UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

~~[X]~~ þ ANNUAL REPORT PURSUANT TO SECTION 13 orOR 15(Dd) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010~~

~~[ ] Transition~~For ~~Report Pursuant to Section 13 or 15(d) of~~ the ~~Securities~~fiscal ~~Exchange~~year ~~Act~~ended ofDecember 31, ~~1934~~2011

o	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 0-11709

~~First~~FIRST ~~Citizens Bancshares~~CITIZENS BANCSHARES, ~~Inc~~INC.

Tennessee	62-1180360
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

(Exact name of registrant as specified in its charter)

One First Citizens Place Dyersburg, Tennessee 38024


Tennessee		62-1180360

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One First Citizens Place
Dyersburg, Tennessee		38024

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (731) 285 - 4410

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


		Name of Each Exchange on
Title of Each Class		Which Registered
None.		N/A

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

~~Indicate by check mark if the~~Common ~~registrant is a well-known seasoned issuer~~stock, asno ~~defined~~par ~~in Rule 405 of the Securities Act. Yes [ ] No [ x ]~~value

~~Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15~~(d)Title of ~~the Act. Yes [ ] No [x]~~Class)

Indicate by check mark ~~whether~~if the registrant ~~(1)~~is ~~has~~a ~~filed~~well-known ~~all~~seasoned ~~reports~~issuer, ~~required~~as todefined bein Rule ~~filed~~405 ~~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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ~~[ ]~~ o No [þ ]

Indicate by check mark if ~~disclosure~~the ofregistrant ~~delinquent filers pursuant to Item 405 Regulation S-K~~ is not ~~contained~~required ~~herein, and will not be contained,~~ to ~~the~~file ~~best~~reports ofpursuant ~~registrant's knowledge, in~~to ~~definitive~~Section ~~proxy~~13 or ~~information~~Section ~~statements~~15(d) ~~incorporated by reference in Part III~~ of ~~this~~the ~~Form 10-K or any amendment to this Form 10-K~~Act. []

~~Indicate by~~Yes ~~check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller reporting company.~~o ~~See~~No ~~definitions~~þ of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check One): Large accelerated filer [ ] Accelerated filer [x] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant: is(1) has afiled ~~shell~~all ~~company~~reports ~~(as~~required to ~~defined~~be infiled ~~Rule 12b-2~~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)~~. Yes~~, [and ~~] No~~(2) has ~~[x]~~been subject to such filing requirements for the past 90 days.

Yes þ No o ~~________________________~~

~~The~~ Indicate by ~~aggregate~~check ~~market~~mark ~~value~~whether ofthe registrant has submitted electronically and posted on ~~voting~~its corporate Web site, if any, every Interactive Data File required to be submitted and ~~non-voting~~posted ~~common~~pursuant ~~stock~~to ~~held~~Rule by405 ~~non~~of Regulation S-~~affiliates~~T ofduring the preceding ~~registrant~~12 onmonths ~~June~~(or ~~30,~~for ~~2010~~such ~~was approximately $77,247,680~~shorter ~~based~~period ~~upon~~that the ~~last~~registrant ~~known~~was required ~~sale~~to ~~price~~submit ~~prior~~and topost such ~~date~~files).

AsYes ~~of February~~þNo ~~15, 2011, the registrant had 3,625,826 outstanding shares of common stock.~~o

~~________________________~~ 1

~~DOCUMENTS~~ Indicate ~~INCORPORATED~~by BYcheck mark if disclosure of delinquent filers pursuant to Item 405 of ~~REFERENCE:~~Regulation S-K is not 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. þ

Indicate ~~Certain~~by ~~information~~check ~~called~~mark ~~for~~whether bythe ~~Part~~registrant ~~III~~is ofa ~~Form 10-K~~large isaccelerated ~~incorporated~~filer, byan accelerated ~~reference~~filer, toa ~~the~~non-accelerated ~~Proxy~~filer ~~Statement~~or ~~for~~a ~~our~~smaller ~~2011~~reporting ~~Annual~~company. See ~~Meeting~~the definitions of ~~Shareholders~~“large toaccelerated befiler,” ~~filed~~“accelerated ~~with~~filer” ~~the~~and ~~Commission~~“smaller reporting ~~within~~company” ~~120~~in ~~days~~Rule 12b-2 ~~after December~~of ~~31,~~the ~~2010~~Exchange Act. (Check One):

~~ITEM~~Large 1.accelerated ~~BUSINESS.~~filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o

~~General~~ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

~~First~~ The aggregate ~~Citizens~~market ~~Bancshares,~~value ~~Inc.~~of (the ~~"Company")~~voting isand anon-voting ~~financial~~common ~~holding company~~stock ~~incorporated~~held ~~in Tennessee in 1982. Through its principal bank~~by ~~subsidiary,~~non-affiliates ~~First~~of ~~Citizens~~the ~~National~~registrant ~~Bank~~on ~~(the "Bank")~~June 30, ~~the~~2011 ~~Company~~was ~~conducts commercial~~approximately ~~banking and financial services operations primarily in West Tennessee. At December 31~~$81, ~~2010~~953, ~~the Company and its subsidiaries had total assets of~~532 ~~$974~~based ~~million~~upon ~~and~~the ~~total~~last ~~deposits~~known ofsale ~~$792~~price ~~million.~~prior ~~The~~to ~~Company's~~such ~~principal executive offices are located at One First Citizens Place, Dyersburg, Tennessee 38024 and its telephone number is (731) 285-4410~~date.

~~The~~ As ~~Company,~~of ~~headquartered~~February ~~in Dyersburg~~21, ~~Tennessee~~2011, is the ~~holding~~registrant ~~company~~had ~~for~~3,607,854 ~~the~~outstanding ~~Bank~~shares ~~and First~~of ~~Citizens (TN) Statutory Trusts III and IV. These trusts hold the~~common ~~Company's trust preferred debt and are not consolidated but are accounted for under the equity method in accordance with generally accepted accounting principles~~stock.

~~The Bank is a~~DOCUMENTS ~~diversified~~INCORPORATED ~~financial~~BY ~~services~~REFERENCE institution that provides banking and other financial services to its customers. The Bank provides customary banking services, such as checking and savings accounts, fund transfers, various types of time deposits, safe deposit facilities, financing of commercial transactions and making and servicing both secured and unsecured loans to individuals, firms and corporations. The Bank is the only community bank in Tennessee recognized as a Preferred Lender for Farm Service Agency. The Bank's agricultural services include operating loans as well as financing for the purchase of equipment and farmland. The Bank's consumer lending department makes direct loans to individuals for personal, automobile, real estate, home improvement, business and collateral needs. The Bank typically sells long-term residential mortgages that it originates to the secondary market without retaining servicing rights. The Bank's commercial lending operations include various types of credit services for customers.

~~The~~ Certain information ~~Bank~~called ~~has~~for by Part III of Form 10-K is incorporated by reference to the ~~following~~Proxy Statement for our 2012 Annual Meeting of Shareholders to be filed ~~subsidiaries:~~with the Commission within 120 days after December 31, 2011.

First Citizens Financial Plus, Inc., a bank service corporation wholly owned by the Bank, provides licensed brokerage services that allow the Bank to compete on a limited basis with numerous non-bank entities that provide such services to the Company's customer base. The brokerage firm operates three locations in West Tennessee. 2

WhitePART 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. The Bank holds a 50% ownership in the agency, which is accounted for using the equity method. The insurance agency operates nine offices in Northwest Tennessee. I

FirstITEM Citizens/White and Associates Insurance Company is organized and existing under the laws of the state of Arizona1. Its principal activity is credit insuranceBUSINESS. The Bank holds a 50% ownership in the agency, which is accounted for using the equity method.

First Citizens Investments, Inc. was organized and exists under laws of the state of Nevada. The principal activity of this entity is to acquire and sell investment securities as well as collect income from the portfolio. First Citizens Investments, Inc. owns the following subsidiary:General

First Citizens ~~Holdings~~Bancshares, Inc. (the “Company”) is a ~~Nevada~~financial ~~corporation~~holding company ~~and~~incorporated isin aTennessee ~~wholly owned~~in ~~subsidiary~~1982. ofThrough its principal bank subsidiary, First Citizens ~~Investments,~~National ~~Inc.~~Bank (the “Bank”), ~~acquires~~the Company conducts commercial banking and ~~sells~~financial services operations primarily in West ~~certain~~Tennessee. ~~investment~~At ~~securities~~December 31, ~~collects~~2011, ~~income~~the ~~from~~Company and its ~~portfolio,~~subsidiaries had total assets of $1.053 billion and total deposits of $856 million. The Company’s ~~owns~~principal ~~the~~executive ~~following~~offices ~~subsidiary:~~are located at One First Citizens Place, Dyersburg, Tennessee 38024 and its telephone number is (731) 285-4410.

~~First~~The ~~Citizens Properties~~Company, ~~Inc. is a real estate investment trust~~ ~~organized~~headquartered ~~and~~in ~~existing~~Dyersburg, ~~under the laws of the state of Maryland~~Tennessee, ~~the principal activity of which~~ is ~~to invest in participation interests in real estate loans made by~~ the ~~Bank~~holding ~~and~~company ~~provide~~for the Bank ~~with an~~and ~~alternative vehicle for raising capital.~~ First Citizens ~~Holdings, Inc.~~(TN) ~~owns~~Statutory ~~100%~~Trusts ofIII ~~the outstanding common stock~~ and ~~60%~~IV. These oftrusts hold the ~~outstanding~~Company’s trust preferred ~~stock~~debt ~~of First Citizens Properties, Inc. Directors, executive officers~~ and ~~certain~~are ~~employees~~not ~~and~~consolidated ~~affiliates~~but ofare ~~the~~accounted ~~Bank own~~for ~~approximately~~under ~~40% of~~ the ~~preferred~~equity ~~stock~~method ~~which is reported as Noncontrolling Interest~~ in ~~Consolidated~~accordance ~~Subsidiaries~~with inaccounting ~~the~~principles ~~Consolidated~~generally ~~Balance~~accepted ~~Sheets~~in of the ~~Company~~United ~~included~~States ~~elsewhere in this Annual Report on 10-K~~(“GAAP”).

The Bank is a diversified financial services institution that provides banking and other financial services to its customers. The Bank provides customary banking services, such as checking and savings accounts, fund transfers, various types of time deposits, safe deposit facilities, financing of commercial transactions and making and servicing both secured and unsecured loans to individuals, firms and corporations. The Bank is the only community bank in Tennessee recognized as a preferred lender for the Farm Service Agency of the U.S. Department of Agriculture (“FSA”), which provides emergency farm loans to help producers recover from production and physical losses caused by natural disasters or quarantine. The Bank’s agricultural services include operating loans as well as financing for the purchase of equipment and farmland. The Bank’s consumer lending department makes direct loans to individuals for personal, automobile, real estate, home improvement, business and collateral needs. The Bank typically sells long-1-term residential mortgages that it originates to the secondary market without retaining servicing rights. The Bank’s commercial lending operations include various types of credit services for customers.

The ~~following~~Bank ~~table~~has ~~sets forth a comparative analysis of key balance sheet metrics of~~ the ~~Company as of December~~following ~~31, for the years indicated (in thousands)~~subsidiaries:

2010 2009 2008
Total assets $ 974,378 $ 956,555 $ 927,502
Total deposits 791,845 752,146 734,915
Total net loans 539,675 578,614 589,458
Total equity capital 89,279 84,367 77,063
First Citizens Financial Plus, Inc., a Tennessee bank service corporation wholly owned by the Bank, provides licensed brokerage services that allow the Bank to compete on a limited basis with numerous non-bank entities that provide such services to the Company’s customer base. The brokerage firm operates three locations in West Tennessee.

~~The~~White ~~table~~and ~~below provides~~Associates/First aCitizens ~~comparison~~Insurance, ofLLC ~~the~~was ~~Company's performance to industry standards based~~chartered ~~on information provided~~ by the ~~Federal~~State ~~Reserve.~~of ~~The~~Tennessee ~~Company~~and is ~~grouped~~a ~~with peers~~general ~~that~~insurance ~~have~~agency ~~assets~~offering ~~totaling~~a ~~$500~~full line ~~million~~of toinsurance $1products ~~billion~~including incasualty, ~~this~~life ~~analysis. According~~and ~~to the September 30~~health, ~~2010~~and ~~Bank Holding Company Performance Report,~~crop ~~which~~insurance. The isBank ~~the~~holds ~~most~~a ~~recent~~50% ~~report~~ownership ~~available~~in ~~as of~~ the ~~date~~agency, ofwhich ~~this~~is ~~Annual Report~~accounted onfor ~~Form~~using ~~10-K,~~ the ~~Company's~~equity ~~peer group consisted of 450 bank holding companies~~method. The ~~following~~insurance ~~table~~agency ~~presents~~operates ~~comparisons~~nine ofoffices ~~the Company with its peers as indicated~~ in ~~Bank Holding Company Performance Reports for the years ended~~ ~~December~~Northwest 31Tennessee. ~~for each of the years indicated:~~

2010 2009 2008
Company Peer(1) Company Peer Company Peer
Net interest income to average assets 3.77% 3.43% 3.74% 3.33% 3.28% 3.39%
Net operating income to average assets 0.92% 0.32% 0.89% -0.13% 0.83% 0.29%
Net loan losses to average total loans 1.38% 1.03% 0.93% 1.18% 0.31% 0.52%
Tier I capital to average assets(2) 8.87% 8.86% 8.40% 8.51% 8.13% 8.69%
Cash dividends to net income 40.86% 28.75% 45.27% 38.66% 55.85% 42.70%
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. The Bank holds a 50% ownership in the agency, which is accounted for using the equity method in accordance with GAAP.

~~________________~~First Citizens Investments, Inc. was organized and exists under laws of the State of Nevada. The principal activity of this entity is to acquire and sell investment securities as well as collect income from the portfolio. First Citizens Investments, Inc. owns the following subsidiary:

~~(1)~~ First ~~Peer~~Citizens ~~information~~Holdings, Inc. is ~~provided~~a ~~for~~Nevada ~~the~~corporation ~~nine~~and ~~months ended~~wholly-owned ~~September~~subsidiary ~~30,~~of ~~2010,~~First ~~which~~Citizens isInvestments, ~~the~~Inc., ~~most~~acquires ~~recent~~and ~~information~~sells ~~available.~~certain ~~(2)~~investment ~~Tier~~securities, Icollects ~~Capital~~income tofrom ~~average~~its ~~assets~~portfolio, isand ~~the~~owns ~~ratio of core equity capital~~the ~~components~~following ~~to average total assets.~~subsidiary:

~~The Company and~~ the Bank employed a total of 259 full-time equivalent employees as of December 31, 2010. The Company and the Bank are committed to hiring and retaining high quality employees to execute the Company's strategic plans.3

~~The~~ First ~~Company's~~Citizens ~~Internet~~Properties, ~~website~~Inc. ~~address~~ is ~~www.firstcitizens-bank.com.~~a ~~The Company~~real ~~makes~~estate ~~its~~investment ~~Annual~~trust organized ~~Reports~~and onexisting ~~Form~~under ~~10-K,~~the ~~Quarterly~~laws ~~Reports~~of onthe ~~Form~~State ~~10-Q~~of Maryland, the principal ~~Current~~activity ~~Reports~~of onwhich ~~Form~~is ~~8-K~~to ~~and~~invest ~~all~~in ~~amendments~~participation tointerests ~~those~~in ~~reports~~real ~~available~~estate ~~free~~loans ofmade ~~charge~~ by ~~link~~the onBank ~~its~~and ~~website~~provide on the ~~"About~~Bank Uswith -an ~~Investor~~alternative ~~Relations"~~vehicle ~~webpage~~for raising ~~under~~capital. First ~~the~~Citizens ~~caption~~Holdings, ~~"SEC~~Inc. ~~Filings"~~owns as100% ~~soon~~of asthe ~~reasonably~~outstanding ~~practicable~~common stock ~~after~~and ~~such material~~60% isof ~~electronically~~the ~~filed~~outstanding ~~with,~~preferred orstock ~~furnished~~of toFirst Citizens Properties, Inc. Directors, ~~the~~executive ~~Securities~~officers and ~~Exchange~~ ~~Commission~~certain ~~(the~~employees ~~"SEC").~~and ~~Shareholders~~affiliates ~~may~~of ~~request~~the Bank aown ~~copy~~approximately 40% of the ~~annual, quarterly~~preferred orstock ~~current~~which ~~reports~~is ~~without~~reported ~~charge~~as byNoncontrolling ~~contacting~~Interest ~~Judy~~in ~~Long,~~Consolidated ~~Secretary,~~Subsidiaries in the Consolidated ~~First~~Balance ~~Citizens~~Sheets ~~Bancshares,~~of ~~Inc.,~~the P.Company O.included ~~Box~~elsewhere ~~370,~~in ~~Dyersburg,~~this ~~Tennessee~~Annual ~~38025~~Report on 10-~~0370~~K.

~~Expansion~~The following table sets forth a comparative analysis of key balance sheet metrics of the Company as of December 31, for the years indicated (in thousands):

The Company, through its strategic planning process, intends to seek profitable opportunities that utilize excess capital and maximize income in Tennessee. If the Company decides to acquire other banking institutions, its objective would be asset growth and diversification into other market areas. Acquisitions and de novo branches might afford the Company increased economies of scale within operation functions and better utilization of human resources. The Company would only pursue an acquisition or de novo branch if the Company's Board of Directors determines it to be in the best interest of the Company and its shareholders. The Company does not currently have plans to acquire other banking institutions.

	2011	2010	2009
Total assets	$1,053,549	$974,378	$956,555
Total deposits	855,672	791,845	752,146
Total net loans	519,660	539,675	578,614
Total equity capital	103,468	89,279	84,367

The table below provides a comparison of the Company’s performance to industry standards based on information provided by the Board of Governors of the Federal Reserve (the “Federal Reserve”). According to the Bank Holding Company Performance Report as of September 30, 2011(the most recent report available as of the date of this Annual Report on Form 10-2-K), the Company’s peer group consisted of 300 bank holding companies with assets totaling $1 billion to $3 billion. The following table presents comparisons of the Company with its peers as indicated in Bank Holding Company Performance Reports for the years ended December 31 for each of the years indicated:

In 2008, the Company expanded by opening a full-service branch in Franklin, Tennessee. The Company also owns two lots in Jackson, Tennessee which it purchased for construction of full-service facilities. The lots were purchased in 2007 and 2008, but construction is temporarily on hold because of current economic conditions. Construction of these facilities is expected to commence in one to three years.

	2011		2010		2009
	Company	Peer⁽¹⁾	Company	Peer⁽²⁾	Company	Peer⁽²⁾
Net interest income to average assets	3.81%	3.45%	3.77%	3.44%	3.74%	3.33%
Net operating income to average assets	1.18%	0.63%	0.92%	0.22%	0.89%	-0.13%
Net loan losses to average total loans	0.45%	0.88%	1.38%	1.12%	0.93%	1.18%
Tier I capital to average assets⁽³⁾	9.15%	9.59%	8.93%	8.85%	8.40%	8.51%
Cash dividends to net income	33.54%	23.10%	40.86%	29.04%	45.27%	38.66%

~~Competition~~________________

The business of providing financial services is highly competitive. In addition to competing with other commercial banks in the service area, 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 criteria. Expanded membership criteria coupled with existing tax-exempt status give credit unions a competitive advantage compared to banks.

⁽¹⁾	Peer information is provided for the nine months ended September 30, 2011, which is the most recent information available.
⁽²⁾	For the years ended December 31, 2010 and 2009, the Company’s peer group consisted of approximately 450 bank holding companies with total asset size of $500 million to $1 billion.
⁽³⁾	Tier I capital to average assets is the ratio of core equity capital components to average total assets.

The ~~Bank~~Company ~~builds~~ and ~~implements strategic plans and commitments to address competitive factors~~ in the ~~various markets it serves. The~~ Bank's ~~primary~~employed ~~strategic~~a ~~focus~~total isof ~~on obtaining~~259 ~~and~~full-time ~~maintaining~~equivalent ~~profitable~~employees ~~customer~~as ~~relationships~~of ~~in all markets it~~December ~~serves~~31, 2011. The ~~markets~~Company ~~demand competitive pricing, but the Bank competes on high quality customer service that will attract~~ and ~~enhance loyal, profitable customers to~~ the Bank~~. Industry~~ ~~surveys~~are ~~have consistently revealed that 65-70% of customers leave banks because of customer service issues. Accordingly, the Bank is~~ committed to ~~excellent~~hiring ~~customer service in all markets that it serves as a means of branding~~ and ~~distinguishing~~retaining ~~itself from other financial~~high ~~institutions. The~~quality ~~Bank~~employees ~~utilizes advertising, including both newspaper and radio, and promotional activities~~ to ~~support~~execute ~~its~~the Company’s strategic ~~plans~~plan.

The ~~Bank~~Company’s ~~offers a~~website ~~typical~~address ~~mix~~is ~~of interest~~www.firstcitizens-~~bearing~~bank.com. ~~transactions,~~The ~~savings~~Company makes ~~and~~its ~~time~~Annual ~~deposit products,~~Reports ason ~~well~~Form as10-K, ~~traditional~~Quarterly ~~non-interest~~Reports ~~bearing~~on ~~deposit~~Form ~~accounts.~~10-Q, ~~The~~Current ~~Bank~~Reports ison aForm ~~leader~~8-K inand ~~deposit~~all ~~market~~amendments ~~share compared~~ to ~~competitors~~those inreports ~~Dyer, Fayette,~~available ~~Lauderdale,~~free ~~Obion, Tipton and Weakley counties. The Bank has~~of ~~consistently~~charge ~~been~~by alink ~~leader~~on inits ~~market~~website ~~share~~on ofthe ~~deposits~~“About inUs ~~its~~– ~~markets~~Investor ~~for~~Relations” webpage ~~several~~under ~~years.~~the ~~The~~caption ~~Bank's~~“SEC ~~market~~Filings” ~~share~~as ~~has~~soon ~~been~~as ~~18%~~reasonably topracticable ~~20%~~after ~~in Dyer, Fayette,~~such ~~Lauderdale,~~materials ~~Obion,~~are ~~Tipton~~electronically ~~and~~filed ~~Weakley~~with, ~~counties~~or ~~combined~~furnished ~~and~~to, inthe ~~excess~~Securities ~~of 62% in~~and ~~Dyer~~Exchange ~~County~~Commission ~~for~~ (the ~~last three years~~“SEC”). ~~The~~ ~~following~~Shareholders ~~market~~may ~~share~~request ~~information for~~a ~~these~~copy ~~counties~~of ~~(banks~~the ~~only~~annual, quarterly ~~deposits~~or ~~inside~~current ofreports ~~market)~~without ischarge ~~from~~by ~~the~~contacting ~~Deposit Market~~Laura ~~Share~~Beth ~~Report~~Butler, Secretary, asFirst ofCitizens ~~June 30~~Bancshares, ~~2010~~Inc., ~~prepared~~P. ~~annually~~O. byBox ~~the~~370, ~~FDIC (dollars~~Dyersburg, ~~in thousands):~~Tennessee 38025-0370.

	# of	Total Deposits		% of Market Share
Bank Name	Offices	June 30, 2010		As of June 30, 2010
First State Bank	15	$	747,025	22.76%
First Citizens National Bank	13	612,590		18.62%
Regions Bank	9	280,830		8.56%
Bank of Fayette County	7	203,948		6.21%
Somerville Bank & Trust Co.	5	159,399		4.86%
Bank of Ripley	4	150,071		4.57%
BancorpSouth Bank	6	149,646		4.56%
Commercial Bank & Trust	2	114,499		3.49%
Security Bank	6	98,865		3.01%
INSOUTH Bank	2	95,449		2.91%
Reelfoot Bank	6	93,617		2.85%
First Farmers Bank of Lynchburg	3	74,233		2.26%
First South Bank	2	71,151		2.17%
Patriot Bank	2	58,743		1.79%
Bank of Gleason	1	58,325		1.78%
Bank of Halls	2	53,697		1.64%
Brighton Bank	2	45,208		1.38%
Greenfield Banking Co.	2	40,706		1.24%
Clayton Bank and Trust	2	37,102		1.13%
Lauderdale County Bank	2	36,924		1.13%
Gates Banking & Trust Co.	1	34,828		1.06%
All others	8	64,795		2.02%
Total	101	$	3,281,651	100.00%

Expansion

~~-3-~~The Company, through its strategic planning process, intends to seek profitable opportunities that utilize excess capital and maximize income in Tennessee. If the Company decides to acquire other banking institutions, its objective would be asset growth and diversification into other market areas. Acquisitions and de novo branches might afford the Company increased economies of scale within operation functions and better utilization of human resources. The Company would only pursue an acquisition or open a de novo branch if the Company’s Board of Directors determines it to be in the best interest of the Company and its shareholders. The Company does not currently have plans to acquire other banking institutions.

~~The Bank also~~ competes in the Shelby and Williamson County markets. Because the size and composition of these two markets is much larger and more diverse than the other markets in which the Bank operates, Shelby and Williamson Counties are excluded from the above table. The Bank's market share in Shelby County was 0.75% and 0.62% as of June 30, 2010 and 2009, respectively. The Bank's market share in Williamson County was 0.18% and 0.11% as of June 30, 2010 and 2009, respectively.4

The Company owns ~~Regulation~~two real estate parcels in Jackson, Tennessee which it purchased for construction of full-service facilities. The lots were purchased in 2007 and 2008, ~~Supervision~~but construction is temporarily on hold because of current economic conditions. Construction of these facilities is expected to commence in one to three years.

The Company 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 (the "Federal Reserve"). As a financial holding company, the Company 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 the Company may:Competition

~~• Acquire~~The ~~ownership~~business orof providing ~~control~~financial ofservices ~~any~~is ~~voting~~highly ~~securities~~competitive. ofIn aaddition ~~bank~~to competing orwith ~~bank~~other ~~holding~~commercial ~~company~~banks ~~where~~in the ~~acquisition~~service ~~results~~area, in the ~~bank~~Bank ~~holding~~competes with savings ~~company~~and ~~owning~~loan orassociations, ~~controlling~~insurance ~~more~~companies, ~~than~~savings 5%banks, ofsmall aloan companies, ~~class~~finance ofcompanies, ~~voting~~mortgage ~~securities~~companies, real estate investment trusts, certain governmental agencies, credit card organizations, credit unions and other enterprises. ofIn ~~that~~1998, ~~bank~~federal orlegislation ~~bank~~allowed ~~holding~~credit ~~company;~~unions orto expand their membership criteria. Expanded membership criteria coupled with existing tax-exempt status give credit unions a competitive advantage compared to banks.

• The Bank builds ~~Acquire~~and ~~substantially~~implements strategic plans and commitments to address competitive factors in the various markets it serves. The Bank’s primary strategic focus is on obtaining and maintaining profitable customer relationships in all ~~assets~~markets it serves. The markets demand competitive pricing, but the Bank competes on high quality customer service that will attract and enhance loyal, profitable customers to the Bank. Industry surveys have consistently revealed that 65-70% of customers leave banks because of customer service issues. Accordingly, the Bank is committed to providing excellent customer service in all markets that it serves as a ~~bank~~means orof ~~bank~~branding ~~holding~~and distinguishing itself from other financial ~~company~~institutions. The orBank ~~merge~~utilizes ~~with~~advertising, ~~another~~including ~~bank~~both ~~holding~~newspaper ~~company~~and radio, and promotional activities to support its strategic plans.

~~Federal~~The ~~Reserve~~Bank offers ~~approval~~a istypical ~~not~~mix ~~required~~of ~~for~~interest-bearing atransaction, ~~bank~~savings ~~subsidiary~~and oftime deposit products, as well as traditional non-interest bearing deposit accounts. The Bank is a ~~bank~~leader ~~holding~~in ~~company~~deposit market share compared to competitors in Dyer, ~~merge~~Fayette, ~~with~~Lauderdale, orObion, ~~acquire~~Tipton ~~substantially~~and ~~all~~Weakley ~~assets~~Counties of ~~another~~Tennessee. ~~bank~~The ~~if prior~~Bank ~~approval~~has ofconsistently been a ~~federal~~leader ~~supervisory~~in ~~agency~~market share of deposits in its markets for several years. The Bank’s market share has been 18% to 20% in Dyer, ~~such~~Fayette, Lauderdale, asObion, ~~the~~Tipton ~~Comptroller~~and Weakley Counties combined and in excess of 62% in Dyer County for the last three years. The following market share information ~~Currency~~for these counties (banks only, deposits inside of market) is ~~required~~from ~~under~~the Deposit Market Share Report, as of June 30, 2011, prepared annually by the ~~Bank~~FDIC (dollars ~~Merger~~in ~~Act.~~thousands):

The Bank Holding Company Act provides that the Federal Reserve shall not approve any acquisition, merger or consolidation that would result in a monopoly or 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. Further, 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.

Bank Name	# of Offices	Total Deposits	Market Share %
First State Bank	15	$ 752,365	22.66%
First Citizens National Bank	13	639,329	19.25%
Regions Bank	9	256,416	7.72%
Bank of Fayette County	7	202,002	6.08%
Somerville Bank & Trust Co.	5	167,444	5.04%
Bank of Ripley	4	161,914	4.88%
BancorpSouth Bank	6	147,968	4.46%
Commercial Bank & Trust	2	118,025	3.55%
Security Bank	6	102,991	3.10%
Reelfoot Bank	5	100,109	3.01%
Insouth Bank	2	92,008	2.77%
First South Bank	2	70,544	2.12%
Farmers Bank of Lynchburg	2	69,509	2.09%
Patriot Bank	2	62,986	1.90%
Bank of Gleason	1	62,560	1.88%
Bank of Halls	2	55,673	1.68%
Greenfield Banking Co.	2	41,337	1.24%
Brighton Bank	2	40,144	1.21%
Lauderdale County Bank	2	38,902	1.17%
Gates Banking & Trust Co.	1	38,210	1.15%
Clayton Bank and Trust	2	33,717	1.02%
All others	8	66,794	2.02%
Total	100	$3,320,947	100.00%

~~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. 5

The Bank also ~~Usury~~competes in the Shelby County and Williamson County markets. Because the size and composition of these two markets is much larger and more diverse than the other markets in which the Bank operates, ~~State~~Shelby ~~Legislation~~and Williamson Counties are excluded from the above table. The Bank’s market share in Shelby County was 0.88% and 0.75% as of June 30, 2011 and 2010, respectively. The Bank’s ~~Economic~~market ~~Environment~~share in Williamson County was 0.21% and 0.18% as of June 30, 2011 and 2010, respectively.

~~Tennessee~~Regulation ~~usury~~and ~~laws limit the rate of interest that may be charged by banks. Certain federal laws provide for preemption of state usury laws.~~ Supervision

~~-4-~~Bank Holding Company Act

~~Tennessee~~The ~~usury~~Company ~~laws~~is ~~permit~~a financial ~~interest~~holding atcompany anunder ~~annual~~the ~~rate~~Bank ofHolding ~~four~~Company ~~percentage~~Act ~~points~~of ~~above~~1956, ~~the~~as ~~average~~amended ~~prime~~(the ~~loan~~“Bank ~~rate~~Holding ~~for~~Company Act”), and is subject to supervision and examination by the ~~most~~Federal ~~recent~~Reserve. ~~week~~As ~~for~~a ~~which~~financial ~~such~~holding ancompany, ~~average~~the ~~rate~~Company ~~has~~is ~~been~~required ~~published~~to byfile with the Federal Reserve, orannual ~~24%,~~reports ~~whichever~~and isother information ~~less.~~regarding ~~The~~its ~~"Most Favored~~business ~~Lender~~obligations ~~Doctrine"~~and ~~permits~~those ~~national~~of ~~banks~~its tosubsidiaries. Federal ~~charge~~Reserve ~~the~~approval ~~highest~~must ~~rate permitted~~be byobtained ~~any~~before ~~state~~the ~~lender.~~Company may:

~~Specific~~Acquire ~~usury laws~~ownership ~~may~~or ~~apply~~control ~~to certain categories~~ of ~~loans,~~any ~~such~~voting assecurities ~~the~~of ~~limitation~~a ~~placed on~~bank ~~interest~~or ~~rates~~bank onholding ~~single~~company ~~pay~~where ~~loans~~the ofacquisition ~~$1,000~~results orin ~~less~~the ~~with~~Company aowning ~~term of one year~~ or ~~less. Rates~~controlling ~~charged~~more onthan ~~installment~~5% ~~loans,~~of ~~including~~a ~~credit~~class ~~cards~~of asvoting ~~well~~securities ~~as other types~~ of ~~loans,~~that ~~may~~bank beor ~~governed by the Industrial Loan and Thrift~~bank ~~Companies~~holding ~~Act.~~company; or
Acquire substantially all assets of a bank or bank holding ~~Gramm-Leach-Bliley~~company ~~Act~~or merge with another bank holding company.

~~Among~~Federal ~~other~~Reserve ~~things,~~approval ~~the~~is ~~Gramm-Leach-Bliley~~not ~~Financial~~required ~~Modernization~~for ~~Act~~a ofbank ~~1999~~subsidiary ~~("GLBA")~~of ~~modified financial~~a ~~privacy~~bank ~~and~~holding ~~community~~company ~~reinvestment~~to merge ~~laws.~~with ~~The~~or ~~new~~acquire ~~financial~~substantially ~~privacy provisions~~all ~~generally~~assets ~~prohibit~~of ~~financial~~another ~~institutions~~bank ~~such~~if ~~as the Bank from~~prior ~~disclosing~~approval ~~non-public~~of ~~personal~~a ~~financial~~federal ~~information~~supervisory toagency, ~~third~~such ~~parties~~as ~~unless customers have~~ the ~~opportunity~~Office ~~to opt out~~ of the ~~disclosure. GLBA also~~Comptroller ~~magnifies~~of the ~~consequences~~Currency ~~of a bank receiving less than a satisfactory Community Reinvestment Act~~ (~~"CRA"~~“OCC”) ~~rating~~, byis ~~freezing~~required ~~new~~under ~~activities until~~ the ~~institution~~ ~~achieves~~Bank aMerger ~~better CRA rating~~Act.

The Bank Holding Company Act provides that the Federal Reserve shall not approve any acquisition, merger or consolidation that would result in a monopoly or 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 the convenience and needs of the community to be served. Further, 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 ~~Secrecy~~Holding Company Act and any other applicable federal banking statutes and regulations. In addition, the Federal Reserve considers 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.

~~Over~~According ~~the past 30 plus years, Congress has passed several laws impacting a financial institution's responsibilities relating~~ to ~~the Bank Secrecy Act. In 2005, the~~ Federal Reserve ~~Financial~~policy ~~Institutions Examination Council ("FFIEC")~~ and ~~federal banking agencies released~~ the ~~interagency "Bank Secrecy Act Anti~~Dodd-~~Money Laundering~~Frank ~~Examination~~Wall ~~Manual."~~Street ~~The~~Reform ~~manual emphasizes a banking organization's responsibility to establish~~ and ~~implement~~Consumer ~~risk-based policies, procedures and~~Protection ~~processes~~Act toof ~~comply~~2010 ~~with~~ (the ~~Bank~~“Dodd-Frank ~~Secrecy~~ Act”), ~~and~~a ~~safeguard~~financial ~~its~~holding ~~operations~~company ~~from money~~must ~~laundering~~act ~~and~~as ~~terrorist financing. It is~~ a source ~~compilation~~ of ~~existing regulatory~~financial ~~requirements,~~strength ~~supervisory~~to ~~expectations~~its ~~and~~subsidiary ~~sound~~banks ~~practices~~and ~~for~~commit ~~Bank~~resources to ~~Secrecy~~support ~~Act/Anti-Money~~each ~~Laundering~~such ~~("BSA/AML") compliance~~subsidiary. AnThis ~~effective~~support ~~BSA/AML compliance~~may ~~program~~be ~~requires~~required ~~sound~~at ~~risk~~times ~~management;~~when ~~therefore, the manual also~~a ~~provides~~financial ~~guidance~~holding oncompany ~~identifying~~may ~~and~~not ~~controlling~~be ~~risk~~able ~~associated~~to ~~with~~provide ~~money laundering~~such ~~and terrorist financing~~support.

The specific examination procedures performed will depend on the BSA/AML risk profile of the banking organization, the quality and quantity of independent testing, the financial institution's history of BSA/AML compliance and other relevant factors. The Bank has implemented effective riskDodd-~~based~~Frank ~~policies~~Wall ~~and procedures~~Street ~~that~~Reform ~~reinforce existing practices~~ and ~~encourage~~Consumer ~~a vigilant~~Protection ~~determination to prevent the institution from becoming associated with criminals or being used as a channel for money laundering or terrorist financing activities.~~Act

The passage of the Dodd-Frank Act brought about a major overhaul of the ~~USA~~current ~~Patriot~~financial institution regulatory system. Among other things, the Dodd-Frank Act established a new, independent Consumer Financial Protection Bureau tasked with protecting consumers from unfair, deceptive and abusive financial products and practices. The Dodd-Frank Act includes provisions that, among other things, reorganize bank supervision and strengthen the Federal Reserve. Further, the Dodd-Frank Act provides that the appropriate federal regulators must establish standards prohibiting as an unsafe and unsound practice any compensation plan of a bank holding company or other “covered financial institution” that provides an insider or other employee with “excessive compensation” or could lead to a material financial loss to such firm. In June 2010, prior to the enactment of the Dodd-Frank Act, the bank regulatory agencies promulgated the Interagency Guidance on Sound Incentive Compensation Policies, which require that financial institutions establish metrics for measuring the impact of activities to achieve incentive compensation with the related risk to the financial institution of such behavior. Together, the Dodd-Frank Act and the recent guidance on compensation could impact compensation policies of the Bank. The Dodd-Frank Act provides other restrictions including requiring institutions to retain credit risk when selling loans to third parties.

The USA Patriot Act (the "Patriot Act") enhances the powers of the federal government and law enforcement organizations to combat terrorism, organized crime and money laundering. The Patriot Act significantly amended and expanded the application of the Bank Secrecy Act, including enhanced customer identity measures, new suspicious activity reporting rules and enhanced anti-money laundering programs. Under the Patriot 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 Patriot Act requires the federal banking 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. The Bank has implemented policies and procedures in compliance with stated regulations of the Patriot Act.6

On June 29, 2011, the Federal Reserve released ~~FDIC~~its ~~Insurance~~final ~~Coverage~~rule implementing the Durbin Debit Interchange Amendment to the Dodd-Frank Act (the “Durbin Amendment”). The final rule set a base interchange rate of $0.21 per transaction, plus an additional five basis points of the transaction cost for fraud charges. The Federal Reserve also approved an interim final rule that allows for an upward adjustment of no more than $0.01 on the debit interchange fee for implementing certain fraud prevention standards. Additionally, the Federal Reserve adopted requirements that issuers include two unaffiliated networks for routing debit transactions, one that is signature-based and one that is personal identification number based. The effective date for the final and interim final rules of the Durbin Amendment was October 1, 2011.

Beginning with the Emergency Economic Stabilization Act of 2008, several changes have been made to federal deposit insurance coverage with regard to the types of accounts covered and coverage limits. Included in these changes, basic FDIC coverage per depositor temporarily increased to $250,000 effective through December 31, 2013 and rules on revocable trusts were amended to remove qualification requirements and allow $250,000 coverage per beneficiary. Two separate insurance components were created under the FDIC Temporary Liquidity Guarantee Program: (i) the Debt Guarantee Program; and (ii) the Transaction Account Guarantee Program ("TAGP"). The Bank opted to participate only in the TAGP component, under which certain nonGramm-~~interest~~Leach-~~bearing~~Bliley transaction account balances are temporarily fully guaranteed through June 30, 2010. The Bank's FDIC insurance premium assessments will be affected based on participation in TAGP and also as a result of assessment increases required to replenish the FDIC insurance fund ("DIF") following the failure of numerous financial institutions in 2008 and 2009. Both the increase of deposit increase to $250,000 per depositor and the unlimited deposit insurance for certain non-interest bearing transaction accounts (similar to those accounts covered by TAGP) were made permanent as part of the Dodd-Frank Wall Street Reform and Protection Act ~~(the "Dodd-Frank Act") signed into law in July of 2010.~~

Among other things, the Gramm-5Leach-Bliley Financial Modernization Act of 1999 (“GLBA”) modified financial privacy and community reinvestment laws. The financial privacy provisions included in GLBA 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. GLBA also magnifies the consequences of a bank receiving less than a satisfactory Community Reinvestment Act (“CRA”) rating, by freezing new activities until the institution achieves a better CRA rating. As of December 31, 2011, the Company had a satisfactory rating under CRA.

~~As a result of increased bank failures and a decrease in the DIF, on September 29, 2009, the~~ FDIC ~~required~~Insurance ~~all insured financial institutions to prepay three years of deposit insurance premiums. The FDIC may require additional special assessment payments if the DIF balance continues to decline.~~Coverage

InThe ~~October 2008,~~Federal ~~the~~Deposit ~~FDIC~~Insurance ~~proposed~~Corporation aImprovement ~~rule~~Act toof ~~alter~~1991 ~~the~~(“FDICIA”) ~~way~~provides ~~in which it differentiates~~ for ~~risk~~a ~~in the~~ risk-based ~~assessment system and to revise~~ deposit insurance ~~assessment rates,~~premium ~~including~~structure ~~base~~for ~~assessment~~insured ~~rates~~financial institutions. The FDIC ~~also~~generally ~~proposed~~provides todeposit ~~introduce three~~insurance ~~adjustments that could be made to an institution's initial base assessment rate, including (i) a potential decrease of~~ up to ~~two basis points for long-term unsecured debt~~$250,000 ~~including senior and subordinated debt, (ii) a~~per ~~potential~~customer ~~increase~~per institution for ~~secured~~depository ~~liabilities~~accounts inheld ~~excess~~at ofinsured ~~15% of domestic~~financial ~~deposits and (iii) for certain~~ institutions,. aSubstantially ~~potential~~all ~~increase~~of ~~for~~the ~~brokered~~ deposits ~~in excess~~ of ~~10%~~the ofBank ~~domestic~~are ~~deposits.~~insured Inup ~~addition, the FDIC proposed~~to ~~raising~~applicable ~~the~~limits ~~current rates uniformly~~ by ~~7 basis points for~~ the ~~assessment~~Deposit ~~for the~~Insurance ~~first~~Fund ~~quarter~~(“DIF”) of ~~2009.~~the ~~The~~FDIC ~~proposal~~and ~~for first quarter 2009 assessment rates~~are ~~was~~subject ~~adopted~~to asdeposit ainsurance ~~final~~assessments ~~rule~~to inmaintain ~~December~~the ~~2008~~DIF. On ~~April~~The ~~1, 2009, the~~ FDIC ~~made~~utilizes ~~additional~~a ~~changes~~risk-based to assessment ~~rates,~~system ~~increasing~~that ~~them~~imposes toinsurance ~~10-14~~premiums ~~basis~~based ~~points for~~upon ~~Risk Category I institutions and 45 basis points for Risk Category IV institutions. In addition, on May 22, 2009, the FDIC adopted~~ a ~~final rule~~ ~~imposing~~risk upmatrix tothat atakes ~~10-basis~~into ~~point~~account ~~emergency special assessment based on~~ a bank'’s ~~Report~~ ofcapital ~~Condition~~level asand ~~of June 30, 2009~~supervisory rating. ~~This~~Effective ~~special~~as ~~assessment~~of ~~was~~the ~~collected on~~second ~~September~~quarter 30of 2011, ~~2009. The~~the ~~Dodd-Frank~~FDIC ~~Act~~bases ~~also revised~~ the ~~assessment base for~~ deposit insurance ~~premiums~~assessment ~~so that assessments will be based~~ on a ~~bank's average~~redefined ~~consolidated~~assessment ~~total~~base ~~assets~~and ~~less~~a ~~its~~new ~~average~~scorecard ~~amount of tangible equity.~~ method Asto ~~part~~calculate ~~of this change in~~ the assessment ~~base, there are proposed changes to assessment rates~~rate.

~~Customer~~Bank ~~Information~~Secrecy ~~Security and Customer Financial Privacy~~Act

~~The~~Over ~~Board~~the ofpast 30 ~~Governors~~plus ofyears, Congress has passed several laws impacting a financial institution’s responsibilities relating to the Bank Secrecy Act. In 2005, the Federal ~~Reserve~~Financial ~~System~~Institutions ~~published~~Examination ~~guidelines~~Council ~~for~~and ~~Customer~~federal banking agencies ~~Information~~released ~~Security~~the interagency “Bank Secrecy Act Anti-Money Laundering Examination Manual.” The manual emphasizes a banking organization’s responsibility to establish and ~~Customer~~implement ~~Financial~~risk-based ~~Privacy~~policies, procedures and processes to comply with athe ~~mandatory~~Bank ~~effective~~Secrecy Act and safeguard its operations from money laundering ~~date~~and terrorist financing. It is a compilation of ~~July~~existing 1regulatory requirements, ~~2001. The~~supervisory expectations and sound practices for Bank ~~has~~Secrecy Act/Anti-Money ~~established~~Laundering ~~policies~~(“BSA/AML”) incompliance. ~~adherence~~An toeffective BSA/AML compliance program requires sound risk management; therefore, the manual also ~~published~~provides ~~guidelines~~guidance on identifying and controlling risk associated with money laundering and terrorist financing.

The ~~three~~specific ~~principal~~examination ~~requirements~~procedures ~~relating~~performed towill depend on the ~~Privacy~~BSA/AML risk profile of ~~Consumer~~the banking ~~Financial~~organization, the quality and quantity of independent testing, the ~~Information~~financial ininstitution’s ~~GLBA~~history ~~are~~of BSA/AML compliance and other relevant factors. The Bank has implemented effective risk-based policies and procedures that reinforce existing practices and encourage a vigilant determination to prevent the institution from becoming associated with criminals or being used as ~~follows:~~a channel for money laundering or terrorist financing activities.

~~• Financial institutions must provide customers with notices~~ describing their privacy policies and practices, including policies with respect to disclosure of nonpublic personal information to affiliates and to nonaffiliated third parties. Notices must be provided at the time the customer relationship is established and annually thereafter;7

~~• Subject~~USA toPatriot 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"); andAct

• The USA Patriot ~~Financial~~Act ~~institutions~~(the ~~generally~~“Patriot ~~may~~Act”) ~~not~~enhances ~~disclose~~the powers of the federal government and law enforcement organizations to combat terrorism, organized crime and money laundering. The Patriot Act significantly amended and expanded the application of the Bank Secrecy Act, including enhanced customer identity measures, new ~~account~~suspicious ~~numbers~~activity reporting rules and enhanced anti-money laundering programs. Under the Patriot Act, each financial institution is required to establish ~~any~~and ~~nonaffiliated~~maintain ~~third~~anti-money ~~party~~laundering ~~for~~programs, ~~marketing~~which ~~purposes~~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 Patriot Act requires the federal banking 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. The Bank has implemented policies and procedures in compliance with stated regulations of the Patriot Act.

~~The~~ Customer Information Security ~~guidelines implement section 501(b) of GLBA, which requires agencies to establish standards for financial institutions relating to administrative, technical~~ and ~~physical~~Customer ~~safeguards for customer records and~~Financial information. The guidelines require financial institutions to establish an information security program to: identify and assess 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.Privacy

~~Each~~The ~~institution~~Federal ~~may~~Reserve ~~implement~~published aguidelines ~~security~~for ~~program~~Customer ~~appropriate~~Information toSecurity ~~its~~and ~~size, complexity, nature~~Customer ~~and~~Financial ~~scope~~Privacy ofwith ~~its~~a ~~operations.~~mandatory ~~The~~effective ~~Bank~~date ~~has~~of ~~structured~~July ~~and~~1, ~~implemented~~2001. The aBank ~~financial~~has ~~security~~established ~~program~~policies ~~that~~in ~~complies~~adherence ~~with~~to ~~all~~the ~~principal~~published ~~requirements of the act~~guidelines.

~~-6-~~ The three principal requirements relating to the Privacy of Consumer Financial Information in GLBA are as follows: Financial institutions must provide customers with notices describing their privacy policies and practices, including policies with respect to disclosure of nonpublic personal information to affiliates and to nonaffiliated third parties. 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”); and Financial institutions generally may not disclose customer account numbers to any nonaffiliated third party for marketing purposes.

~~Regulatory~~The Customer ~~agencies~~Information ~~also~~Security ~~published~~guidelines ~~the~~implement ~~"Interagency~~section ~~Guidance~~501(b) onof ~~Response~~GLBA, ~~Programs for~~which ~~Unauthorized~~requires ~~Access~~agencies to ~~Customer~~establish ~~Information~~standards ~~and~~for ~~Customer Notice." Each~~ financial ~~institution~~institutions isrelating ~~required~~ to administrative, ~~implement~~technical aand ~~response~~physical ~~program~~safeguards tofor ~~address~~customer records and ~~unauthorized~~information. ~~access~~The toguidelines ~~sensitive~~require ~~customer~~financial ~~information~~institutions ~~maintained~~to byestablish ~~the~~an ~~institution~~information orsecurity ~~its~~program ~~service~~to: ~~providers. The~~identify ~~Bank~~and ~~has~~assess ~~implemented~~risks anthat ~~appropriate~~may threaten ~~response~~customer ~~program,~~information; ~~which~~develop ~~includes:~~a ~~formation~~written ofplan ancontaining ~~"Incident~~policies ~~Response~~and ~~Team";~~procedures ~~properly~~to ~~assessing~~manage and ~~investigating~~control ~~any~~these ~~incident~~risks; ~~notifying~~implement and test the ~~Office~~plan; ofand adjust the ~~Comptroller~~plan ofon ~~the~~a ~~Currency~~continuing ~~(the~~basis ~~"OCC")~~to ofaccount ~~any~~for ~~security~~changes ~~breach~~in technology, ~~if necessary;~~the ~~taking~~sensitivity ~~appropriate~~of ~~steps~~customer toinformation, ~~contain~~ and ~~control~~internal ~~any~~or ~~incident;~~external ~~and~~threats ~~notifying~~to ~~affected~~information ~~customers when required~~security.

Each institution ~~Identity~~may ~~Theft~~implement a security program appropriate to its size, complexity, nature ~~Prevention~~and ~~Program~~scope of its operations. The Bank has structured and implemented a financial security program that complies with all principal requirements of GLBA.

Regulatory ~~The~~agencies ~~Fair~~also ~~and Accurate~~published ~~Credit~~the ~~Transactions~~“Interagency ~~Act~~Guidance ~~("FACT")~~on ~~requires~~Response ~~banking~~Programs ~~institutions to~~for ~~implement~~Unauthorized anAccess ~~Identity Theft Prevention Program~~ to ~~detect,~~Customer ~~prevent~~Information and ~~mitigate identity~~Customer ~~theft~~Notice.” Pursuant into such ~~connection~~guidance, ~~with~~each ~~the~~financial ~~opening~~institution ofis ~~certain~~required ~~accounts~~to orimplement ~~certain~~a ~~existing~~response ~~accounts.~~program ~~Program~~to ~~requirements~~address ~~include~~unauthorized ~~incorporating~~access ~~federal~~to ~~guidelines~~sensitive ~~on investigating~~ customer ~~address~~information maintained ~~discrepancies~~by ~~and~~the ~~identifying~~institution ~~other~~or ~~"red~~its ~~flags" that~~service ~~may indicate potential identity theft~~providers. The Bank has implemented ~~a comprehensive~~an ~~Identity~~appropriate ~~Theft~~response ~~Prevention Program~~program, which ~~covers~~includes: ~~all~~formation ~~customer~~of an ~~accounts~~“Incident ~~and~~Response ~~accomplishes~~Team”; ~~the~~properly ~~following~~assessing ~~standards~~and asinvestigating ~~set~~any ~~forth in FACT: (1)~~incident; ~~identify~~notifying ~~relevant~~the ~~red~~OCC ~~flags~~of ~~for~~any ~~covered~~security ~~accounts;~~breach, ~~(2)~~if ~~detect red flags~~necessary; ~~(3)~~taking appropriate ~~respond~~steps ~~appropriately~~ to ~~any~~contain ~~red~~and ~~flags~~control ~~detected~~any incident; and ~~(4)~~notifying ~~ensure~~affected ~~the program is~~customers ~~updated~~when ~~periodically~~required.

~~Federal Legislation~~Identity onTheft ~~Banking Products and Services~~Prevention Program

~~Following~~The ~~the~~Fair and ~~economic~~Accurate ~~crises~~Credit ofTransactions ~~2008,~~Act ~~Congress~~(“FACT”) ~~and~~requires ~~the~~banking ~~regulatory~~institutions ~~agencies issued~~to ~~legislation,~~implement ~~rules~~an ~~and~~Identity ~~regulations~~Theft ~~creating~~Prevention orProgram ~~amending~~to ~~numerous requirements on disclosures~~detect, ~~documentation,~~prevent and ~~procedures~~mitigate identity theft in ~~relation~~connection towith ~~several~~the ~~products and~~opening ~~services~~of ~~offered~~certain byaccounts ~~financial~~or ~~institutions~~certain existing accounts. ~~Many~~ ofProgram ~~these~~requirements ~~proposals~~include incorporating federal ~~provide~~guidelines ~~customers~~on ~~with~~investigating ~~additional~~customer ~~disclosure~~address ~~information~~discrepancies and ~~protections~~identifying other “red flags” that may indicate potential identity theft. The ~~regulatory~~ ~~changes~~Bank ~~include,~~has implemented ~~but~~a ~~are~~comprehensive ~~not~~Identity ~~limited~~Theft toPrevention Program, ~~the~~which ~~Real~~covers ~~Estate Settlement~~all ~~Procedures~~customer ~~Act,~~accounts ~~Federal~~and ~~Reserve~~accomplishes ~~Regulation~~the Efollowing ~~governing~~standards ~~overdraft~~as ~~protection, the~~set ~~Truth~~forth in ~~Lending~~FACT: (1) ~~Act~~identify ~~and~~relevant ~~the~~red ~~Truth~~flags infor ~~Savings~~covered ~~Act. The~~accounts; ~~Bank's~~(2) ~~policies~~detect ~~and procedures~~red ~~are~~flags; ~~being~~(3) respond ~~revised~~appropriately to ~~incorporate~~any ~~recent~~red ~~regulatory~~flags ~~requirements~~detected; and (4) ensure ~~full~~the ~~compliance~~program is updated periodically.

~~Federal Monetary Polices~~ 8

~~Monetary~~ ~~policies of the~~ Federal ~~Reserve~~Legislation ~~have a significant effect~~ on ~~operating results~~ ofBanking ~~bank~~Products ~~holding companies~~ and their subsidiary banks. The Federal Reserve regulates the national supply of bank credit by open market operations in U.S. government securities, changes in the discount rate on bank borrowings and changes in reserve requirements against bank deposits.Services

~~Federal~~Following ~~Reserve~~the ~~monetary~~economic ~~policies~~crises ~~have~~of ~~materially~~2008, ~~affected~~Congress and the ~~operating~~regulatory ~~results~~agencies ofissued legislation, ~~commercial~~rules and regulations creating or amending numerous requirements ~~banks~~on disclosures, documentation, and procedures in ~~the~~relation ~~past~~to several products and ~~are~~services ~~expected~~offered toby dofinancial soinstitutions. Many inof ~~the~~these ~~future~~proposals provide customers with additional disclosure information and protections. The regulatory ~~nature~~changes ofinclude, but are not limited to, the Real Estate Settlement ~~future~~Procedures ~~monetary~~Act, ~~policies~~Federal ~~and~~Reserve Regulation E governing overdraft protection, the ~~effect~~Truth ofin ~~such~~Lending ~~policies~~Act onand the ~~business~~Truth in Savings Act. The Bank’s policies and ~~earnings~~procedures ofare ~~the~~being ~~company~~revised ~~and~~to ~~its~~incorporate ~~subsidiaries~~recent ~~cannot~~regulatory berequirements ~~accurately~~and ensure ~~predicted~~full compliance.

~~The~~Federal ~~Dodd-Frank~~Monetary ~~Wall Street Reform and Consumer Protection Act~~Polices

~~The~~Monetary policies ~~passage~~ of the ~~Dodd-Frank~~Federal ~~Act~~Reserve ~~brought~~have ~~about~~ a ~~major~~significant ~~overhaul~~effect ofon ~~the current~~operating ~~financial institution regulatory system. Among other things, the Dodd-Frank Act establishes a~~results ~~new,~~of ~~independent~~bank ~~Consumer~~holding ~~Financial~~companies ~~Protection Bureau tasked with protecting consumers from unfair, deceptive~~ and ~~abusive~~their ~~financial~~subsidiary ~~products and practices~~banks. The ~~Dodd-Frank~~Federal ~~Act~~Reserve regulates ~~also requires~~ the ~~implementation~~national supply of ~~the "Volcker Rule" for banks and~~ bank ~~holding~~credit ~~companies,~~by ~~which~~open ~~would~~market ~~prohibit,~~operations ~~with~~in ~~certain limited~~U.S. ~~exceptions,~~government ~~proprietary trading~~securities, ~~investment~~changes in ~~and sponsorship of hedge funds and private equity funds, and otherwise limit~~ the ~~relationships~~discount ~~with~~rate ~~such funds.~~on ~~The Dodd-Frank Act includes provisions that, among other things, reorganize~~ bank ~~supervision~~borrowings and ~~strengthen the Federal Reserve. The Dodd-Frank~~ ~~Act~~changes ~~also~~in ~~requires~~reserve ~~fees~~requirements ~~charged~~against ~~for~~bank ~~debit card transactions, commonly referred to as interchange fees, to be both "reasonable and proportional" to the cost incurred by the card issuer~~deposits.

~~Further,~~Federal ~~the~~Reserve monetary ~~Dodd-Frank~~policies ~~Act~~have ~~provides~~materially ~~that~~affected the ~~appropriate~~operating ~~federal regulators~~results ~~must establish standards prohibiting as an unsafe and unsound practice any compensation plan~~ of ~~a bank holding company or other "covered~~commercial ~~financial~~banks ~~institution"~~in ~~that~~the ~~provides~~past anand ~~insider~~are orexpected ~~other employee with "excessive compensation" or could lead~~ to ado ~~material~~so ~~financial~~in ~~loss~~the ~~to such firm~~future. The Innature ~~June 2010, prior to the implementation~~ of ~~the Dodd-Frank Act, the bank~~ ~~regulatory~~future ~~agencies~~monetary ~~promulgated~~policies ~~the~~and ~~Interagency Guidance on Sound Incentive Compensation Policies, which requires that financial institutions establish metrics for measuring~~ the ~~impact~~effect of ~~activities to achieve incentive compensation with the related risk to the financial institution of~~ such ~~behavior. Together,~~policies ~~the Dodd-Frank Act and the recent guidance~~ on ~~compensation may impact~~ the ~~current~~business ~~compensation policies at the Bank. The Dodd-Frank Act provides~~and ~~other~~earnings ~~restrictions~~of ~~including limiting~~ the ~~ability~~company ~~of financial institutions to utilize trust preferred securities as tier one capital going forward,~~ and ~~requiring~~ ~~institutions~~its tosubsidiaries ~~retain~~cannot ~~credit~~be ~~risk~~accurately ~~when selling loans to third parties~~predicted.

~~-7-~~Basel III

In September 2010, the oversight body of the Basel Committee announced a package of reforms, commonly referred to as Basel III, that will increase existing capital requirements substantially over the next four years as well as add additional liquidity requirements for banks. These reforms were endorsed by the G20 at the summit held in Seoul, South Korea in November 2010. The short-term and long-term impact of the new Basel III capital standards and the forthcoming new capital rules to be proposed for U.S. banks is uncertain. As a result of the recent deterioration in the global credit markets and the potential impact of increased liquidity risk and interest rate risk, it is unclear what the short-term impact of the implementation of Basel III may be or what impact a pending an alternative approach for U.S. banks may have on the cost and availability of different types of credit and the potential compliance costs of implementing the new capital standards.

OnRevisions September 12, 2010, the oversight body of the Basel Committee announced a package of reforms which will increase existing capital requirements substantially over the next four years as well as add additional liquidity requirements onto banks, commonly referred to asRegulation Basel III. These reforms were endorsed by the G20 at the summit held in Seoul, South Korea in November 2010. The short-term and long-term impact of the new Basel III capital standards and the forthcoming new capital rules to be proposed for non-Basel III U.S. banks is uncertain. As a result of the recent deterioration in the global credit markets and the potential impact of increased liquidity risk and interest rate risk, it is unclear what the short-term impact of the implementation of Basel III may be or what impact a pending alternative standardized approach to Basel III option for non-Basel III U.S. banks may have on the cost and availability of different types of credit and the potential compliance costs of implementing the new capital standards.E

On ~~Small~~July 31, 2010, the Federal Reserve implemented revised Regulation E. The effect ~~Business~~of ~~Act~~this revision was to allow customers of ~~2011~~the Bank to opt out of overdraft protection programs, and thereby potentially reduce fee income generated by the Bank. The Bank has taken all steps necessary to be compliant with the revised Regulation E.

~~As part of the Small Business Act of 2010~~Usury, ~~the~~State ~~Small Business Lending~~Legislation ~~Fund~~and ~~(the~~Economic "SBLF") was created within the Treasury Department. As announced on January 14, 2010, the SBLF will buy preferred shares from banks, with the rate of return on these shares directly tied to the increase in small business lending undertaken at the bank. To date, the Bank has not chosen to participate in the SBLF.Environment

Tennessee usury ~~Revisions~~laws limit the rate of interest that may be charged by banks. Certain federal tolaws ~~Regulation~~provide Efor preemption of state usury laws.

Tennessee Onusury ~~July~~laws ~~31,~~permit ~~2010,~~interest ~~the~~at ~~Federal~~an ~~Reserve~~annual ~~implemented~~rate ~~revised~~of ~~Regulation~~four E.percentage ~~The~~points ~~effect~~above the ofaverage ~~this~~prime ~~revision~~loan ~~was~~rate tofor ~~allow~~the ~~customers~~most ofrecent ~~the~~week ~~Bank~~for towhich ~~opt~~such ~~out~~an ofaverage ~~overdraft~~rate ~~protection~~has ~~programs,~~been ~~and~~published ~~thereby~~by ~~potentially~~the ~~reduce~~Federal ~~fee~~Reserve, ~~income~~or ~~generated~~24%, bywhichever ~~the Bank~~is less. The ~~Bank~~“Most Favored ~~has~~Lender ~~taken~~Doctrine” ~~all~~permits ~~steps~~national ~~necessary~~banks to becharge ~~compliant with~~ the ~~revised~~highest rate ~~Regulation~~permitted Eby any state lender.

Specific usury ~~Insurance~~laws may apply to certain categories of loans, such as the limitation placed on ~~Activities~~ interest rates on single pay loans of $1,000 or less with a term of 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.

~~Subsidiaries of the Company sell various types of insurance as agents in the State of Tennessee.~~ Insurance ~~activities~~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.

Subsidiaries of ~~-8-~~the Company sell various types of insurance as agents 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 1A. RISK FACTORS.~~ 9

Information containedITEM herein includes forward-looking statements with respect to the beliefs, plans, risks, goals and estimates of the Company1A. Forward-looking statements areRISK necessarily based upon estimates and assumptions that are inherently subject to significant banking, economic, and competitive uncertainties, many of which are beyond management's controlFACTORS. When used in this discussion, the words "anticipate," "project," "expect," "believe," "should," "will," "intend," "is likely," "going forward," "may" and other expressions are intended to identify forward-looking statements. These forward-looking statements are within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Such statements may include, but are not limited to, capital resources, strategic planning, acquisitions or de novo branching, ability to meet capital guidelines, legislation and governmental regulations affecting financial services companies, construction of new branch locations, dividends, critical accounting policies, allowance for loan losses, fair value estimates, goodwill, occupancy and depreciation expense, held-to-maturity securities, available-for-sale securities, trading securities, cash flows, core deposit intangibles, diversification in the real estate loan portfolio, interest income, maturity of loans, loan impairment, loan ratings, charge-offs, other real estate owned, maturity and re-pricing of deposits, borrowings with call features, dividend payout ratio, off-balance sheet arrangements, the impact of recently issued accounting standards, changes in funding sources, liquidity, interest rate sensitivity, net interest margins, debt securities, non-accrual status of loans, contractual maturities of mortgage-backed securities and collateralized mortgage obligations, other-than-temporary impairment of securities, amortization expense, deferred tax assets, independent appraisals for collateral, property enhancement or additions, efficiency ratio, ratio of assets to employees, net income, changes in interest rates, loan policies, categorization of loans, maturity of FHLB borrowings and the effectiveness of internal control over financial reporting.

Information contained herein includes forward-looking statements with respect to the beliefs, plans, risks, goals and estimates of the Company. Forward-looking statements are necessarily based upon ~~information~~estimates ~~currently~~and ~~available~~assumptions that are inherently subject to significant banking, economic, and ~~represent~~competitive uncertainties, many of which are beyond management'’s ~~expectations~~control. When orused ~~predictions~~in this ofdiscussion, the ~~future.~~words As“anticipate,” a“project,” ~~result~~“expect,” ~~of risks~~“believe,” ~~and~~“should,” ~~uncertainties~~“will,” ~~involved~~“intend,” ~~actual~~“is ~~results~~likely,” ~~could~~“going ~~differ~~forward,” ~~materially~~“may” ~~from~~and ~~such~~other expressions are intended to identify forward-looking statements. These forward-looking ~~The~~statements ~~potential~~are ~~factors~~within ~~that~~the ~~could~~meaning ~~affect~~of section 27A of the ~~Company's~~Securities ~~results~~Act ~~include~~of 1933, as amended (the “Securities Act”), and section 21E of the Securities Exchange Act of 1934, as amended. Such statements may include, but are not limited to:, capital resources, strategic planning, acquisitions or de novo branching, ability to meet capital guidelines, legislation and governmental regulations affecting financial services companies, construction of new branch locations, dividends, critical accounting policies, allowance for loan losses, fair value estimates, goodwill, occupancy and depreciation expense, held-to-maturity securities, available-for-sale securities, trading securities, cash flows, core deposit intangibles, diversification in the real estate loan portfolio, interest income, maturity of loans, loan impairment, loan ratings, charge-offs, other real estate owned, maturity and re-pricing of deposits, borrowings with call features, dividend payout ratio, off-balance sheet arrangements, the impact of recently issued accounting standards, changes in funding sources, liquidity, interest rate sensitivity, net interest margins, debt securities, non-accrual status of loans, contractual maturities of mortgage-backed securities and collateralized mortgage obligations, other-than-temporary impairment of securities, amortization expense, deferred tax assets, independent appraisals for collateral, property enhancement or additions, efficiency ratio, ratio of assets to employees, net income, changes in interest rates, loan policies, categorization of loans, maturity of FHLB borrowings and the effectiveness of internal control over financial reporting.

• Forward-looking ~~Changes~~statements inare ~~general~~based ~~economic~~upon information currently available and ~~business~~represent management’s ~~conditions;~~expectations or predictions of the future. As a result of risks and uncertainties involved, actual results could differ materially from such forward-looking statements. The potential factors that could affect the Company’s results include but are not limited to:

• Changes in general economic and business conditions; Changes in market rates and prices of securities, loans, deposits and other financial instruments; Changes in legislative or regulatory developments affecting financial institutions in general, including changes in tax, banking, insurance, securities or other financial service related laws; Changes in government fiscal and monetary policies; The ability of the Company to provide and market competitive products and services; Concentrations within the loan portfolio; Fluctuations in prevailing interest rates and the effectiveness of the Company’s interest rate hedging strategies; The Company’s ability to maintain credit quality; The effectiveness of the Company’s risk monitoring systems; The ability of the Company’s borrowers to repay loans; The availability of and costs associated with maintaining and/or obtaining adequate and timely sources of liquidity; Geographic concentration of the Company’s assets and susceptibility to economic downturns in that area; The ability of the Company to attract, train and retain qualified personnel; Changes in consumer preferences; and Other factors generally understood to affect financial results of financial services companies.

• Changes in legislative or regulatory developments affecting financial institutions in general, including changes in tax, banking, insurance, securities or other financial service related laws;10

The Company undertakes no obligation to update its • forward-looking statements to reflect events or circumstances that occur after ~~Changes~~the indate ~~government~~of ~~fiscal~~this ~~and~~Annual ~~monetary~~Report ~~policies;~~on Form 10-K.

In addition to the factors listed • above, management believes that the risk factors set forth below should be ~~The~~considered ~~ability~~in ofevaluating the Company’s business. The relevant risk factors outlined below may be supplemented from time to ~~provide~~time ~~and~~in ~~market~~the ~~competitive~~Company’s press ~~products~~releases and ~~services;~~filings with the SEC.

We are ~~• Concentrations~~subject ~~within~~to ~~the~~credit ~~loan~~quality ~~portfolio;~~risks and our credit policies may not be sufficient to avoid losses.

We are subject • to the risk of losses resulting from the failure of borrowers, guarantors and ~~Fluctuations~~related inparties ~~prevailing~~to pay interest ~~rates~~and principal amounts on loans. Although we maintain credit policies and credit underwriting, monitoring and collection procedures that management believes are sufficient to manage this risk, these policies and procedures may not prevent losses, particularly during periods in which the ~~effectiveness~~local, regional or national economy suffers a general decline. If a large number of ~~the~~borrowers ~~Company's~~fail to repay their loans, our financial condition ~~interest~~and ~~rate~~results ~~hedging~~of ~~strategies;~~operations may be adversely affected.

Earnings could be adversely ~~• The~~affected ~~Company's~~if ~~ability~~values toof ~~maintain~~other ~~credit~~real ~~quality;~~estate owned decline.

We are • subject to the risk of losses from the liquidation and/or valuation adjustments ~~The~~on ~~effectiveness~~other real estate owned. We owned over 100 properties totaling $11.1 million in other real estate owned as of December 31, 2011. Other real estate owned is valued at the ~~Company's~~lower ~~risk~~of ~~monitoring~~cost ~~systems;~~or fair market value less cost to sell. Fair market values are based on independent appraisals for properties valued at $50,000 or greater and appraisals are updated annually. We may incur future losses on these properties if economic and real estate market conditions result in further declines in the fair market value of these properties.

If our allowance for loan ~~• The~~losses ~~ability~~becomes ofinadequate, ~~the~~our ~~Company's~~financial ~~borrowers~~condition toand ~~repay~~results ~~loans;~~of operations could be adversely affected.

We maintain an ~~• The~~allowance ~~availability~~for loan losses that we believe is a reasonable estimate of known and inherent ~~costs~~losses ~~associated~~in our loan portfolio. Management uses various assumptions and judgments to evaluate on a quarterly basis the adequacy of the allowance for loan losses in accordance with ~~maintaining~~GAAP as well as regulatory guidelines. The amount of future losses is susceptible to changes in economic, operating and~~/or~~ ~~obtaining~~other ~~adequate~~conditions, changes in interest rates which may be beyond our control, and ~~timely~~these ~~sources~~losses may exceed current estimates. Although we believe the allowance for loan losses is a reasonable estimate of ~~liquidity;~~known and inherent losses in our loan portfolio, we cannot fully predict such losses or that our loan loss allowance will be adequate in the future. Excessive loan losses could have an adverse effect on our financial performance.

Federal and ~~• Geographic~~state ~~concentration~~regulators ofperiodically ~~the~~review ~~Company's~~our ~~assets~~allowance for loan losses and ~~susceptibility~~may require us to ~~economic~~increase our provision for loan losses or recognize further loan ~~downturns~~charge-offs, based on judgments different than those of our management. Any increase in ~~that~~the ~~area;~~amount of our provision or loans charged-off as required by these regulatory agencies could have an adverse effect on our results of operations.

~~• The ability of the Company to attract, train and retain qualified personnel;~~11

• Changes in ~~consumer~~interest ~~preferences;~~rates could ~~and~~have an adverse effect on our earnings.

Our • profitability is in part a function of interest rate spread, or the difference ~~Other~~between ~~factors~~interest ~~generally~~rates ~~understood~~earned on investments, loans and other interest-earning assets and the interest rates paid on deposits and other interest-bearing liabilities. Interest rates are largely driven by monetary policies set by the Federal Open Market Committee, or FOMC, and trends in the prevailing market rate of interest embodied by the yield curve. The FOMC establishes target rates of interest to ~~affect~~influence the ~~financial~~cost and availability of capital and promote ~~results~~national economic goals. In January 2012, the FOMC indicated that rates would most likely remain at the historical low of ~~financial~~a ~~services~~range ~~companies~~of 0.00% to 0.25% through the end of 2014. The yield curve is a representation of the relationship between short-term interest rates to longer-term debt maturity rates. Currently, the yield curve is fairly steep as short-term rates continue at historic lows. As of December 31, 2011, the Bank was liability sensitive in terms of interest rate risk exposure, meaning that the Bank will likely experience margin compression when federal funds rates increase. In other words, upward pressure on deposit interest rates will outpace increases in the interest rates on interest-earning assets. Deposits are currently priced at historically low levels and are likely to reprice at a faster pace than interest-earning assets when the rate environment begins rising. The majority of variable-rate loans are priced at floors that will require significant increase in federal fund and prime rates before loan yields increase.

Prepayment of ~~-9-~~principal cash flows from the investment portfolio is expected to be steady in 2012 as rates continue to be very low. Credit availability has improved recently because of the actions of the Federal Reserve and U.S. Treasury Department as described above. Reinvestment rates on the investment portfolio have dropped significantly (greater than 100 basis points) over the last 12 months.

~~The~~If ~~Company~~the ~~undertakes~~rate noof interest ~~obligation~~paid toon ~~update~~deposits ~~its~~and other borrowings increases more than the rate of ~~forward-looking~~interest ~~statements~~earned on loans and other investments, our net interest income and, therefore, earnings could be adversely affected. Earnings could also be adversely affected if the rates on loans and other investments fall more quickly than those on deposits and other borrowings. While management takes measures to ~~reflect~~guard ~~events~~against orinterest ~~circumstances~~rate risk, there can be no assurance that such ~~occur~~measures ~~after~~will be effective in minimizing the exposure to interest rate risk. A sudden and significant increase in the ~~date~~market rate of ~~this~~interest ~~Annual~~could have ~~Report~~a material adverse effect on ~~Form~~the ~~10-K~~Company’s financial position and earnings.

InWe ~~addition~~are togeographically concentrated ~~the~~in ~~factors~~West ~~listed above~~Tennessee, ~~management~~and ~~believes~~changes ~~that the risk factors set forth below should be considered~~ in ~~evaluating~~local ~~the~~economic ~~Company's~~conditions ~~business. The relevant risk factors outlined below~~ may ~~be supplemented from time to time in the Company's press~~ ~~releases~~impact ~~and~~our ~~filings with the Securities and Exchange Commission~~profitability.

We ~~are~~operate ~~subject~~primarily toin ~~credit~~West ~~quality~~Tennessee ~~risks~~and the majority of all loan customers and most deposit and other customers live or have operations in this area. Accordingly, our ~~credit~~success ~~policies~~depends ~~may~~significantly ~~not~~upon growth in population, income levels, deposits, housing starts and continued attraction of business ventures to this area. Our profitability is impacted by changes in general economic conditions in this market. The residential real estate market in the Shelby County and surrounding markets continues to be ~~sufficient~~a concern due to elevated inventories and the negative impact on market values. New and existing home sales have improved, but remain well below 2006 – 2007 levels or the level of absorption required to ~~avoid~~meaningfully ~~losses~~allow the residential real estate market to recover fully. We also remain concerned about the impact of plant closings (such as Goodyear and Briggs & Stratton) and their impact to unemployment levels and economic conditions in our rural markets. Additionally, unfavorable local or national economic conditions could reduce our growth rate, affect the ability of our customers to repay their loans and generally affect our financial condition and results of operations.

We are ~~subject~~less able tothan ~~the~~larger ~~risk~~institutions ofto ~~losses~~spread ~~resulting from~~ the ~~failure~~risks of ~~borrowers,~~unfavorable ~~guarantors~~local ~~and~~economic ~~related~~conditions ~~parties~~across toa ~~pay~~large ~~interest~~number ~~and~~of ~~principal~~diversified ~~amounts on loans~~economies. ~~Although~~ ~~we maintain credit policies and credit underwriting~~Moreover, ~~monitoring~~we ~~and collection procedures that management believes~~ are ~~sufficient~~ unable to ~~manage~~give ~~this~~assurance ~~risk,~~that ~~these policies~~we ~~and~~will ~~procedures~~benefit ~~may~~from ~~not~~any ~~prevent~~market ~~losses,~~growth ~~particularly during periods in which the local, regional~~ or ~~national economy suffers a general decline. If a~~favorable ~~large~~economic ~~number~~conditions ofin ~~borrowers fail to repay their loans,~~ our ~~financial~~primary ~~condition and~~market ~~results~~areas ofif ~~operations~~they ~~may~~do ~~be adversely affected~~occur.

~~Earnings~~If ~~could~~financial bemarket ~~adversely~~conditions ~~affected~~worsen ifor ~~values~~our ofloan ~~other~~demand ~~real~~increases ~~estate~~significantly, ~~owned~~our ~~decline~~liquidity position could be adversely affected.

We rely on dividends Wefrom the Bank as our primary source of funds. The Bank’s primary sources of funds are client deposits and loan repayments. While scheduled loan ~~subject~~repayments have historically been a relatively stable source of funds, they are susceptible to the ~~risk~~inability of ~~losses~~borrowers ~~from~~to repay the ~~liquidation~~loans. ~~and/or~~The ~~valuation~~ability ~~adjustments~~of onborrowers ~~other~~to ~~real~~repay ~~estate~~loans ~~owned. We~~can ~~owned~~be ~~over~~adversely ~~100~~affected ~~properties~~by ~~totaling~~a ~~$14.7~~number of factors, ~~million~~including changes in ~~other~~economic ~~real~~conditions, ~~estate~~adverse ~~owned~~trends asor ofevents ~~December~~affecting business 31industry groups, ~~2010. Other~~reductions in real estate values or markets, business ~~owned~~closings isor ~~valued~~lay-offs, atnatural ~~the~~disasters ~~lower~~and national or international instability. Additionally, deposit levels may be affected by a number of factors, ~~cost~~including orrates ~~fair~~paid ~~market~~by ~~value~~competitors, ~~less~~general ~~cost~~interest rate levels, regulatory capital requirements, returns available to ~~sell~~clients on alternative investments and general economic conditions. Accordingly, we may be required ~~Fair~~from ~~market~~time ~~values~~to ~~are~~time ~~based~~to rely on ~~independent~~secondary ~~appraisals~~sources ~~for~~of ~~properties~~liquidity ~~valued~~to atmeet withdrawal ~~$50,000~~demands or ~~greater~~otherwise fund operations. Such sources include Federal Home Loan Bank advances, sales of securities and ~~appraisals~~loans, ~~are~~and ~~updated~~federal ~~annually. We~~funds ~~may~~lines ~~incur~~of ~~future~~credit ~~losses~~from oncorrespondent banks, as well as out-of-market time deposits. While we believe that these ~~properties~~sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if ~~economic~~we continue to grow and ~~real~~experience ~~estate~~increasing ~~market~~loan ~~conditions~~demand. ~~result~~We may be required to inslow ~~further~~or ~~declines~~discontinue inloan ~~the~~growth, ~~fair~~capital ~~market~~expenditures ~~value~~or ofother ~~these~~investments ~~properties~~or liquidate assets should such sources not be adequate.

~~If our allowance for loan~~ ~~losses becomes inadequate, our financial condition and results of operations could be adversely affected.~~12

~~We maintain an~~ ~~allowance~~Market ~~for~~conditions ~~loan losses that we believe is a reasonable estimate of known and~~could ~~inherent~~adversely ~~losses~~affect in our ~~loan~~ability ~~portfolio.~~to ~~Management~~obtain ~~uses~~additional ~~various~~capital ~~assumptions and judgments to evaluate~~ on afavorable quarterly basis the adequacy of the allowance for loan losses in accordance with generally accepted accounting principles as well as regulatory guidelines. The amount of future losses is susceptible to changes in economicterms, ~~operating and other conditions, changes in interest rates which~~ ~~may~~should ~~be beyond our control, and these losses may exceed current estimates. Although~~ we ~~believe~~need the allowance for loan losses is a reasonable estimate of known and inherent losses in our loan portfolio, we cannot fully predict such losses or that our loan loss allowance will be adequate in the futureit. ~~Excessive loan losses could have an adverse effect on our financial performance.~~

~~Federal~~Our ~~and~~business ~~state~~strategy ~~regulators~~calls ~~periodically~~for ~~review~~continued ~~our~~growth. ~~allowance~~We ~~for~~anticipate ~~loan~~that ~~losses~~we ~~and~~will ~~may require~~be usable to support ~~increase~~this ~~our~~growth ~~provision~~through ~~for~~the ~~loan~~generation ~~losses~~of oradditional ~~recognize~~deposits ~~further~~at ~~loan~~new branch ~~charge-offs~~locations, ~~based~~as onwell ~~judgments~~as ~~different~~through ~~than~~returns ~~those~~realized ofas ~~our~~a ~~management.~~result ~~Any~~of investment ~~increase~~opportunities. However, we may need to raise additional capital in the ~~amount~~future to ofsupport ~~our~~continued ~~provision~~growth orand ~~loans~~maintain ~~charged-off~~capital aslevels. ~~required~~We ~~by these~~may ~~regulatory~~not ~~agencies~~be ~~could~~able ~~have~~to obtain anadditional ~~adverse~~capital ~~effect~~in the amounts or on ~~our~~terms ~~results~~satisfactory ofto us. Growth ~~operations~~may be constrained if we are unable to raise additional capital as needed.

~~Changes~~Failure into ~~interest~~remain ~~rates~~competitive ~~could~~in ~~have~~ an ~~adverse~~increasingly ~~effect~~competitive onindustry ~~our~~may ~~earnings~~adversely affect results of operations and financial condition.

~~Our~~We encounter ~~profitability~~strong iscompetition infrom ~~part~~other afinancial ~~function~~institutions ofin ~~interest~~our ~~rate~~market ~~spread~~areas. In addition, orestablished ~~the~~financial ~~difference between~~institutions ~~interest~~not ~~rates~~already ~~earned~~operating onin ~~investments,~~our market ~~loans~~areas ~~and~~may ~~other~~open ~~interest-earning assets~~branches ~~and~~in ~~the~~our ~~interest~~market ~~rates~~areas ~~paid~~at onfuture ~~deposits~~dates ~~and~~or ~~other interest-bearing~~may ~~liabilities.~~compete ~~Interest~~in ~~rates~~the ~~are~~market ~~largely~~via ~~driven~~the byinternet. ~~monetary~~Certain ~~policies~~aspects ~~set~~of byour ~~the~~banking business ~~Federal~~also ~~Open~~compete ~~Market~~with ~~Committee~~savings institutions, orcredit ~~FOMC~~unions, ~~and~~mortgage ~~trends in the prevailing market~~banking ~~rate~~companies, ofconsumer ~~interest~~finance ~~embodied~~companies, byinsurance ~~the~~companies ~~yield~~and ~~curve. The~~other institutions, ~~FOMC~~some ~~establishes~~of ~~target rates~~which ofare ~~interest~~not subject to ~~influence~~ the ~~cost~~same ~~and~~degree ~~availability~~ of ~~capital~~regulation ~~and promote~~or ~~national~~restrictions ~~economic~~imposed ~~goals~~on us. In ~~December~~Many ~~2008,~~of ~~the~~these ~~FOMC~~competitors ~~cut~~have ~~rates~~substantially greater toresources aand ~~historical low~~lending oflimits aand ~~range~~are ofable ~~0.00%~~ to ~~0.25%. Federal~~offer ~~funds~~services ~~rates remained at~~ that ~~level~~we do ~~through~~not ~~December 2010~~provide. ~~The~~ ~~yield~~While ~~curve~~we isbelieve athat ~~representation~~we ofcompete ~~the~~effectively ~~relationship between~~with ~~short-term~~these ~~interest~~other financial ~~rates~~institutions toin ~~longer-term~~our ~~debt~~market ~~maturity rates. Currently~~areas, ~~the~~we ~~yield~~may ~~curve~~face isa ~~fairly~~competitive disadvantage ~~steep~~ as ~~short-term~~a ~~rates~~result ~~continue at historic lows. As~~ of ~~December~~our ~~31,~~smaller ~~2010~~size, ~~the~~smaller ~~Bank~~asset isbase, ~~liability~~lack ~~sensitive in~~of ~~terms~~geographic ofdiversification ~~interest~~and ~~rate~~inability ~~risk~~to ~~exposure,~~spread ~~meaning~~our ~~that~~marketing ~~the~~costs ~~Bank~~across ~~will likely~~a ~~experience~~broader ~~margin compression when federal funds rates increase~~market. In ~~other words,~~If ~~upward~~we ~~pressure~~have onto ~~deposit~~raise interest rates ~~will~~paid ~~outpace~~on ~~increases~~deposits inor ~~the~~lower interest rates charged on ~~interest-earning~~loans ~~assets. Deposits~~to ~~are~~compete ~~currently~~effectively, ~~priced~~our ~~at historically~~net ~~low~~interest ~~levels~~ margin and ~~are~~income ~~likely~~could tobe ~~reprice~~negatively ataffected. aFailure ~~faster~~to ~~pace~~compete ~~than~~effectively to ~~interest-earning~~attract ~~assets~~new ~~when~~or ~~the~~to ~~rate~~retain ~~environment~~existing ~~begins~~clients ~~rising. The~~may ~~majority of~~reduce ~~variable-rate~~or ~~loans~~limit ~~are~~our ~~priced~~margins ~~at floors that will require significant~~and ~~increase~~our inmarket ~~federal~~share ~~fund~~ and ~~prime~~may ~~rates~~adversely ~~before~~affect ~~loan~~our ~~yields~~results ~~increase. Federal Home Loan Bank borrowings comprise the majority~~ of ~~wholesale~~operations ~~borrowings, the~~and ~~majority~~financial ~~of which will reprice steadily over the next 18 months~~condition.

We expect the failure of other ~~-10-~~banks to increase our expenses.

~~Prepayment~~The failure of ~~principal~~numerous ~~cash~~banks ~~flows~~as ~~from~~a ~~the~~result ~~investment~~of ~~portfolio~~the iseconomic ~~expected~~recession tomay behave ~~steady~~a innegative impact ~~2011~~on asour ~~rates~~earnings, ~~continue~~as topremiums berequired ~~very~~for ~~low.~~FDIC ~~Credit~~insurance ~~availability~~may ~~has~~increase ~~improved~~in 2012 ~~recently~~and ~~because~~beyond. ofIn ~~the~~2011 ~~actions~~and of2010, ~~the~~FDIC ~~Federal~~premium ~~Reserve~~expense totaled approximately $823,000 and U$1.2 S.million, ~~Treasury Department~~respectively, asand ~~described~~was ~~above~~included in non-interest expense. We ~~Reinvestment~~cannot ~~rates~~give onany assurances that the ~~investment~~FDIC ~~portfolio have~~will ~~dropped~~not ~~significantly~~require ~~(greater~~special assessments ~~than~~or ~~100~~increase ~~basis~~deposit ~~points)~~insurance ~~over~~assessments in the ~~last 12 months~~future.

~~If the rate of~~Adverse ~~interest~~perceptions ~~paid~~about ~~on deposits and other borrowings increases more than the rate of interest earned on loans and other investments,~~ our ~~net~~business ~~interest income and, therefore, earnings~~ could be adversely ~~affected.~~affect ~~Earnings~~our ~~could~~results ~~also~~of beoperations ~~adversely affected if the rates on loans~~ and other investments fall more quickly than those on deposits and other borrowings. While management takes measures to guard against interest rate risk, there can be no assurance that such measures will be effective in minimizing the exposure to interest rate risk. A sudden and significant increase in the market rate of interest could have a material adverse effect on the Company's financial ~~position and earnings~~condition.

We ~~are~~believe ~~geographically~~that ~~concentrated~~our inreputational ~~West~~risk ~~Tennessee~~increased significantly during the recent economic recession as a result of the elevated number of bank failures and volume of negative media headlines related to the banking industry. As a result, the FDIC implemented various programs to help mitigate such risks, including increasing deposit insurance limits to $250,000. As part of its strategic initiatives, management implemented various action plans including communications with and training ~~changes~~sessions infor our staff and communications to local ~~economic~~customers ~~conditions~~and ~~may~~civic ~~impact~~groups ~~our~~regarding ~~profitability~~management’s view on stability in the Company as well as most local community banking institutions.

WeThe ~~operate~~public ~~primarily~~perception ~~in West Tennessee and the majority~~ of ~~all~~our ~~loan~~ability ~~customers~~to ~~and~~conduct ~~most deposit~~business and ~~other~~expand ~~customers live or has operations in this area. Accordingly,~~ our ~~success~~customer ~~depends~~base ~~significantly upon growth in population, income levels,~~may ~~deposits,~~also ~~housing~~be ~~starts~~affected ~~and continued attraction of business ventures to this area. Our profitability is impacted~~ by ~~changes~~practices ~~in general economic conditions in this market. One area~~ of ~~particular concern for 2011 is~~ the ~~residential~~Company’s ~~real estate~~Board ~~market~~of inDirectors, ~~the Shelby County~~ management and ~~surrounding markets~~employees. AsSignificant ~~inventories escalated~~relationships ~~and~~with ~~sales~~vendors, ~~declined~~customers ~~in 2008~~ and ~~2009, the loan portfolio was~~other ~~negatively~~external ~~impacted~~parties asmay ~~the~~also ~~real~~affect ~~estate~~our ~~market~~reputation. ~~moved~~Adverse ~~toward~~perceptions ~~economic~~about ~~equilibrium~~our inbusiness ~~2010. Additionally,~~practices ~~unfavorable local~~ or ~~national economic conditions could reduce our growth rate, affect~~ the ~~ability~~business practices of ~~our~~those ~~customers~~with towhom ~~repay~~we ~~their~~have ~~loans~~significant ~~and~~relationships ~~generally~~could ~~affect~~adversely impact our ~~financial condition and~~ results of operations. and financial condition.

We are ~~less~~subject ~~able than larger institutions~~ to ~~spread the risks of unfavorable local economic~~extensive ~~conditions~~government ~~across~~regulation aand ~~large number of diversified economies~~supervision. ~~Moreover, we are unable to give assurance that we will benefit from any market growth or favorable economic conditions in our primary market areas if they do occur.~~

IfWe are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not our shareholders. These regulations affect our lending practices, capital structure, investment practices and dividend policy and growth, among other things. Future changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial ~~market~~services ~~conditions~~and products we may ~~worsen~~offer and/or ~~our~~increase ~~loan~~the ~~demand~~ability ~~increases~~of ~~significantly~~non-banks to offer competing financial services and products, ~~our~~or ~~liquidity~~decrease ~~position~~the flexibility in pricing certain products and services by the Bank, among other things. Failure to comply with laws, regulations or policies could result in sanctions imposed by regulatory agencies, civil money penalties, civil liability and/or reputation damage, which could have a material adverse effect on our financial condition and results of operations. While our policies and procedures are designed to deter and detect any such violations, there can be ~~adversely~~no ~~affected~~assurance that such violations will not occur.

~~We rely on~~ dividends from the Bank as our primary source of funds. The Bank's primary sources of funds are client deposits and loan repayments. While scheduled loan repayments have historically been a relatively stable source of funds, they are susceptible to the inability of borrowers to repay the loans. The ability of borrowers to repay loans can be adversely affected by a number of factors, including changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay-offs, natural disasters and national or international instability. Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic conditions. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include Federal Home Loan Bank advances, sales of securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits. While we believe that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if we continue to grow and experience increasing loan demand. We may be required to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets should such sources not be adequate.13

~~Market~~ Our ~~conditions~~common ~~could~~stock is not listed ~~adversely~~or ~~affect~~traded ~~our~~on ~~ability~~any toestablished ~~obtain~~securities ~~additional~~market ~~capital~~and onis ~~favorable~~normally ~~terms,~~less liquid than ~~should~~securities wetraded ~~need~~in itthose markets.

Our ~~business~~common stock ~~strategy~~is ~~calls~~not ~~for~~listed ~~continued~~or ~~growth.~~traded Weon ~~anticipate~~any ~~that~~established wesecurities ~~will~~market beand ~~able~~we tohave no ~~support~~plans ~~this~~to ~~growth~~seek ~~through~~to ~~the~~list ~~generation~~our ofcommon ~~additional~~stock ~~deposits~~on atany ~~new~~recognized ~~branch locations~~exchange. Accordingly, our ascommon ~~well~~stock ashas ~~through~~substantially ~~returns~~less ~~realized~~daily astrading avolume ~~result~~than ofthe ~~investment~~average ~~opportunities.~~securities ~~However,~~listed weon ~~may~~any ~~need~~national tosecurities ~~raise~~exchange. ~~additional~~Most ~~capital~~transactions in ~~the future~~our tocommon ~~support~~stock ~~continued~~are ~~growth~~privately negotiated trades and ~~maintain~~our ~~capital~~common ~~levels~~stock is very thinly traded. WeThere ~~may~~is ~~not~~no bedealer ~~able~~for ~~to obtain~~our ~~additional~~stock ~~capital~~and inno ~~the~~“market ~~amounts~~maker.” orOur shares ondo ~~terms~~not ~~satisfactory~~have toa ustrading symbol. ~~Growth~~The lack of a liquid market can produce ~~may~~downward bepressure ~~constrained~~on ifour westock ~~are~~price ~~unable~~and tocan ~~raise~~reduce ~~additional~~the ~~capital~~marketability asof ~~needed~~our common stock.

Our ability to pay dividends ~~-11-~~may be limited.

~~Failure~~As a holding company, the Company is a separate legal entity from the Bank and does not conduct significant income-generating operations of its own. It currently depends upon the Bank’s cash and liquidity to ~~remain~~pay ~~competitive~~dividends to its shareholders. We cannot provide assurance that the Bank will have the capacity to pay dividends to the Company in anthe ~~increasingly~~future. ~~competitive~~Various ~~industry~~statutes ~~may~~and ~~adversely~~regulations limit ~~affect~~the ~~results~~availability of dividends from the Bank. It is possible that, ~~operations~~depending ~~and~~upon the Bank’s financial condition and other factors, the Bank’s regulators could assert that payment of dividends by the Bank to the Company is an unsafe or unsound practice. In the event that the Bank is unable to pay dividends to the Company, we may not be able to pay dividends to our shareholders.

WeITEM encounter strong competition from other financial institutions in our market areas1B. In addition,UNRESOLVED establishedSTAFF financial institutions not already operating in our market areas may open branches in our market areas at future dates or may compete in the market via the internetCOMMENTS. Certain aspects of our banking business also compete with savings institutions, credit unions, mortgage banking companies, consumer finance companies, insurance companies and other institutions, some of which are not subject to the same degree of regulation or restrictions imposed on us. Many of these competitors have substantially greater resources and lending limits and are able to offer services that we do not provide. While we believe that we compete effectively with these other financial institutions in our market areas, we may face a competitive disadvantage as a result of our smaller size, smaller asset base, lack of geographic diversification and inability to spread our marketing costs across a broader market. If we have to raise interest rates paid on deposits or lower interest rates charged on loans to compete effectively, our net interest margin and income could be negatively affected. Failure to compete effectively to attract new or to retain existing clients may reduce or limit our margins and our market share and may adversely affect our results of operations and financial condition.

~~We expect the failure of other banks to increase our expenses~~None.

TheITEM failure of numerous banks from 2008 through 2010 may have a negative impact on our earnings, as premiums required for FDIC insurance may continue to increase in 2011 and beyond. In 2009, we paid FDIC deposit insurance assessments totaling $5.6 million, including a special assessment of $425,000 paid during third quarter 2009 and prepaid assessment of $4.5 million paid in fourth quarter 2009, as compared to aggregate payments of approximately $144,000 in 2008. In 2010, approximately $1.2 million of the prepaid assessment was expensed and included in non-interest expense. We cannot give any assurances that the FDIC will not require additional special assessments or increase deposit insurance assessments in the futurePROPERTIES.

The Bank has 16 ~~Adverse~~full-service bank financial centers, three drive-through only branches, one ~~perceptions~~loan ~~about~~production ~~our~~office ~~business~~and ~~could~~28 ~~adversely~~ATMs ~~affect~~spread ~~our~~over ~~results~~nine ofTennessee ~~operations~~counties. A list of available banking locations and ~~financial~~hours ~~condition~~is maintained on the Bank’s website (www.firstcitizens-bank.com) under the “Locate Us” section. The Bank owns and occupies the following properties:

We The ~~believe~~Bank’s ~~that~~main branch and executive offices are located in a ~~our~~six-story ~~reputational~~building ~~risk~~at ~~increased~~One ~~significantly~~First ~~during~~Citizens ~~the~~Place ~~recent~~(formerly ~~economic~~200 West Court), ~~recession~~Dyersburg, asDyer aCounty, ~~result~~Tennessee. This ofproperty also includes the ~~elevated~~Banking Annex, ~~number~~which has an address of ~~bank~~215-219 ~~failures~~Masonic Street. The Banking Annex houses the Bank’s operations, information technology, call center, bank security and ~~volume~~mail ofdepartments; ~~negative~~ The ~~media~~Bank’s ~~headlines~~downtown ~~related~~drive-through tobranch ~~the~~is ~~banking~~located ~~industry.~~at As117 aSouth Church ~~result~~Street, ~~the~~Dyersburg, ~~FDIC~~Dyer County, Tennessee, and is a remote motor bank ~~implemented~~with ~~various~~six ~~programs~~drive-through tolanes ~~help~~and ~~mitigate~~a ~~such~~drive-up ~~risks~~ATM lane; The Green Village Financial Center, ~~including~~located ~~increasing deposit~~at ~~insurance~~710 ~~limits~~U.S. 51 Bypass adjacent to ~~$250~~the Green Village Shopping Center in Dyersburg,~~000.~~ AsDyer ~~part~~County, Tennessee, ofis ~~its~~a ~~strategic~~full-service ~~initiatives~~banking facility; The Newbern Financial Center, a full-service facility, is located ~~management~~at ~~implemented~~104 ~~various~~North ~~action~~Monroe ~~plans~~Street, ~~including~~Newbern, ~~communications~~Dyer ~~with~~County, ~~and~~Tennessee; ~~training~~ The ~~sessions~~Industrial ~~for~~Park ~~our~~Financial ~~staff~~Center ~~and~~located ~~communications~~at to2211 ~~local~~St. ~~customers~~John Avenue, ~~and~~Dyersburg, ~~civic~~Dyer County, Tennessee is a full-service banking facility; ~~groups~~ The ~~regarding~~Ripley ~~management's~~Financial ~~view~~Center onis ~~stability~~a infull-service ~~the~~facility ~~Company~~located asat 316 ~~well~~Cleveland asStreet ~~most~~in Ripley, Lauderdale County, Tennessee; ~~local~~ The ~~community~~Troy Financial Center is a full-service banking ~~institutions.~~ facility located at 220 East Harper Street in Troy, Obion County, Tennessee;

~~The public~~ perception of our ability to conduct business and expand our customer base may also be affected by practices of the Company's board of directors, management and employees. Significant relationships with vendors, customers and other external parties may also affect our reputation. Adverse perceptions about our business practices or the business practices of those with whom we have significant relationships could adversely impact our results of operations and financial condition. 14

We The ~~are~~Union ~~subject~~City Financial Center operates one full-service facility, one motor branch and three ATMs in Obion County. The main office is located at 100 Washington Avenue in Union City, Tennessee, and the drive-through branch is located across from the main office at First and Harrison Streets. The Martin Financial Center is a full-service facility located at 200 University Avenue, Martin, Weakley County, Tennessee; The Munford Financial Center is a full-service facility located at 1426 Munford Avenue in Munford, Tipton County, Tennessee. In addition, a drive-through facility is located at 1483 Munford Avenue, also in Munford; The Atoka Financial Center is a full-service facility located at 123 Atoka-Munford Avenue, Atoka, Tipton County, Tennessee; The Millington Financial Center is a full-service branch facility located at 8170 Highway 51 N., Millington, Shelby County, Tennessee; The Bartlett Financial Center is a full-service facility located at 7580 Highway 70, Bartlett, Shelby County, Tennessee; The Arlington Financial Center is a full-service facility located at 5845 Airline Road, Arlington, Shelby County, Tennessee; The Oakland Financial Center is a full-service facility located at 7285 Highway 64, Oakland, Fayette County, Tennessee; The Collierville Financial Center is a full-service facility located at 3668 South Houston Levee in Collierville, Shelby County, Tennessee; The Franklin Financial Center is a full-service facility located at 1304 Murfreesboro Road in Franklin, Williamson County, Tennessee; A lot located on Christmasville Cove in Jackson, Madison County, Tennessee, that was purchased in 2007 and on which the Company expects to construct ~~extensive~~a full-service branch location in the next three to five years; and ~~government~~ A ~~regulation~~lot located on Union University Drive in Jackson, Madison County, Tennessee, that was purchased in February 2008 and ~~supervision~~on which the Company expects to construct a full-service branch in the next one to three years.

WeThe ~~are~~Bank ~~subject~~owns toall ~~extensive~~properties ~~federal~~ and ~~state~~there ~~regulation and supervision. Banking regulations~~ are ~~primarily~~no ~~intended~~liens toor ~~protect~~encumbrances ~~depositors'~~against ~~funds,~~any ~~federal deposit insurance~~properties ~~funds~~owned ~~and~~by the ~~banking system as a whole, not our shareholders~~Bank. ~~These regulations~~All ~~affect~~facilities ~~our~~described ~~lending~~above ~~practices,~~are ~~capital~~adequate ~~structure, investment practices~~ and ~~dividend policy and growth, among other things. Future changes~~appropriate to ~~statutes,~~provide ~~regulations~~banking or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services ~~and~~as ~~products~~noted ~~we may offer~~ and~~/or~~ ~~increase~~are ~~the~~adequate ~~ability of non-banks~~ to ~~offer~~handle ~~competing~~growth ~~financial~~expected ~~services and products, or decrease the flexibility~~ in ~~pricing certain products and services by~~ the ~~Bank,~~foreseeable ~~among other things~~future. ~~Failure~~As togrowth ~~comply~~continues ~~with laws, regulations~~ or ~~policies~~needs ~~could result in sanctions by regulatory agencies~~change, ~~civil~~individual ~~money~~property ~~penalties,~~enhancements ~~civil liability and/~~or ~~reputation~~additional ~~damage,~~properties ~~which~~will ~~could have a material adverse effect on our financial condition and results of operations. While our policies and procedures are designed to deter and detect any such violations, there can~~ be noevaluated ~~assurance~~as ~~that such violations will not occur~~necessary.

-12-ITEM 3. LEGAL PROCEEDINGS.

~~Our~~The ~~common~~Company ~~stock~~and its issubsidiaries are defendants in various lawsuits arising out of the normal course of business. In the opinion of management, the ultimate resolution of such matters should not ~~listed~~have a material adverse effect on the Company’s consolidated financial condition or ~~traded~~results onof ~~any~~operations. ~~established~~Litigation ~~securities~~is, however, ~~market~~inherently uncertain, and isthe ~~normally~~Company ~~less~~cannot ~~liquid~~make ~~than~~assurances that it ~~securities~~will ~~traded~~prevail in ~~those~~any ~~markets~~of these actions, nor can it estimate with reasonable certainty the amount of damages that it might incur.

~~Our common stock~~ is not listed or traded on any established securities market and we have no plans to seek to list our common stock on any recognized exchange. Accordingly, our common stock has substantially less daily trading volume than the average securities listed on any national securities exchange. Most transactions in our common stock are privately negotiated trades and the shares are very thinly traded. There is no dealer for our stock and no "market maker." Our shares do not have a trading symbol. The lack of a liquid market can produce downward pressure on our stock price and can reduce the marketability of our shares. 15

Our ability to pay dividends may be limited.

As a holding company, the Company is a separate legal entity from the Bank and does not conduct significant income-generating operations of its own. It currently depends upon the Bank's cash and liquidity to pay dividends to its shareholders. We cannot provide assurance that in the future the Bank will have the capacity to pay dividends to the Company. Various statutes and regulations limit the availability of dividends from the Bank. It is possible, depending upon the Bank's financial condition and other factors, the Bank's regulators could assert that payment of dividends by the Bank to the Company is an unsafe or unsound practice. In the event that the Bank is unable to pay dividends to the Company, we may not be able to pay dividends to our shareholders.

ITEM 1B UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Bank has 16 full-service bank financial centers, three drive-through only branches, one loan production office and 30 ATMs spread over nine Tennessee counties. A list of available banking locations and hours is maintained on the Bank's website (www.firstcitizens-bank.com) under the "Locate Us" section. The Bank owns and occupies the following properties:

• The Bank's main branch and executive offices are located in a six-story building at One First Citizens Place (formerly 200 West Court), Dyersburg, Dyer County, Tennessee. This property also includes the Banking Annex, which has an address of 215-219 Masonic Street. The Banking Annex houses the Bank's operations, information technology, call center, bank security and mail departments;

• The Bank's downtown drive-through branch is located at 117 South Church Street, Dyersburg, Dyer County, Tennessee, and is a remote motor bank with six drive-thru lanes and a drive-up ATM lane;

• The Green Village Financial Center, located at 620 U.S. 51 Bypass adjacent to the Green Village Shopping Center in Dyersburg, Dyer County, Tennessee, is a full-service banking facility;

• The Newbern Financial Center, a full-service facility, is located on North Monroe Street, Newbern, Dyer County, Tennessee;

• The Industrial Park Financial Center located at 2211 St. John Avenue, Dyersburg, Dyer County, Tennessee is a full-service banking facility;

• The Ripley Financial Center is a full-service facility located at 316 Cleveland Street in Ripley, Lauderdale County, Tennessee;

• The Troy Financial Center is a full-service banking facility located on Harper Street just west of Highway 51 in Troy, Obion County, Tennessee;

-13-

• The Union City Financial Center operates one full-service facility, one motor branch and three ATMs in Obion County. The main office is located at 100 Washington Avenue in Union City, Tennessee, and the drive-through branch is located across from the main office at First and Harrison Streets.

• The Martin Financial Center is a full-service facility located at 200 University Avenue, Martin, Weakley County, Tennessee;

• The Munford Financial Center is a full-service facility located at 1426 Munford Avenue in Munford, Tipton County, Tennessee. In addition, a drive-through facility is located at 1483 Munford Avenue, also in Munford;

• The Atoka Financial Center is a full-service facility located at 123 Atoka-Munford Avenue, Atoka, Tipton County, Tennessee;

• The Millington Financial Center is a full-service branch facility located at 8170 Highway 51 N. Millington, Shelby County, Tennessee;

• The Bartlett Financial Center is a full-service facility located at 7580 Highway 70, Bartlett, Shelby County, Tennessee;

• The Arlington Financial Center is a full-service facility located at 5845 Airline Road, Arlington, Shelby County, Tennessee;

• The Oakland Financial Center is a full-service facility located at 7285 Highway 64, Oakland, Fayette County, Tennessee;

• The Collierville Financial Center is a full-service facility located at 3668 South Houston Levee in Collierville, Shelby County, Tennessee;

• The Franklin Financial Center is a full-service facility located at 1304 Murfreesboro Road in Franklin, Williamson County, Tennessee;

• A lot located on Christmasville Cove in Jackson, Madison County, Tennessee, that was purchased in 2007 and on which the Company expects to construct a full-service branch location in the next one to three years; and

• A lot located on Union University Drive in Jackson, Madison County, Tennessee, that was purchased in February 2008 and on which the Company expects to construct a full-service branch in the next one to three years.

The Bank owns all properties and there are no liens or encumbrances against any properties owned by the Bank. All 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 as necessary.

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 was no material pending or threatened litigation against the Company or its subsidiaries as of December 31, 2010.

-14-

PART II

Holders and Market Information

As of February 1521, ~~2011~~2012, there were 1,~~062~~071 shareholders of the Company'’s common stock. The Company'’s common stock is not listed or traded on any established public trading market. The table below shows the quarterly range of high and low sale prices for the Company'’s common stock during the fiscal years ~~2010~~2011 and ~~2009~~2010. ~~These~~ These sale prices represent known transactions reported to the Company and do ~~not~~ not necessarily represent all trading transactions for the periods.

Year	Quarter	High		Low	~~Low~~
2010	First Quarter	$	32.00		$	32.00
2011	First	$34.00		$34.00
	Second Quarter	32.00			32.00
	Second	34.00		32.00
	Third Quarter	32.00			32.00
	Third	34.00		34.00
	Fourth Quarter	34.00			32.00
	Fourth	36.00		34.00
2009	First Quarter	$	31.00		$	28.00
2010	First	32.00		32.00
	Second Quarter	28.00			26.00
	Second	32.00		32.00
	Third Quarter	26.00			26.00
	Third	32.00		32.00
	Fourth Quarter	32.00			29.80
	Fourth	34.00		32.00

Dividends

The Company paid aggregate dividends per share of the Company'’s common stock of $1.0010 in ~~2010~~2011 and $1.0400 in ~~2009~~2010. The following quarterly dividends per share of common stock were paid for ~~2010~~2011 and ~~2009~~2010:

Quarter	~~2010~~2011		2010	~~2009~~
First Quarter	$0.20	~~0.15~~	$0.15	$	~~0.29~~
Second Quarter	0.1520		0.15	~~0.15~~
Third Quarter	0.1520		0.15	~~0.15~~
Fourth Quarter(1)	0.5550		0.55	~~0.45~~
Total	$1.10	~~1.00~~	$1.00	$	~~1.04~~

________________

(1) On December 15, ~~2010~~2011, the Company paid a special dividend of $0.4030 per share, payable to holders of record as of ~~November~~December 151, ~~2010~~2011, in addition to the fourth quarter dividend of $0.1520 per share payable to holders of record as of November 15, 2011. On December 15, ~~2009~~2010, the Company paid a special dividend of $0.3040 per share, payable to holders of record as of November 15, ~~2009~~2010, in addition to the fourth quarter dividend of $0.15 per share.

Future dividends will depend on the Company'’s earnings, financial condition, regulatory capital levels and other factors, which the Company'’s Board of Directors considers relevant. See the section above entitled "“Item 1. Business -– Regulation and Supervision"” and Note 16 to the Company'’s Consolidated Financial Statements included elsewhere in this Annual Report on 10-K for more information on restrictions and limitations on the Company'’s ability to pay dividends.

Issuer Purchases of Equity Securities

The Company had no publicly announced plans or programs for purchase of stock during ~~2010~~2011. There were no shares of Company common stock repurchased during the quarter ended December 31, ~~2010~~2011.

~~-15-~~16

Unregistered Sale of Securities

The Company sold ~~808~~eight shares of its common stock in ~~2010~~2011 at a price of $3234.00 per share for an aggregate price of $~~25,856~~272. Sales of these shares occurred in ~~2010~~2011 as follows (in dollars, except number of shares):

	No. of	Aggregate
Date	No. of Shares	Aggregate Price
Date	Shares	Price
July 2, 2011	4	$136
January 29, 2010	800	$	25,600
July 28, 2011	2	68
July 8, 2010	8	256
October 28, 2011	2	68
	808	$	25,856
Total	8	$272

The Company ~~also~~ sold 808 ~~1,519~~ shares of its common stock in ~~2009~~2010 at a ~~weighted average~~ price of $2732.6900 per share for an aggregate price of $4225,~~054~~856 and ~~sold~~1,519 ~~150~~ shares of its common stock in ~~2008~~2009 at a weighted average price of $3427.7469 per share for an aggregate price of $542,~~211~~054. The Company used proceeds from such sales to pay general expenses of the Company. All shares of common stock were issued in reliance upon the exemption from the registration requirements of the ~~Securities~~ ~~Act of 1933, as amended (the "~~Securities Act"), as set forth in Section 4(2) under the Securities Act and, in some cases, Rule 506 of Regulation D promulgated thereunder relating to sales by an issuer not involving any public offering, to the extent an exemption from such registration was required.

ITEM 6. SELECTED FINANCIAL DATA.

The following table presents selected financial data of the Company for the 12 months ended December 31, for the years indicated (dollars in thousands, except per share data):

	2010		2009		2008		2007		2006
	2011	2010	2009	2008	2007
Net interest income	$ 36,150	$ 34,377	$ 33,199	33$ 29,~~199~~833	$ 27,429	~~29,833~~	$	~~27,429~~	$	~~26,785~~
Gross interest income	4645,~~347~~506	46,347	49,011	52,467	5254,~~467~~279		~~54,279~~		~~50,927~~
Income from continuing operations	811,~~875~~862	8,875	8,327	7,529	79,~~529~~160		~~9,160~~		~~9,157~~
Net income per common share	23.4528	2.45	2.30	2.08	2.0853		~~2.53~~		~~2.52~~
Cash dividends declared per common share	1.0010	1.00	1.04	1.16	1.16		~~1.16~~		~~1.16~~
Total assets at year-end	~~974~~1,~~378~~053,549	974,378	956,555	927,502	~~927~~876,~~502~~156		~~876,156~~		~~831,420~~
Long-term obligations (1)	4243,~~296~~976	42,296	42,216	73,843	7363,~~843~~165		~~63,165~~		~~59,538~~
Allowances for loan losses as a % of total loans	1.4752%	1.47%	1.50%	1.22%	1.2208%		~~1.08%~~		~~1.13%~~
Allowances for loan losses as a % of
Allowances for loan losses as a % of non-performing loans	98.49%	76.40%	96.87%	168.09%	336.24%
non-performing loans	76.40%		96.87%		168.09%		336.24%		471.96%
Loans 90 days past due as a % of total loans	1.39%	1.12%	1.54%	0.73%	0.32%
Loans 90 days past due as a % of total loans	1.12%		1.54%		0.73%		0.32%		0.24%

________________

(1) Long-term obligations consist of Federal Home Loan Bank ("“FHLB"”) advances that mature after December 31, ~~2011~~2012, and trust-preferred securities.

~~-16-~~ 17

~~Executive~~ITEM ~~Overview~~7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ForExecutive the year ended December 31, 2010, the Company's stable core earnings streams resulted in a return on equity ("ROE") of 9.8%. Dividends were reduced slightly from $1.04 per share in 2009 to $1.00 in 2010. Strong net interest margins, gains on sale of available-for-sale securities and management's commitment to efficiency and cost control served to more than offset challenges presented by the current economic recession. Net income for 2010 increased to $8.9 million compared to $8.3 million in 2009 and $7.5 million in 2008. Challenges in 2010 consisted of but were not limited to stressed real estate conditions and job losses in local markets, provision for loans losses, expenses related to other real estate owned ("OREO") and other-than-temporary impairment on a small volume of available-for-sale securities.Overview

~~The~~For ~~major~~the ~~drivers~~year ofended ~~increased~~December 31, ~~earnings~~2011, ~~were~~the ~~increased~~Company’s ~~net~~stable ~~interest~~core ~~income~~earnings ~~and~~streams ~~gain~~resulted in a return on ~~sale~~equity (“ROE”) of ~~available-for-sale~~ ~~securities~~12. ~~Provision~~2% ~~for~~compared ~~loan~~to ~~losses was $7~~9.08% ~~million~~for in 2010. Dividends ~~compared~~increased to $7.1.10 ~~million~~per share in ~~2009~~2011 ~~and~~compared to $21.900 ~~million~~ in ~~2008~~2010. ~~Gain~~Strong onnet ~~sale of~~interest ~~available~~margin, reduced provision for ~~sale~~loan ~~securities~~losses ~~totaled~~and ~~$1.9~~management’s ~~million~~commitment ~~in 2010 compared~~ to ~~$1.2 million~~efficiency ~~in 2009~~ and ~~net~~cost control ~~credit~~served ~~losses~~to ofmore ~~other-~~than~~-temporary~~ ~~impairment realized~~offset inchallenges ~~earnings~~presented ~~totaled~~by ~~approximately~~the ~~$589,000~~current ~~compared to approximately~~economic ~~$651,000 in 2009~~recession. ~~Earnings~~ Net ~~per~~income ~~share~~for ~~were~~2011 totaled $211.459 ~~for~~million ~~the year ended December 31, 2010~~ compared to $28.309 ~~for~~million ~~the~~in 2010 ~~year ended December 31, 2009~~ and $28.083 ~~for the~~million ~~year~~in ~~ended December 31, 2008~~2009.

~~During~~The ~~2010,~~major ~~capital~~drivers ~~growth~~ of ~~5.8%~~increased ~~outpaced~~earnings ~~asset~~were ~~growth~~increased ofnet ~~1.9%. Capital~~interest ~~growth~~income ~~greater~~and ~~than~~reduced ~~asset~~provision ~~growth~~for ~~was~~loan ~~attributable~~losses. Net tointerest aincome totaled $536.2 million ~~increase~~ in ~~retained~~2011 ~~earnings,~~compared ~~partially~~to ~~offset by a~~ $234.4 3 million ~~decrease~~ in ~~accumulated other comprehensive income~~2010. ~~Also, preferred~~Provision ~~shares totaling $2 million accounted~~ for asloan alosses ~~non-controlling interest~~decreased infrom a$7.0 ~~consolidated~~million ~~subsidiary were issued to an affiliate~~ in 2010~~. Increased~~ ~~retained~~to ~~earnings of~~ $5.2.4 million ~~was a result of increased earnings and lower dividends~~ in ~~2010 compared to 2009~~2011. ~~Decreased~~Gain ~~accumulated~~on ~~other~~sale ~~comprehensive income was a result~~ of ~~unrealized depreciation of the~~ available-for-sale securities ~~portfolio~~totaled approximately $943,000 in 2011 compared to ~~prior year~~$1. ~~Return~~9 onmillion ~~average~~in ~~equity was 9.80% for~~ 2010 ~~compared~~and tonet ~~10.19%~~credit losses ~~for~~of ~~2009~~other-than-temporary ~~and~~impairment ~~10.07%~~realized ~~for~~in ~~2008. Return~~earnings ~~on assets~~totaled ~~("ROA")~~approximately ~~was 0.92%~~$48,000 ~~0.89%~~compared ~~and~~to ~~0.83%~~approximately ~~for 2010~~$589,000 ~~2009~~in ~~and 2008, respectively~~2010. ~~ROE~~Earnings per ofshare ~~9.80%~~were ~~and ROA of 0~~$3.~~92%~~28 for ~~2010 exceeded~~ the ~~same~~year ~~measures~~ended ~~for~~December ~~the~~31, ~~Southeast Public Bank Peer Report~~2011, ascompared ~~produced~~to by$2.45 ~~Mercer Capital's~~and ~~Financial~~$2.30 ~~Institutions~~for ~~Group (~~the ~~"Peer~~years ~~Report"),~~ended ~~which~~December ~~reported~~31, an2010 ~~average ROE of negative 15.42%~~ and ~~average~~ ~~ROA~~2009, ~~of negative 0~~respectively.~~37% for 2010.~~

InDuring ~~2010~~2011, ~~the~~capital ~~Company's~~growth ~~dividend~~of 15.9% ~~payout~~outpaced ~~ratio~~asset ~~was~~growth 41of 8.1%. Capital ~~which~~growth greater than asset growth was attributable ~~slightly~~to ~~lower~~a ~~than~~$7.9 ~~the~~million ~~Company's~~increase ~~historical~~in retained earnings and a $6.9 million ~~range~~increase in accumulated other comprehensive income. Retained earnings increased 11.5% in 2011 as a result of 45increased undistributed net income and conservative dividend payout ratio of 34%. Accumulated other comprehensive income increased due to ~~55%~~increase ~~over~~of $6.9 million in unrealized appreciation (net of tax) on the available-for-sale ~~past~~securities ~~five~~portfolio ~~years~~compared to prior year. ~~Dividend~~Return ~~yield~~on average equity was 12.2% in 2011 compared to 9.8% for 2010 ~~was~~and 310.132%, for 2009. ~~which~~Return on assets (“ROA”) was ~~comparable~~1.22%, to0.92% ~~historical~~and ~~dividend~~0.89% ~~yields~~for in2011, ~~excess~~2010 and 2009, respectively. For 2011, ROE of 312.2% and ROA of 1. ~~The~~22% ~~Peer~~exceeded the same measures for the Southeast Public Bank Peer Report, ~~reported~~as aproduced ~~peer~~by ~~dividend~~Mercer ~~payout~~Capital’s ~~ratio~~Financial Institutions Group (the “Peer Report”), which reported an average ROE of 50negative 2.68% and aaverage ROA ~~dividend yield~~ of 1 0.5201% for ~~2010~~2011. The Peer Report provides market pricing and performance data on publicly traded banks in Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee.

~~Maintaining~~In ~~and~~2011, ~~improving~~the ~~net~~Company’s dividend ~~interest~~payout ~~margins~~ratio ~~continues~~was 34% compared to be41% ain ~~top~~2010. The ~~priority~~dividend ~~for~~payout ~~many~~ratio ~~financial~~has ~~institutions,~~trended ~~including~~lower over the ~~Bank. The~~past ~~Company's~~three ~~net~~years ~~interest~~as ~~margin~~part ~~had~~of ~~been~~the ~~stable~~Company’s strategic ~~from~~effort ~~2005~~ to ~~2008~~grow inand ~~the~~preserve ~~range~~capital ofduring ~~3.75%~~the torecent 4economic recession.~~00%~~ Dividend yield ~~and~~for ~~increased~~2011 towas 43.2024% incompared ~~2009 and~~to 43.2813% in 2010~~. Interest~~ ~~rate~~and ~~risk~~consistent ~~position~~with historical ~~for~~dividend ~~the~~yields ~~Company~~in isexcess ~~liability sensitive,~~of ~~which~~3%. The ~~also~~Peer ~~contributed~~Report toreported ~~the~~an average ~~improvement~~dividend ofpayout ~~net~~ratio ~~interest~~of ~~margins~~37.2% ~~in 2009~~ and ~~2010. For~~an ~~more~~average ~~information,~~dividend ~~see~~yield ~~Item 7A~~ of ~~this~~1.73% ~~Annual Report on Form~~for ~~10-K~~2011.

~~The~~Maintaining ~~efficiency~~and ~~ratio~~improving ~~is a~~net ~~measure~~interest ofmargins ~~non-interest~~continues ~~expense~~to asbe a ~~percentage~~top ofpriority ~~total~~for ~~revenue. The~~many ~~Company~~financial ~~computes~~institutions, including the ~~efficiency~~Bank. The ~~ratio~~Company’s bynet ~~dividing non-~~interest ~~expense~~margin byhad ~~the~~been stable ~~sum~~from ~~of net~~2005 ~~interest~~to ~~income~~2008 onin athe ~~tax~~range ~~equivalent~~of ~~basis~~3.75% to 4.00% and ~~non-interest~~increased ~~income. This~~to is4.20% ain ~~non-GAAP~~2009 ~~financial~~and ~~measure,~~4.28% ~~which~~in ~~management~~2010 ~~believes~~and ~~provides~~2011. As ~~investors~~of ~~with important~~December ~~information~~31, ~~regarding~~2011, the Company'’s ~~operational efficiency.~~ interest ~~Comparison~~rate ofrisk ~~the~~position ~~Company's~~was ~~efficiency~~liability ~~ratio~~sensitive. Being ~~with~~slightly ~~those~~liability ofsensitive over ~~other~~the ~~companies~~past ~~may not~~three beyears ~~possible~~contributed ~~because~~to ~~other~~the ~~companies~~Company’s ~~may~~ability ~~calculate~~to ~~the~~maintain ~~efficiency~~a ~~ratio~~net ~~differently~~interest margin above 4. ~~The~~0% ~~efficiency~~from ~~ratio~~2009 ~~for~~through ~~the~~2011. For ~~years~~more ~~2010~~information, ~~2009~~see Item ~~and~~7A ~~2008~~of ~~was~~this ~~59.03%, 59.78%,~~Annual ~~and~~Report ~~66.14%,~~on ~~respectively~~Form 10-K.

The ~~tangible~~efficiency ~~common equity~~ ratio is a measure of non-~~GAAP~~interest ~~measure~~expense ~~used~~as bya ~~management~~percentage toof ~~evaluate~~total ~~capital adequacy~~revenue. The ~~Tangible~~Company ~~common~~computes ~~equity~~the isefficiency ~~total~~ratio ~~equity~~by ~~less~~dividing non-interest expense by the sum of net ~~accumulated~~interest ~~other~~income ~~comprehensive~~on a tax equivalent basis and non-interest income. This is ~~("OCI")~~a non-GAAP financial measure, ~~goodwill~~which ~~and~~management ~~deposit-based~~believes ~~intangibles~~provides investors with important information regarding the Company’s operational efficiency. Comparison ~~Tangible~~of ~~assets~~the ~~are~~Company’s efficiency ratio with those of other companies may ~~total~~not ~~assets~~be ~~less~~possible ~~goodwill~~because ~~and~~other ~~deposit-based~~companies ~~intangibles~~may calculate the efficiency ratio differently. The ~~tangible~~efficiency ~~common equity~~ ratio ~~was~~for ~~7.84%~~the asyears ofended ~~year-end~~December 31, 2011, 2010 and ~~compared~~2009 towas 760.201%, in59.0%, ~~2009~~ and 659.928% in, ~~2008~~respectively.

The tangible common equity ratio is a non-17GAAP measure used by management to evaluate capital adequacy. Tangible common equity is total equity less net accumulated other comprehensive income, goodwill and deposit-based intangibles. Tangible assets are total assets less goodwill and deposit-based intangibles. The tangible common equity ratio was 7.95% as of year-end 2011 compared to 7.84% at year-end 2010 and 7.20% at year-end 2009.

~~A reconciliation of non-GAAP~~ ~~measures of efficiency ratio and tangible common equity is provided as follows (dollars in thousands):~~18

	2010		2009		2008
Efficiency ratio:
Net interest income(1)	$	36,368	$	34,891	$	31,033
Non-interest income(2)	12,270		12,462		11,395
Total revenue	48,638		47,353		42,428
Non-interest expense	28,710		28,309		28,064
Efficiency ratio	59.03 %		59.78 %		66.14 %
Tangible common equity ratio:
Total equity capital	$	89,279	84,312		$	77,008
Less:
Accumulated other comprehensive income	1,896		4,256		1,526
Goodwill	11,825		11,825		11,825
Other intangible assets	120		204		289
Tangible common equity	$	75,438	$	68,027	$	63,368
Total assets	$	974,378	$	956,555	$	927,502
Less:
Goodwill	11,825		11,825		11,825
Other intangible assets	120		204		289
Tangible assets	$	962,433	$	944,526	$	915,388
Tangible common equity ratio	7.84%		7.20%		6.92%

A reconciliation of non-GAAP measures of efficiency ratio and tangible common equity is provided as follows (dollars in thousands):

___________________

	At or for the Year Ended December 31,
	2011	2010	2009
Efficiency ratio:
Net interest income⁽¹⁾	$38,428	$36,368	$34,891
Non-interest income⁽²⁾	11,625	12,270	12,462
Total revenue	50,053	48,638	47,353
Non-interest expense	30,072	28,710	28,309
Efficiency ratio	60.08%	59.03%	59.78%
Tangible common equity ratio:
Total equity capital	$103,468	$89,279	$84,312
Less:
Accumulated other comprehensive income	8,801	1,896	4,256
Goodwill	11,825	11,825	11,825
Other intangible assets	35	120	204
Tangible common equity	$82,807	$75,438	$68,027
Total assets	$1,053,549	$974,378	$956,555
Less:
Goodwill	11,825	11,825	11,825
Other intangible assets	35	120	204
Tangible assets	$1,041,689	$962,433	$944,526
Tangible common equity ratio	7.95%	7.84%	7.20%

(1) Net interest income includes interest and rates on securities that are non-taxable for federal income tax purposes that are presented on a taxable equivalent basis based on a federal statutory rate of 34%.___________________

(2) Non-interest income is presented net of any credit losses from other-than-temporary impairment losses on available-for-sale securities recognized against earnings for the years presented.

⁽¹⁾	Net interest income includes interest and rates on securities that are non-taxable for federal income tax purposes that are presented on a taxable equivalent basis based on a federal statutory rate of 34%.
⁽²⁾	Non-interest income is presented net of any credit losses from other-than-temporary impairment losses on available-for-sale securities recognized against earnings for the years presented.

Critical Accounting Policies

The accounting and reporting of the Company and its subsidiaries conform to ~~accounting principles generally accepted in the United States ("~~GAAP") and follow ~~general~~ general practices within the industry. Preparation of financial statements ~~requires~~ requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Management believes that the Company'’s estimates are reasonable under the facts and circumstances based on past experience and information supplied from professionals, regulators and others. Accounting estimates are considered critical if (i) management is required to make assumptions or judgments about items that are highly uncertain at the time estimates are made and (ii) 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 on presentation of the Company'’s Consolidated Financial Statements.

The development, selection and disclosure of critical accounting policies are discussed and approved by the Audit Committee of the Bank'’s Board of Directors. Because of 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 consist of the allowance for loan losses, fair value of financial instruments and goodwill.

~~-18-~~19

Allowance For Loan Losses

The allowance for 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. Management believes the allowance for loan loss estimate is a critical accounting estimate because: (i) changes can materially affect provision for loan loss expense on the income statement, (ii) changes in the borrower'’s cash flows can impact the reserve, and (iii) management makes 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. In addition, ~~federal regulatory agencies~~ as a part of their examination process, ~~periodically~~federal regulatory agencies periodically review the Bank'’s loans and allowances for loan losses and may require the Bank to recognize adjustments based on their judgment about information available to them at the time of their examination. See Note 1 of the Company'’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more information.

Fair Value of Financial Instruments

Certain assets and liabilities are required to be carried on the balance sheet at fair value. Further, the fair value of financial instruments must 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~~counterparties.

Fair values for the majority of the Bank'’s available-for-sale investment securities are based on observable market prices obtained from independent asset pricing services that are based on observable transactions but not quoted market prices.

Fair value of derivatives (if any) held by the Company is determined using a combination of quoted market rates for similar instruments and quantitative models 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 derivatives (if any). For more information, see Notes 1 and 20 in the Company'’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

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 could potentially 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 are critical because estimates and assumptions are made based on prevailing market factors, historical earnings and multiples and other contingencies. For more information, see Notes 1 and 8 in the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Results of Operations

The Company reported consolidated net income of $811.9 million for the year ended December 31, ~~2010~~2011, compared to $8.39 million infor ~~2009~~the year ended December 31, 2010 and $78.5 3 million in ~~2008~~2009. The 33% increase in net income from 2010 to ~~2009~~2011 was primarily a result of ~~increases~~increased in net interest income and ~~gain~~ onreduced ~~sale~~provision ~~of available-~~for~~-sale~~ ~~securities,~~loan ~~which served to more than offset increased expenses and~~ losses ~~related to OREO~~. Earnings per share were $23.45 28 for ~~2010~~2011 compared to $2.3045 for ~~2009~~2010 and $2.08 30 for ~~2008~~2009. Return on average assets was 01.9222%, 0.8992% and 0.8389% for the years ended December 31, ~~2010~~2011, ~~2009~~ 2010 and ~~2008~~2009, respectively. Return on average equity was 912.802%, 10 9.198% and 10.072% for ~~2010~~ 2011, ~~2009~~2010 and ~~2008~~2009, respectively.

~~Asset~~During ~~growth~~2011, ~~was~~the ~~modest~~Company atachieved ~~less~~the ~~than~~milestone 2%of becoming a community bank with over $1 billion in ~~2010~~assets. Asset ~~compared~~growth towas 38.1% infor ~~2009~~the ~~and~~year 5ended December 31, 2011 compared to 1.9% inand ~~2008~~3. 1% for the years ended December 31, 2010 and 2009, respectively. Asset growth of $1879.1 million was ~~driven~~ primarily bya result of strong core deposit growth, inas savings and demand grew 22.2% and 19.5%, respectively in 2011. Deposit growth was primarily used for incremental purchases of available-for-sale investment securities ofdue ~~$45~~to ~~million~~weak loan demand in 2011. ~~Federal~~The ~~funds~~majority ~~sold increased~~of $7Interest ~~million,~~Bearing ~~net~~Deposits ~~loans~~in ~~decreased~~Banks ~~$39~~was ~~million~~the ~~and~~excess ~~OREO~~balance ~~increased~~held $4at ~~million~~the ~~in 2010~~Federal ~~compared~~Reserve toBank ~~2009. Deposit~~which ~~growth~~totaled ~~of 5~~$38.3% ormillion and $405.8 million inas ~~2010~~of ~~consisted~~December of31, ~~increased~~2011 ~~savings~~and ~~deposits~~2010, ofrespectively. Federal funds sold decreased $283.3 million, net loans decreased $20 million and ~~increased~~other ~~time~~real ~~deposits~~estate ofowned (“OREO”) decreased $123.7 million~~. Demand~~ ~~deposits~~in ~~were~~2011 ~~flat~~compared atto ~~$100~~2010. Time ~~million~~deposits atdecreased ~~both~~7.5% ~~year-end~~and ~~2010~~other ~~and~~borrowings ~~2009~~decreased 9.4% in 2011.

Key economic ~~-19-~~factors including, but not limited to, stressed real estate markets, job losses and the market interest rate environment put pressure on asset quality during 2009 and 2010 but stabilized somewhat in 2011. Although the Bank has experienced challenges in asset quality over the past three years because of the downturn in real estate markets, particularly in and around Shelby County, Tennessee, asset quality was considered satisfactory at December 31, 2011 and trends are stabilizing, as evidenced by decreased loans charged off and decreased volume of loans transferred into OREO in 2011 compared to 2010 and 2009.

~~Prevailing~~ economic factors including, but not limited to, stressed real estate markets, job losses and the market interest rate environment put pressure on asset quality during 2009 and 2010. The Bank has been challenged by deteriorating asset quality over the past three years primarily because of the downturn in real estate markets in and around Shelby County, Tennessee. Economic conditions have resulted in non-performing loans and OREO levels above historical ranges experienced in recent years prior to 2008. While economic trends were unfavorable over the past three years, such conditions were considered manageable by the Company's management and core earnings streams were generally able to absorb required increased provision for loan losses as well as increased expense and losses related to OREO. Non-performing loans as a percent of total loans showed more favorable trends at 1.12% as of year-end 2010 compared to 1.54% as of year-end 2009. Non-performing loans and OREO as a percent of total loans plus OREO at December 31, 2010 were 3.71% compared to 3.28% and 1.63% at December 31, 2009 and 2008, respectively, while the Bank's peer group's average was 4.61% as reported in the Uniform Bank Performance Report for all insured commercial banks having assets between $300 million and $1 billion ("UBPR") at December 31, 2010. Net charge-offs in 2010 were $7.8 million compared to $5.6 million in 2009 and $1.9 million in 2008. The allowance for loan losses as a percent of non-performing loans was 130.9%, 96.8% and 167.2% as of December 31, 2010, 2009 and 2008, respectively. Unfavorable trends in these key asset quality metrics over the last three years began to show some improvement by year-end 2010. OREO totaled $14.7 million, $10.5 million and $5.4 million as of December 31, 2010, 2009 and 2008, respectively. 20

~~Provision~~While ~~for~~many economic ~~loan~~trends ~~losses~~remained ~~was~~problematic ~~flat~~during at2011 $7and ~~million~~had ina ~~both~~negative ~~2009~~impact ~~and~~on ~~2010. The~~the ~~allowance for~~Bank’s ~~loan~~ability ~~losses~~to asachieve aquality ~~percent~~loan ofgrowth, ~~total~~the ~~loans~~overall ~~was~~trend ~~1.47%~~in atasset ~~year-end~~quality ~~2010 compared to 1.50%~~for atthe ~~year-end~~existing ~~2009~~portfolio ~~and~~stabilized ~~1.22%~~in at2011 ~~year-end~~compared ~~2008. Additions made~~ to the ~~reserve account,~~prior astwo years. As a ~~percent of gross charge-offs~~result, provision for ~~2010~~loan ~~were~~losses ~~85.5%~~decreased ~~compared~~ to ~~118~~$2.~~6% in~~4 ~~2009~~million ~~and~~in ~~125.7%~~2011 ~~for~~compared ~~2008~~to $7. ~~The~~0 ~~allowance~~million ~~for~~in ~~loan~~each ~~losses~~of ~~was~~the ~~evaluated~~prior ~~in accordance~~two ~~with~~years. Net ~~GAAP~~charge-offs ~~and~~were ~~was~~$2.4 ~~weighted~~million in ~~toward~~2011 ~~actual~~compared ~~historical~~to ~~losses~~$7.8 ~~and included~~million ~~factor~~in ~~adjustments~~2010 ~~for~~and ~~changes~~$5.6 million in ~~environmental conditions~~2009. The allowance ~~methodology~~for ~~used~~loan tolosses ~~evaluate~~as ~~the~~a ~~adequacy~~percent of ~~the~~total ~~allowance~~loans was ~~revised~~1.52% ~~slightly in~~as ~~fourth~~of ~~quarter~~December ~~2010~~31, ~~pursuant~~2011 compared to ~~ASC~~1.47% ~~Update~~at ~~2010-20~~December ~~Receivables (Topic 310)~~31, ~~Disclosures~~ ~~about~~2010 ~~the~~and ~~Credit~~1.50% ~~Quality~~at ofDecember ~~Financial~~31, ~~Receivables and the Allowance~~2009. ~~for~~Additions ~~Credit~~made ~~Losses~~to ~~but~~the ~~did~~reserve ~~not~~account, ~~result~~as in a ~~significant~~percent ~~change~~of ingross ~~the~~charge-offs, ~~required~~were ~~reserve~~90.7%, ~~considered~~85.5% ~~necessary~~and ~~to absorb probable losses~~118. ~~For~~6% ~~more~~for ~~information, see~~ the ~~section~~years ~~below~~ended ~~entitled~~December ~~"Recently~~31, ~~Issued~~2011, ~~Accounting~~2010 ~~Standards~~and 2009, respectively."

The allowance for loan losses aswas ofevaluated ~~December 31, 2010 compared to December 31, 2009 trended downward~~ in ~~terms~~accordance ofwith ~~amount~~GAAP ~~allocated~~ and aswas aweighted ~~percentage of total loans~~toward ~~because~~actual ofhistorical ~~decreased~~losses ~~loans in 2010~~ and ~~improving~~included ~~trends~~factor ofadjustments ~~past~~for ~~due~~changes ~~and~~in ~~impaired~~environmental ~~loans~~conditions. The allowance for loan losses was considered adequate for each of the periods presented to properly account for changes in the economies of local markets, changes in collateral values, variables in underwriting methods, levels of charged-off loans and volumes of non-performing loans. See additional information regarding the allowance for loan losses in Notes 1 and 4 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

~~Consistent~~Non-performing loans ~~with~~as a percent of total loans were 1.49% as of December 31, 2011 compared ~~prior~~to ~~years~~1.12% as of December 31, ~~the~~2010 ~~Company~~and ~~continues~~1.54% as of December 31, 2009. Non-performing loans and OREO as a percent of total loans plus OREO at December 31, 2011 were 3.51% compared to ~~show~~3.71% ~~asset~~and ~~quality~~3.28% ~~indicators~~at ~~below~~December 31, 2010 and 2009, respectively, while the average of the Bank’s peer group was 4.04% as ~~levels~~reported in ~~terms~~the ofUniform ~~loans~~Bank Performance ~~30-89~~Report ~~days~~for ~~past~~all ~~due~~insured commercial banks having assets between $1 billion and ~~nonperforming~~$3 ~~loans~~billion (“UBPR”) at December 31, 2011. The allowance for ~~Comparison~~loan losses as a percent of ~~key~~non-performing ~~asset~~loans ~~quality~~was ~~indicators~~98.49%, ~~between~~130.9% ~~the~~and ~~Company~~96.8% as of December 31, 2011, 2010 and ~~peers~~2009, ~~were~~respectively. OREO totaled $11.1 million, $14.7 million and $10.5 million as ~~follows~~of ~~for~~December ~~the~~31, ~~last~~2011, ~~five~~2010 ~~years:~~and 2009, respectively.

	2010		2009		2008		2007		2006
	COMPANY	PEER*	COMPANY	PEER	COMPANY	PEER	COMPANY	PEER	COMPANY	PEER
Allowance as % of total loans	1.47%	1.93%	1.50%	1.82%	1.22%	1.43%	1.08%	1.21%	1.13%	1.21%
Non-performing loans to total loans	1.12%	3.21%	1.54%	3.14%	0.74%	2.07%	0.32%	1.03%	0.24%	0.55%
Loans 30-89 days past due to total loans	0.44%	1.20%	0.93%	1.44%	1.15%	1.43%	0.74%	1.11%	0.62%	0.79%
Net charge-offs to average total loans	1.38%	0.99%	0.93%	1.06%	0.31%	0.51%	0.13%	0.18%	0.23%	0.11%

In 2011, the Company had asset quality indicators below certain peer levels in terms of nonperforming loans to total loans and net-charge-offs to average total loans. Comparison of certain asset quality indicators between the Company and UBPR peer group were as follows for the last five years:

___________________

	Year Ended December 31,
	2011		2010		2009		2008		2007
	Company	Peer*	Company	Peer*	Company	Peer*	Company	Peer*	Company	Peer*
Allowance as % of total loans	1.52%	2.03%	1.47%	1.93%	1.50%	1.82%	1.22%	1.43%	1.08%	1.21%
Non-performing loans to total loans	1.50%	2.83%	1.12%	3.21%	1.54%	3.14%	0.74%	2.07%	0.32%	1.03%
Loans 30-89 days past due to total loans	0.90%	0.87%	0.44%	1.20%	0.93%	1.44%	1.15%	1.43%	0.74%	1.11%
Net charge-offs to average total loans	0.45%	0.92%	1.38%	0.99%	0.93%	1.06%	0.31%	0.51%	0.13%	0.18%

* Peer data is derived from the UBPR as of December 31 of the year indicated.___________________

~~The~~* ~~Company's allowance~~Peer asdata ais ~~percent~~derived offrom ~~loans~~the ~~was~~UBPR ~~less~~as ~~than~~of ~~peer~~December as31 of the ~~Company's non-performing~~year ~~loans~~indicated. ~~(loans~~As 90of ~~days~~December or31, ~~more~~2011, ~~past~~the ~~due~~Bank ~~accruing~~was ~~interest~~in ~~and non-accrual~~Peer ~~loans)~~Group ~~were~~2, ~~also~~which ~~below~~consisted ~~peer~~of asall ofinsured ~~year-end~~commercial ~~2010. For~~banks ~~more information~~having ~~regarding~~assets ~~loans~~between ~~and~~$1 ~~allowance~~billion ~~for~~and ~~loan~~$3 ~~losses,~~billion. ~~see~~For ~~the~~2007 ~~section below~~to ~~entitled~~2010, ~~"Financial~~the ~~Condition~~Bank --was ~~Loan~~in ~~Portfolio~~Peer ~~Analysis"~~Group ~~and~~3, ~~Note~~which 1consisted ~~to the~~of ~~Consolidated~~all ~~Financial~~insured ~~Statements~~commercial ~~included~~banks ~~elsewhere~~having inassets ~~this~~between ~~Annual~~$300 ~~Report on~~million ~~Form~~and ~~10-K~~$1 billion.

~~Net~~Based ~~yield~~ on the ~~average~~UBPR, ~~earning~~the ~~assets~~Company’s ~~improved~~allowance toas ~~4.28%~~a ~~for~~percent ~~2010~~of ~~compared~~loans ~~to 4.20% for 2009 and 3.84% for 2008. Net interest margin improvement~~ was ~~attributed~~less tothan ~~the~~peers’, as the Company'’s ~~ability~~non-performing toloans ~~reprice~~(loans ~~interest~~90 ~~bearing~~days ~~liabilities~~or atmore ~~lower~~past ~~rates,~~due accruing ~~primarily~~interest ~~time~~and ~~deposits~~non-accrual ~~and~~loans) ~~other~~were ~~borrowings,~~also inbelow apeers’ ~~greater~~as ~~volume~~of ~~than~~year-end 2011. ~~decreases~~For inmore ~~yields~~information onregarding ~~interest~~loans ~~earning~~and ~~assets. The~~allowance ~~Bank~~for ~~remained~~loan inlosses, asee the ~~liability~~section ~~sensitive~~below ~~position~~entitled as“Financial ofCondition ~~year~~-~~end~~- ~~2010~~Loan ~~and~~Portfolio ~~could~~Analysis” ~~face margin~~and ~~compression~~Note ~~when~~1 ~~the~~to ~~rate environment begins rising. For more information about~~ the ~~Company's~~Consolidated ~~interest~~Financial ~~rate~~Statements ~~sensitivity,~~included ~~see~~elsewhere ~~Item~~in ~~7A of~~ this ~~Annual~~ Annual Report on Form 10-K.

Net yield on -average earning assets was 4.28% for both 2011 and 2010 and 4.20% for 2009. Strong net interest margin over the past three years was attributable to the Company’s ability to reprice interest bearing liabilities at lower rates, primarily time deposits and other borrowings, in a greater volume than decreases in yields on interest earning assets. The Bank remained in a liability sensitive position as of year-end 2011 and could face margin compression when the rate environment begins rising. For more information about the Company’s interest rate sensitivity, see Item 7A of this Annual Report on Form 10-K.

~~Total~~ non-interest income for 2010 decreased approximately $254,000 compared to 2009. The net decrease was primarily attributable to losses recognized on OREO totaling $1.2 million in 2010 compared to approximately $470,000 in 2009. Other-than-temporary credit impairment losses on available-for-sale securities for 2010 and 2009 totaled approximately $589,000 and $651,000, respectively, and related primarily to two different series of pooled trust preferred securities. 21

~~Non~~Total non-interest income ~~from~~for ~~mortgage~~the ~~banking~~year ~~and~~ended ~~service~~December ~~charges~~31, on2011 ~~deposits~~decreased ~~were~~$1.2 ~~flat in 2010~~million compared to ~~2009. Despite~~ the ~~challenges~~year ofended ~~the~~December ~~national real estate market~~31, ~~the~~ ~~markets~~2010. The ~~served~~net bydecrease ~~the~~was ~~Bank~~primarily attributable ~~continued~~ to ~~deliver~~losses ~~consistent~~recognized ~~mortgage activity~~on ~~and~~OREO ~~overall~~totaling ~~stable non-interest income. Gross income and fees recorded from mortgage activity totaled~~ $1.14 million ~~per year~~ in ~~each of the~~2011 ~~past~~compared ~~three~~to ~~years~~$1. ~~Income~~2 ~~from~~million ~~fiduciary activities totaled approximately $785,000~~ in 2010 ~~compared~~and toreduced ~~approximately~~gains ~~$806,000~~on insale ~~2009 and approximately~~of ~~$816,000 in 2008. Bank~~available-~~owned~~for-sale ~~life~~securities ~~insurance~~totaling ~~("BOLI") earnings totaled~~ approximately $~~677~~943,000 in ~~2010~~2011 compared to ~~approximately~~ $~~830,000 in both 2009 and 2008~~1. ~~Fee income from deposit accounts, which included interchange fees on debit and ATM transactions, was $6.~~9 million ~~per year~~ in 2010 ~~and 2009 and $7~~.~~2 million in 2008.~~ ~~Recent~~Other-than-temporary ~~legislation~~credit ~~that~~impairment ~~became~~losses ~~effective in 2010 will likely~~on ~~result~~available-for-sale insecurities ~~dilution~~for ~~of overdraft fee income and interchange income with respect to~~ the ~~Bank's~~years ~~debit~~ended ~~card~~December ~~program~~31, ~~beginning in~~ 2011~~. Brokerage~~ ~~fees~~and ~~decreased~~2010 totaled approximately $~~237~~48,000 ~~in 2010~~ and $~~156~~589,000, inrespectively, ~~2009~~and ~~because~~related ~~of continued~~primarily ~~volatility~~to inpooled ~~stock~~trust ~~and~~preferred ~~bond markets and weak consumer confidence during the recent economic recession~~securities.

The Company'’s effective tax rate was 1922% in ~~2010~~2011 ~~and~~compared ~~2009~~to ~~and 27~~19% in ~~2008~~2010 and 2009. The effective tax rate was impacted by fluctuations in certain factors including, but not limited to, the volume of and related earnings on tax-free investments within the Bank'’s investment portfolio, tax-exempt earnings and expenses on bank-owned life insurance (“BOLI”), certain tax benefits that result from dividends and payouts under the Bank'’s Employee Stock Ownership Plan ("“ESOP"”), and other factors incidental to the financial services business. Fluctuations in the deduction related to the ESOP dividends and payouts and tax-exempt interest earned in the investment portfolio were the largest contributors to the various effective rates for the past three years.

Interest- earning assets in ~~2010~~2011 averaged $~~850~~898 million at an average rate of 5.73% compared to ~~$831~~ $850 million at an average rate of 65.17% in ~~2009~~2010 and $~~808~~831 million at an average ~~rate~~ rate of 6.71% in ~~2008~~2009. Interest bearing liabilities at ~~year-end~~December ~~2010~~31, 2011 averaged ~~$772~~ $797 million at an average cost of 1.62% compared to $~~754~~772 million at an average ~~cost~~ cost of 2.1.6% at ~~year-end~~December ~~2009~~31, 2010 and $~~737~~754 million at an average cost of 32.1% at ~~year-end~~ ~~2008. The following table presents the annual average balance sheet and net interest income analysis for the years ended~~ December 31, ~~2010,~~ 2009 ~~and 2008 (dollars in thousands):~~.

	YEAR-TO-DATE AVERAGES AND RATES
	2010					2009					2008
	Average				Average	Average				Average	Average				Average
	Balance		Interest		Rate	Balance		Interest		Rate	Balance		Interest		Rate
ASSETS
Interest earning assets:
Loans (1)(2)(3)	$	561,964	$	36,085	6.42%	$	589,528	$	38,402	6.51%	$	606,015	$	42,356	6.99%
Investment securities:
Taxable	171,024		6,262		3.66%	148,140		7,260		4.90%	141,724		7,643		5.39%
Tax exempt (4)	94,185		5,970		6.34%	75,752		4,977		6.57%	54,204		3,529		6.51%
Interest earning
Deposits	1,056		6		0.57%	914		16		1.75%	867		42		4.84%
Federal funds sold	21,705		55		0.25%	16,392		48		0.29%	4,721		97		2.05%
Total interest earning assets	849,934		48,378		5.69%	830,726		50,703		6.10%	807,531		53,667		6.65%

The following ~~(Table~~table ~~continued~~presents onthe ~~next~~annual ~~page.~~average balance sheet and net interest income analysis for the years ended December 31, 2011, 2010 and 2009 (dollars in thousands):

-21-

	AVERAGE BALANCES AND RATES
	2011			2010			2009
	Balance	Interest	Rate	Balance	Interest	Rate	Balance	Interest	Rate
Assets
Interest earning assets:
Loans (1)(2)(3)	$541,255	$34,159	6.31%	$561,964	$36,085	6.42%	$589,528	$38,402	6.51%
Investment securities:
Taxable	215,458	6,832	3.17%	171,024	6,262	3.66%	148,140	7,260	4.90%
Tax exempt (4)	107,760	6,700	6.22%	94,185	5,970	6.34%	75,752	4,977	6.57%
Interest earning deposits	25,537	65	0.25%	1,056	6	0.57%	914	16	1.75%
Federal funds sold	8,403	28	0.33%	21,705	55	0.25%	16,392	48	0.29%
Total interest earning assets	898,413	47,784	5.32%	849,934	48,378	5.69%	830,726	50,703	6.10%
Non-interest earning assets:
Cash and due from banks	14,122			17,802			14,989
Premises and equipment	29,758			30,498			31,143
Other assets	66,707			67,067			56,178
Total assets	$1,009,000			$965,301			$933,036
Liabilities and shareholders' equity
Interest bearing liabilities
Savings deposits	$351,221	$2,981	0.85%	$304,605	$ 2,972	0.98%	$265,055	$ 3,007	1.13%
Time deposits	362,313	4,711	1.30%	360,634	5,738	1.59%	374,469	8,722	2.33%
Federal funds purchased and other interest bearing liabilities	83,217	1,664	2.00%	107,208	3,300	3.08%	114,624	4,083	3.56%
Total interest bearing liabilities	796,751	9,356	1.17%	772,447	12,010	1.55%	754,148	15,812	2.10%
Non-interest bearing liabilities
Demand deposits	107,792			97,294			89,819
Other liabilities	7,351			4,997			7,367
Total liabilities	911,894			874,738			851,334
Total shareholders' equity	97,106			90,564			81,702
Total liabilities and shareholders' equity	$1,009,000			$965,302			$933,036
Net interest income		$38,428			$36,368			$34,891
Net yield on average earning assets			4.28%			4.28%			4.20%

	YEAR-TO-DATE AVERAGES AND RATES
___________________
	2010					2009					2008
(1)	Loan totals are loans held for investments and net of unearned income and loan loss reserves.
	Average				Average	Average				Average	Average				Average
(2)	Fee income on loans held for investment is included in interest income and computations of the yield.
	Balance		Interest		Rate	Balance		Interest		Rate	Balance		Interest		Rate
(3)	Includes loans on non-accrual status.
Non-interest earning assets:
(4)	Interest and rates on securities that are non-taxable for federal income tax purposes are presented on a taxable equivalent basis based on the Company’s statutory federal tax rate of 34%.
Cash and due from banks	$	17,802				$	14,989				$	16,357
Premises & equipment	30,498					31,143					34,771
Other assets	67,067					56,178					51,325
Total assets	$	965,301				$	933,036				$	909,984
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing liabilities
Savings deposits	$	304,605	$	2,972	0.98%	$	265,055	$	3,007	1.13%	$	217,754	$	2,846	1.31%
Time deposits	360,634		5,738		1.59%	374,469		8,722		2.33%	390,233		14,671		3.76%
Federal funds purchased and
other interest bearing liabilities	107,208		3,300		3.08%	114,624		4,083		3.56%	129,194		5,117		3.96%
Total interest bearing liabilities	772,447		12,010		1.55%	754,148		15,812		2.10%	737,181		22,634		3.07%
Non-interest bearing liabilities
Demand deposits	97,294					89,819					90,999
Other liabilities	4,996					7,367					7,061
Total liabilities	874,737					851,334					835,241
Total shareholders' equity	90,564					81,702					74,743
Total liabilities and shareholders'
equity	$	965,301				$	933,036				$	909,984
Net Interest Income			$	36,368				$	34,891				$	31,033
Net Yield on Average Earning
Assets					4.28%					4.20%					3.84%

~~___________________~~ 23

~~(1) Loan~~ ~~totals are loans held for investments and net of unearned income and loan loss~~Volume/Rate ~~reserves.~~Analysis

~~(2) Fee income~~The onfollowing ~~loans~~table ~~held~~provides ~~for~~an ~~investment~~analysis ~~is included in interest income and computations~~ of the ~~yield. Loans~~impact ~~held~~of ~~for~~changes ~~sale~~in balances and ~~related~~rates ~~mortgage~~on ~~banking~~ interest income, ~~however,~~and ~~are~~interest ~~reported~~expense inchanges ~~other~~from ~~assets~~2011 to 2010 and ~~other~~2010 ~~income~~to ~~and,~~2009 ~~therefore, are~~(in ~~excluded.~~ thousands):

(3) Includes loans on non-accrual status.

	2011 Compared to 2010			2010 Compared to 2009
	Due to Changes in:			Due to Changes in:
	Average Volume	Average Rate	Total Increase (Decrease)	Average Volume	Average Rate	Total Increase (Decrease)
Interest earned on:
Loans	$(1,307)	$(619)	$(1,926)	$(1,770)	$ (547)	$(2,317)
Taxable securities	1,409	(839)	570	838	(1,836)	(998)
Tax-exempt securities	844	(114)	730	1,169	(176)	993
Interest bearing deposits with other banks	61	(2)	59	1	(11)	(10)
Federal funds sold and securities purchased under agreements to sell	(44)	17	(27)	13	(6)	7
Total interest earning assets	963	(1,557)	(594)	251	(2,576)	(2,325)
Interest expense on:
Savings deposits	396	(387)	9	388	(423)	(35)
Time deposits	22	(1,049)	(1,027)	(220)	(2,764)	(2,984)
Federal funds purchased and securities sold under agreements to repurchase and other borrowings	(480)	(1,156)	(1,636)	(228)	(555)	(783)
Total interest bearing liabilities	(62)	(2,592)	(2,654)	(60)	(3,742)	(3,802)
Net interest earnings	$1,025	$1,035	$2,060	$311	$1,166	$1,477

~~(4)~~ Non-Interest ~~and~~ ~~rates on securities that are non-taxable for federal income tax purposes are presented on a taxable equivalent basis based on the Company's statutory federal tax rate of 34%.~~Income

The following table compares non-~~22-~~interest income for the years ended December 31, 2011, 2010 and 2009 (dollars in thousands):

Volume/Rate Analysis

	Total 2011	Increase (Decrease)		Total 2010	Increase (Decrease)		Total 2009
	Total 2011	Amount	%	Total 2010	Amount	%	Total 2009
Mortgage banking income	$ 830	$ (286)	25.63%	$1,116	$ 5	0.45%	$1,111
Income from fiduciary activities	803	18	2.29%	785	(21)	(2.61)%	806
Service charges on deposit accounts	6,634	(289)	(4.17)%	6,923	(18)	(0.26)%	6,941
Brokerage fees	1,263	183	16.94%	1,080	(237)	(18.00)%	1,317
Earnings on bank owned life insurance	736	59	8.71%	677	(155)	(18.63)%	832
Gain (loss) on sale of foreclosed property	(1,374)	(218)	18.86%	(1,156)	(686)	145.96%	(470)
Gain on sale of available-for-sale securities	943	(941)	(49.95)%	1,884	688	57.53%	1,196
Income from insurance activities	899	(14)	(1.53)%	913	79	9.47%	834
Other non-interest income	939	302	47.41%	637	91	16.67%	546
Total non-interest income	$11,673	$(1,186)	(9.22)%	$12,859	$(254)	(1.94)%	$13,113

~~The~~Total non-interest ~~following~~income ~~table~~decreased ~~provides~~9.2% anin ~~analysis~~2011 ofcompared to 2010. As residential real estate values remained depressed, the ~~impact~~Bank’s ofmortgage ~~changes~~activity indeclined as ~~balances~~the ~~and~~prevailing environment made it difficult for many borrowers to refinance even though mortgage rates onremain ~~interest~~at or near historically low levels. Mortgage banking income ~~and~~decreased ~~interest~~to ~~expense~~approximately ~~changes~~$830,000 ~~from~~in ~~2010~~2011 compared to $1.1 ~~2009~~million in each of 2010 and 2009. Income from fiduciary activities increased 2.3% or approximately $18,000 in 2011 compared to ~~2008~~2010. Service (charges on deposits decreased 4.2% in ~~thousands):~~2011 compared to 2010. Brokerage fees increased approximately $183,000 or 16.9% in 2011 compared to 2010.

	2010 Compared to 2009 Due to Changes in:						2009 Compared to 2008 Due to Changes in:
					Total						Total
	Average		Average		Increase		Average		Average		Increase
	Volume		Rate		(Decrease)		Volume		Rate		(Decrease)
Interest earned on:
Loans	$	(1,770)	$	(547)	$	(2,317)	$	(1,073)	$	(2,881)	$	(3,954)
Taxable securities	838		(1,836)		(998)		314		(697)		(383)
Tax exempt securities	1,169		(176)		993		1,416		32		1,448
Interest bearing
deposits with other banks	1		(11)		(10)		1		(27)		(26)
Federal funds sold and
securities purchased
under agreements to sell	13		(6)		7		34		(83)		(49)
Total interest earning assets	$	251	$	(2,576)	$	(2,325)	$	692	$	(3,656)	$	(2,964)
Interest expense on:
Savings deposits	388		(423)		(35)		535		(374)		161
Time deposits	(220)		(2,764)		(2,984)		(367)		(5,582)		(5,949)
Federal funds purchased
and securities sold under
agreements to repurchase	(228)		(555)		(783)		(519)		(515)		(1,034)
Total interest bearing liabilities	(60)		(3,742)		(3,802)		(351)		(6,471)		(6,822)
Net interest earnings	$	311	$	1,166	$	1,477	$	1,043	$	2,815	$	3,858

~~Non~~Loss on sale of foreclosed property includes write downs of OREO subsequent to foreclosure and has had a negative trend over the past three years due to elevated volumes of OREO and declining real estate values. For more information regarding OREO, see the section below entitled “– Financial Condition – Other Real Estate Owned” and Note 9 in the Company’s Consolidated Financial Statements included elsewhere this Annual Report on Form 10-~~Interest~~K. Earnings ~~Income~~on BOLI assets increased approximately $59,000 or 8.7% in 2011 compared to 2010. Gain on sale of available-for-sale securities decreased approximately $941,000 in 2011 compared to 2010 as a result of strategies designed to realize appreciation in the investment portfolio. See additional information regarding sale of securities in Note 3 of the Company’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. In 2011, total non-interest income (excluding impairment losses on available-for-sale securities) contributed 20.41% of total revenue in 2011 compared to 21.7% and 19.6% for 2010 and 2009, respectively. Other non-interest income totaling approximately $939,000 for 2011 included gain on disposition of property of approximately $273,000 resulting from the sale of the Bank’s real property in Union City, Tennessee. The Union City property previously served as a limited service facility for the Bank through January 2009.

~~The~~Income ~~following~~from White and Associates/First Citizens Insurance, LLC, a ~~table~~full-service ~~compares~~insurance ~~non~~agency (“WAFCI”), was included in Income from Insurance Activities in the Consolidated Statements of Income and increased approximately $18,000 or 2% in 2011 compared to 2010. Non-interest income generated by WAFCI for ~~the~~2011, ~~years~~2010 ~~ended~~and ~~December~~2009 31totaled approximately $813,000, ~~2010~~$795,000 ~~2009~~and $735,000, respectively. Income from insurance activities also includes commissions from sale of credit life policies and ~~2008~~the ~~(dollars~~Company’s inproportionate ~~thousands):~~share of income from the Bank’s other 50% owned insurance agency, First Citizens/White and Associates Insurance Company.

			Increase										Increase
	Total		(Decrease)						Total				(Decrease)						Total
	2010		Amount				%		2009				Amount				%		2008
Mortgage banking income	$	1,116		$		5		0.45		$		1,111		$		(28)		-2.46		$		1,139
Income from fiduciary activities	785		(21)				-2.61		806				(10)				-1.23		816
Service charges on deposit accounts	6,923		(18)				-0.26		6,941				(331)				-4.55		7,272
Brokerage fees	1,080		(237)				-18.00		1,317				(156)				-10.59		1,473
Earnings on bank owned life insurance	677		(155)				-18.63		832				(1)				-0.12		833
Gain (loss) on sale of foreclosed property	(1,156)		(686)				145.96		(470)				(186)				65.49		(284)
Gain on sale of available-for-sale securities	1,884		688				57.53		1,196				760				174.31		436
Income from insurance activities	913		79				9.47		834				(106)				-11.28		940
Other non-interest income	637		91				16.67		546				(25)				-4.38		571
Total non-interest income	$	12,859	$		(254)		-1.94%		$		13,113		$		(83)		-0.63%		$		13,196

Non-Interest Expense

The following table compares non-~~23-~~interest expense for the years ended December 31, 2011, 2010 and 2009 (dollars in thousands):

Total non-interest income decreased less than two percent in 2010 compared to 2009. Although residential real estate values declined and it became more difficult for borrowers to purchase or refinance in 2010, the Bank's mortgage activity remained stable because of the historically low interest rate environment. Mortgage banking income has been flat at $1.1 million per year in each of the past three years. Income from fiduciary activities decreased 2.6% or approximately $21,000 in 2010 compared to 2009. Service charges on deposits decreased less than one percent in 2010 compared to 2009. Brokerage fees decreased approximately $237,000 or 18.0% in 2010 compared to 2009 as consumer confidence and willingness to invest in brokerage products remained weak. Gain on sale of foreclosed property includes write down of OREO subsequent to foreclosure and has had a negative trend over the past two years due to increased volume of OREO. For more information regarding OREO, see the section below entitled "- Financial Condition - Other Real Estate Owned" and Note 9 in the Company's Consolidated Financial Statements included elsewhere this Annual Report on Form 10-K. Earnings on BOLI assets decreased approximately $155,000 or 18% in 2010 compared to 2009 due to lower overall earnings and higher overall mortality charges on the policies. Gain on sale of available-for-sale securities increased approximately $688,000 in 2010 compared to 2009 as a result of strategies to realize appreciation in the investment portfolio. See additional information regarding sale of securities in Note 3 of the Company's Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. In 2010, total non-interest income (excluding impairment losses on available-for-sale securities) contributed 21.7% of total revenue compared to 19.6% and 20.1% for 2009 and 2008, respectively.

	Total 2011	Increase (Decrease)		Total 2010	Increase (Decrease)		Total 2009
	Total 2011	Amount	%	Total 2010	Amount	%	Total 2009
Salaries and employee benefits	$16,700	$1,283	8.32%	$15,417	$ 132	0.86%	$15,285
Net occupancy expense	1,676	(83)	(4.72)%	1,759	(45)	(2.49)%	1,804
Depreciation	1,780	(12)	(0.67)%	1,792	(60)	(3.24)%	1,852
Data processing expense	1,741	150	9.43%	1,591	399	33.47%	1,192
Legal and professional fees	653	212	48.07%	441	136	44.59%	305
Stationary and office supplies	217	(4)	(1.81)%	221	(33)	(12.99)%	254
Amortization of intangibles	85	–	–%	85	–	–%	85
Advertising and promotions	662	(41)	(5.83)%	703	81	13.02%	622
Premiums for FDIC insurance	823	(377)	(31.42)%	1,200	(471)	(28.19)%	1,671
Expenses related to other real estate owned	682	(206)	(23.20)%	888	246	38.32%	642
ATM related fees and expenses	915	131	16.71%	784	301	62.32%	483
Other expenses	4,138	309	8.07%	3,829	(285)	(6.93)%	4,114
Total non-interest expense	$30,072	$1,362	4.74%	$28,710	$401	1.42%	$28,309

~~Income~~Total non-interest ~~from~~expense ~~First~~increased ~~Citizens/White~~4.7% in 2011 compared to 2010. Non-interest expense was dominated by salaries and ~~Associates~~employee ~~Insurance~~benefits ~~Company~~expense, ~~LLC~~which ~~was~~comprised ~~included~~56% of total non-interest expense in ~~Income~~2011 ~~from~~compared ~~Insurance~~to ~~Activities~~54% in ~~the~~2010 ~~Consolidated Statements~~and of53% ~~Income~~in 2009. Salary and ~~increased~~employee ~~approximately~~benefits ~~$60,000~~expense orincreased 8.3% or $1.3 million in ~~2010~~2011 compared to ~~2009~~2010. ~~This~~ The ~~increase~~majority ~~was~~of athe ~~result~~Company’s ofemployees receive ~~increased~~performance-based ~~income~~incentives ~~from~~based ~~various~~on ~~insurance~~factors ~~products~~designed to achieve ~~including~~strategic ~~commercial~~goals ~~lines,~~and ~~personal~~are ~~lines,~~balanced ~~title~~for ~~insurance~~risk and ~~other products~~reward. ~~Non-interest~~ Such ~~income~~factors ~~generated~~are byaligned with ~~First~~strategic ~~Citizens/White~~objectives and ~~Associates~~include ~~Insurance Company,~~achievement ~~LLC,~~of a ~~full-service~~certain ~~insurance~~ROE ~~agency~~level, accomplishing ~~for~~annual ~~2010~~budget goals, ~~2009~~ and ~~2008~~attainment ~~totaled approximately~~of ~~$795~~business development goals,~~000,~~ ~~$735~~asset quality goals,~~000,~~ and ~~$773,000,~~other ~~respectively. Other~~metrics ~~income~~applicable to the individual’s ~~from~~job ~~insurance~~responsibilities. Incentive ~~activities~~pay ~~consists~~totaled 11.5% of ~~commissions~~salaries and benefits in 2011 compared to 8.9% in 2010 and 8.3% in 2009. The Company also increased its allocation to retirement plans from ~~sale~~5% of ~~credit~~compensation ~~life~~in 2010 to 9% in 2011. ~~policies~~For additional information regarding the Company’s retirement plans and contributions, see Note 21 in the Company'’s ~~proportionate~~Consolidated ~~share~~Financial ofStatements included ~~income~~elsewhere ~~from~~in ~~First~~this Annual Report on Form 10-K. Significant expense ~~Citizens/White~~associated with salaries and ~~Associates~~benefits ~~Insurance~~is consistent with the Company’s strategic plan to hire and retain high quality employees to provide outstanding customer service and strive for exceptional shareholder returns.

~~Non-Interest Expense~~25

The following table compares ~~non-interest~~assets ~~expense~~per employee for the ~~years~~Company ~~ended~~compared ~~December~~to ~~31,~~its ~~2010~~peers, ~~2009~~based ~~and~~on ~~2008~~information ~~(dollars~~obtained infrom UBPR for the years ended December 31 (in thousands):

				Increase					Increase
Year	Company		Peer*
	Total			(Decrease)			Total		(Decrease)			Total
2011	$4,050		$4,970
2010	~~2010~~3,760		4,540	~~Amount~~		%	~~2009~~		~~Amount~~		%	~~2008~~
Salaries and employee benefits	$	15,417		$	132	0.86%	$	15,285	$	(1,547)	-9.19	$	16,832
2009	3,680		4,600
Net occupancy expense	1,759			(45)		-2.49	1,804		59		3.38	1,745
2008	3,465		4,310
Depreciation	1,792			(60)		-3.24	1,852		(16)		-0.86	1,868
2007	3,210		4,060
Data processing expense	1,591			399		33.47	1,192		208		21.14	984
Legal and professional fees	441			136		44.59	305		(48)		-13.60	353
Stationary and office supplies	221			(33)		-12.99	254		(5)		-1.93	259
Amortization of intangibles	85			-		-	85		-		-	85
Advertising and promotions	703			81		13.02	622		(89)		-12.52	711
Premiums for FDIC insurance	1,200			(471)		-28.19	1,671		1,576		1658.95	95
OREO expenses	888			246		38.32	642		207		47.59	435
ATM related fees and expenses	784			301		62.32	483		61		14.45	422
Other non-interest expenses	3,829			(285)		-6.93	4,114		(161)		-3.77	4,275
Total non-interest expense	$	28,710		$	401	1.42%	$	28,309	$	245	0.87%	$	28,064

Total non-interest expense increased 1.4% in 2010 compared to 2009. Non-interest expense was dominated by salaries and benefits expense, which comprised 54% of total non-interest expense in 2010 compared to 53% in 2009 and 58% in 2008. Salary and benefits expense increased approximately $132,000 or less than 1% in 2010 compared to 2009. The majority of the Company's employees receive performance-based incentives based on factors designed to achieve strategic goals and are balanced for risk and reward. Such factors are aligned with strategic objectives and include achievement of a certain ROE level, accomplishing annual budget goals, and attainment of business development goals, asset quality goals, and other metrics applicable to the individual's job responsibilities. Incentive pay totaled 8.9% of salaries and benefits expenses in 2010 compared to 8.3% in 2009 and 9.3% in 2008. Significant expense associated with salaries and benefits is consistent with the Company's strategic plan to hire and retain high quality employees to provide outstanding customer service and strive for exceptional shareholder returns.___________________

~~-24-~~* As of December 31, 2011, the Bank was in Peer Group 2, which consisted of all insured commercial banks having assets between $1 billion and $3 billion. For 2007 to 2010, the Bank was in Peer Group 3, which consisted of all insured commercial banks having assets between $300 million and $1 billion in assets.

~~The~~Comparison ~~following~~of ~~table compares~~ assets per employee for the Company ~~compared~~and its peers revealed that the Company improved in each of the last five years but continued to be more heavily staffed than its peers. The trend of less assets per employee than peers was consistent with historical trends and employees necessary to support the Company’s non-interest income streams including brokerage, ~~based~~mortgage and trust ondivisions. The ~~information~~Company’s ~~obtained~~ratio ~~from~~of ~~UBPR~~assets ~~for~~per employee steadily improved over the past five years ~~ended~~as ~~December~~newer 31branches ~~(in~~became profitable and as a result improved ~~thousands):~~the overall efficiency of operations within the Company. In an effort to provide a high level of customer service and strategic efforts to continue growth of non-interest income streams, management expects the trend of lower assets per employees compared to peers to continue in future periods.

	Company		Peer
2010	$	3,760	$	4,540
2009	3,680		4,600
2008	3,465		4,310
2007	3,210		4,060
2006	3,121		3,940

Net occupancy expense decreased by approximately $83,000 or 4.7% in 2011 compared to 2010 as a result of strategic efforts to control expenditures in 2011. Depreciation was flat in 2011 compared to 2010. Data processing expense increased 9.4% in 2011 because of increased expenses associated with upgrading certain systems and outsourcing certain portions of the information technology functions of the Bank. While outsourcing of functions such as item processing resulted in increased data processing expense, this initiative also decreased other categories of other non-interest expense such as postage, stationary and supplies and certain salaries and employee benefits expenses. Also, upgrades of certain systems were required in order to achieve efficiency strategies and/or in order to comply with changes in regulation. The Company continues to strive for efficiencies in the areas of expansion, data integrity/security and customer service. However, strategies adopted by the Company’s Board of Directors to provide superior customer service will continue to exert pressure on occupancy, depreciation and other non-interest expenses going forward.

~~Comparison~~In of2011, expense ~~assets~~related ~~per~~to ~~employee~~FDIC ~~for~~insurance ~~the~~premiums ~~Company~~decreased ~~and~~approximately ~~its~~$377,000 ~~peers~~as ~~revealed~~a ~~that~~result of the ~~Company improved~~FDIC’s change in ~~each~~how ofpremium ~~the~~assessments ~~last~~are ~~five~~calculated. The ~~years~~change ~~but~~in calculations ~~continued~~had toa befavorable ~~more~~impact ~~heavily~~and reduced premium expense in 2011 compared ~~staffed~~to ~~than~~2010 ~~its~~and ~~counterparts~~2009. The ~~trend~~2009 oftotal ~~less~~included ~~assets~~the ~~per~~special ~~employee~~assessment ~~than~~as ~~peers~~of June ~~was~~30, ~~consistent~~2009 ~~with~~(paid ~~historical~~September ~~trends~~30, ~~and~~2009) ~~employees~~in ~~necessary to support~~ the ~~Company's~~ ~~non-interest~~amount ~~income~~of ~~streams~~approximately ~~including brokerage~~$425,000 ~~mortgage~~paid to ~~and~~the ~~trust divisions. The~~FDIC ~~Company's~~to ~~ratio~~help ~~steadily~~offset ~~improved~~increased ~~over~~costs incurred by the ~~past~~fund ~~few~~caused ~~years~~by asan ~~newer~~increased ~~branches~~number ~~become~~of ~~profitable~~failed ~~and~~banks. In asDecember a2009, ~~result~~the ~~improve~~FDIC required the ~~overall efficiency~~Bank ofto ~~operations~~pre-pay ~~within~~projected ~~the~~assessments ~~Company~~for 2010 through 2012 totaling $4. In2 anmillion. The ~~effort~~prepaid toassessment ~~provide~~is areflected ~~high~~in ~~level~~Other ~~of customer~~Assets ~~service~~in ~~and~~the ~~strategic~~Company’s Consolidated ~~efforts~~Financial toStatements ~~continue~~included ~~growth~~elsewhere ofin ~~non-interest income~~this ~~streams,~~Annual ~~management~~Report ~~expects~~on Form ~~the~~10-K ~~trend~~and oftotaled ~~lower~~$2.1 ~~assets~~million ~~per~~and ~~employees compared~~$2.9 tomillion ~~peer~~as toof ~~continue~~December in31, ~~future~~2011 ~~periods~~and 2010, respectively.

~~Net~~Legal ~~occupancy~~and ~~expense~~professional ~~decreased~~fees ~~modestly~~increased ~~by approximately $45,000 or 2.5%~~ in ~~2010~~2011 compared to ~~2009~~ 2010 as a result of ~~strategic~~legal expenses ~~efforts~~related to ~~control~~pursuit ~~expenditures~~of indeficiencies ~~2010. Depreciation~~on ~~trended~~loans ~~slightly~~charged ~~lower~~off ~~in 2009~~ and foreclosures ~~2010~~as ~~compared~~well ~~to 2008~~ as ~~a result~~consulting ofprojects ~~controlling~~necessary ~~purchases~~to ~~and~~comply ~~expenses~~with ~~related primarily to computer~~increased ~~equipment~~regulatory burdens and ~~software. Certain~~to ~~shorter-lived~~execute ~~assets,~~certain ~~primarily~~efficiency ~~computer~~strategies. Stationary ~~equipment~~ and ~~software,~~office supplies were ~~fully~~essentially ~~depreciated~~flat ~~by early 2008~~ and ~~were~~decreased ~~not immediately~~less ~~replaced~~than ~~with~~2% ~~new~~in ~~purchases. Data processing expense increased~~2011 ~~approximately~~compared ~~$400,000~~to in 2010 ~~because~~as a result of increased ~~expenses~~cost ~~associated~~of ~~with upgrading~~supplies ~~certain~~offset ~~systems~~by ~~and~~reduced ~~outsourcing certain portions~~ usage of ~~the~~papers ~~information technology~~and ~~functions~~other ~~of the Bank~~products. ~~While~~Reduction ~~outsourcing of functions such as item processing resulted~~ in ~~increased~~use ~~data~~of ~~processing~~paper ~~expense,~~and ~~this~~other ~~initiative~~supplies ~~also~~was ~~decreased~~due ~~other~~to ~~categories~~increased utilization of ~~other~~electronic ~~non-interest~~rather ~~expense~~than ~~such~~paper ~~as postage,~~documents. ~~stationary~~Advertising and ~~supplies~~promotions ~~and~~expense ~~salaries~~decreased ~~and~~approximately ~~employee benefits expenses. Also~~$41, ~~upgrades~~000 ~~of certain systems were required~~ in ~~order~~2011 compared to ~~achieve~~2010. Advertising ~~efficiency strategies~~ and~~/or~~ inpromotion ~~order~~costs toare ~~comply~~expensed ~~with~~as ~~changes~~incurred ~~in regulation. The Company~~and ~~continues~~totaled toapproximately ~~strive~~$662,000 ~~for efficiencies~~ in ~~the areas of expansion~~2011, ~~data integrity/security~~approximately ~~and customer service. However~~$703,000 ~~strategies~~in ~~adopted~~2010 byand ~~the~~approximately ~~Company's Board of Directors to provide superior customer service will continue to exert pressure on occupancy~~$622,000 ~~depreciation~~in ~~and other non-interest expenses going forward~~2009.

~~Expense related~~ to FDIC insurance premiums decreased approximately $400,000 in 2010 compared to 2009. The decrease was primarily a result of the special assessment as of June 30, 2009 (paid September 30, 2009) in the amount of approximately $425,000 by the FDIC to help offset increased costs incurred by the fund caused by an increased number of failed banks. In December 2009, the FDIC required the Bank to pre-pay projected assessments for 2010 through 2012 totaling $4.2 million. The prepaid assessment is reflected in Other Assets in the Company's Consolidated Financial Statements included elsewhere this Annual Report on Form 10-K and totaled $2.9 million and $4.0 million as of December 31, 2010 and 2009, respectively. 26

~~Legal~~Expenses ~~and~~related ~~professional fees increased in 2010 compared~~ to ~~2009~~OREO astotaled aapproximately ~~result~~$682,000 ofin ~~legal expenses~~2011 ~~incurred~~compared ~~for collections and foreclosures as well as consulting projects related~~ to ~~increased regulatory burdens and overall efficiency strategies. Stationary and office supplies decreased~~ approximately ~~13%~~ $888,000 in 2010 ~~compared~~ ~~to 2009 as a result of outsourcing certain data processing functions~~ and ~~increased use of electronic rather than paper documents. Advertising and promotions expense increased~~ approximately $81642,000 in ~~2010~~2009. The ~~compared~~reduction toin ~~2009 because~~expense ofwas ~~the~~primarily attributable ~~implementation~~to ~~and~~decreased ~~promotion~~volume of ~~the~~OREO ~~Company's~~acquired ~~customer-centric strategies~~in 2011. ~~Advertising~~In ~~and~~2011, ~~promotion costs are expensed as incurred and~~loans ~~totaled~~totaling ~~approximately~~ $~~703,000~~3.6 inmillion ~~2010~~were ~~compared~~transferred to ~~approximately $622,000 in 2009. Expenses related to~~ OREO ~~totaled~~as ~~approximately $888,000 in 2010~~ compared to ~~approximately~~ $~~642,000~~11.7 inmillion ~~2009 and approximately $435,000~~ in ~~2008~~ 2010. For more information regarding OREO, see the section below entitled " “Financial Condition - – Other Real Estate Owned"” and Note 9 in the Company'’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. ~~Other non-interest expense decreased approximately $285,000 in 2010 compared to 2009 primarily because of efforts to control costs as part of the Company's overall efficiency strategies.~~

Expenses associated with the Company’s ATM and debit card program totaled approximately $915,000 in 2011 compared to approximately $784,000 in 2010. Increased expenses for the ATM and debit card program were primarily related to costs of regulatory compliance, data integrity and fraud prevention and control. Other non-~~25-~~interest expense increased approximately $309,000 in 2011 compared to 2010 due to the combined effect of small increases in, among other things, education, various fees (such as to correspondent banks), directors’ fees, minority interest expense and franchise tax expenses.

No impairment of goodwill was recognized in any of the periods presented in this report. Goodwill was 1.2112% and 1.2421% of total assets and 1311.5666% and 1413.0356% of total capital as of December 31, ~~2010~~2011 and ~~2009~~2010, respectively. Amortization of core deposit intangibles was flat at approximately $85,000 in each of the past three years. Core deposit intangibles will be fully amortized in 2012.

Financial Condition

Changes in the statement of financial condition for the years ended December 31, ~~2010~~2011 and ~~2009~~2010 reflected the Company'’s strategic efforts to focus on ~~modest~~ quality asset growth and capital preservation during the economic recession. Asset growth in ~~2010~~2011 was ~~primarily~~8.1% and was primarily driven by growth of 19.5% in demand deposits and 22.2% in savings deposits. Funds from deposit growth were primarily invested in available-for-sale ~~investment~~ securities, which increased 24.0% in 2011. The ~~impact~~continued ofimpact of the recent economic recession was evident in negative loan growth ~~and~~of ~~increased~~3.7% ~~OREO~~ for ~~the~~ the year ended December 31, ~~2010~~2011. ~~Deposit growth overall for 2010 was moderate at 5.3% with increased savings and time deposits and flat overall demand deposits.~~

As evidenced in the cash flow statements, the Company’s ~~slowed~~ deployment of capital for purchases of premises ~~and~~ and equipment tototaled ~~approximately~~ $1.51 million in ~~2010~~2011 compared to ~~approximately~~ $~~631,000~~ 1.5 million in ~~2009~~2010 and approximately $~~3.3~~631,000 ~~million~~ in ~~2008~~2009. Premises and equipment purchases in 2009 ~~and 2010~~through ~~consisted~~2011 consisted primarily of ~~upgrade~~upgrading and ~~replacement~~replacing of computer hardware and software as well as renovations to various ~~branches~~branch facilities.

Investment Securities Analysis

The following table presents the composition of total investment securities atas of December 31 for the last five years (in thousands):

	December 31,
	2011	2010	2009	2008	2007
	2010				2009				2008				2007				2006
U.S. Treasury and government agencies	$249,240	$191,443	$ 158,458	$ 148,269	$ 134,460
U. S. Treasury & government agencies	$	191,443				$		158,458		$		148,269		$		134,460		$		127,602
State and political subdivisions	115,634	102,450	89,211	59,588	51,037
State & political subdivisions	102,450				89,211				59,588				51,037				44,338
All other	591	930	2,122	2,643	4,910
All others	930				2,122				2,643				4,910				5,436
Total investment securities	$365,465	$294,823	$ 249,791	$ 210,500	$ 190,407
Total investment securities	$	294,823			$		249,791		$		210,500		$		190,407		$		177,376

In ~~2010~~2011, total investment securities portfolio growth of $4570.06 million consisted of $3357.08 million increase in agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMO”) and $13.2 million increase in municipal securities. Growth in the overall portfolio of $4570.0 6 million was primarily driven by incremental purchases of new agency and municipal debt securities~~. The~~ ~~allocation to tax-exempt municipal securities~~ as ~~a percent of the total~~ ~~portfolio~~well ~~was consistent at 35% of total securities~~ as ofan ~~year-end~~increase ~~2010 compared to 36% as~~ of ~~year-end 2009~~$11. ~~Allocation~~2 tomillion ~~tax-exempt municipal securities increased~~ in ~~2009~~net ~~and~~unrealized ~~2010~~appreciation ~~as this sector was considered to have exceptional~~(pre-tax) ~~value based~~ on ~~ongoing dislocations in~~ the public finance market and because of opportunities presented by the spending of municipalities as a result of government stimulus programs. The increase in tax-exempt municipal bonds also serves as protection from further downward movement in interest rates that is balanced out by a more defensive posture in the Company's taxable sector of the portfolio.

The allocation ~~Maturity~~to tax-exempt municipal securities as a percent of the total portfolio was 32% as of December 31, 2011 compared to 35% and ~~Yield~~36% onas ~~Securities~~of December 31, 2010 and 2009, respectively. This range of ratios is consistent with recent allocations, as the Company has maintained approximately one-third of its portfolio in the tax-exempt municipal sector for many years.

~~Contractual~~Maturity ~~maturities on investment securities are generally ten years. However, the expected remaining lives of such bonds are expected to be much shorter due to anticipated payments from U. S. Treasury~~ and ~~government~~Yield ~~agency~~on securities. These securities comprise 64% of the portfolio and are primarily amortizing payments that provide stable monthly cash inflows of principal and interest payments. The following table presents contractual maturities and yields by category for debt securities as of December 31, 2010 (dollars in thousands):Securities

Contractual ~~-26-~~maturities on investment securities are generally ten years. However, the expected remaining lives of such bonds are expected to be much shorter due to anticipated payments from U. S. Treasury and government agency securities. These securities comprised 68% of the portfolio at December 31, 2011 and are primarily amortizing payments that provide stable monthly cash inflows of principal and interest payments. The following table presents contractual maturities and yields by category for debt securities as of December 31, 2011 (dollars in thousands):

				Maturing			Maturing
	Maturing			After One			After Five			Maturing
	Within One			Year Within			Years Within			After Ten
	Year			Five Years			Ten Years			Years
	Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield	Total
U. S. Treasury and
government agencies(1)	$	-	0.00%	$	1,187	4.04%	$	21,661	3.47%	$	168,595	3.66%	$	191,443
State and political
subdivisions(2)	3,371		6.98%	8,488		6.99%	25,342		6.32%	65,249		6.54%	102,450
All other	-		-%	-		-%	-		- %	885		5.56%	885
Total debt securities	$	3,371		$	9,675		$	47,003		$	234,729		$	294,778
Equity securities	-		-%	-		-%	-		- %		45	1.18%		45
Total	$	3,371		$	9,675		$	47,003		$	234,774		$	294,823

________________

	Maturing Within One Year		Maturing After One Year Within Five Years		Maturing After Five Years Within Ten Years		Maturing After Ten Years		Total
	Amount	Yield	Amount	Yield	Amount	Yield	Amount	Yield	Total
U. S. Treasury and government agencies⁽¹⁾	$ -	-%	$ 558	4.08%	$34,831	2.73%	$213,851	3.11%	$249,240
State and political subdivisions⁽²⁾	2,992	7.12%	8,786	6.79%	36,593	6.04%	67,263	6.42%	115,634
All other	-		-		-		553	5.44%	553
Total debt securities	2,992		9,344		71,424		281,667		365,427
Equity securities	-		-		-		38	1.05%	38
Total	$2,992		$ 9,344		$ 71,424		$281,705		$ 365,465

(1) The above table includes agency mortgage-backed securities (MBS) and collateralized mortgage obligations (CMO) based on contractual maturities (primarily in the After Ten Years category). However, the remaining lives of such securities are expected to be much shorter due to anticipated payments. ________________

(2) Yields are presented on a tax-equivalent basis using a federal statutory rate of 34%.

(1)	Of this category, 98% of the total consisted of MBS and CMO which are presented based on contractual maturities (with 86% of the total for this category in the Maturing After Ten Years category). However, the remaining lives of such securities are expected to be much shorter due to anticipated payments.
(2)	Yields are presented on a tax-equivalent basis using a federal statutory rate of 34%.

Held-To-Maturity and Available-For-Sale Securities

The Company held no securities in the held-to-maturity ~~category~~or trading categories as of December 31, ~~2010~~2011 or ~~and 2009~~2010. The following table presents amortized cost and fair value of available-for-sale securities as of December 31, ~~2010~~2011 (in thousands):

	Amortized		Fair	~~Fair~~
	Cost		Value	~~Value~~
U. S. government agencies and corporate obligations	$	189,280		$	191,443
U.S. government agencies and corporate obligations	$242,459		$249,240
Obligations of states and political subdivisions:
Obligations of states and political subdivisions	106,554		115,634
Taxable securities	1,415			1,318
U.S. securities:
Tax-exempt securities	98,359			101,132
Other debt securities	2,171		553
U. S. securities:
Equity securities	23		38
Other debt securities	2,675			885
Total	$351,207		$365,465
Equity securities	23			45
Total	$	291,752		$	294,823

In addition to amounts presented above, the Bank ~~also~~ had $5.7 million in FHLB and Federal Reserve Bank stock at both December 31, 2011 and 2010, recorded at cost. Equity securities listed above ~~consisted~~ consisted primarily of shares of Fannie Mae and Freddie Mac perpetual preferred stock.

Total investment securities at December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009 were $~~295~~365 million, $~~250~~295 million ~~and~~ and $~~210~~250 million, respectively. Available-for-sale investments increased $4570.06 million or 1824.0% from December 31, ~~2009~~2010 to December 31, ~~2010~~2011, as a result of interest cash flows reinvested into new securities and additional incremental funds allocated to the portfolio during the year. Objectives of the Bank'’s 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 FDIC-insured limits. Pledged investments at December ~~year-end~~31, ~~2010~~2011 had a fair market value of $~~181~~197 million. The average expected life of the investment securities portfolio was 54.14 years, 5.01 years and 35.7 0 years as of December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, respectively. Portfolio yields (on a tax equivalent basis) were 4.71% as of ~~year-end~~December ~~2010~~31, 2011 compared to 54.27% as of ~~year-end~~December 31, ~~2009~~2010 and 5.52% as of ~~year-end~~December ~~2008~~31, 2009.

The Company classifies investments, based on intent, into trading, available-for-sale and held-to-maturity categories in accordance with GAAP. The Company held no securities in the trading category for any of the last five years and does not expect to hold any such securities in ~~2011~~2012. The Company'’s investment strategy is to classify most of the securities 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.

~~-27-~~28

U.S. Treasury securities and government agencies and corporate obligations consisted primarily of ~~mortgage-backed securities ("~~MBS") and ~~collateralized mortgage obligations ("~~CMO") and accounted for 68% and 63% of the investment portfolio for years ended December 31, ~~2010~~2011 and ~~2009~~2010, respectively. Credit quality of the Company'’s MBS and CMO portfolio was considered strong and reflected a net unrealized gain of $26.2 8 million as of December 31, ~~2010~~2011. Credit quality factors on the bonds and related underlying mortgages are evaluated at the time of purchase and on a periodic basis thereafter. These factors typically include, but are not limited to, average loan-to-value ratios, average FICO credit score, payment seasoning (how many months of payment history), geographic dispersion, average maturity and average duration. Management believes that this level of amortizing securities provides steady cash flows, as evidenced by the Consolidated Statement of Cash Flows included elsewhere in the Annual Report on Form 10-K. Principal cash flows for ~~2011~~2012 are projected to be $4150-60 million.

~~Approximately~~As of December 3631, 2011, approximately 32% of the investment portfolio was invested in municipal securities, atwhich ~~both~~were geographically diversified, compared to 36% as of December 31, 2010 ~~and 2009~~. ~~Municipal~~Fair value of municipal securities totaled $~~102~~116 million ($114.2 ~~and~~million were ~~geographically diversified. Approximately~~tax-exempt ~~71%,~~and or $681.4 million taxable) at December 30, 2011. Approximately 67% of municipal securities were general obligation municipal bonds and the remaining 2833% were revenue bonds at December 31, 2011. The revenue bonds are primarily essential services bonds such as for water and sewer, school systems and other public improvement projects. Overall credit quality of the municipal portfolio was considered strong and reflected a net unrealized gain of $29.71 million as of year-end ~~2010~~2011.

~~Approximately~~As 1% of ~~the portfolio at~~ December 31, ~~2010~~2011, ~~consisted~~less than 1% of ~~one~~the ~~corporate~~investment ~~bond~~portfolio ~~and~~consisted of three collateralized debt obligation securities that are backed by trust-preferred securities ("“TRUP CDOs"”) issued by banks, thrifts and insurance companies. These ~~four~~three debt securities reflected a net unrealized loss of $1.86 million as of year-end ~~2010~~2011. The market for TRUP CDOs ~~became~~has been inactive insince 2008 and as a a result, quoted market values ~~trended~~have been significantly below amortized cost since ~~beginning~~that ~~in 2008~~time. These securities are evaluated for other-than-temporary ~~impairment~~ impairment on a quarterly basis. Charges for credit loss portion of other-than-temporary impairment totaling approximately $~~589~~48,000 and $~~651~~589,000 were recognized against earnings for the years ended December 31, ~~2010~~2011 and ~~2009~~2010, respectively. For more information, see Note 3 in the Company'’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

The ~~Company had~~following ~~one~~table ~~interest~~indicates ~~rate~~by ~~swap~~category ~~classified~~gross asunrealized agains ~~cash~~and ~~flow~~losses ~~hedge~~within ~~at December 31, 2009~~the ~~which~~available-for-sale ~~matured~~portfolio inas ~~September~~of ~~2010. For~~December ~~more information~~31, ~~see~~2011 ~~Note 3~~ (in ~~the Company's Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.~~thousands):

The following table indicates by category gross unrealized gains and losses within the available-for-sale portfolio as of December 31, 2010 (in thousands):

	Unrealized Gains	Unrealized Losses	Net
U.S. Treasury securities and obligations of U.S. government agencies and corporations	$ 6,793	$(12)	$ 6,781
	$ 6,793	$(12)	$ 6,781
Obligations of states and political subdivisions	9,083	(3)	9,080
All other	15	(1,618)	(1,603)
Total	$15,891	$(1,633)	$14,258

	Unrealized Gains		Unrealized Losses		Net
U. S. Treasury securities and obligations of U. S.
government agencies and corporations	$	3,721	$	(1,558)	$	2,163
Obligations of states and political subdivisions	3,073		(397)		2,676
All other	22		(1,790)		(1,768)
Total	$	6,816	$	(3,745)	$	3,071

Unrealized gains and losses noted above were included in Accumulated Other Comprehensive Income, net of tax.

~~Unrealized~~Loan ~~gains~~Portfolio ~~and losses noted above were included in Accumulated Other Comprehensive Income, net of tax.~~Analysis

~~-28-~~The following table compares the portfolio mix of loans held for investment as of December 31 for each of the last five years (in thousands):

Loan Portfolio Analysis

	2011	2010	2009	2008	2007
Commercial, financial and agricultural	$ 72,174	$ 66,297	$ 71,301	$ 80,317	$ 80,509
Real estate-construction	39,964	49,148	66,414	97,340	106,695
Real estate-mortgage	383,934	395,256	407,058	375,714	353,655
Installment loans to individuals	28,027	31,593	34,071	36,220	37,106
Other loans	3,600	5,409	8,554	7,167	6,674
Total loans	$527,699	$547,703	$587,398	$596,758	$584,639

~~The following~~ ~~table compares the portfolio mix of loans held for investment as of December 31 for each of the last five years (in thousands):~~29

	2010		2009		2008		2007		2006
Commercial, financial and agricultural	$	66,297	$	71,301	$	80,317	$	80,509	$	80,033
Real estate-construction	49,148		66,414		97,340		106,695		86,206
Real estate-mortgage	395,256		407,058		375,714		353,655		340,839
Installment loans to individuals	31,593		34,071		36,220		37,106		36,735
Other loans	5,409		8,554		7,167		6,674		5,021
Total loans	$	547,703	$	587,398	$	596,758	$	584,639	$	548,834

For purposes of the table above, loans do not include loans that are sold in the secondary mortgage market. The Company classifies loans to be sold in the secondary mortgage market separately in its consolidated financial statements. Secondary market mortgages totaled $2.6 million, $2.8 million and $2.7 million as of December 31, 2011, 2010 and 2009, respectively. For more information, see Notes 4, 5 and 6 in the Company’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Interest and fees earned on secondary mortgage loans were included in mortgage banking income as reported in other non-interest income in the Company’s Consolidated Financial Statements.

~~For~~Changes ~~purposes~~In ofLoan the table above, loans do not include loans that are sold in the secondary mortgage market. The Company classifies loans to be sold in the secondary mortgage market separately in its consolidated financial statements. Secondary market mortgages totaled $2.8 million, $2.7 million, and $2.6 million as of December 31, 2010, 2009 and 2008, respectively. For more information, see Notes 4, 5 and 6 in the Company's Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Interest and fees earned on secondary mortgage loans were included in mortgage banking income as reported in other non-interest income in the Company's Consolidated Financial Statements.Categories

~~Changes~~Total Inloans ~~Loan~~at December ~~Categories~~31, 2011 were $528 million compared to $548 million at December 31, 2010 and $587 million at December 31, 2009. Downward loan trends were a result of overall decreased loan demand as well as management’s strategic efforts to reduce exposures in certain loan categories such as construction and development loans. Loans decreased 3.7% in 2011 and 6.7% in 2010. The following table details the breakdown of changes by category for the year ended December 31, 2011 (dollars in thousands):

Total loans at December 31, 2010 were $548 million compared to $587 million at December 31, 2009 and $597 million at December 31, 2008. Loans decreased 6.8% in 2010 and 1.6% in 2009 compared to loan growth of 2.1% in 2008. The following table details the breakdown of changes by category for 2010 (dollars in thousands):

	Increase (Decrease)	Percent Change
Commercial, financial and agricultural	$ 5,877	8.86%
Real estate-construction	(9,184)	(18.69%)
Real estate-mortgage	(11,322)	(2.86%)
Installment loans to individuals	(3,566)	(11.29%)
Other loans	(1,809)	(33.44%)
Net change in loans	$(20,004)	(3.65%)

	Increase		Percent
	(Decrease)		Change
Commercial, financial and agricultural	$	(5,004)		-6.23%
Real estate-construction	(17,266)		-17.74%
Real estate-mortgage	(11,802)		-3.14%
Installment loans to individuals	(2,478)		-6.84%
Other loans	(3,145)		-43.88%
Total change in loans	$	(39,695)	-6.65%

The loan portfolio remains heavily weighted in real estate loans, which accounted for $424 million or 80% of total loans as of December 31, 2011 compared to $444 million or 81% of total loans as of December 31, 2010. Commercial and residential construction loans accounted for $40 million of the $424 million invested in real estate loans. Construction loans have trended downward steadily over the past five years, consistent with the effects on that sector from the recent economic recession. Although the portfolio was heavily weighted in real estate, the Bank does not invest in sub-prime or non-traditional mortgages. Within real estate loans, residential mortgage loans (including residential construction) was the largest category, comprising 35% of total loans as of December 31, 2011 compared to 36% as of December 31, 2010. Diversification of the real estate portfolio is a necessary and desirable goal of the Company’s 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, the Company will strive to maintain real estate loan portfolio diversification. Risk monitoring of commercial real estate concentrations is performed in accordance with regulatory guidelines and includes assessment of risk levels of various types of commercial real estate and review of ratios of various concentrations of commercial real estate as a percentage of capital. During 2011, loans decreased 3.7% and capital increased 15.9%. Therefore, real estate loans as a percent of capital decreased. The following table presents real estate loans as a percent of total risk based capital as of December 31 for each of the last five years:

At December 31, 2010, the loan portfolio was heavily weighted in real estate loans, which accounted for $444 million or 81% of total portfolio. Commercial and residential construction loans accounted for $49 million of the $444 million invested in real estate loans. Although the portfolio was heavily weighted in real estate, the Bank does not invest in sub-prime or non-traditional mortgages. Within real estate loans, residential mortgage loans (including residential construction) were the largest category, comprising 36% of total loans. 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, the Company will strive to maintain real estate loan portfolio diversification. Risk monitoring of commercial real estate concentrations is performed in accordance with regulatory guidelines and includes assessment of risk levels of various types of commercial real estate and review of ratios of various concentrations of commercial real estate as a percentage of capital. During 2010, as loans decreased 6.7% and capital increased 5.8%, real estate loans as a percent of capital decreased. The following table presents real estate loans as a percent of total risk based capital for each of the last five years:

	2011	2010	2009	2008	2007
As a percent of total risk based capital*:
Construction and development	40.06%	53.05%	77.40%	120.68%	135.33%
Residential (one-to-four family)	163.40%	184.50%	206.82%	203.75%	193.71%
Other real estate loans	224.04%	245.15%	270.74%	265.31%	257.64%
Total real estate loans	427.50%	482.70%	554.96%	589.74%	586.68%

~~-29-~~________________

	2010	2009	2008	2007	2006
As a percent of total risk based capital*:
Construction and development	53.05%	77.40%	120.68%	135.33%	115.24%
Residential (one-to-four family)	184.50%	206.82%	203.75%	193.71%	203.93%
Other real estate loans	245.15%	270.74%	265.31%	257.64%	255.93%
Total real estate loans	482.70%	554.96%	589.74%	586.68%	575.10%

Total risk based capital is a non-GAAP measure used by regulatory authorities and reported on quarterly regulatory filings. Total risk based capital for the Bank was $99.8 million, $92.6 million, $85.8 million, $80.7 million and $78.8 million as of December 31, 2011, 2010, 2009, 2008 and 2007, respectively.

~~________________~~ 30

* TotalNegative loan ~~risk~~growth ~~based~~in ~~capital~~2011 isoccurred across all loan categories except commercial, financial and agricultural loans with weak overall loan demand as a ~~non-GAAP~~result ~~measure~~of ~~used~~distressed real estate markets, job losses and other factors resulting from the economic recession. Growth of $5.9 million in commercial, financial and agricultural loans in 2011 was primarily concentrated in the agricultural sector. Agriculture was a strong sector in the local economies and markets served by the ~~regulatory~~Bank, ~~authorities~~as crop yields and prices had favorable trends in 2011. Also, the ~~reported~~Bank onhas ~~quarterly~~strategically ~~regulatory~~reduced ~~filings~~its concentration of one-to-four family residential construction and non-owner occupied commercial real estate loans since 2007 as focus shifted to lower-risk owner-occupied commercial real estate. ~~Total~~As a result, the ratios of total construction and development loans as a percent of total risk based capital ~~for~~(as reflected in the table above) and one-to-four ~~Bank~~family residential construction loans as a percent of total risk based capital trended downward from 2007 to 2011. As of December 31, 2011, the ratio of one-to-four family residential construction loans to total risk based capital was ~~$92~~11.677% compared ~~million~~to 19.75%, ~~$85~~33.821%, ~~million~~55.88% and 76.02% as of December 31, ~~$80~~2010, 2009, 2008 and 2007, respectively.7 As ~~million~~of December 31, ~~$78~~2011, the ratio of non-owner occupied commercial real estate loans as a percent of total risk based capital also trended downward to 127.812% ~~million~~compared ~~and~~to ~~$74~~148.889%, 188.55%, ~~million~~232.68% ~~for~~and ~~years~~243.53% ~~ended~~as of December 31, 2010, 2009, 2008, ~~2007~~ and ~~2006~~2007, respectively.

~~Negative~~Average ~~loan growth~~Loan in 2010 occurred across all loan categories with weak overall loan demand as a result of distressed real estate markets, job losses and other factors resulting from the economic recession. Also, the Bank strategically reduced its concentration of one-to-four family residential construction and non-owner occupied commercial real estate loans since 2007 as focus shifted to lower-risk owner-occupied commercial real estate. As a result, the ratio of one-to-four family residential construction loans as a percent of total risk based capital trended downward from 2007 to 2010 and was 19.75% as of December 31, 2010 compared to 33.21% as of December 31, 2009, 55.88% as of December 31, 2008 and 76.02% at December 31, 2007. The ratio of non-owner occupied commercial real estate loans as a percent of total risk based capital also trended downward to 148.89% as of December 31, 2010 compared to 188.55% as of December 31, 2009, 232.68% as of December 31, 2008 and 243.53% as of December 31, 2007. The ratio of owner occupied commercial real estate loans as a percent of total risk based capital was 105.57% as of December 31, 2010 compared to 107.05% as of December 31, 2009 compared to 101.80% as of December 31, 2008 and 102.99% as of December 31, 2007.Yields

The average yield on loans of the Bank has trended downward over the past five years, as loans have repriced during the historically low interest rate environment. Average ~~Loan~~yield ~~Yields~~on loans for the years indicated were as follows:

~~The~~2011 ~~average yield~~- on6.32% ~~loans~~2010 of- ~~the~~6.42% ~~Bank~~2009 ~~has~~- ~~trended~~6.51% ~~downward~~2008 as- ~~loans repriced during the historically low interest rate environment over the past three years~~6. ~~Average yield~~99% on2007 ~~loans~~- ~~for the years indicated were as follows:~~7.98%

~~2010~~The -aggregate amount ~~6.42%~~of ~~2009~~unused -guarantees, ~~6.51%~~commitments ~~2008~~to -extend 6credit and standby letters of credit was $80.~~99%~~2 ~~2007~~million at year-end 72011.~~98%~~ For ~~2006~~more -information 7regarding commitments and standby letters of credit, see Note 18 in the Company’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.~~65%~~

~~The~~Loan aggregate amount of unused guarantees, commitments to extend credit and standby letters of credit was $80.9 million at year-end 2010. For more information regarding commitments and standby letters of credit, see Note 18 in the Company's Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.Maturities

~~Loan~~As ~~Maturities~~of December 31, 2011, contractual maturities of loans were as follows (in thousands):

Contractual maturities of loans as of December 31, 2010 were as follows (in thousands):

	Due in One Year or Less	Due After One Year but Within Five Years	Due After Five Years
Real estate	$107,941	$253,070	$62,887
Commercial, financial and agricultural	40,299	31,442	4,033
All other loans	8,003	18,716	1,308
Total	$156,243	$303,228	$68,228

			Due After
	Due in One		One Year but		Due After
	Year or Less		Within Five Years		Five Years
Real estate	$	93,820	$	279,427	$	71,157
Commercial, financial and agricultural	39,616		28,337		3,753
All other loans	8,209		21,773		1,611
Total	$	141,645	$	329,537	$	76,521

As of December 31, 2011, loans with a remaining maturity of more than one year consisted of the following (in thousands):

-30-

Loans with maturities after one year for which:
Interest rates are fixed or predetermined	$311,793
Interest rates are floating or adjustable	59,663

Loans with Maturities After One Year for which:
	(In thousands)
Interest Rates are Fixed or Predetermined	$	338,426
Interest Rates are Floating or Adjustable	$	67,632

The degree of interest rate risk to which a bank is subjected can be controlled through a well-defined funds management program. The Company controls interest rate risk by matching interest sensitive assets and liabilities. At year-end 2011, the Company was liability-sensitive, meaning that liabilities reprice at a faster rate than assets. Therefore, in a rising rate environment (with a normal yield curve) net interest income would decline. The majority of the Bank’s loan portfolio will reprice or mature in less than five years. Approximately $161 million or 31% of total loans will either reprice or mature over the next 12 months, while $159 million or 30% of total loans will mature or reprice after one year but less than three years. Approximately $150 million or 28% of total loans will mature or reprice after three years but in less than five years. The remaining 11% or $58 million reprices or matures in greater than five years.

~~The degree of interest rate risk~~ to which a bank is subjected can be controlled through a well-defined funds management program. The Company controls interest rate risk by matching interest sensitive assets and liabilities. Overall, the Company remains in a fairly neutral position in terms of interest rate risk as evidenced by flat net interest margins during a the three-year period from 2008 through 2010, in which federal funds rates have ranged from 0.25% to 5.25%. At year-end 2010, the Company was liability-sensitive, meaning that liabilities reprice at a faster rate than assets. Therefore, in a rising rate environment (with a normal yield curve) net interest income would decline, while a declining rate environment would result in increased interest rate margins and net interest income. The majority of the Bank's loan portfolio will reprice or mature in less than five years. Approximately $159 million or 29% of total loans will either reprice or mature over the next 12 months, while $185 million or 34% of total loans will mature or reprice after one year but less than three years. Approximately $144 million or 26% of total loans will mature or reprice after three years but in less than five years. The remaining 11% or $60 million reprices or matures in greater than five years.31

Loan Policy Guidelines

Management has established policies approved by the Company'’s 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~~LTV ~~to value~~ ratios and ~~maturities~~ maturities related to various types of collateral at December 31, ~~2010~~2011, were as follows:

Collateral	Maximum Amortization	Maximum LTV
Real estate	Various (see discussion below)	Various (see discussion below)
Equipment*	5 Years	75%
Inventory	5 Years	50%
Accounts receivable	5 Years	75%
Livestock	5 Years	75%
Crops	1 Year	50%
Securities**	10 Years	75%(Listed), 50% (Unlisted)

___________________________

* New farm equipment can be amortized over seven years with an FSA guaranty; farm irrigation systems may be amortized over seven years without an FSA guaranty.

*	New farm equipment can be amortized over seven years with a guaranty by the FSA. Farm irrigation systems may be amortized over seven years without an FSA guaranty.
**	When proceeds are used to purchase or carry securities not listed on a national exchange, maximum LTV shall be 50%.

The Company’s ** When proceedspolicy ~~are~~manages ~~used~~risk toin ~~purchase~~the orreal ~~carry~~estate ~~stocks~~portfolio ~~not~~by ~~listed~~adherence onto ~~a national~~regulatory ~~exchange,~~limits ~~maximum~~in regards to LTV ~~shall~~percentages, beas ~~50%.~~designated by the following categories:

The Company's policy manages risk in the real estate portfolio by adherence to supervisory limits in regards to LTV percentages, as designated by the following categories:

Loan Category	Maximum LTV
Raw land	65%
Farmland	80%
Real estate-construction:
Commercial acquisition and development	70%
Commercial, multi-family^* and other non-residential	80%
One-to-four family residential owner occupied	80%
One-to-four family residential non-owner occupied	75%
Commercial (existing property):
Owner occupied improved property	85%
Non-owner occupied improved property	80%
Residential (existing property):
Home equity lines	80%
Owner occupied one-to-four family residential	90%
Non-owner occupied one-to-four family residential	75%

~~-31-~~____________________

Loan Category	LTV Limit
Raw land	65%
Farmland	80%
Real estate-construction:
Commercial acquisition and development	70%
Commercial, multi-family* and other non-residential	80%
One-to-four family residential owner occupied	80%
One-to-four family residential non-owner occupied	75%
Commercial (existing property):
Owner occupied improved property	85%
Non-owner occupied improved property	80%
Residential (existing property):
Home equity lines	80%
Owner-occupied one-to-four family residential	90%
Non-owner occupied one-to-four family residential	75%

* Multi-family construction loans include loans secured by cooperatives and condominiums.

~~____________________~~Loans may be approved in excess of the LTV limits, provided that they are approved on a case by case basis pursuant to the Bank’s loan policy as follows:

* Multi-family ~~construction~~ The ~~loans~~request ~~include~~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 ~~secured~~approved by ~~cooperatives~~the ~~and~~full Board ~~condominiums.~~ 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

~~On an approved~~ ~~exception basis, loans may be approved in excess of the LTV limits, provided that they are approved pursuant to the Bank's loan policy as follows:~~32

The ~~request~~aggregate isportion ~~fully~~of ~~documented to~~these ~~support~~loans in excess of the ~~fact~~LTV limits that ~~other~~are ~~credit~~classified ~~factors~~as ~~justify~~commercial, ~~the~~agricultural, ~~approval~~multi-family ~~of that~~or ~~particular~~non-one-to-four ~~loan~~family asresidential anproperty ~~exception~~shall tonot exceed 30% of the ~~LTV~~Bank’s total ~~limit;~~ capital.

The Bank’s loan, policy ifadditionally ~~approved,~~requires ~~is designated~~every inloan ~~the~~to ~~Bank's~~have ~~records~~a ~~and~~documented ~~reported~~repayment arrangement. While asreasonable anflexibility ~~aggregate~~is ~~number~~necessary ~~with all~~to ~~other~~meet ~~such~~credit ~~loans~~needs ~~approved~~of customers, byin ~~the~~general, ~~full~~real ~~Board~~estate ofloans ~~Directors~~are onto atbe ~~least~~repaid awithin the following ~~quarterly~~time ~~basis;~~ frames:

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

Loan Category	Amortization Period
Raw land	10 years
Real estate- construction	1.5 years
Real estate-commercial, multi-family, and other non-residential	20 years
Real estate-one-to-four family residential	25-30 years
Home equity	10 years
Farmland	20 years

~~The~~Credit ~~aggregate~~Risk ~~portion~~Management ofand ~~these~~Allowance ~~loans~~for inLoan ~~excess of the LTV limits that are classified as commercial, agricultural, multi-family or non-one-to-four family residential property shall not exceed 30% of the Bank's total capital.~~Losses

~~The~~Loan ~~Bank's~~portfolio quality ~~loan~~stabilized in 2011 compared to 2010 and 2009 and remains manageable ~~policy~~relative ~~additionally~~to ~~requires~~prevailing ~~every~~market ~~loan~~conditions. The ratio of net charge-offs to average ~~have~~net loans outstanding was 0.44%, 1.38% and 0.95% for the years ended December 31, 2011, 2010 and 2009, respectively. The aggregate of non-performing loans and OREO as a ~~documented~~percent ~~repayment~~of total loans plus OREO at December ~~arrangement~~31, 2011 totaled 3.52% compared to 3.71% at December 31, 2010 and 3.28% at December 31, 2009. ~~While~~The ~~reasonable~~decrease ~~flexibility~~from isDecember ~~necessary~~31, 2010 to ~~meet~~December ~~credit~~31, ~~needs~~2011 was primarily as a result of decreased volume of OREO. The volume of OREO decreased $3.7 ~~customers,~~million and loans charged off decreased $5.2 million in ~~general,~~2011 ~~real~~compared ~~estate~~to 2010 but the total non-performing loans ~~are~~increased $1.8 million from 2010 to be2011. Management believes, ~~repaid~~however, ~~within~~that the ~~following~~Bank’s strong credit risk management practices ~~time~~provide ~~frames:~~a means for timely identification and assessment of problem credits in order to minimize losses.

Loan Category			Amortized Period
Raw land			10 years
Real estate- construction			1.5 years
Commercial, multi-family, and other non-residential			20 years
One-to-four family residential			25-30 years
Home equity			10 years
Farmland			20 years

Credit risk management procedures include assessment of loan quality through use of an internal loan rating system. Each loan is assigned a rating upon origination and the rating may be revised over the life of the loan as circumstances warrant. The rating system utilizes eight major classification types based on risk of loss with Grade 1 being the lowest level of risk and Grade 8 being the highest level of risk. Loans rated Grades 1 to 4 are the general “pass” grade loans with low to average levels of credit risk. Loans rated Grade 5 are “special mention” loans that may have one or more circumstances that warrant additional monitoring but do not necessarily indicate probable credit losses or above average levels of credit risk. Loans rated Grade 6 or higher are considered internally criticized and have above average levels of credit risk. For additional information regarding the Company’s loans by internal risk rating, see Note 4 in the Company’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Credit ~~Risk~~risk ~~Management~~management practices also include a loan review function that is independent of the lending process itself. Results of loan review are reported to the Bank’s Board of Directors and ~~Allowance~~serve to validate the Bank’s internal loan rating process. Results of loan review, as well as current portfolio mix by rating, are incorporated into the process for ~~Loan~~quarterly ~~Losses~~evaluations of the allowance for loan losses and impaired loans.

~~Loan~~Examples ~~portfolio quality~~of ~~faced~~factors ~~challenges~~taken ~~in 2009 and 2010 but remains manageable relative to~~into ~~prevailing~~consideration ~~market~~during ~~conditions. The~~assessment ~~ratio~~ of ~~net~~loan ~~charge~~quality ~~offs~~for torating ~~average net loans outstanding was 1.38%~~purposes, ~~0.95% and 0.31%~~ for ~~2010, 2009 and 2008,~~ ~~respectively. The~~independent ~~aggregate~~loan ofreview ~~non-performing loans~~ and ~~OREO~~for asevaluation ~~a percent~~ of ~~total~~ ~~loans~~the ~~plus~~adequacy ~~OREO at year-end 2010 increased to 3.71% compared to 3.28% and 1.63% at year-end 2009 and 2008, respectively, primarily as a result~~ of ~~increased~~ ~~volume of OREO. Negative trends in OREO and charged off loans were expected given negative economic trends across~~ the ~~industry~~allowance ~~during the recent~~for ~~economic~~loan ~~recession. Management~~losses ~~believes~~include, ~~however,~~but ~~that~~are ~~the~~not ~~Bank's~~limited ~~strong credit risk management provides a means for timely identification and assessment of problem credits in order~~ to, ~~minimize~~the ~~losses.~~ following:

~~-32-~~ Economic conditions; Management experience and depth; Credit history; Business conditions; Sources of repayment;

~~Credit risk management~~ procedures include assessment of loan quality through use of an internal loan rating system. Each loan is assigned a rating upon origination and the rating may be revised over the life of the loan as circumstances warrant. The rating system utilizes eight major classification types based on risk of loss with Grade 1 being the lowest level of risk and Grade 8 being the highest level of risk. Loans rated Grades 1 to 4 are the general "pass" grade loans with low to average levels of credit risk. Loans rated Grade 5 are "special mention" loans that may have one or more circumstances that warrant additional monitoring but do not necessarily indicate probable credit losses or above average levels of credit risk. Loans rated Grade 6 or higher are considered internally criticized and have above average levels of credit risk. 33

~~Credit~~ Debt ~~risk~~service ~~management~~coverage ~~practices~~ratios; ~~also~~ Financial ~~include~~condition ~~a loan review function that is independent~~ of ~~the lending process itself. Results of loan review are reported to the Bank'~~borrower(s) ~~Board of Directors~~ and/or ~~serve to validate the Bank'~~guarantor(s); Deposit ~~internal~~relationship; Payment ~~loan rating process. Results of loan~~history; ~~review,~~ Collateral asvalues; ~~well as current portfolio mix by rating, are incorporated into the~~and ~~process~~ Adherence ~~for~~to ~~quarterly~~loan ~~evaluations~~policy ofand ~~the~~adherence ~~allowance~~to ~~for~~ loan ~~losses and impaired~~documentation ~~loans~~requirements.

~~Examples~~Loans ofinternally classified ~~factors~~at ~~taken~~a ~~into~~Grade 6 or higher are those loans that have certain ~~consideration~~characteristics ~~during~~or ~~assessment~~circumstances that warrant additional credit quality monitoring and may meet the definition of an impaired loan ~~quality~~described ~~for~~below. Loans or ~~rating~~borrowing ~~purposes~~relationships with an outstanding balance greater than $250,000 ~~for~~that ~~independent~~are ~~loan~~also ~~review~~rated ~~and~~Grade 6 or higher are reviewed on an individual basis for impairment as part of the quarterly evaluation of the adequacy of the allowance ~~for~~ for loan losses. Loan ~~include~~impairment of internally criticized loans, ~~but~~if any, is measured using either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral-dependent. The majority of the Company’s impaired loans is secured by real estate and considered collateral-dependent. Therefore, impairment losses are ~~not~~primarily ~~limited~~based on the fair value of the underlying collateral (usually real estate). Specific allocations to the allowance for loan losses are made for loans found to be collateral- or cash flow-deficient. Loans less than $250,000 are generally evaluated on a pooled basis for impairment unless the ~~following:~~ loan is identified as a troubled debt restructuring (“TDR”).

Specific allocations on impaired • loans are typically the difference between the book value or cost of the loan ~~Economic~~and ~~conditions;~~ the estimated fair market value of the collateral, less cost to sell. An additional provision for loan losses necessary for specific allocations on impaired loans is typically made in the quarter that the loan becomes internally criticized or rated Grade 6 or higher. At the time a loan with a balance of $250,000 or greater becomes rated Grade 6 or higher, an updated independent third party appraisal is ordered. If an appraisal for a property securing a loan greater than $250,000 is not received prior to the evaluation date, management estimates the specific allocation for that quarter in a manner similar to that used for loans with a balance of less than $250,000 and makes adjustments if necessary in the subsequent quarter when the independent third party appraisal is received.

An analysis of • the allocation of the allowance for loan losses is made each fiscal quarter at ~~Management~~the ~~experience~~end of the second month (i.e., February, May, August, and ~~depth;~~ November) and reported to the Bank’s Board of Directors at its meeting preceding quarter-end. The allowance for loan losses is estimated using methods consistent with GAAP as well as regulatory guidance on allowance for loan losses. For additional information regarding the Company’s accounting policy on the allowance for loan losses, see Note 1 in the Company’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

The evaluation • of the adequacy of the allowance for loan losses includes identification of ~~Credit~~impaired ~~history;~~ loans and allocation of specific reserves if considered necessary on a case-by-case basis for loans meeting the Company’s criteria for individual impairment analysis. A loan is deemed impaired when it is probable that the Bank will be unable to collect all amounts of principal and interest due according to the original contractual terms of the loan. Impairment occurs when (i) the present value of expected future cash flows discounted at the loan’s effective interest rate impede full collection of the contract and (ii) fair value of the collateral, if the loan is collateral-dependent, indicates unexpected collection of full contract value. Specific reserve allocations are made for loans found to be collateral- or interest cash flow-deficient. In addition, an allowance is determined for loans evaluated on a pooled basis. Income recognition from impaired loans is determined in accordance with GAAP, as well as financial institution regulatory guidance.

Impaired loans were • primarily collateral-dependent and totaled $6.8 million as of December 31, 2011 ~~Business~~compared ~~conditions;~~ to $9.3 million and $10.0 million as of December 31, 2010 and 2009, respectively. The decreasing trend in impaired loans was attributable to stabilization in the portfolio and consistent with decreasing trend of loans transferred into OREO in 2011 compared to 2010 and 2009. For additional information on impaired loans, see Note 4 in the Company’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

~~• Sources of repayment;~~ 34

The following • table summarizes the change in the allowance for loan losses for the past five ~~Debt~~years ~~service~~(dollars ~~coverage~~in ~~ratios;~~ thousands):

• Financial condition of borrower(s) and/or guarantor(s);

	Year Ended December 31,
	2011	2010	2009	2008	2007
Average net loans outstanding	$541,255	$561,964	$589,528	$606,014	$606,015
Allowance for loan losses:
Balance at beginning of period	$8,028	$8,784	$7,300	$6,328	$6,211
Loans charged off	(2,675)	(8,187)	(5,951)	(2,274)	(1,096)
Recovery of loans previously charged off	261	431	375	388	379
Net loans charged off	(2,414)	(7,756)	(5,576)	(1,886)	(717)
Provision for loan losses charged to expense	2,425	7,000	7,060	2,858	834
Balance at end of period	$8,039	$8,028	$8,784	$7,300	$6,328
Ratio of net charged off loans to average net loans outstanding	0.44%	1.38%	0.95%	0.31%	0.12%

Changes to the allowance • for loan losses for 2011 consisted of (i) loans charged off of $2.7 million, ~~Deposit~~(ii) ~~relationship;~~ recovery of loans previously charged off of approximately $261,000, and (iii) provision for loan losses totaling $2.4 million. Charge-offs in 2011 occurred in all markets served.

The following • table identifies charge-offs and recoveries by category for the years ended ~~Payment~~December ~~history;~~ 31 (in thousands):

• Collateral values; and

	2011	2010	2009	2008	2007
Charge-offs:
Domestic:
Commercial, financial and agricultural	$ (850)	$ (953)	$ (874)	$ (638)	$ (227)
Real estate-construction	(646)	(4,462)	(1,824)	(569)	(107)
Real estate-mortgage	(994)	(2,565)	(2,812)	(655)	(406)
Installment loans to individuals and credit cards	(185)	(207)	(441)	(412)	(356)
Total charge-offs	(2,675)	(8,187)	(5,951)	(2,274)	(1,096)
Recoveries:
Domestic:
Commercial, financial and agricultural	81	121	68	141	124
Real estate-construction	50	52	130	23	22
Real estate-mortgage	68	180	64	82	148
Installment loans to individuals and credit cards	62	78	113	142	85
Total recoveries	261	431	375	388	379
Net loans charged off	$(2,414)	$(7,756)	$(5,576)	$(1,886)	$(717)

For additional ~~• Adherence~~information toregarding the allowance for loan ~~policy~~losses ~~and~~including ~~adherence~~allocation toof ~~loan~~the allowance ~~documentation~~by category, see Note 5 in the Company’s Consolidated Financial ~~requirements~~Statements included elsewhere in this Annual Report on Form 10-K.

~~Loans~~Charge-offs ~~internally classified~~of atimpaired ~~a Grade 6 or higher are those~~ loans ~~that have certain~~ ~~characteristics~~with orspecific ~~circumstances~~allocations ~~that~~generally ~~warrant~~occur ~~additional~~at ~~credit quality monitoring and may meet~~ the ~~definition~~time of anforeclosure, ~~impaired loan described below. Loans~~typically orwhen ~~borrowing~~the ~~relationships~~loan ~~with~~is an60-120 ~~outstanding~~days ~~balance~~past ~~greater~~due. ~~than~~On ~~$250~~occasion,~~000~~ ~~that are~~however, ~~also~~a ~~rated~~loan ~~Grade~~is considered 6collateral-dependent orand ~~higher~~impaired ~~are~~but ~~reviewed~~is onnot anpast ~~individual~~due. In ~~basis for~~this ~~impairment~~case, asa ~~part~~partial ofcharge-off ~~the~~is ~~quarterly~~made ~~evaluation~~at of the ~~adequacy~~time of the ~~allowance for~~updated ~~loan~~appraisal ~~losses. Loan impairment of internally criticized loans, if any,~~ is ~~measured~~received ~~using~~to ~~either~~adjust the ~~present value of expected future cash flows discounted at the~~ loan's ~~effective~~to ~~interest rate or the~~ fair value of the ~~collateral~~ ~~if the loan is~~ collateral, ~~dependent.~~less ~~The~~cost ~~majority~~to ~~of the Company's~~sell. ~~impaired~~Partially ~~loans is secured by real estate and considered collateral~~charged-~~dependent. Therefore,~~off ~~impairment~~loans ~~losses~~continue ~~are~~to ~~primarily~~be ~~based~~reported onas ~~the fair value of the underlying collateral (usually real estate)~~impaired. ~~Specific~~These ~~allocations~~loans are toalso ~~the allowance~~reported ~~for~~in non-performing loan ~~losses~~totals ~~are~~if ~~made~~such ~~for~~ loans ~~found~~fit tocriteria ~~be collateral- or cash~~for ~~flow~~non-~~deficient. All~~performing ~~loans~~assets ~~less~~as ~~than~~discussed ~~$250,000 are evaluated on a pooled basis for impairment~~below.

~~Specific allocations on impaired~~ loans are typically the difference between the book value or cost of the loan and the estimated fair market value of the collateral, less cost to sell. An additional provision for loan losses necessary for specific allocations on impaired loans is typically made in the quarter that the loan becomes internally criticized or rated Grade 6 or higher. At the time a loan with a balance of $250,000 or greater becomes rated Grade 6 or higher, an updated independent third party appraisal is ordered. If an appraisal for a property securing a loan greater than $250,000 is not received prior to the evaluation date, management estimates the specific allocation for that quarter in a manner similar to that used for loans with a balance of less than $250,000 and makes adjustments if necessary in the subsequent quarter when the independent third party appraisal is received. 35

~~An analysis of~~ the allocation of the allowance for loan losses is made each fiscal quarter at the end of the second month (i.e., February, May, August, and November) and reported to the Bank's Board of Directors at its meeting preceding quarterNon-~~end. The~~Performing allowance for loan losses is estimated using methods consistent with GAAP as well as regulatory guidance on allowance for loan losses. For additional information regarding the Company's accounting policy on the allowance for loan losses, see Note 1 in the Company's Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.Assets

Non-performing assets consist of non-33performing loans, OREO and non-accrual debt securities. Non-performing loans consist of non-accrual loans, loans 90 days or more past due and still accruing interest and restructured loans. Categorization of a loan as non-performing is not in itself a reliable indicator of impairment. A loan may be deemed impaired prior to becoming 90 days past due, restructured or put on non-accrual status. The Bank’s policy is to not accrue interest or discount on (i) any asset which is maintained on a cash basis because of deterioration in the financial position of the borrower, (ii) any asset for which payment in full of interest or principal is not expected or (iii) 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 days past due test for 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 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 the loan’s restoration to a current status. Loans that represent probable losses are recognized as impaired and adequately reserved for in the allowance for loan losses. Valuation of non-performing loans are subject to the same process described above for internally criticized loans in regards to obtaining new appraisals and timing of specific allocations and subsequent charge-off. There have been no significant time lapses in the years ended December 31, 2011, 2010 or 2009 between the identification and recognition of impairment and subsequent charge-off of non-performing or impaired loans. The following table summarizes non-performing assets at December 31 for the past five years (dollars in thousands):

The evaluation of the adequacy of the allowance for loan losses includes identification of impaired loans and allocation of specific reserves if considered necessary on a case-by-case basis for loans meeting the Company's criteria for individual impairment analysis. A loan is deemed impaired when it is probable that a creditor will be unable to collect all amounts of principal and interest due according to the original contractual terms of the loan. Impairment occurs when (i) the present value of expected future cash flows discounted at the loan's effective interest rate impede full collection of the contract and (ii) fair value of the collateral, if the loan is collateral-dependent, indicates unexpected collection of full contract value. Specific reserve allocations are made for loans found to be collateral- or interest cash flow-deficient. In addition, an allowance is determined for loans evaluated on a pooled basis. Income recognition from impaired loans is determined in accordance with GAAP, as well as financial institution regulatory guidance.

	2011	2010	2009	2008	2007
Non-accrual loans:
Commercial, financial and agricultural	$ 675	$ 500	$ 639	$ 425	$ 133
Real estate-construction	1,018	854	1,171	662	354
Real estate-mortgage	5,358	2,545	1,927	2,496	1,123
Installment loans to individuals	259	249	64	90	68
Total non-accrual loans	7,310	4,148	3,801	3,673	1,678
Loans 90 days past due accruing interest:
Commercial, financial and agricultural	34	500	106	-	25
Real estate-construction	-	35	1,472	-	53
Real estate-mortgage	570	1,441	3,660	722	126
Installment loans to individuals	2	10	34	25	-
Total loans 90 days past due accruing interest	606	1,986	5,272	747	204
Total non-current loans	$7,916	$6,134	$9,073	$4,420	$1,882
Total non-current loans as % of total loans	1.50%	1.12%	1.54%	0.74%	0.32%
Troubled debt restructuring:
Commercial, financial and agricultural	$ 643	$ 15	$ 11	$ 14	$ -
Real estate-construction	680	-	-	-	-
Real estate-mortgage	5,571	2,770	1,117	1,138	1,568
Installment loans to individuals	201	68	122	92	53
Total troubled debt restructuring	$7,095	$2,853	$1,250	$1,244	$1,621
Total troubled debt restructuring as a % of total loans	1.34%	0.52%	0.21%	0.21%	0.28%
OREO and other repossessed property	$11,073	$14,734	$10,527	$5,446	$2,302
Non-accrual debt securities	352	241	520	-	-
Total other non-performing assets	$11,425	$14,975	$11,047	$5,446	$2,302
Total other non-performing assets as % of total assets	1.08%	1.54%	1.15%	0.59%	0.26%

~~Impaired~~ Other ~~loans were primarily collateral~~non-~~dependent~~performing ~~and~~assets ~~totaled~~decreased $9.3 .5 million asfrom of December 31, 2010 ~~compared~~ to ~~$10.0 million as of~~ December 31, ~~2009~~2011 ~~and~~primarily ~~$12.2~~as ~~million~~a asresult of ~~December~~ ~~31, 2008~~decreased OREO. For ~~additional~~more information onabout ~~impaired loans~~OREO, see ~~Note 4 in~~ the ~~Company's~~section ~~Consolidated~~below ~~Financial~~entitled ~~Statements~~“– ~~included elsewhere in this~~Other ~~Annual~~Real ~~Report~~Estate ~~on Form 10-K~~Owned.”

~~The following~~ ~~table summarizes activity posted to the allowance for loan losses for the past five years (in thousands):~~36

	2010			2009			2008			2007			2006
Average net loans outstan

FirstITEM Citizens/White and Associates Insurance Company is organized and existing under the laws of the state of Arizona1. Its principal activity is credit insuranceBUSINESS. The Bank holds a 50% ownership in the agency, which is accounted for using the equity method.

-12-ITEM 3. LEGAL PROCEEDINGS.

ITEM 1B UNRESOLVED STAFF COMMENTS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS.

PART II

ITEM 5. MARKET FOR REGISTRANT'’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

ITEM 6. SELECTED FINANCIAL DATA.

Critical Accounting Policies

Results of Operations

Filing Compare · FIRST CITIZENS BANCSHARES INC /TN/