Back to GetFilings.com
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, 1997
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 9, 1998
(Common stock, .625 par value) 495,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year
ended December 31, 1997 are incorporated by reference into
Parts I and II. Portions of the Proxy Statement for 1998
Annual Meeting of Security Holders are incorporated by
reference in Part III of this Form 10-K.
- -1-
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 1997, 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.
- -2-
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
- -5-
investment companies and 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
- -6-
agent for the account of 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
- -7-
investments; (22) providing tax planning and 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
- -13-
firms, regulated small 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, regular
savings 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, MasterCard/Visa applications and
cash advances, night deposit services, notary public
services, payroll deduction plan, personal collections, safe
deposit boxes, signature guarantees, travelers checks,
treasury securities, U.S. Savings Bonds, individual
retirement accounts, and utility and municipal payments.
The Bank also provides discount
- -14-
brokerage services, mutual funds, and other alternative
investment products to offer its customers a full range of
investment services. 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
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
- -15-
short term or 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, and (7) second liens on
commercial and residential real estate. 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 nor
exposed to loan concentrations to a single customer or to a
single industry, the loss of any one or more of which would
have a material adverse effect on the financial condition of
the Bank.
Employees
As of December 31, 1997, 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 company. A
- -19-
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 eliminating
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 $ 100 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 branch, is located in McConnellsburg,
Pennsylvania. The Bank currently has four 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
- -25-
September 26, 1988. On January 7, 1997 ATM's were opened at
the Warfordsburg and Hustontown branches. The main office,
Warfordsburg, Hustontown and Shade Gap branches are owned by
the Bank. The Penn's Village branch is rented.
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, 1997, the approximate number of shareholders of
record was 492.
Market Cash Market Cash
Price Dividend Price Dividend
1997 1996
First Quarter $ 35.00 $ .16 $ 27.00 $ .15
Second Quarter 35.00 .16 32.00 .15
Third Quarter 40.00 .185 35.00 .179
Fourth Quarter 45.00 .195 35.00 .185
- -26-
Item 6. Selected Financial Data.
1997 1996 1995 1994 1993
Income (000 omitted)
Interest income $ 7,898 $ 7,513 $ 7,298 $ 6,417 $ 6,349
Interest expense 4,036 3,725 3,732 3,269 3,575
Provision for
loan losses 20 65 62 48 70
Net interest
income after
provision for
loan losses 3,842 3,723 3,504 3,100 2,704
Securities gains
(losses) 3 ( 2) 5 2 89
Other operating
income 470 391 276 242 229
Other operating
expenses 2,626 2,425 2,304 2,236 2,097
Income before
income taxes 1,689 1,687 1,481 1,108 925
Applicable income
tax 384 455 422 319 225
Net income $ 1,305 $ 1,232 $ 1,059 $ 789 $ 700
Per share amounts are based on following weighted averages:
1997 - 495,000 1995 - 480,476 1993 - 440,000
1996 - 495,000 1994 - 440,000
Income before
income taxes $ 3.41 $ 3.41 $ 3.08 $ 2.52 $ 2.10
Applicable income
taxes .77 .92 .88 .73 .51
Net income 2.64 2.49 2.20 1.79 1.59
Cash dividend paid .70 .66 .55 .48 .44
Book value 23.04 20.50 19.08 14.12 15.42
- -27-
Item 6. Selected Financial Data (Continued).
1997 1996 1995 1994 1993
Income (000 omitted)
Year-End Balance Sheet Figures (000 omitted)
Total assets $ 105,770 $ 102,355 $ 96,449 $ 90,890 $ 88,349
Net loans 70,416 63,791 59,871 60,321 60,998
Total investment
securities 25,922 28,474 29,365 24,060 18,350
Deposits-non-
interest
bearing 8,159 10,000 7,959 7,266 6,930
Deposits-interest
bearing 82,062 81,632 78,399 76,728 74,220
Total deposits 90,221 91,632 86,358 83,994 81,150
Liabilities for
borrowed money 3,470 0 0 220 0
Total stock-
holders'
equity 11,407 10,149 9,445 6,214 6,785
Ratios
Average equity/
average assets 10.29 9.80 9.29 7.23 7.15
Return on
average equity 11.98 12.57 12.13 12.08 10.73
Return on
average assets 1.23 1.23 1.13 .87 .77
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 26
through 32 of the annual report to security holders 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 25 of the annual shareholders report for the year
ended December 31, 1997 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 4.0% to
4.1% 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 1997 1996
1995
Average Average Average
(000 omitted) Balance Interest Rate Balance Interest Rate Balance
Interest Rate
Investment securities:
Taxable interest
income $ 23,627 $ 1,532 6.5% $ 26,647 $ 1,651 6.2% $ 26,010 $
1,498 5.7%
Nontaxable interest
income 5,090 254 5.0 3,040 153 5.0 1,586
81 5.1
Total investment
securities 28,717 1,786 6.2 29,687 1,804 6.1 27,596
1,579 5.7
Loans (net of unearned
discounts) 68,171 6,098 8.9 62,530 5,686 9.1 61,011
5,64
9 9.3
Other short-term
investments 255 14 5.5 430 23 5.3 661
70 5.9
Total interest
earning assets 97,143 $ 7,898 8.1% 92,647 $ 7,513 8.1%
8
9,268 $ 7,298 8.2%
Allowance for loan
losses ( 475) ( 392) ( 364)
Cash and due from banks 2,847 2,638 2,399
Bank premises and
equipment 2,371 2,083 2,028
Other assets 3,978 3,211 1,440
Total assets $ 105,864 $ 100,187 $ 94,771
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing demand
deposits $ 15,528 $ 412 2.6% $ 15,758 $ 413 2.6% $ 14,871
$
398 2.7%
Savings deposits 13,816 368 2.7 14,578 400 2.7 14,663 417 2.8
Time deposits 53,738 3,136 5.8 49,582 2,847 5.7 47,502 2,872
6.0
Short-term borrowings 2,114 120 5.7 1,196 65 5.4
709 44 6.2
Total interest
bearing
liabilities 85,196 $ 4,036 4.7% 81,114 $ 3,725 4.6% 77,745
$
3,731 4.8%
Demand deposits 8,848 8,562 7,902
Other liabilities 927 645 394
Total liabilities 94,971 90,321 86,041
Stockholders'
equity 10,893 9,866 8,730
Total liabilities &
stockholders'
equity $ 105,864 $ 100,187 $ 94,771
Net interest income/net
yield on average
earning assets $ 3,862 4.0% $ 3,788 4.1% $ 3,567 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 1997, 1996 and 1995.
- -29-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
CHANGES IN NET INTEREST INCOME TAX EQUIVALENT YIELDS
1997 Versus 1996 1996 Versus 1995
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) $ 502 ($ 80) $ 422 $ 138 ($ 111) $ 27
Taxable
investment
securities ( 196) 67 ( 129) 39 92 131
Nontaxable
investment
securities 103 ( 2) 101 73 ( 1) 72
Other short-term
investments ( 10) 1 ( 9) ( 12) ( 3) ( 15)
Total interest
income 399 ( 14) 385 238 ( 23) 215
Interest Expense
Interest bearing
demand ( 6) 6 0 23 ( 9) 14
Savings
deposits ( 20) ( 12) ( 32) ( 2) ( 15) ( 17)
Time deposits 241 48 289 119 ( 144) ( 25)
Short-term
borrowings 52 2 54 26 ( 4) 22
Total interest
expense 267 44 311 166 ( 172) ( 6)
Net interest
income $ 74 $ 221
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, 1997, 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 6,154 0 0 6,154
Yield 0% 4.02% 0% 0% 4.02%
State and municipal
Book value 100 1,171 3,879 0 5,150
Yield 6.06% 7.45% 7.63% 0% 7.56%
Mortgage-Backed
Book value 0 0 0 9,729 9,729
Yield 0% 0% 0% 4.36% 4.36%
Total book value $ 100 $ 7,325 $ 3,877 $ 9,729 $ 21,033
Yield 6.06% 4.57% 7.63% 4.36% 5.04%
Other Debt Securities:
FHLMC/FNMA non-
cumulative preferred
stock
Book value $ 4,188
Yield 8.54%
Equity Securities:
Total Equity Securities $ 577
Yield 6.59%
Total Investment Securities $ 25,798
Yield 5.64%
- -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:
1997 1996 1995 1994 1993
(000 omitted)
Commercial, financial and
agricultural $ 7,180 $ 7,648 $ 11,135 $ 11,641 $ 10,337
Real estate - Construction 0 0 386 159 386
Real estate - Mortgage 53,624 47,519 37,822 37,196 38,221
Installment and other
personal loans (net of
unearned discount) 10,099 9,068 10,872 11,682 12,455
Total loans $ 70,903 $ 64,235 $ 60,215 $ 60,678 $ 61,399
Presented below are the approximate maturities of the loan
portfolio (excluding real estate mortgages and installments) at
December 31, 1997:
Under One One to Over Five
Year Five Years Years Total
(000 omitted)
Commercial, financial and
agricultural $ 4,667 $ 1,292 $ 1,221 $ 7,180
Real estate - Construction 0 0 0 0
Total $ 4,667 $ 1,292 $ 1,221 $ 7,180
The following table presents the approximate amount of fixed
rate loans and variable rate loans due as of December 31, 1997:
Fixed Rate Variable
Loans Rate Loans
(000 omitted)
Due within one year $ 5,204 $ 13,853
Due after one but within five years 11,771 5,686
Due after five years 15,885 18,504
Total $ 32,860 $ 38,043
- -32-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
SUMMARY OF LOAN LOSS EXPERIENCE
Years Ended December 31
1997 1996 1995 1994 1993
(000 omitted)
Average total loans
outstanding (net of
unearned income) $ 68,171 $ 62,530 $ 61,011 $ 61,062 $ 64,104
Allowance for loan losses,
beginning of period $ 444 $ 345 $ 358 $ 400 $ 376
Additions to provision
for loan losses charged
to operations 20 65 62 48 70
Loans charged off during
the year
Commercial 6 0 35 68 39
Installment 40 9 48 31 14
Total charge-off's 46 9 83 99 53
Recoveries of loans
previously charged off:
Commercial 49 33 1 6 2
Installment 20 10 7 3 5
Total recoveries 69 43 8 9 7
Net loans charged off ( 23) ( 34) 75 90 46
Allowance for loan losses, $ 487 $ 444 $ 345 $ 358 $ 400
Ratio of net loans
charged off to average
loans outstanding ( .03)% ( .05)% .12% .15% .07%
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.
1997 1996 1995 1994 1993
(000 omitted)
Nonaccrual loans $ 413 $ 310 $ 310 $ 80 $ 249
Accrual loans:
Restructured $ 0 $ 0 $ 0 $ 0 $ 0
30 through 89 days
past due 1,466 1,716 2,533 3,876 2,551
90 days or more
past due 431 1,041 253 85 147
Total accrual
loans $ 1,897 $ 2,757 $ 2,786 $ 3,961 $ 2,698
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
1997 1996 1995
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 $ 49 10.13% $ 53 11.91% $ 123 35.68%
Real estate -
Constr-
uction 0 0.00 0 0.00 2 0.64
Real estate -
Mortgage 368 75.63 328 73.98 157 45.62
Instal-
lment 70 14.24 63 14.11 63 18.06
Total $ 487 100.00% $ 444 100.00% $ 345 100.00%
Years Ended December 31
1994 1993
Percentage Percentage
Allowance of Loans to Allowance of Loans to
Amount Total Loans Amount Total Loans
(000 omitted)
Commercial,
financial and
agricultural $ 136 37.92% $ 144 36.05%
Real estate -
Construction 1 .27 3 .63
Real estate -
Mortgage 152 42.55 172 43.01
Installment 69 19.26 81 20.31
Total $ 358 100.00% $ 400 100.00%
- -35-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
DEPOSITS
The average amounts of deposits are summarized below:
Years Ended December 31
1997 1996 1995
(000 omitted)
Demand deposits $ 8,848 $ 8,562 $ 7,902
Interest bearing demand deposits 15,528 15,758 14,871
Savings deposits 13,816 14,578 14,663
Time deposits 53,738 49,582 47,502
Total deposits $ 91,930 $ 88,480 $ 84,938
The following is a breakdown of maturities of time
deposits of $ 100,000 or more as of December 31, 1997:
Maturity (000 omitted)
Certificates of Deposit
Three months or less $ 1,982
Over three months through six months 1,692
Over six months through twelve months 1,744
Over twelve months 4,749
$ 10,167
RETURN ON EQUITY AND ASSETS (APPLYING DAILY AVERAGE BALANCES)
The following table presents a summary of significant
earnings and capital ratios:
1997 1996 1995
Assets $ 105,864 $ 100,187 $ 94,771
Net income $ 1,305 $ 1,232 $ 1,059
Equity $ 10,893 $ 9,866 $ 8,730
Cash dividends paid $ 347 $ 327 $ 272
Return on assets 1.23% 1.23% 1.13%
Return on equity 11.98% 12.49% 12.13%
Dividend payout ratio 26.6% 26.5% 25.7%
Equity to asset ratio 10.29% 9.85% 9.21%
- -36-
FULTON BANCSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED SUMMARY OF OPERATIONS
Years Ended December 31
1997 1996 1995 1994 1993
(000 omitted)
Interest income $ 7,898 $ 7,513 $ 7,298 $ 6,417 $ 6,349
Interest expense 4,036 3,725 3,732 3,269 3,575
Net interest income 3,862 3,788 3,566 3,148 2,774
Provision for loan losses 20 65 62 48 70
Net interest income after
provision for loan
losses 3,842 3,723 3,504 3,100 2,704
Other income:
Trust 63 43 42 41 30
Service charges - Deposits 146 130 99 102 127
Other service charges,
collection and exchange,
charges, commission fees 93 102 69 80 67
Other operating income 171 114 71 21 94
Total other income 473 389 281 244 318
Income before operating
expense 4,315 4,112 3,785 3,344 3,022
Operating expenses:
Salaries and employees
benefits 1,178 1,129 1,072 957 934
Occupancy and equipment
expense 465 418 370 325 258
Other operating expenses 983 878 862 954 905
Total operating
expenses 2,626 2,425 2,304 2,236 2,097
Income before income taxes 1,689 1,687 1,481 1,108 925
Income tax 384 455 422 319 225
Net income applicable
to common stock $ 1,305 $ 1,232 $ 1,059 $ 789 $ 700
Per share data:
Earnings per common share $ 2.64 $ 2.49 $ 2.20
$
1.79 $ 1.59
Cash dividend - Common .70 .66 $ .55 * $ .48 $ .44
Weighted average number
of common shares 495,000 495,000 480,476 440,000 440,000
* Based on 495,000 shares outstanding
- -37-
FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES
($ 000 omitted) 1997 1996 1995 1994 1993
LOANS
Lines of credit $ 3,290 $ 3,492 $ 3,556 $ 3,606 $ 3,611
Tax free 2,201 2,458 3,027 1,930 2,846
Commercial 13,966 12,702 10,356 10,533 11,873
Mortgage 35,415 32,833 33,430 34,458 34,793
Consumer 13,299 11,045 10,642 10,535 10,981
Total loans 68,171 62,530 61,011 61,062
64,104
INVESTMENT SECURITIES
U.S. Government 0 254 404 564 665
U.S. Government agencies 6,931 6,984 5,361 4,743 6,206
State & municipal 5,090 3,040 1,586 906 553
Mortgage-backed securities 13,861 18,730 19,777 17,744 13,741
FNMA & FHLMC preferred
stock 2,443 124 0 0 0
Other 392 679 468 407 468
Total investment
securities 28,717 29,687 27,596 24,364 21,633
OTHER SHORT-TERM INVESTMENTS
Federal funds sold 255 430 661 536 1,713
TOTAL EARNING ASSETS 97,143 92,647 89,268 85,962 87,450
TOTAL ASSETS $ 105,864 $ 99,844 $ 93,959 $ 90,315 $ 91,297
Percent increase 6.0% 6.3% 4.0% (1.1)% 5.0%
DEPOSITS
Interest-bearing demand $ 15,528 $ 15,758 $ 14,871 $ 14,876 $ 15,431
Savings 13,816 14,578 14,663 16,641 16,052
Time 53,738 49,582 47,502 43,919 44,283
Total interest-
bearing deposits 83,082 79,918 77,036 75,436 75,766
OTHER BORROWINGS
Federal funds purchased 276 908 524 408 0
Liabilities for borrowed
money 1,838 288 185 200 1,030
TOTAL INTEREST-BEARING
LIABILITIES 85,196 81,114 77,745 76,044 76,796
- -38-
FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES (CONTINUED)
1997 1996 1995 1994 1993
AVERAGE RATES EARNED
% % % % %
Loans
Commercial 9.11 9.31 9.95 8.90 7.77
Mortgage 8.67 8.64 8.99 7.94 7.42
Consumer 8.89 9.58 10.09 10.14 10.42
Tax free 5.62 5.91 6.05 6.73 6.21
Lines of credit 9.19 9.13 9.84 8.63 7.31
Total 8.73 9.09 9.22 8.45 7.92
Investment Securities
U.S. Government 0.00 6.40 6.40 6.11 5.90
U.S. Government agencies 6.17 6.09 5.86 5.35 5.34
State & municipal 5.00 5.02 5.08 5.34 7.18
Mortgage-backed securities 6.46 6.50 5.94 4.87 5.59
Other 7.27 6.32 6.54 6.17 7.06
Total 6.22 6.08 5.89 5.03 5.60
Other Short-Term Investments
Federal funds sold 5.51 5.30 5.85 4.02 3.63
Total earning assets 8.13 8.11 8.15 7.44 7.24
AVERAGE RATES PAID
Time & savings deposits 4.71 4.59 4.77 4.29 4.69
Federal funds purchased 5.61 5.61 6.09 3.93 0.00
Liabilities for borrowed money 5.68 5.55 6.36 3.74 3.26
Total interest-bearing
liabilities 4.74 4.59 4.78 4.29 4.67
- -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 1998 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,
1997, 1996 and 1995 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 1997 $ 101,825 $ 0 $ 0 $ 0 $ 0 $ 0 $ 59,889
1996 83,200 0 0 0 0 0 60,987
1995 77,850 0 0 0 0 0 19,873
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
1997 $ 0 $ 1,140 $ 6,081 $ 52,668 $ 0
1998 6,000 1,351 9,027 42,609 2,000
1999 2,000 875 6,939 10,059 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, 1997, the cash surrender value of the policies
was $ 718,961.
- -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. Not
applicable.
(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:
- -43-
(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.
(10) Material contracts. None.
(11) Statement re: computation of per share
earnings. Not applicable.
(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.
- -44-
(23) Consents of experts and counsel. Not
applicable.
(24) Power of attorney. Not applicable.
(27) Financial data schedule. Filed herewith.
(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 , 1998
Clyde H. Bookheimer CEO (Principal Executive
Officer)
/s/ Raleigh V. Barnett Director March , 1998
Raleigh V. Barnett
/s/ David L. Seiders Director March , 1998
David L. Seiders
/s/ John J. Kelso Director & Chairman March , 1998
John J. Kelso of the Board
/s/ Cecil B. Mellott Director March , 1998
Cecil B. Mellott
/s/ Robert C. Snyder Director & Vice- March , 1998
Robert C. Snyder Chairman
/s/ Ellis L. Yingling Director March , 1998
Ellis L. Yingling
/s/ Clair R. Miller Director March ____, 1998
Clair R. Miller
- -46-
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.