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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number: 33-85626
FULTON BANCSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 25-1598464
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Lincoln Way East
McConnellsburg, Pennsylvania 17233
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (717) 485-3144
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for 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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at March 23, 2000
(Common stock, .625 par value) 495,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended
December 31, 1999 are incorporated by reference into Parts I
and II. Portions of the Proxy Statement for 2000 Annual
Meeting of Security Holders are incorporated by reference in
Part III of this Form 10-K.
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Item 1. Business.
Description of the Company
Fulton Bancshares Corporation (the "Company"), a
Pennsylvania business corporation, is a bank holding company
registered with and supervised by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board").
The Company was incorporated on March 29, 1989 under the
business corporation law of the Commonwealth of Pennsylvania
for the purpose of becoming a bank holding company. Since
commencing operations, the Company's business has consisted
primarily of managing and supervising the Fulton County
National Bank and Trust Company (the "Bank"), and its
principal source of income has been dividends paid by the
Bank. The Company has two wholly-owned subsidiaries - the
Bank, and Fulton County Community Development Corporation
("FCCDC"), which was formed on June 7, 1996 to support
efforts of the local downtown business revitalization project
by making low interest loans to eligible small businesses for
the purpose of facade improvement. FCCDC had minimal
activity in 1999, and has no employees.
The principal executive office of the Company is
located at 100 Lincoln Way East, McConnellsburg, Fulton
County, Pennsylvania 17233. The telephone number of the
Company is (717) 485-3144.
The Company has no employees.
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Supervision and Regulation - The Company
The Company is subject to the provisions of the
Bank Holding Company Act of 1956, as amended (the "Bank
Holding Company Act"), and to supervision by the Federal
Reserve Board. The Bank Holding Company Act requires the
Company to secure the prior approval of the Federal Reserve
Board before it owns or controls, directly or indirectly,
more than five percent (5%) of the voting shares or
substantially all of the assets of any institution, including
another bank. The Bank Holding Company Act prohibits
acquisition by the Company of more than five percent (5%) of
the voting shares of, or interest in, all or substantially
all of the assets of any bank located outside of Pennsylvania
unless such acquisition is specifically authorized by the
laws of the state in which such bank is located.
A bank holding company is prohibited from engaging
in or acquiring direct or indirect control of more than five
percent (5%) of the voting shares of any company engaged in
nonbanking activities unless the Federal Reserve Board, by
order or regulation, has found such activities to be so
closely related to banking or managing or controlling banks
as to be a proper incident thereto.
- -3-
The Company is required to file an annual report
with the Federal Reserve Board and any additional information
that the Federal Reserve Board may require pursuant to the
Bank Holding Company Act. The Federal Reserve Board may also
make examinations of the Company and any or all of its
subsidiaries.
Federal law prohibits acquisitions of control of a
bank holding company without prior notice to certain federal
bank regulators. Control is defined for this purpose as the
power, directly or indirectly, to direct the Management or
policies of the bank or bank holding company or to vote 25%
or more of any class of voting securities of the bank holding
company. A person or group holding revocable proxies to vote
25% or more of the stock of a bank or its holding company
would presumably be deemed to control the institution for
purposes of this federal law.
Subsidiary banks of a bank holding company are
subject to certain restrictions imposed by the Federal
Reserve Act on any extensions of credit to the bank holding
company or any of its subsidiaries, on investments in the
stock or other securities of the bank holding company and on
taking of such stock or securities as collateral for loans to
any borrower.
- -4-
Permitted Activities
The Federal Reserve Board permits bank holding
companies to engage in activities so closely related to
banking or managing or controlling banks as to be a proper
incident thereto. The Company does not at this time engage
in any of the permissible activities described below, nor
does the Company have any current plans to engage in these
activities in the foreseeable future.
While the types of permissible activities are
subject to a variety of limitations and to change by the
Federal Reserve Board, the principal activities that
presently may be conducted by a bank holding company and may
in the future be engaged by the Company are: (1) making,
acquiring or servicing loans and other extensions of credit
for its own account or for the account of others, such as
would be made by consumer finance, credit card, mortgage,
commercial finance and factoring companies; (2) operating as
an industrial bank or similar entity in the manner authorized
by state law so long as the institution does not both accept
demand deposits and make commercial loans; (3) operating as a
trust company in the manner authorized by federal or state
law so long as the institution does not make certain types of
loans or investments or accept deposits, except as may be
permitted by the Federal Reserve Board; (4) acting as an
investment or financial advisor to investment companies and
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other persons; (5) leasing personal and real property or
acting as agent, broker or advisor in leasing property; (6)
making equity and debt investments in corporations or
projects designed primarily to promote community welfare; (7)
providing to others financially oriented data processing or
bookkeeping services; (8) acting as an insurance agent or
broker in relation to insurance for itself and its
subsidiaries or for insurance directly related to extensions
of credit; (9) acting as underwriter for credit life
insurance and credit accident and health insurance: (10)
providing courier services of a limited character; (11)
providing management consulting advice to nonaffiliated banks
and nonbank depository institutions; (12) selling money
orders, travelers' checks and United States savings bonds;
(13) performing appraisals of real estate; (14) acting as
intermediary for the financing of commercial or industrial
income-producing real estate by arranging for the transfer of
the title, control and risk of such a real estate project to
one or more investors; (15) providing securities brokerage
services, related securities credit activities and incidental
activities such as offering custodial services, individual
retirement accounts and cash management services, if the
securities brokerage services are restricted to buying and
selling securities solely as agent for the account of
- -6-
customers and do not include securities underwriting or
dealing or investment advice or research services; (16)
underwriting and dealing in obligations of the United States,
general obligations of states and their political
subdivisions such as bankers' acceptances and certificates of
deposit; (17) providing general information, advisory
services and statistical forecasting with respect to foreign
exchange markets; (18) acting as a futures commission
merchant in the execution and clearance on major commodity
exchanges of futures contracts and options on futures
contracts for bullion, foreign exchange, government
securities, certificates of deposit and other money market
instruments; (19) performing personal property appraisals
that require expertise regarding all types of personal and
business property, including intangible property such as
corporate securities; (20) providing commodity trading and
futures commission merchant advice; (21) providing consumer
financial counseling to individuals on consumer-oriented
financial management matters, including debt consolidation,
mortgage applications, bankruptcy, budget management, real
estate tax shelters, tax planning, retirement and estate
planning, insurance and general investment management, so
long as this activity does not include the sale of specific
products or investments; (22) providing tax planning and
- -7-
preparation advice to corporations and individuals; (23)
providing check guaranty services to subscribing merchants;
(24) operating a collection agency and credit bureau; and
(25) acquiring and operating thrift institutions, including
savings and loan associations, building and loan associations
and FDIC-insured savings banks.
Certain Provisions of Pennsylvania Banking Law
Under the Pennsylvania Banking Code of 1965, as
amended, (the "Code"), the Company has been permitted since
March 4, 1990 to control an unlimited number of banks.
However, the Company would be subject to the requirements of
the Bank Holding Company Act as discussed in the "Supervision
and Regulation - The Company" section above.
Also since March 4, 1990, the Code authorizes
reciprocal interstate banking without any geographic
limitation. Reciprocity between states exists when a foreign
state's law authorizes Pennsylvania bank holding companies to
acquire banks or bank holding companies located in that state
on terms and conditions substantially no more restrictive
than those applicable to such an acquisition by a bank
holding company located in that state. For a further
discussion of interstate banking and branching, see the
section entitled "Legislation and Regulatory Changes" below.
- -8-
Legislation and Regulatory Changes
From time to time, legislation is enacted which
has the effect of increasing the cost of doing business,
limiting or expanding permissible activities or affecting the
competitive balance between banks and other financial
institutions. Proposals to change the laws and regulations
governing the operations and taxation of banks, bank holding
companies and other financial institutions are frequently
made in Congress, and before various bank regulatory
agencies. No prediction can be made as to the likelihood of
any major changes or the impact such changes might have on
the Company and its subsidiary, the Bank. Certain changes of
potential significance to the Company which have been enacted
recently are discussed below.
The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking and Branch
Act") permits interstate banking to occur. Bank holding
companies, pursuant to an amendment to the Bank Holding
Company Act, can acquire a bank located in any state, as long
as the acquisition does not result in the bank holding
company controlling more than 10% of the deposits in the
United States, or 30% of the deposits in the target bank's
state. The legislation permits states to waive the
concentration limits and require that the target institution
- -9-
be in existence for up to five years before it can be
acquired by an out-of-state bank or bank holding company.
Interstate branching and merging of existing banks is
permitted after September 29, 1997 if the bank is adequately
capitalized and demonstrates good management.
The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") was enacted in August of
1989. This law was enacted primarily to improve the
supervision of savings associations by strengthening capital,
accounting and other supervisory standards. In addition,
FIRREA reorganized the FDIC by creating two deposit insurance
funds to be administered by the FDIC: The Savings
Association Insurance Fund and the Bank Insurance Fund.
Customers' deposits held by the Bank are insured under the
Bank Insurance Fund. FIRREA also regulates real estate
appraisal standards and the supervisory/enforcement powers
and penalty provisions in connection with the regulation of
the Bank.
- -10-
Effects of Inflation
Inflation has some impact on the Company's, the
Bank's, and FCCDC's operating costs. Unlike many industrial
companies, however, substantially all of the Bank's and
FCCDC's assets and liabilities are monetary in nature. As a
result, interest rates have a more significant impact on the
Company's, the Bank's, and FCCDC's performance than the
general level of inflation. Over short periods of time,
interest rates may not necessarily move in the same direction
or in the same magnitude as prices of goods and services.
Monetary Policy
The earnings of the Company, the Bank, and FCCDC
are affected by domestic economic conditions and the monetary
and fiscal policies of the United States Government and its
agencies. An important function of the Federal Reserve
System is to regulate the money supply and interest rates.
Among the instruments used to implement those objectives are
open market operations in United States government securities
and changes in reserve requirements against member bank
deposits. These instruments are used in varying combinations
to influence overall growth and distribution of bank loans,
investments and deposits, and their use may also affect rates
charged on loans or paid for deposits.
- -11-
The Bank is a member of the Federal Reserve System
and, therefore, the policies and regulations of the Federal
Reserve Board have a significant effect on its deposits,
loans and investment growth, as well as the rate of interest
earned and paid, and are expected to affect the Bank's
operations in the future. The effect of such policies and
regulations upon the future business and earnings of the
Company, the Bank, and FCCDC cannot be predicted.
Environmental Regulation
There are several federal and state statutes which
regulate the obligations and liabilities of financial
institutions pertaining to environmental issues. In addition
to the potential for attachment of liability resulting from
its own actions, a bank may be held liable under certain
circumstances for the actions of its borrowers, or third
parties, when such actions result in environmental problems
on properties that collateralize loans held by the Bank.
Further, the liability has the potential to far exceed the
original amount of the loan issued by the Bank. Currently,
the Company, the Bank, and FCCDC are not party to any pending
legal proceeding pursuant to any environmental statute, nor
is the Company, the Bank, or FCCDC aware of any circumstances
which may give rise to liability under any such statute.
- -12-
Description of the Bank
The Bank was organized on February 24, 1887 as a
Pennsylvania state-chartered banking institution. It
converted to a national banking association on September 5,
1933, and is presently under the supervision of the Office of
the Comptroller of the Currency (the "Comptroller"). The
Bank is a member of the Federal Reserve System. Customers'
deposits held by the Bank are insured by the FDIC to the
maximum extent permitted by law. The Bank's legal
headquarters are located at 100 Lincoln Way East,
McConnellsburg, Fulton County, Pennsylvania 17233.
The Bank engages in a full service commercial and
consumer banking business, including the acceptance of time
and demand deposits and the making of secured and unsecured
commercial and consumer loans, and offering trust services.
The Bank's primary service area is located in Fulton County,
Pennsylvania. Specifically, the main office of the Bank is
located in McConnellsburg, the county seat. Within the
defined service area of the Bank's main office, the banking
business is highly competitive. In addition to local
community banks, the Bank competes with regionally-based
commercial banks, all of which have greater assets, capital
and lending limits. The Bank also competes with savings
banks, savings and loan associations, money market funds,
insurance companies, stock brokerage firms, regulated small
- -13-
loan companies, credit unions and with the issuers of
commercial paper and other securities.
In order to compete effectively in this market and
to obtain business from individuals, small and medium-sized
businesses and professionals, the Bank offers specialized
services such as extended hours of operation and personal and
business checking accounts at competitive rates in addition
to traditional commercial and consumer banking and trust
services. The Bank accepts time, demand and savings
deposits, including passbook accounts, statement savings
accounts, NOW accounts, money market accounts, certificates
of deposit and club accounts. The Bank makes secured and
unsecured commercial, consumer, mortgage and construction
loans. Consumer loans include revolving credit lines. The
following support services are offered by the Bank to make
financial management more efficient and convenient for its
customers: bank by mail, direct deposit, drive-in banking,
Federal Tax Depository, automatic teller machine, night
deposit services, notary public services, payroll deduction
plan, bond coupon collections, foreign money exchange, safe
deposit boxes, signature guarantees, travelers checks, money
orders, cashiers checks, treasury securities, U.S. Savings
Bonds, individual retirement accounts, and utility and
municipal payments. The Bank also offers its customers
access to discount brokerage services, mutual funds, and
other alternative investment products through its affiliation
- -14-
with Sentry Trust Company. The Bank expects to experience a
modest increase in growth.
Lending Activities
It is the Bank's general policy to grant all of
its loans in its primary trade area. This trade area
includes all of Fulton County, southern Huntington County,
western Franklin County, and the Hancock, Maryland area. The
Bank's lending objectives are as follows: (1) to establish a
diversified loan portfolio composed of a predetermined mix of
mortgage loans, commercial loans, consumer loans and all
other loan types; (2) to provide a satisfactory rate of
return to its shareholders by properly pricing loans to
include the cost of funds, administrative costs, bad debts,
local economic conditions, competition, customer
relationships, the term of the loan, credit risk, and
collateral quality; and, (3) to provide protection for its
depositors by maintaining a predetermined level of loans to
deposits to ensure liquidity. The Bank recognizes that the
lending of money is a community responsibility which involves
a degree of credit risk and is willing to undertake such
risks by utilizing standard banking procedures and making
prudent judgments when extending credit.
The Bank makes loans to both individual consumers
and commercial entities. The types of loans offered include:
(1) loans for businesses and individuals on a short term or
- -15-
seasonal basis; (2) mortgage and construction loans, (3)
loans to individuals for consumer purchases such as
appliances, furniture, vacations, etc.: (4) loans secured by
marketable stock and bonds providing adequate margins for
market fluctuations; (5) short term working capital loans
secured by the assignment of accounts receivable and
inventory; (6) automobile loans, (7) second liens on
commercial and residential real estate, (8) home equity lines
of credit, and (9) PHEAA student loans. Loans of these types
will be considered desirable by the Bank provided such loans
meet the test of sound credit.
The Bank has adopted the following loan-to-value
ratios, in accordance with standards adopted by its bank
supervisory agencies:
Loan Category
Loan-to-Value Limit
Raw land 65%
Land development 75%
Construction:
Commercial, multifamily, and other
nonresidential 80%
1 to 4-family residential 85%
Improved property 85%
Owner-occupied 1 to 4 family and
home equity 90%
The Bank does not assume undue risk on any loan within the
loan portfolio, and takes appropriate steps to secure all
loans as necessary.
- -16-
Concentration
The Bank is neither dependent upon deposits from
nor exposed to loan concentrations to a single customer, the
loss of which would have a material adverse effect on the
financial condition of the Bank. Although the Bank has a
diversified loan portfolio, a significant portion of its
customers' ability to honor their contracts is dependent upon
the agribusiness economic sector (approximately 20% of loan
portfolio).
Employees
As of December 31, 1999, the Bank has forty-four
(44) full-time equivalent employees.
Supervision and Regulation - The Bank
The operations of the Bank are subject to federal
and state statutes applicable to banks chartered under the
banking laws of the United States, to members of the Federal
Reserve System and to banks whose deposits are insured by the
FDIC. The operations of the Bank are also subject to
regulations of the Comptroller, the Federal Reserve Board and
the FDIC. The primary supervisory authority of the Bank is
the Comptroller, which regulates and examines the Bank. The
Comptroller has authority to prevent national banks from
engaging in unsafe or unsound practices in conducting their
businesses.
Federal and state banking laws and regulations
govern, among other things, the scope of a bank's business,
the investments a bank may make, the reserves against
deposits a bank must maintain, loans a bank makes and
- -17-
collateral it takes, the maximum interest rates a bank may
pay on deposits, the activities of a bank with respect to
mergers and consolidations and the establishment of branches.
Under Pennsylvania law, the Bank may establish or acquire
branch offices, subject to certain limitations, in any county
of the state. National bank branches, however may be
established within the permitted area only after approval by
the Comptroller.
As a subsidiary bank of a bank holding company,
the Bank is subject to certain restrictions imposed by the
Federal Reserve Act on any extensions of credit to the bank
holding company or its subsidiaries, or investments in the
stock or other securities as collateral for loans. The
Federal Reserve Act and Federal Reserve Board regulations
also place certain limitations and reporting requirements on
extensions of credit by the Bank to principal shareholders of
its parent holding company, among others, and to related
interests of such principal shareholders. In addition, such
legislation and regulations may affect the terms upon which
any person becoming a principal shareholder of a holding
company may obtain credit from banks with which the
subsidiary Bank maintains a correspondent relationship.
FDIC
Under the Federal Deposit Insurance Act, the
Comptroller possesses the power to prohibit institutions
- -18-
regulated by it (such as the Bank) from engaging in any
activity that would be an unsafe and unsound banking practice
or would otherwise be in violation of the law. Moreover, the
Financial Institutions Regulatory and Interest Rate Control
Act of 1978 ("FIRA") generally expanded the circumstances
under which officers or directors of a bank may be removed by
the institution's federal supervisory agency, restricts
lending by a bank to its executive officers, directors,
principal shareholders or related interests thereof and
restricts management personnel of a bank from serving as
directors or in other management positions with certain
depository institutions whose assets exceed a specified
amount or which have an office within a specified geographic
area, and restricts management personnel from borrowing from
another institution that has a correspondent relationship
with their bank. Additionally, FIRA requires that no person
may acquire control of a bank unless the appropriate federal
supervisory agency has been given sixty (60) days prior
written notice and within that time has not disapproved the
acquisition or otherwise extended the period for disapproval.
Control for purposes of FIRA, means the power, directly or
indirectly, to direct the management or policies or to vote
twenty-five percent (25%) or more of any class of outstanding
stock of a financial institution or its respective holding
- -19-
company. A person or group holding revocable proxies to vote
twenty-five percent (25%) or more of the outstanding common
stock of a financial institution or holding company such as
the Company, would presumably be deemed to control the
institution for purposes of FIRA.
Garn-St Germain
The Garn-St Germain Depository Institutions Act of
1982 ("1982 Act") removed certain restrictions on a bank's
lending powers and liberalized its depository capabilities.
The 1982 Act also amended FIRA (see above) by changing the
statutory limits on lending by a bank to its executive
officers, directors, principal shareholders or related
interests thereof and by relaxing certain reporting
requirements. The 1982 Act, however, also tightened FIRA
provisions respecting management interlocks and correspondent
bank relationships involving a bank's management personnel.
CRA
Under the Community Reinvestment Act of 1977, as
amended ("CRA"), the Comptroller is required to assess the
record of all financial institutions regulated by it to
determine if these institutions are meeting the credit needs
of the community (including low and moderate income
neighborhoods) which they serve and to take this record into
account in its evaluation of any application made by any of
such institutions for, among other things, approval of a
- -20-
branch or other deposit facility, office relocation, a merger
or an acquisition of bank shares. The Financial Institutions
Reform, Recovery and Enforcement Act of 1989 amended the CRA
to require, among other things, that the Comptroller make
publicly available the evaluation of a bank's record of
meeting the credit needs of its entire community, including
low and moderate income neighborhoods. This evaluation will
include a descriptive rating and a statement describing the
basis for the rating, which is publicly disclosed.
BSA
Under the Bank Secrecy Act ("BSA"), banks and
other financial institutions are required to report to the
Internal Revenue Service currency transactions of more than $
10,000 or multiple transactions of which the Bank is aware in
any one day that aggregate in excess of $ 10,000. Civil and
criminal penalties are provided under the BSA for failure to
file a required report, for failure to supply information
required by the BSA or for filing a false or fraudulent
report.
CEBA
An omnibus federal banking bill, known as the
Competitive Equality Banking Act ("CEBA"), was signed into
law in August of 1987. Included in the legislation were
measures: (1) imposing certain restrictions on transactions
- -21-
between banks and their affiliates; (2) expanding the powers
available to Federal bank regulators in assisting failed and
failing banks; (3) limiting the amount of time banks may hold
certain deposits prior to making such funds available for
withdrawal and any interest thereon; and (4) requiring that
any adjustable rate mortgage loan secured by a lien on a one-
to-four family dwelling include a limitation on the maximum
rate at which interest may accrue on the principal balance
during the term of such loan.
FDICIA
Capital Categories
In December of 1991 the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") became law.
Under FDICIA, institutions must be classified, based on their
risk-based capital ratios into one of five defined
categories, as illustrated below:
Total Tier 1 Tier 1 Under a
Risk-Based Risk-Based Leverage Capital Order
Ratio Ratio Ratio or Directive
CAPITAL CATEGORY
Well capitalized > 10.0 > 6.0 > 5.0 No
Adequately
capitalized > 8.0 > 4.0 > 4.0*
Undercapitalized < 8.0 < 4.0 < 4.0*
Significantly
undercapitalized< 6.0 < 3.0 < 3.0
Critically
undercapitalized < 2.0
* 3.0 for those banks having the highest available
regulatory rating.
Based on the above criteria, the Bank is classified
as "well capitalized".
- -22-
Prompt Corrective Action
In the event an institution's capital deteriorates
to the undercapitalized category or below, FDICIA prescribes
an increasing amount of regulatory intervention, including:
(1) the institution of a capital restoration plan and a
guarantee of the plan by a parent institution; and (2) the
placement of a hold on increases in assets, number of
branches or lines of business. If capital has reached the
significantly or critically undercapitalized levels, further
material restrictions can be imposed, including restrictions
on interest payable on accounts, dismissal of management and
(in critically undercapitalized situations) appointment of a
receiver. For well capitalized institutions, FDICIA provides
authority for regulatory intervention where the institution
is deemed to be engaging in unsafe or unsound practices or
receives a less than satisfactory examination report rating
for asset quality, management, earnings or liquidity. All
but well capitalized institutions are prohibited from
accepting brokered deposits without prior regulatory
approval.
Operational Controls
Under FDICIA, financial institutions are subject
to increased regulatory scrutiny and must comply with certain
operational, managerial and compensation standards to be
developed by Federal Reserve Board regulations.
- -23-
FDICIA also requires the regulators to issue new rules
establishing certain minimum standards to which an
institution must adhere including standards requiring a
minimum ratio of classified assets to capital, minimum
earnings necessary to absorb losses and minimum ratio of
market value to book value for publicly held institutions.
Additional regulations are required to be developed relating
to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth and
excessive compensation, fees and benefits.
Examinations and Audits
Annual full-scope, on site examinations are
required for all FDIC-insured institutions except
institutions with assets under $ 250 million which are well
capitalized, well managed and not subject to a recent change
in control, in which case, the examination period is every
eighteen (18) months. Banks with total assets of $ 150
million or more are required to submit to their supervising
federal and state banking agencies a publicly available
annual audit report and are subject to additional accounting
and reporting regulations.
Truth-In-Savings
A separate subtitle within FDICIA, called the
"Bank Enterprise Act of 1991", requires "truth-in-savings" on
consumer deposit accounts so that consumers can make
meaningful comparisons between the competing claims of banks
- -24-
with regard to deposit accounts and products. Under this
provision, the Bank is required to provide information to
depositors concerning the terms of their deposit accounts,
and in particular, to disclose the annual percentage yield.
There are some operational costs of complying with the Truth-
In-Savings law.
Management believes that full implementation of
the FDICIA has had no material impact on liquidity, capital
resources or reported results of operation.
Item 2. Properties
The main administrative office of the Bank, which
also includes a drive-up facility, is located in
McConnellsburg, Pennsylvania. The Bank currently has six
branch offices one of which is located at Penn's Village on
Route 16 at the east end of McConnellsburg, Pennsylvania.
This branch office opened on May 11, 1981. In addition, the
Bank installed an ATM at the Penn's Village Shopping Center
in March, 1989. The Bank also serves the communities
surrounding the Pennsylvania/Maryland border through its
branch office located in Warfordsburg, Pennsylvania. This
branch opened for business on April 4, 1983. On the same
day, a third branch office was opened in Hustontown,
Pennsylvania, which services northern Fulton County.
Finally, to service the southern end of Huntington County,
the Bank acquired a branch in Shade Gap, Pennsylvania, on
September 26, 1988. On July 15, 1999, the Bank opened a
branch, including an ATM, at the Sandy Ridge Mall in
- -25-
Orbisonia, PA. To service the western portion of Franklin
County, the Bank opened a branch, including an ATM, on Route
30 in St. Thomas, PA on November 15, 1999. On
January 7, 1997 ATM's were opened at the Warfordsburg and
Hustontown branches. In June, 1998 the Bank opened an ATM at
the Shade Gap branch and added an ATM to its main office
drive-up facility. The main office, Warfordsburg,
Hustontown, Orbisonia and Shade Gap branches are owned by the
Bank. The Penn's Village branch is rented.
The Bank plans to close its Shade Gap branch
(except for the ATM facility) on June 30, 2000.
Item 3. Legal Proceedings.
Fulton Bancshares Corporation is an occasional
party to legal actions arising in the ordinary course of its
business. In the opinion of the Company's management, Fulton
Bancshares Corporation has adequate legal defenses and/or
insurance coverage respecting any and each of these actions
and does not believe that they will materially affect the
Company's operations or financial position.
Item 4. Submission of Matters to Vote of Security Holders.
None
Item 5. Market for Registrant's Common Stock and Related
Security Holder Matters.
The corporation's common stock is traded on a
limited basis in the local over-the-counter market. As of
December 31, 1999, the approximate number of shareholders of
record was 515.
Market Cash Market Cash
Price Dividend Price Dividend
1999 1998
First Quarter $ 55.00 $ .17 $ 45.00 $ .165
Second Quarter 60.00 .17 50.00 .165
Third Quarter 60.00 .20 50.00 .19
Fourth Quarter 51.00 .32 55.00 .20
Dividend restrictions are detailed in Note 15 of
the annual shareholders report and are incorporated herein by
reference.
- -26-
Item 6. Selected Financial Data.
1999 1998 1997 1996 1995
Income (000 omitted)
Interest income $ 8,804 $ 8,192 $ 7,898 $ 7,513 $ 7,298
Interest expense 4,325 4,151 4,036 3,725 3,732
Provision for
loan losses 195 185 20 65 62
Net interest
income after
provision for
loan losses 4,284 3,856 3,842 3,723 3,504
Securities gains
(losses) 6 4 3 ( 2) 5
Other operating
income 583 718 470 391 276
Other operating
expenses 3,011 2,745 2,626 2,425 2,304
Income before
income taxes 1,862 1,833 1,689 1,687 1,481
Applicable income
tax 395 406 384 455 422
Net income $ 1,467 $ 1,427 $ 1,305 $ 1,232 $ 1,059
Per share amounts are based on following weighted averages:
1999 - 495,000 1997 - 495,000 1995 - 480,476
1998 - 495,000 1996 - 495,000
Income before
income taxes $ 3.76 $ 3.70 $ 3.41 $ 3.41 $ 3.08
Applicable income
taxes .80 .82 .77 .92 .88
Net income 2.96 2.88 2.64 2.49 2.20
Cash dividend paid .86 .72 .70 .66 .55
Book value 25.76 25.21 23.04 20.50 19.08
- -27-
Item 6. Selected Financial Data (Continued).
1999 1998 1997 1996 1995
Income (000 omitted)
Year-End Balance Sheet Figures (000 omitted)
Total assets $ 128,478 $ 119,649 $ 105,770 $ 102,355 $ 96,449
Net loans 90,995 80,214 70,416 63,791 59,871
Total investment
securities 24,436 29,183 25,922 28,474 29,365
Deposits-non-
interest
bearing 12,354 11,553 8,159 10,000 7,959
Deposits-interest
bearing 90,957 87,788 82,062 81,632 78,399
Total deposits 103,311 99,341 90,221 91,632 86,358
Liabilities for
borrowed money 11,475 7,100 3,470 0 0
Total stock-
holders'
equity 12,753 12,479 11,407 10,149 9,445
Ratios
Average equity/
average assets 10.36 10.51 10.29 9.80 9.29
Return on
average equity 11.43 12.23 11.98 12.57 12.13
Return on
average assets 1.18 1.29 1.23 1.23 1.13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Management's discussion and analysis of financial
condition and results of operations included on pages 27
through 32 of the annual report to shareholders is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data,
some of which is required under Guide 3 (statistical
disclosures by bank holding companies) are shown on pages 2
through 26 of the annual shareholders report for the year
ended December 31, 1999 and are incorporated herein by
reference. Additional schedules required in addition to
those included in the annual shareholders report are
submitted herewith.
- -28-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
For additional information concerning liquidity, refer to statistical
disclosures applicable to the investment and loan portfolio.
Closely related to the management of liquidity is the management of rate
sensitivity which focuses on maintaining stability in the net interest margin.
As
illustrated in the table below the tax equivalent net interest margin ranged
from 3.9% to
4.0% of average earning assets during the past 3 years. An asset/liability
committee
monitors and coordinates the overall asset/liability strategy.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
Interest Rates and Interest Differential Tax Equivalent Yields
Years Ended December 31
ASSETS 1999 1998
1997
Average Average Average
(000 omitted) Balance Interest Rate Balance Interest Rate Balance
Interest Rate
Investment securities:
Taxable interest
income $ 20,274 $ 1,189 5.9% $ 20,510 $ 1,185 5.8% $ 23,627 $
1,532 6.5%
Nontaxable interest
income 5,903 292 4.9 5,793 286 4.9 5,090
254 5.0
Total investment
securities 26,177 1,481 5.7 26,303 1,471 5.6 28,717
1,786 6.2
Loans (net of unearned
discounts) 87,902 7,322 8.3 75,610 6,702 8.8 68,171
6,09
8 8.9
Other short-term
investments 18 1 5.5 343 19 5.5 255
14 5.5
Total interest
earning assets 114,097 8,804 7.7% 102,256 $ 8,192 8.0%
9
7,143 $ 7,898 8.1%
Allowance for loan
losses ( 695) ( 578) ( 475)
Cash and due from banks 3,201 2,560 2,847
Bank premises and
equipment 3,137 2,557 2,371
Other assets 4,245 4,207 3,978
Total assets $ 123,985 $ 111,002 $ 105,864
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand
deposits $ 16,951 $ 401 2.4% $ 16,779 $ 455 2.7% $ 15,528
$
412 2.6%
Savings deposits 13,834 351 2.5 13,616 357 2.6 13,816 368 2.7
Time deposits 56,443 2,990 5.3 54,621 3,102 5.7 53,738 3,136
5.8
Short-term borrowings 11,804 583 4.9 4,426 237 5.4
2,114
120 5.7
Total interest
bearing
liabilities 99,032 $ 4,325 4.4% 89,442 $ 4,151 4.6 85,196
$
4,036 4.7%
Demand deposits 11,362 9,146 8,848
Other liabilities 666 749 927
Total liabilities 111,060 99,337 94,971
Stockholders'
equity 12,925 11,665 10,893
Total liabilities &
stockholders'
equity $ 123,985 $ 111,002 $ 105,864
Net interest income/net
yield on average
earning assets $ 4,479 3.9% $ 4,041 4.0% $ 3,862 4.0%
For purposes of calculating loan yields, the average loan volume
includes
nonaccrual loans. For purposes of calculating yields on nontaxable interest
income, the
taxable equivalent adjustment is made to equate nontaxable interest on the
same basis as
taxable interest. The marginal tax rate was 34% for 1999, 1998 and 1997.
- -29-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
CHANGES IN NET INTEREST INCOME TAX EQUIVALENT YIELDS
1999 Versus 1998 1998 Versus 1997
Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in
Total Total
Average Average Increase Average Average Increase
Volume Rate (Decrease) Volume Rate (Decrease)
(000 omitted)
Interest Income
Loans (net of
unearned
discounts) $ 1,082 ($ 462) $ 620 $ 662 ($ 58) $ 604
Taxable
investment
securities ( 14) 18 4 ( 202) ( 145) ( 347)
Nontaxable
investment
securities 5 1 6 35 ( 3) 32
Other short-term
investments ( 18) 0 ( 18) 5 0 5
Total interest
Income 1,055 ( 443) 612 500 ( 206) 294
Interest Expense
Interest bearing
Demand 5 ( 59) ( 54) 33 10 43
Savings
deposits 6 ( 12) ( 6) ( 5) ( 6) ( 11)
Time deposits 104 ( 216) ( 112) 51 ( 85) ( 34)
Short-term
borrowings 398 ( 52) 346 132 ( 15) 117
Total interest
expense 513 ( 339) 174 211 ( 96) 115
Net interest
income $ 438 $ 179
Changes which are attributed in part to volume and in part
to rate
are allocated in proportion to their relationships to the amounts of changes.
- -30-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
The following table shows the maturities of investment
securities at book value as of December 31, 1999, and weighted average
yields of such securities. Yields are shown on a tax equivalent basis,
assuming a 34% federal income tax rate.
After 1 year After 5 years
Within but within but within After
1 year 5 years 10 years 10 years Total
(000 omitted)
Bonds:
U. S. Treasury
Book value $ 0 $ 0 $ 0 $ 0 $ 0
Yield 0% 0% 0% 0% 0%
U. S. Government agencies
Book value 0 9,751 500 0 10,251
Yield 0% 4.61% 5.22% 0% 4.64%
State and municipal
Book value 250 2,256 990 594 4,090
Yield 8.18% 7.41% 7.58% 7.02% 7.45%
Mortgage-Backed
Book value 0 27 14 4,849 4,890
Yield 0% 5.24% 4.31% 4.69% 4.69%
Total book value $ 250 $ 12,034 $ 1,504 $ 5,443 $ 19,231
Yield 8.18% 5.11% 6.82% 4.94% 5.25%
Other Debt Securities:
FHLMC/FNMA non-
cumulative preferred
stock
Book value $ 5,239
Yield 7.50%
Equity Securities:
Total Equity Securities $ 1,002
Yield 5.69%
Total Investment Securities $ 25,472
Yield 5.73%
- -31-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
LOAN PORTFOLIO
The following table presents the loan portfolio at the end of
each of the last five years:
1999 1998 1997 1996 1995
(000 omitted)
Commercial, financial and
agricultural $ 12,294 $ 11,401 $ 7,180 $ 7,648 $ 11,135
Real estate - Construction 0 0 0 0 386
Real estate - Mortgage 69,273 58,915 53,624 47,519 37,822
Installment and other
personal loans (net of
unearned discount) 10,228 10,478 10,099 9,068 10,872
Total loans $ 91,795 $ 80,794 $ 70,903 $ 64,235 $ 60,215
Presented below are the approximate maturities of the loan
portfolio (excluding real estate mortgages and installments) at
December 31, 1999:
Under One One to Over Five
Year Five Years Years Total
(000 omitted)
Commercial, financial and
agricultural $ 7,991 $ 2,213 $ 2,090 $ 12,294
Real estate - Construction 0 0 0 0
Total $ 7,991 $ 2,213 $ 2,090 $ 12,294
The following table presents the approximate amount of fixed
rate loans and variable rate loans due as of December 31, 1999:
Fixed Rate Variable
Loans Rate Loans
(000 omitted)
Due within one year $ 10,024 $ 11,144
Due after one but within five years 16,530 8,515
Due after five years 21,555 24,027
Total $ 48,109 $ 43,686
- -32-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
SUMMARY OF LOAN LOSS EXPERIENCE
Years Ended December 31
1999 1998 1997 1996 1995
(000 omitted)
Average total loans
outstanding (net of
unearned income) $ 87,902 $ 75,610 $ 68,171 $ 62,530 $ 61,011
Allowance for loan losses,
beginning of period $ 580 $ 487 $ 444 $ 345 $ 358
Additions to provision
for loan losses charged
to operations 195 185 20 65 62
Loans charged off during
the year
Commercial 14 67 6 0 35
Installment 34 47 40 9 48
Total charge-off's 48 114 46 9 83
Recoveries of loans
previously charged off:
Commercial 63 16 49 33 1
Installment 10 6 20 10 7
Total recoveries 73 22 69 43 8
Net loans charged off ( 25) 92 ( 23) ( 34) 75
Allowance for loan losses, $ 800 $ 580 $ 487 $ 444 $ 345
Ratio of net loans
charged off to average
loans outstanding ( .03)% .12% ( .03)% ( .05)%
.12%
The provision is based on an evaluation of the adequacy of the
allowance for possible loan losses. The evaluation includes, but is not
limited to, review of net loan losses for the year, the present and
prospective financial condition of the borrowers and evaluation of current
and projected economic conditions.
- -33-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
LOANS
The following table sets forth the outstanding balances of
those loans on a nonaccrual status and those on accrual status which
are contractually past due as to principal or interest payments for
30 days or more at December 31.
1999 1998 1997 1996 1995
(000 omitted)
Nonaccrual loans $ 0 $ 0 $ 413 $ 310 $ 310
Accrual loans:
Restructured $ 0 $ 0 $ 0 $ 0 $ 0
30 through 89 days
past due 1,084 1,458 1,466 1,716 2,533
90 days or more
past due 168 442 431 1,041 253
Total accrual
loans $ 1,252 $ 1,900 $ 1,897 $ 2,757 $ 2,786
See Note 5 of the notes to consolidated financial
statements for details of income recognized and foregone revenue on
nonaccrual loans for the past three years.
Management has not identified any significant problem
loans in the accrual loan categories shown above.
- -34-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
The following is an allocation by loan categories of the allowance
for loan losses at December 31 for the last five years. In retrospect the
specific allocation in any particular category may prove excessive or
inadequate and consequently may be reallocated in the future to reflect the
then current conditions. Accordingly, the entire allowance is available to
absorb losses in any category:
Years Ended December 31
1999 1998 1997
Percentage Percentage Percentage
Allowance of Loans to Allowance of Loans to Allowance of Loans to
Amount Total Loans Amount Total Loans Amount Total Loans
(000 omitted)
Commercial,
financial and
agri-
cultural $ 107 13.37% $ 82 14.11% $ 49 10.13%
Real estate -
Constr-
uction 0 0.00 0 0.00 0 0.00
Real estate -
Mortgage 609 76.13 423 72.92 368 75.63
Instal-
lment 84 10.50 75 12.97 70 14.24
Total $ 800 100.00% $ 580 100.00% $ 487 100.00%
Years Ended December 31
1996 1995
Percentage Percentage
Allowance of Loans to Allowance of Loans to
Amount Total Loans Amount Total Loans
(000 omitted)
Commercial,
financial and
agricultural $ 53 11.91% $ 123 35.68%
Real estate -
Construction 0 0.00 2 0.64
Real estate -
Mortgage 328 73.98 157 45.62
Installment 63 14.11 63 18.06
Total $ 444 100.00% $ 345 100.00%
- -35-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
DEPOSITS
The average amounts of deposits are summarized below:
Years Ended December 31
1999 1998 1997
(000 omitted)
Demand deposits $ 11,362 $ 9,146 $ 8,848
Interest bearing demand deposits 16,951 16,779 15,528
Savings deposits 13,834 13,616 13,816
Time deposits 56,443 54,621 53,738
Total deposits $ 98,590 $ 94,162 $ 91,930
The following is a breakdown of maturities of time
deposits of $ 100,000 or more as of December 31, 1999:
Maturity (000 omitted)
Certificates of Deposit
Three months or less $ 3,075
Over three months through six months 6,682
Over six months through twelve months 1,863
Over twelve months 843
$ 12,463
RETURN ON EQUITY AND ASSETS (APPLYING DAILY AVERAGE BALANCES)
The following table presents a summary of significant
earnings and capital ratios:
1999 1998 1997
Assets $ 123,985 $ 111,002 $ 105,864
Net income $ 1,467 $ 1,427 $ 1,305
Equity $ 12,925 $ 11,665 $ 10,893
Cash dividends paid $ 426 $ 356 $ 347
Return on assets 1.18% 1.29% 1.23%
Return on equity 11.43% 12.23% 11.98%
Dividend payout ratio 29.0% 24.9% 26.6%
Equity to asset ratio 10.36% 10.51% 10.29%
- -36-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED SUMMARY OF OPERATIONS
Years Ended December 31
1999 1998 1997 1996 1995
(000 omitted)
Interest income $ 8,804 $ 8,192 $ 7,898 $ 7,513 $ 7,298
Interest expense 4,325 4,151 4,036 3,725 3,732
Net interest income 4,479 4,041 3,862 3,788 3,566
Provision for loan losses 195 185 20 65 62
Net interest income after
provision for loan
losses 4,284 3,856 3,842 3,723 3,504
Other income:
Trust 12 97 63 43 42
Service charges - Deposits 160 140 146 130 99
Other service charges,
collection and exchange,
charges, commission fees 127 123 93 102 69
Other operating income 290 362 171 114 71
Total other income 589 722 473 389 281
Income before operating
expense 4,873 4,578 4,315 4,112 3,785
Operating expenses:
Salaries and employees
benefits 1,314 1,242 1,178 1,129 1,072
Occupancy and equipment
expense 647 569 465 418 370
Other operating expenses 1,050 934 983 878 862
Total operating
Expenses 3,011 2,745 2,626 2,425 2,304
Income before income taxes 1,862 1,833 1,689 1,687 1,481
Income tax 395 406 384 455 422
Net income applicable
to common stock $ 1,467 $ 1,427 $ 1,305 $ 1,232 $ 1,059
Per share data:
Earnings per common share $ 2.96 $ 2.88 $ 2.64
$
2.49 $ 2.20
Cash dividend - Common .86 .72 .70 .66 $ .55
Weighted average number
of common shares 495,000 495,000 495,000 495,000 480,476
* Based on 495,000 shares outstanding
- -37-
FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES
($ 000 omitted) 1999 1998 1997 1996 1995
LOANS
Lines of credit $ 2,921 $ 3,332 $ 3,290 $ 3,492 $ 3,556
Tax free 846 1,281 2,201 2,458 3,027
Commercial 18,413 14,203 13,966 12,702 10,356
Mortgage 48,070 40,916 35,415 32,833 33,430
Consumer 17,652 15,878 13,299 11,045 10,642
Total loans 87,902 75,610 68,171 62,530 61,011
INVESTMENT SECURITIES
U.S. Government 0 0 0 254 404
U.S. Government agencies 8,465 5,863 6,931 6,984 5,361
State & municipal 5,903 5,793 5,090 3,040 1,586
Mortgage-backed securities 5,988 9,324 13,861 18,730 19,777
FNMA & FHLMC preferred
stock 5,021 4,746 2,443 124 0
Other 800 577 392 679 468
Total investment
securities 26,177 26,303 28,717 29,687 27,596
OTHER SHORT-TERM INVESTMENTS
Federal funds sold 18 343 255 430 661
TOTAL EARNING ASSETS 114,097 102,256 97,143 92,647 89,268
TOTAL ASSETS $ 123,985 $ 111,002 $ 105,864 $ 99,844 $ 93,959
Percent increase (decrease) 11.5% 4.9% 6.0% 6.3% 4.0%
DEPOSITS
Interest-bearing
demand $ 16,951 $ 16,979 $ 15,528 $ 15,758 $ 14,871
Savings 13,834 13,616 13,816 14,578 14,663
Time 56,443 54,621 53,738 49,582 47,502
Total interest-
bearing deposits 87,228 85,016 83,082 79,918
77,036
OTHER BORROWINGS
Federal funds purchased 70 622 276 908 524
Liabilities for borrowed
money 11,734 3,804 1,838 288 185
TOTAL INTEREST-BEARING
LIABILITIES 99,032 89,442 85,196 81,114 77,745
- -38-
FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES (CONTINUED)
1999 1998 1997 1996 1995
AVERAGE RATES EARNED
% % % % %
Loans
Commercial 8.32 9.23 9.11 9.31 9.95
Mortgage 8.01 8.61 8.67 8.64 8.99
Consumer 8.74 8.77 8.89 9.58 10.09
Tax free 5.53 5.82 5.62 5.91 6.05
Lines of credit 8.35 8.81 9.19 9.13 9.84
Total 8.37 8.72 8.73 9.09 9.22
Investment Securities
U.S. Government 0.00 0.00 0.00 6.40 6.40
U.S. Government agencies 6.05 5.95 6.17 6.09 5.86
State & municipal 4.94 4.93 5.00 5.02 5.08
Mortgage-backed securities 5.44 5.50 6.46 6.50 5.94
Other 5.96 5.99 7.27 6.32 6.54
Total 5.65 5.57 6.22 6.08 5.89
Other Short-Term Investments
Federal funds sold 4.43 5.49 5.51 5.30 5.85
Total earning assets 7.72 7.90 8.13 8.11 8.15
AVERAGE RATES PAID
Time & savings deposits 4.29 4.60 4.71 4.59 4.77
Federal funds purchased 5.05 5.57 5.61 5.61 6.09
Liabilities for borrowed money 4.91 5.32 5.68 5.55 6.36
Total interest-bearing
liabilities 4.37 4.64 4.74 4.59 4.78
- -39-
Item 9. Disagreements on Accounting and Financial Disclosures.
Not applicable.
- -40-
PART III
The information required by Items 10, 12 and 13 is
incorporated by reference from Fulton Bancshares
Corporation's definitive proxy statement for the 2000 Annual
Meeting of shareholders filed pursuant to Regulation 14A.
- -41-
Item 11. Executive Compensation
Shown below is information concerning the annual
compensation for services in all capacities to the Company,
the Bank, and FCCDC for the fiscal years ended December 31,
1999, 1998 and 1997 of the Chief Executive Officer. There
were no other officers of the Company, the Bank, or FCCDC
whose total annual salary and bonus during that time frame
exceeded $ 100,000.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted
Name and Annual Stock Options/ LTIP All Other
Principal Salary Bonus Compensation Award(s) SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
Clyde H.
Bookheimer
President &
CEO 1999 $ 117,208 $ 0 $ 0 $ 0 $ 0 $ 0 $ 61,990
1998 112,000 0 0 0 0 0 47,566
1997 101,825 0 0 0 0 0 59,889
Footnotes:
(1) All other compensation includes the following:
Fringe Benefits Deferred
(Personal Use of Bank Retirement Supplemental Executive Directors
Directors Owned Vehicle) Plan Retirement Plan Fees
1999 $ 0 $ 1,234 $ 12,149 $ 48,607 $ 0
1998 0 908 7,906 38,752 0
1997 0 1,140 6,081 52,668 0
The supplemental executive retirement plan was funded by single premium
life insurance policies on the CEO, with the Bank named as beneficiary.
Actual payments to the CEO amounting to $ 73,000 annually will not begin
until 2005. At December 31, 1999, the cash surrender value of the policies
was $ 789,884.
- -42-
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.
(a) Certain documents filed as part of Form 10-K
Financial Statement Schedules and Exhibits
(1) Financial statements. See Item 8 of this
report for the index to financial
statements.
(2) Financial statement schedules. See Item 8
of this report.
Schedule I - Distribution of assets,
liabilities and stockholders' equity,
interest rates and interest differential
tax equivalent yields
Schedule II - Changes in net interest
income tax equivalent yields
Schedule III - Investment portfolio
Schedule IV - Loan portfolio
Schedule V - Summary of loan loss
experience
Schedule VI - Nonaccrual and delinquent
loans
Schedule VII - Allocation of allowance for
loan losses
Schedule VIII - Schedule of deposits,
return on equity and assets
Schedule IX - Consolidated summary of
operations
- -43-
(3) Exhibits.
Exhibit Numbers
(2) Plan of acquisition, reorganization,
arrangement, liquidation or succession.
Not applicable.
(3) (a) Articles of incorporation.
Incorporated by reference to Exhibit 3A to
the Registrant's Registration Statement on
Form SB-2, Registration No. 33-85626.
(b) By-laws. Incorporated by reference to
Exhibit 3B to the Registrant's
Registration Statement on Form SB-2,
Registration No. 33-85626.
(4) Instruments defining the rights of
security holders including indentures.
The rights of the holders of Registrant's
common stock are contained in:
(i) Articles of Incorporation of Fulton
Bancshares Corporation, filed as
Exhibit 3A to Registrant's
Registration Statement on Form SB-2
(Registration No. 33-85626).
(ii) By-laws of Fulton Bancshares
Corporation, filed as Exhibit 3B to
the Registrant's Registration
Statement on Form SB-2 (Registration
No. 33-85626).
(9) Voting trust agreement. Not applicable.
- -44-
(10) Material contracts. None.
(11) Statement re: computation of per share
earnings. See Item 5 of this report.
(12) Statements re: computation of ratios. Not
applicable.
(13) Annual report to security holders, Form 10-Q
or quarterly report to security holders. Not
applicable.
(16) Letter re: change in certifying accountant.
not applicable.
(18) Letter re: change in accounting principles.
Not applicable.
(21) Subsidiaries of the registrant. Filed
herewith as Exhibit 21.
(22) Published report regarding matters submitted
to vote of security holders. Not applicable.
(23) Consents of experts and counsel. Filed
herewith.
(24) Power of attorney. Not applicable.
(27) Financial data schedule. Filed herewith
under Item 8.
(28) Information from reports furnished to state
insurance regulatory authorities. Not
applicable.
(99) Additional exhibits. Not applicable.
(b) Reports on Form 8-K. None.
- -45-
SIGNATURES
In accordance with the requirements of Section 13 or 15(d)
of the Securities Act of 1934, this report was signed by the
following persons on behalf of the Registrant in the capacities and
on the dates indicated.
Signature Title Date
/s/ Clyde H. Bookheimer Director, President & March , 2000
Clyde H. Bookheimer CEO (Principal Executive
Officer)
/s/ David L. Seiders Director March , 2000
David L. Seiders
/s/ Cecil B. Mellott Director & Vice March , 2000
Cecil B. Mellott Chairman
/s/ Robert C. Snyder Director & March , 2000
Robert C. Snyder Chairman
/s/ Ellis L. Yingling Director & Vice March , 2000
Ellis L. Yingling Chairman
/s/ Clair R. Miller Director March ____, 2000
Clair R. Miller
- -46-
Exhibit Index
Exhibit No. Sequentially numbered
pages
13 Annual report to shareholders
21 Subsidiaries of the Registrant
23.1 Independent Auditor's Consent
27 Financial data schedule
- -47-
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
1. Fulton County National Bank and Trust, Pennsylvania; a
national bank organized February 24, 1887 under the
Pennsylvania Banking Code.
It converted to a national banking association on September 5,
1933.
2. Fulton County Community Development Corporation, which was
formed on June 7, 1996 under the Pennsylvania Business
Corporation Law of 1988, as amended.
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
Board of Directors and Shareholders
Fulton Bancshares Corporation
We consent to the incorporation by reference in registration
statements (Form SB-2 No. 33-85626) of Fulton Bancshares Corporation
of our report dated February 15, 2000, appearing in this annual
report on Form 10-K of Fulton Bancshares Corporation for the year
ended December 31, 1999.
SMITH ELLIOTT KEARNS & COMPANY, LLC
Chambersburg, PA
March 23, 2000