNDER SECTION 13 OR 15(d)          
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD

FROM ______________________________ TO ______________________________

Commission File Number 2-90200

FIRST MCMINNVILLE CORPORATION

200 East Main Street, McMinnville, TN 37110

(931) 473-4402

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   o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: November 12, 2002 — 518,980.

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Consolidated Balance Sheets

September 30, 2002 and December 31, 2001

(Unaudited)

See accompanying notes to consolidated financial statements (unaudited).

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Consolidated Statements of Earnings

Three Months Ended September 30, 2002 and 2001
and Nine Months Ended September 30, 2002 and 2001

(Unaudited)

See accompanying notes to consolidated financial statements (unaudited).

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Consolidated Statements of Comprehensive Earnings

Three Months and Nine Months Ended September 30, 2002 and 2001

(Unaudited)

See accompanying notes to consolidated financial statements (unaudited).

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Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2002 and 2001

Increase (Decrease) in Cash and Cash Equivalents

See accompanying notes to consolidated financial statements (unaudited).

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Consolidated Statements of Cash Flows, Continued

Nine Months Ended September 30, 2002 and 2001

Increase (Decrease) in Cash and Cash Equivalents

(Unaudited)

See accompanying notes to consolidated financial statements (unaudited).

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Notes to Consolidated Financial Statements

(Unaudited)

Basis of Presentation

The unaudited consolidated financial statements include the accounts of First McMinnville Corporation (Company) and its wholly-owned subsidiary, The First National Bank of McMinnville (Bank) and the Bank’s wholly-owned subsidiary, First Community Title & Escrow Company.

The accompanying consolidated financial statements have been prepared, without audit, in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the statements contain all adjustments and disclosures necessary to summarize fairly the financial position of the Company as of September 30, 2002 and December 31, 2001, the results of operations for the nine months and three months ended September 30, 2002 and 2001, comprehensive earnings for the nine months and three months ended September 30, 2002 and 2001 and changes in cash flows for the nine months ended September 30, 2002 and 2001. All significant intercompany transactions have been eliminated. The interim consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. The results for interim periods are not necessarily indicative of results to be expected for the complete fiscal year.

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The purpose of this discussion is to provide insight into the financial condition and results of operations of the Registrant and its subsidiary. This discussion should be read in conjunction with the consolidated financial statements. Reference should also be made to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 for a more complete discussion of factors that impact liquidity, capital and the results of operations.

Forward — Looking Statements

     Management’s discussion of the Company, and management’s analysis of the Company’s operations and prospects, and other matters, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of federal and state securities laws. Although the Company believes that the assumptions underlying such forward-looking statements contained in this Report are reasonable, any of the assumptions could be inaccurate and, accordingly, there can be no assurance that the forward-looking statements included herein will prove to be accurate. The use of such words as expect, anticipate, forecast, and comparable terms should be understood by the reader to indicate that the statement is “forward-looking” and thus subject to change in a manner that can be unpredictable. Factors that could cause actual results to differ from the results anticipated, but not guaranteed, in this Report, include (without limitation) economic and social conditions, competition for loans, mortgages, and other financial services and products, changes in interest rates, unforeseen changes in liquidity, results of operations, and financial conditions affecting the Company’s customers, material unforeseen complications related to addressing Year 2000 issues (both as to the Company and as to its customers, vendors, consultants and governmental agencies), as well as other risks that cannot be accurately quantified or completely identified. Many factors affecting the Company’s financial condition and profitability, including changes in economic conditions, the volatility of interest rates, political events and competition from other providers of financial services simply cannot be predicted. Because these factors are unpredictable and beyond the Company’s control, earnings may fluctuate from period to period. The purpose of this type of information (such as in Item 2, as well as other portions of this Report) is to provide Form 10-Q readers with information relevant to understanding and assessing the financial conditions and results of operations of the Company, and not to predict the future or to guarantee results. The Company is unable to predict the types of circumstances, conditions, and factors that can cause anticipated results to change. The Company undertakes no obligation to publish revised forward-looking statements to reflect the occurrence of changes or of unanticipated events, circumstances, or results.

Liquidity and Interest Rate Sensitivity Management

     The concept of liquidity involves the ability of the Company and its subsidiary to meet future cash flow requirements, particularly those of customers who are either withdrawing funds from their accounts or borrowing to meet their credit needs.

     Proper asset/liability management is designed to maintain stability in the balance of interest-sensitive assets to interest-sensitive liabilities in order to provide a stable growth in net interest margins. Earnings on interest-sensitive assets such as loans tied to the prime rate of interest and federal funds sold, may vary considerably from fixed rate assets such as long-term investment securities and fixed rate loans. Interest-sensitive liabilities such as large certificates of deposit and money market certificates, generally require higher costs than fixed rate instruments such as passbook savings.

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

     The Company maintains a formal asset and liability management process to quantify, monitor and control interest rate risk and to assist management in maintaining stability in the net interest margin under varying interest rate environments. The Company accomplishes this process 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 held for purposes other than trading, changes in market conditions, loan volumes and pricing and deposit volume and mix. These assumptions are inherently uncertain, and, as a result, interest income can not be precisely estimated nor can the impact of higher or lower interest rates on net interest income 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.

     Based on the results of the analysis as of September 30, 2002, the Company would expect net interest income to decrease approximately $112,000 over a twelve month period if rates increased 2%. Net interest income would be expected to increase approximately $112,000 over a 12 month period should rates decrease 2%. The rate sensitivity as of September 30, 2002 was 1.09 to 1.0 (0-91 days) and .95 to 1.0 (0-365 days). This asset/liability mismatch in pricing is referred to as “gap” and is measured as rate sensitive assets divided by rate sensitive liabilities for a defined time period. A gap of 1.0 means that assets and liabilities are perfectly matched as to pricing within a specific time period and interest rate movements will not affect net interest margin, assuming all other factors hold constant.

     Banks, in general, must maintain large cash balances to meet day-to-day cash flow requirements as well as maintaining required reserves for regulatory agencies. The cash balances maintained are the primary source of liquidity. Federal funds sold, which are basically overnight or short-term loans to other banks that increase the other bank’s required reserves, are also a major source of liquidity.

     The Company’s investment portfolio consists of earning assets that provide interest income. For those securities classified as held-to-maturity the Company has the ability and intention to hold these securities until maturity. Securities classified as available for sale include securities intended to be used as part of the Company’s asset/liability strategy and/or securities that may be sold in response to changes in interest rate, prepayment risk, the need or desire to increase capital and similar economic factors. Securities totaling approximately $7.9 million mature or reprice within the next twelve months.

     A secondary source of liquidity is the Bank’s loan portfolio. At September 30, 2002 commercial, consumer and other loans of approximately $36.4 million and mortgage loans of approximately $10.4 million either will become due or will be subject to rate adjustments within twelve months. Emphasis continues to be placed on structuring adjustable rate loans.

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

     As for liabilities, certificates of deposit of $100,000 or greater of approximately $39.8 million will become due during the next twelve months. The Bank’s deposit base increased approximately $14.8 million during the nine months ended September 30, 2002. Securities sold under repurchase agreements increased approximately $76,000 during the nine months ended September 30, 2002. The increase in securities sold under agreements to resell was approximately $2.1 million during the quarter ended September 30, 2002. The deposit base increased approximately $2.9 million during the nine months ended September 30, 2001. Federal funds sold were $14.5 million at September 30, 2002 and $23.6 million at June 30, 2002. Federal funds purchased were $5.0 million at December 31, 2001. Advances from the Federal Home Loan Bank were $1,000,000 at September 30, 2002, June 30, 2002 and December 31, 2001.

     Historically, there has been no significant reduction in immediately withdrawable accounts such as negotiable order of withdrawal accounts, money market demand accounts, demand deposit and regular savings. Management anticipates that there will be no significant withdrawals from these accounts except as discussed in the preceding paragraph.

     The Subsidiary Bank is limited by law, regulation and prudence as to the amount of dividends that it can pay. At September 30, 2002, the Bank can declare during the remainder of 2002 cash dividends in an aggregate amount not to exceed approximately $7.1 million, exclusive of any 2002 net earnings, without prior approval of the Comptroller of the Currency. However, most of these funds will be retained for use in the Bank’s operations rather than being paid out in dividends. It is anticipated that with present maturities, the anticipated growth in deposit base, and the efforts of management in its asset/liability management program, liquidity will not pose a problem in the foreseeable future. At the present time there are no known trends or any known commitments, demands, events or uncertainties that management believes will result in or that are reasonable likely to result in the Company’s liquidity changing in any material way.

Capital Resources

     A primary source of capital is internal growth through retained earnings. The ratio of stockholders’ equity to total assets was 15.3% at September 30, 2002 and 14.6% at December 31, 2001. The increase in the ratio resulted primarily from an increase in the net unrealized gain on securities available for sale of approximately $728,000 and net earnings of $3,779,000 during the nine months ended September 30, 2002. Total assets increased 4.5% during the nine months ended September 30, 2002. The annualized rate of return on stockholders’ equity for the first nine months of 2002 was 12.2% compared to 10.5% for the comparable period in 2001. Principally because of the relatively high percentage of equity capital, the return on equity is lower than the reported average for many banks in the Bank’s peer group. Dividends of $389,000 and $366,000 or $.75 and $.70 per share were declared in the nine months ended September 30, 2002 and 2001, respectively. Cash dividends will be increased in the remainder of 2002 over 2001 only in the discretion of the Board of Directors and as profits permit. Dividends paid during 2001 were $3.00 per share. No material changes in the mix or cost of capital is anticipated in the foreseeable future. At the present time, there are no material commitments for capital expenditures.

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

Capital Resources, Continued

     Actions taken by the Board of Governors of the Federal Reserve System have resulted in multiple decreases in interest rates during the past several months and lower interest rates of new debt securities. The Company’s securities portfolio consists primarily of debt securities with an average yield greater than the current market rate. These factors have contributed to an unrealized gain on securities available-for-sale of $771,000 (net of income taxes of $475,000) at September 30, 2002.

     Regulations of the Comptroller of the Currency establish required minimum capital levels for the Bank. Under these regulations, national banks must maintain certain capital levels as a percentage of average total assets (leverage capital ratio) and as a percentage of total risk-based assets (risk-based capital ratio). Under the risk-based requirements, various categories of assets and commitments are assigned a percentage related to credit risk ranging from 0% for assets backed by the full faith and credit of the United States to 100% for loans other than residential real estate loans and certain off-balance sheet commitments. Total capital is characterized as either Tier 1 capital which includes common shareholders’ equity, noncumulative perpetual preferred stock and a limited amount of cumulative perpetual preferred — or Tier 2 capital which includes the allowance for loan losses up to 1.25% of risk weighted assets, perpetual preferred stock, subordinated debt and various other hybrid capital instruments, subject to various limits. Goodwill is not includable in Tier 1 or Tier 2 capital. National banks must maintain a Tier 1 capital to risk-based assets of at least 4.0%, a total capital to risk-based assets ratio of at least 8.0% and a leverage capital ratio defined as Tier 1 capital to average total assets of at least 4.0%. The same ratios are also required in order for a national bank to be considered “adequately capitalized” under the OCC’s “prompt corrective action” regulations, which impose certain operating restrictions on institutions which are not adequately capitalized. The Bank has a Tier 1 risk-based ratio of 26.7%, a total capital to risk-based ratio of 27.9% and a Tier 1 leverage ratio of 15.3%, and was thus in the “well capitalized” category under the regulations.

     The Federal Reserve Board imposes consolidated capital guidelines on bank holding companies which have more than $150 million in consolidated assets. These guidelines require bank holding companies to maintain consolidated capital ratios which are essentially the same as the minimum capital levels required for national banks. The Company’s consolidated capital ratios were substantially the same as those set forth above for the Bank, and exceeded the minimums required under these Federal Reserve Board guidelines at September 30, 2002.

     On April 8, 1997, the Company’s stockholders approved the First McMinnville Corporation 1997 Stock Option Plan. The Company has granted the right to purchase 46,000 shares of stock to its directors, officers and employees at exercise prices ranging from $58.15 to $74.30 per share. At September 30, 2002, 6,785 options had been exercised and 24,325 options were exercisable. 21,000 of these options were granted to Directors which vested over a three year period. Of this total, 4,450 options have been exercised, 1,500 options were forfeited and 15,050 options are exercisable at September 30, 2002. Shares granted to officers and employees are exercisable over a period of 10 years or the number of years until the optionee reaches age 65, whichever is less.

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

Results of Operations

     Net earnings were $3,779,000 for the nine months ended September 30, 2002 as compared to $2,969,000 for the same period in 2001. Net earnings were $1,148,000 for the quarter ended September 30, 2002 as compared to $1,066,000 during the same quarter in 2001.

     As in most financial institutions, a major element in analyzing the statement of earnings is net interest income which is the excess of interest earned over interest paid. The net interest margin could be materially affected during periods of volatility in interest rates.

     The Company’s interest income, excluding tax equivalent adjustments, decreased by $1,519,000 or 10.4% during the nine months ended September 30, 2002 as compared to the comparable period in 2001. Interest income for the quarter ended September 30, 2002 decreased $546,000 or 11.4% when compared to the quarter ended September 30, 2001 and $125,000 or 2.9% as compared to the second quarter of 2002. The decrease for the third quarter of 2002 compared to the same period in 2001 and compared to the quarter ended June 30, 2002 were primarily attributable to a decrease in interest rates during the fourth quarter of 2001 and during 2002. The ratio of average earning assets to total average assets was 96.1% for the nine months ended September 30, 2002 as compared to 96.8% for the same period in 2001.

     Interest expense decreased by $2,999,000 for the nine months ended September 30, 2002 or 38.5% as compared to the same period in 2001. Interest expense for the quarter ended September 30, 2002 decreased $893,000 or 36.9% as compared to the quarter ended September 30, 2001. Interest expense for the quarter ended September 30, 2002 decreased $59,000 or 3.7% over the quarter ended June 30, 2002. The decreases in interest expense can be attributable primarily to decreases in interest rates over the past twelve months.

     The foregoing resulted in net interest income of $8,248,000 for the nine months ended September 30, 2002, an increase of $1,480,000 or 21.9% compared to the prior year period. Net interest income for the quarter ended September 30, 2002 increased $347,000 or 14.7% as compared to the third quarter of 2001. Net interest income for the quarter ended September 30, 2002 decreased $66,000 or 2.4% as compared to the quarter ended June 30, 2002.

     The following schedule details the loans of the Company at September 30, 2002 and December 31, 2001:

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

Results of Operations, Continued

     The provision for loan losses was $135,000 for the first nine months of 2002 and 2001. The provision was $46,000 and $45,000 for each of the quarters ended September 30, 2002 and 2001, respectively. The provision for loan losses is based on past loan experience and other factors which, in management’s judgment, deserve current recognition in estimating possible loan losses. Such factors include past loan loss experience, growth and composition of the loan portfolio, review of specific loan problems, the relationship of the allowance for loan losses to outstanding loans, and current economic conditions that may affect the borrower’s ability to repay. Management has in place a system that is designed to identify and to monitor loan problems on a timely basis.

     The Company accounts for impaired loans under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan — Income Recognition and Disclosures”. These pronouncements apply to impaired loans except for large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment including credit card, residential mortgage, and consumer installment loans.

     A loan is deemed to be impaired when it is probable that the Company will be unable to collect the scheduled payments of principal and interest due under the contractual terms of the loan agreement. Impaired loans are measured at the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment in the loan, the Company shall recognize an impairment by creating a valuation allowance with a corresponding charge to the provision for loan losses or by adjusting an existing valuation allowance for the impaired loan with a corresponding charge or credit to the provision for loan losses.

     The Company’s first mortgage single family residential and consumer loans which total approximately $65,900,000 and $2,390,000, respectively at September 30, 2002, are divided into various groups of smaller-balance homogeneous loans that are collectively evaluated for impairment and thus are not subject to the provisions of SFAS Nos. 114 and 118. Substantially all other loans of the Company are evaluated for impairment under the provisions of SFAS Nos. 114 and 118.

     The Company considers all loans on nonaccrual status to be impaired. Loans are placed on nonaccrual status when doubt as to timely collection of principal or interest exists, or when principal or interest is past due 90 days or more unless such loans are well-secured and in the process of collection. Delays or shortfalls in loan payments are evaluated with various other factors to determine if a loan should be considered to be impaired. Generally, delinquencies under 90 days are considered insignificant unless certain other factors are present which indicate impairment is probable. The decision to place a loan on nonaccrual status is also based on an evaluation of the borrower’s financial condition, collateral, liquidation value, and other factors that affect the borrower’s ability to pay.

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

Results of Operations, Continued

     Generally, at the time a loan is placed on nonaccrual status, all interest accrued on the loan in the current fiscal year is reversed from income, and all interest accrued and uncollected from the prior year is charged off against the allowance for loan losses. Thereafter, interest on nonaccrual loans is recognized as interest income only to the extent that cash is received and future collection of principal is not in doubt. If the collectibility of outstanding principal is doubtful, such interest received is applied as a reduction of principal. A nonaccrual loan may be restored to accruing status when principal and interest are no longer past due and unpaid and future collection of principal and interest on a timely basis is not in doubt. At September 30, 2002 and 2001, the Company had no loans on nonaccrual status and there were no nonaccrual loans outstanding at any time during the two nine month periods then ended.

     Loans not on nonaccrual status are classified as impaired in certain cases where there is inadequate protection by the current net worth and financial capacity of the borrower or of the collateral pledged, if any. In those cases, such loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt, and if such deficiencies are not corrected, there is a probability that the Company will sustain some loss. In such cases, interest income continues to accrue as long as the loan does not meet the Company’s criteria for nonaccrual status.

     Generally, the Company also classifies as impaired any loans the terms of which have been modified in a troubled debt restructuring after January 1, 1995. Interest is accrued on such loans that continue to meet the modified terms of their loan agreements. At September 30, 2002, the Company had no loans that have had the terms modified in a troubled debt restructuring.

     The Company’s charge-off policy for impaired loans is similar to its charge-off policy for all loans in that loans are charged-off in the month when they are considered uncollectible.

     Impaired loans and related allowance for loan loss amounts at September 30, 2002 and December 31, 2001 were as follows:

     The allowance for loan loss related to impaired loans was measured based upon the estimated fair value of related collateral. The estimation of collateral “fair value” is not an exact science and involves subjective judgments which are not guaranteed.

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

Results of Operations, Continued

     The average recorded investment in impaired loans for the nine months ended September 30, 2002 and 2001 was $1,928,000 and $2,026,000, respectively. The related amount of interest income recognized on the accrual method for the period that such loans were impaired was approximately $119,000 and $127,000 for 2002 and 2001, respectively.

     The following schedule details selected information as to non-performing loans of the Company at September 30, 2002:

     Transactions in the allowance for loan losses were as follows:

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

Results of Operations, Continued

     The following table presents total internally graded loans as of September 30, 2002 and December 31, 2001:

     The increase in the internally graded loans is concentrated in three loans that were downgraded during the nine months ended September 30, 2002. All of the loans are performing and management believes there is adequate collateral on each loan. The loans were downgraded due to anticipated decreases in these customers’ projected cash flows primarily due to a slowing down economy. Two of the loans are secured by commercial and residential rental property and one loan is secured by property on which a restaurant is located.

     Residential real estate loans that are graded substandard totaling $1,572,000 and $1,708,000 at September 30, 2002 and December 31, 2001, respectively, consist of thirty four and thirty one individual loans, respectively, that have been graded accordingly due to bankruptcies, inadequate cash flows and delinquencies. No material losses on these loans is anticipated by management.

     The collateral values, based on estimates received by management, securing the above internally graded loans total approximately $17,077,000 ($2,802,000 related to real property and $14,275,000 related to commercial and other loans). Such loans are listed as classified when information obtained about possible credit problems of the borrower has prompted management to question the ability of the borrower to comply with the agreed repayment terms. The loan classifications do not represent or result from trends or uncertainties which management expects will materially and adversely affect future operating results, liquidity or capital resources.

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FORM 10-Q, CONTINUED

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued

Results of Operations, Continued

     The Company maintains an allowance for loan losses which management believes is adequate to absorb loses inherent in the loan portfolio. A formal review is prepared bi-monthly by the Loan Review Committee to assess the risk in the portfolio and to determine the adequacy of the allowance for loan losses. The review includes analysis of historical performance, the level of non-performing and adversely rated loans, specific analysis of certain problem loans, loan activity since the previous assessment, reports prepared by the Loan Review Committee, consideration of current economic conditions, and other pertinent information. The level of the allowance to net loans outstanding will vary depending on the overall results of this bi-monthly assessment. The review is presented to and subsequently approved by the Board of Directors.

     The following detail provides a breakdown of the allocation of the allowance for possible loans losses: