FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2002
Commission file number: 33-850626
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 July 25, 2002
(Common stock, .625 par value) 492,770
FULTON BANCSHARES CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets - June 30, 2002
and December 31, 2001 4
Condensed consolidated statements of income - three months
ended June 30, 2002 and 2001 5
Condensed consolidated statements of comprehensive income -
three months ended June 30, 2002 and 2001 6
Condensed consolidated statements of income - six
months ended June 30, 2002 and 2001 7
Condensed consolidated statements of comprehensive income -
six months ended June 30, 2002 and 2001 8
Condensed consolidated statements of cash flows - six months
ended June 30, 2002 and 2001 9
Notes to condensed consolidated financial statements 10 - 12
Management's discussion and analysis of financial
condition and results of operations 13 - 17
PART II - OTHER INFORMATION 18
Signatures 19
Exhibits 20 -22
PART I - FINANCIAL INFORMATION
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31
2002 2001*
(Unaudited)
(000 Omitted)
ASSETS
Cash and due from banks $ 4,677 $ 5,529
Available-for-sale securities 37,694 30,799
Federal Reserve, Atlantic Central Bankers Bank,
Federal Home Loan Bank, at cost which
approximates market 868 1,101
Loans, net of allowance for loan losses 104,282 103,656
Bank building, equipment, furniture & fixtures, net 3,938 3,674
Other real estate owned 157 83
Accrued interest/dividends receivable 1,050 903
Cash surrender value of life insurance 4,541 4,431
Other assets 711 679
Total assets $ 157,918 $ 150,855
LIABILITIES
Deposits:
Noninterest-bearing deposits $ 13,312 $ 13,486
Interest-bearing deposits:
Savings deposits 28,216 29,230
Time deposits 83,373 74,322
Total deposits 124,901 117,038
Accrued interest payable 392 425
Other borrowed money 15,750 17,325
Other liabilities 972 823
Total liabilities 142,015 135,611
STOCKHOLDERS' EQUITY
Capital stock, common, par value - $ 0.625;
4,000,000 shares authorized; 492,770
shares issued and outstanding at June 30,
2002 and December 31, 2001 310 310
Surplus 2,051 2,051
Retained earnings 13,691 13,036
Net unrealized gains/(losses) available-for-sale
securities ( 59) ( 63)
Treasury stock: 2,230 shares, at cost ( 90) ( 90)
Total stockholders' equity 15,903 15,244
Total liabilities and stockholders'
equity $ 157,918 $ 150,855
* Condensed from audited financial statements
The accompanying notes are an integral part of these
condensed financial statements.
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
(000 Omitted)
Interest & Dividend Income $ 1,918 $ 2,188
Interest & fees on loans
Interest & dividends on investment securities:
U.S. Government securities 309 169
Obligations of state & political
subdivisions 26 32
Interest on federal funds sold 5 31
Other interest & dividend income 317 132
Total interest & dividend income 2,575 2,552
Interest Expense
Interest on deposits 906 1,147
Interest on federal funds purchased 1 1
Interest on other borrowed money 225 225
Total interest expense 1,132 1,373
Net interest income before provision
for loan losses 1,443 1,179
Provision for loan losses 110 0
Net interest income after provision for loan losses 1,333 1,179
Other Income
Service charges on deposit accounts 48 44
Other fee income 36 24
Other non-interest income 77 74
Securities gains (losses) 0 17
Total other income 161 159
Other Expense
Salaries and employee benefits 411 369
Fixed asset expenses (including depreciation) 190 180
FDIC insurance premiums 5 5
Other noninterest expenses 327 300
Total other expenses 933 854
Net income before income taxes 561 484
Applicable income taxes 122 108
Net income $ 439 $ 376
Weighted average number of shares outstanding 492,770 492,745
Net income per share $ .89 $ .76
Cash dividends declared per share .22 .20
The accompanying notes are an integral part of these
condensed financial statements.
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
Net income $ 439 $ 376
Gross unrealized gain (loss) on
investments available for sale,
net of tax 170 ( 107)
Reclassification adjustment for gains
(losses) included in net
income, net of tax 0 11
Net unrealized gain (loss) on
investments available for sale,
net of tax 170 ( 96)
Comprehensive income $ 609 $ 280
The accompanying notes are an integral part of these
condensed financial statements.
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
(000 Omitted)
Interest & Dividend Income $ 3,850 $ 4,423
Interest & fees on loans
Interest & dividends on investment
securities:
U.S. Government securities 487 361
Obligations of state & political
subdivisions 52 76
Interest on federal funds sold 5 31
Other interest & dividend income 624 226
Total interest & dividend income 5,018 5,117
Interest Expense
Interest on deposits 1,739 2,259
Interest on federal funds purchased 1 1
Interest on other borrowed money 456 498
Total interest expense 2,196 2,758
Net interest income before
provision for loan losses 2,822 2,359
Provision for loan losses 125 15
Net interest income after provision for
loan losses 2,697 2,344
Other Income
Service charges on deposit accounts 91 87
Other fee income 82 55
Other non-interest income 144 130
Securities gains (losses) 1 26
Total other income 318 298
Other Expense
Salaries and employee benefits 859 774
Fixed asset expenses (including
depreciation) 377 365
FDIC insurance premiums 10 10
Other noninterest expenses 623 563
Total other expenses 1,869 1,712
Net income before income taxes 1,146 930
Applicable income taxes 273 221
Net income $ 873 $ 709
Weighted average number of shares
outstanding 492,770 492,745
Net income per share $ 1.77 $ 1.44
Cash dividends declared per share .44 .40
The accompanying notes are an integral part of these
condensed financial statements.
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
Net income $ 873 $ 709
Gross unrealized gain (loss) on
investments available for sale,
net of tax 3 ( 7)
Reclassification adjustment for gains
(losses) included in net
income, net of tax 1 17
Net unrealized gain (loss) on investments
available for sale, net of tax 4 10
Comprehensive income $ 877 $ 719
The accompanying notes are an integral part of these
condensed financial statements.
FULTON BANCSHARES, CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2002 and 2001
(UNAUDITED)
2002 2001
Cash flows from operating activities:
Net income $ 873 $ 709
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 164 180
Provision for loan losses 125 15
Gain on sale - Securities ( 1) ( 26)
Gain on sale - OREO ( 9) 0
Other - Net ( 174) ( 111)
Net cash provided by operating activities 978 767
Cash flows from investing activities:
Purchase of investment securities -
Available-for-sale ( 13,438) ( 12,078)
Redemption of Federal Home Loan Bank Stock 233 421
Sales of available-for-sale securities 601 1,703
Maturities of available-for-sale securities 5,948 9,498
Net (increase) in loans ( 993) ( 1,942)
Net (increase) in federal funds sold 0 ( 1,325)
Proceeds from sale of OREO 175 0
Purchases of & deposits on bank premises and
equipment - net ( 427) ( 96)
Net cash provided (used) by investing activities ( 7,901) ( 3,802)
Cash flows from financing activities:
Net increase (decrease) in deposits 7,863 7,905
Dividends paid ( 217) ( 197)
Net increase (decrease) in other borrowed money ( 1,575) ( 5,000)
Net cash provided (used) by financing activities 6,071 2,078
Net increase (decrease) in cash and cash
equivalents ( 852) ( 327)
Cash and cash equivalents, beginning balance 5,529 4,276
Cash and cash equivalents, ending balance $ 4,677 $ 3,949
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest $ 2,229 $ 2,335
Income taxes 377 266
Supplemental schedule of noncash investing and
financing activities:
Change in net unrealized gain on investments
available for sale (net of deferred taxes) 4 10
The accompanying notes are an integral part of these
condensed financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)
Review of Interim Financial Statements
The condensed consolidated financial statements as of and for
the three and six months ended June 30, 2002 and 2001 have
been reviewed by independent certified public accountants.
Their report on the review is attached as Exhibit 99 to the
10-Q filing.
Note 1. Basis of Presentation
The financial information presented at and for the three and
six months ended June 30, 2002 and 2001 is unaudited.
Information presented at December 31, 2001 is condensed from
audited year-end financial statements. However, unaudited
information reflects all adjustments (consisting solely of
normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of the
financial position, results of operations and cash flows for
the interim period.
Note 2. Principles of Consolidation
The consolidated financial statements include the accounts of
the corporation and its wholly-owned subsidiaries, Fulton
County National Bank & Trust Company and the Fulton County
Community Development Corporation. All significant
intercompany transactions and accounts have been eliminated.
Note 3. Cash Flows
For purposes of the statements of cash flows, the corporation
has defined cash and cash equivalents as those amounts
included in the balance sheet captions "cash and due from
banks" and "federal funds sold". As permitted by Statement
of Financial Accounting Standards No. 104, the corporation
has elected to present the net increase or decrease in
deposits in banks, loans and time deposits in the statements
of cash flows.
Note 4. Federal Income Taxes
For financial reporting purposes the provision for loan
losses charged to operating expense is based on management's
judgment, whereas for federal income tax purposes, the amount
allowable under present tax law is deducted. Additionally,
certain expenses are charged to operating expense in the
period the liability is incurred for financial reporting
purposes, whereas for federal income tax purposes, these
expenses are deducted when paid. As a result of these timing
differences, deferred income taxes are provided in the
financial statements. Federal income taxes were computed
after reducing pretax accounting income for nontaxable
municipal and loan income.
Note 5. Other Commitments
In the normal course of business, the Corporation makes
various commitments and incurs certain contingent liabilities
which are not reflected in the accompanying financial
statements. These commitments include various guarantees and
commitments to extend credit and the Corporation does not
anticipate any losses as a result of these transactions.
Note 6. Earnings Per Share of Common Stock
Earnings per share of common stock were computed based on an
average of 492,770 shares for the quarter ended June 30, 2002
and 492,745 shares for the quarter ended June 30, 2001.
Note 7. Investment Securities
The carrying amounts of investment securities and their
approximate fair values at March 31, 2002 were as follows:
Gross Gross
Amortized Unrealized Unrealized
Cost Gains (Losses) Fair Value
Debt and equity securities available for sale:
FNMA/FHLMC non -
cumulative
preferred stocks $ 13,310,382 $ 60,390 ($ 452,932) $ 12,917,840
State & municipal
securities 2,300,302 48,349 ( 55,128) 2,293,523
U.S. Government agencies 15,476,140 207,821 0 15,683,961
Mortgage-backed securities 5,568,484 43,362 ( 6,494) 5,605,352
Corporate bonds 997,249 73,301 0 1,070,550
Equity securities 132,000 3,700 ( 12,500) 123,200
$ 37,784,557 $ 436,923 ($ 527,054) $ 37,694,426
There were no securities categorized "Held-to-maturity" or
"Trading" at June 30, 2002.
Note 8. Comprehensive Income
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting of Comprehensive Income", became effective for
fiscal years and interim reporting periods beginning after
December 15, 1997.
Comprehensive income is defined as the change in equity
from transactions and other events from nonowner sources.
It includes all changes in equity except those resulting
from investments by owners and distributions to owners.
Consequently, a "Statement of Comprehensive Income" has
been included in this filing.
Note 9. Correction of Error
During the third quarter 2001, an error was identified in
the premium/discount amortization on investments purchased
in 1997. As a result, the following changes were needed to
the June 30, 2001 report:
As
Originally As
Reported Change Adjusted
Statement of Income -
3 months ended June 30, 2001
Total interest and dividend income $ 2,490 $ 62 $ 2,552
Net interest income 1,117 62 1,179
Net income before income taxes 422 62 484
Applicable income taxes 87 21 108
Net income per share .68 .08 .76
Statement of Income -
3 months ended June 30, 2001
Total interest and dividend income $ 5,066 $ 51 $ 5,117
Net interest income 2,308 51 2,359
Net income before income taxes 879 51 930
Applicable income taxes 204 17 221
Net income 675 34 709
Net income per share 1.37 .07 1.44
FULTON BANCSHARES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Net after tax income for the first six months of 2002 was
$ 873,000 compared to $ 709,000 for the same period in 2001,
representing an increase of $ 164,000, or 23.1%. Net income on an
adjusted per share basis for the first six months of 2002 was
$ 1.77, an increase of $ .33 from the $ 1.44 per share realized
during the six months ended June 30, 2001.
RESULTS OF OPERATIONS
Second Quarter 2002 vs. Second Quarter 2001
Interest income for the second quarter of 2002 was $ 2,575,000
compared with $ 2,552,000 earned during the same period in 2001,
for an increase of $ 23,000, or 0.9%. The increase was due
primarily to a higher average balance of investments, which
typically produce lower yields than loans, in 2002 compared with
the same period in 2001. Management expects average rates earned
for the rest of 2002 to increase slowly over the rest of 2002.
Interest expense for the second quarter of 2002 was
$ 1,132,000, a decrease of $ 241,000, or 17.6% over the $ 1,373,000
incurred for the same period in 2001. The decrease was due
primarily to a decrease in interest rates paid on deposits and
short-term borrowings. Management expects average rates paid for
the rest of 2002 to increase slowly over the rest of 2002.
Net interest income for the second quarter of 2002 totaled
$ 1,143,000, up $ 264,000, or 22.4%, from the second quarter of
2001.
Six Months 2002 vs. Six Months 2001
Interest income for the first six months of 2002 was
$ 5,018,000 compared with $ 5,117,000 for the six months ended June
30, 2001, for a decrease of $ 99,000, or 1.9%. The decrease was
due primarily to a significant decrease in interest rates earned on
loans and investments and a higher average balance of investments,
which typically produce lower yields than loans, in 2002 compared
with the same period in 2001. Management expects average rates
paid for the rest of 2002 to increase slowly over the rest of 2002.
Interest expense for the first six months of 2002 was
$ 2,196,000, a decrease of $ 562,000, or 20.4% over the $ 2,758,000
incurred for the same period in 2001. The decrease was due
primarily to a decrease in interest rates paid on deposits and
short-term borrowings. Management expects average rates paid for
the rest of 2002 to increase slowly over the rest of 2002.
NET INTEREST MARGIN
The net interest margin for the first six months of 2002 was
4.09% compared with 3.74% for the first six months of 2001.
Liquidity and interest rate risk are continuously monitored through
Asset-Liability Committee reports. Management plans to protect its
net interest margin by competitively pricing loans and deposits and
by structuring interest-earning assets and liabilities in such a
way that they can be repriced in response to changes in market
interest rates.
NON-INTEREST INCOME
Second Quarter 2002 vs. Second Quarter 2001
Second quarter 2002 non-interest income increased to $ 161,000
from $ 159,000, or 1.3%. Service charges on deposit accounts
increased $ 4,000, or 9.1%. Other fee income increased $ 12,000,
or 50.0%, primarily as a result of instituting ATM surcharges.
Other non-interest income was $ 77,000 and $ 74,000 for the second
quarter 2002 and 2001, respectively. Securities gains totaling
$ 17,000 were reported for the second quarter of 2001 while no
securities gains or losses were reported for the second quarter
2002.
Six Months 2002 vs. Six Months 2001
Non-interest income for the first six months of 2002 and the
same period in 2001 was $ 318,000 and 298,000, respectively.
Service charges on deposit accounts increased $ 4,000, or 4.6%.
Other fee income increased $ 27,000, or 49.1%, primarily as a
result of instituting ATM surcharges. Other non-interest income
increased $14,000, or 10.8%, primarily due to increased earnings on
cash surrentder value of director/officer life insurance and
$ 9,000 gain on sale of OREO reported in 2002. Securities gains
totaling $ 1,000 were reported for the first six months of 2002
compared with $ 26,000 for the same period in 2001.
NON-INTEREST EXPENSES
Second Quarter 2002 vs. Second Quarter 2001
Non-interst expenses for the second quarter of 2002 totaled
$ 933,000, an increase of $ 79,000, or 9.3%, over the $ 854,000 for
the second quarter of 2001. Salaries and employee-related expenses
were up $ 42,000, or 11.4%, primarily due to the addition of
personnel to staff a branch office opened in early February, 2002,
and merit pay increases. Fixed asset expenses increased $ 10,000,
or 5.6%, primarily due to increased equipment and building
maintenance costs and depreciation for the addition of the new
full-service banking facility, which were partially offset by
reduced depreciation expense on assets that became fully
depreciated at the end of 2001. Other non-interest expenses
increased by $ 27,000, or 9.0%, due to increases in advertising and
promotion costs, OCC assessments, data processing, PA shares tax,
telephone, and other operating expenses.
Six Months 2002 vs. Six Months 2001
Non-interst expenses for the first six months of 2002 totaled
$ 1,869,000, an increase of $ 157,000, or 9.2%, over the
$ 1,712,000 for the same period of 2001. Salaries and employee-
related expenses were up $ 85,000, or 9.9%, primarily due to the
addition of personnel to staff a branch office opened in early
February, 2002, and merit pay increases. Fixed asset expenses
increased $ 12,000, or 3.3%, primarily due to increased equipment
and building maintenance costs and depreciation for the addition of
the new full-service banking facility, which were partially offset
by reduced depreciation expense on assets that became fully
depreciated at the end of 2001. Other non-interest expenses
increased by $ 60,000, or 10.7%, due to increases in advertising
and promotion costs, OCC assessments, data processing, PA shares
tax, telephone, and other operating expenses.
INCOME TAXES
The income tax provision for the second quarter of 2002 was
$ 122,000 compared with $ 108,000 for the second quarter of 2001.
The effective income tax rate was 23.8% for the six months of 2002
and 2001, based on tax expense of $ 273,000 and $ 221,0000,
respectively.
PROVISION FOR LOAN LOSSES
A $ 125,000 provision for loan losses was made for the first
six months of 2002 compared with $ 15,000 for the first six months
of 2001. The provisions were made based on management's evaluation
of the reserve for possible loan losses at June 30, 2002 and 2001.
A summary of the allowance for loan losses is as follows:
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(In 000's)
June 30, 2002 June 30, 2001
Allowance for loan losses
Beginning of period $ 845 $ 847
Loans charged-off during the period:
Real estate loans 0 0
Installment loans 33 9
Commercial and all other loans 3 0
Total charge-offs 36 9
Recoveries of loans previously charged-off:
Real estate loans 0 0
Installment loans 3 13
Commercial and all other loans 0 2
Total recoveries 3 15
Net loans (charged-off) recovered ( 33) 6
Provision for loan losses charged to
operations 125 15
Allowance for loan losses - end of period $ 937 $ 868
Loans 90 days or more past due (still accruing interest) and
those on nonaccrual status were as follows at June 30:
NONPERFORMING LOANS
(In 000's)
90 Days or More Past
Due Nonaccrual Status
2002 2001 2002 2001
Real estate loans $ 612 $ 153 $ 87 $ 268
Installment loans 26 38 0 0
Commercial and all other loans 0 13 0 53
Total loans $ 638 $ 204 $ 87 $ 321
There were no restructured loans for any of the time periods
set forth above.
FINANCIAL CONDITION
ASSETS
Total assets on June 30, 2002 were $ 157,918,000 compared with
$ 150,855,000, on December 31, 2001, an increase of 4.7%.
Management intends to contain growth and concentrate on
maintaining adequate profit margins. Net loans on June 30,
2002 stood at $ 104,282,000, an increase of 0.6% from
$ 103,656,000 on December 31, 2001. The loan loss reserve at
June 30, 2002 was $ 937,000 and is considered adequate, in
management's judgment, to absorb possible loan losses on
existing loans.
LIABILITIES
Total deposits increased 6.7% to $ 124,901,000 as of June 30,
2002 compared with $ 117,038,000 at December 31, 2001.
Noninterest-bearing demand deposits and interest-bearing
savings deposits decreased 1.3% and 3.5% respectively, while
interest-bearing time deposits increased 12.2%.
CAPITAL
Total equity capital as of June 30, 2002 was $ 15,903,000,
representing 10.1% of total assets, an increase of $ 659,000
from the $ 15,244,000 reported on December 31, 2001.
Accumulated earnings for the first six months of 2002 were
partially offset by dividends declared and paid of $ 217,000.
On July 20, 2000, the Board of Directors announced the
approval of a plan to purchase, in open and privately
negotiated transactions, up to 2% of its shares of outstanding
common stock. As of June 30, 2002, the company had
repurchased 2,230 shares, representing 0.45% of its
outstanding common stock. It is the intention of management
and the Board of Directors to continue to pay a fair return on
the stockholders' investment while retaining adequate earnings
to allow for continued growth.
REGULATORY CAPITAL
The Company maintains capital ratios that are well above the
minimum total capital levels required by federal regulatory
authorities, including risk-based capital guidelines. A comparison
of Fulton Bancshares Corporation's capital ratios to regulatory
minimum requirements at June 30, 2002 is as follows:
Fulton Regulatory
Bancshares Minimum
Corporation Requirements
Leverage ratio 10.2% 4.0%
Risk based capital ratios:
Tier I (core capital) 14.3% 4.0%
Combined tier I and tier II (core
capital plus allowance for loan
losses) 15.1% 8.0%
BALANCE SHEET ANALYSIS
The following table highlights the changes in the balance
sheet. Since quarter-end balances can be distorted by one-day
fluctuations, an analysis of changes in the quarterly averages is
provided to show balance sheet trends.
BALANCE SHEET ANALYSIS
(In 000's)
Second Second
Quarter 2002 Quarter 2001
ASSETS
Federal funds sold $ 1,194 $ 2,852
Securities available for sale 36,708 21,348
Other investments 876 1,177
Loans 104,376 104,058
Total interest-earning assets 143,154 129,435
Cash and due from banks 3,891 3,744
Bank premises and equipment 3,862 3,583
All other assets 6,519 5,466
Allowance for loan losses ( 869) ( 875)
Total assets $ 156,557 $ 141,353
LIABILITIES
Interest-bearing deposits in domestic
offices $ 107,969 $ 98,618
Federal funds purchased 289 51
Other short-term borrowings 15,086 15,000
Total interest-bearing liabilities 123,344 113,669
Noninterest-bearing deposits 16,140 12,185
All other liabilities 1,409 941
Total liabilities 140,893 126,795
STOCKHOLDERS' EQUITY
Common stockholders' equity 15,812 14,641
Net unrealized holding losses, net of tax ( 148) ( 83)
Total stockholders' equity 15,664 14,558
Total liabilities and stockholders'
equity $ 156,557 $ 141,353
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Referred to Description of
Item 601 of Regulation S-K Exhibit
99 Report of Independent
Accountant on Interim
Financial Statements
99.1 Certification of Chief
Executive Officer
pursuant to 18 U.S.C.
Section 1350
99.2 Certification of Chief
Financial Officer
pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
/s/Clyde H. Bookheimer
Clyde H. Bookheimer,
President and Chief
Executive Officer
Date July 31, 2002 /s/Doriann Hoffman
Doriann Hoffman,
Vice President
(Principal Financial
Officer)
EXHIBIT 99
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
Fulton Bancshares Corporation and Subsidiaries
McConnellsburg, Pennsylvania
We have reviewed the accompanying consolidated balance sheet
of Fulton Bancshares Corporation and Subsidiaries as of June 30, 2002
and the related condensed consolidated statements of income,
comprehensive income, and cash flows for the interim periods ended
June 30, 2002 and 2001. These condensed consolidated financial
statements are the responsibility of the corporation's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public Accountants.
A review of interim financial information consists principally of
applying analytical procedures to financial data and making inquiries
of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the condensed consolidated
financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
/s/ Smith Elliott Kearns & Company, LLC
SMITH ELLIOTT KEARNS & COMPANY, LLC
Chambersburg, Pennsylvania
July 31, 2002
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OR THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fulton Bancshares
Corporation (the "Company") on Form 10-Q for the period ending
June 30, 2002 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Clyde H. Bookheimer, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-
Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the final condition and results of
operations of the Company.
/s/ Clyde H. Bookheimer
Chief Executive Officer
July 31, 2002
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OR THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fulton Bancshares
Corporation (the "Company") on Form 10-Q for the period ending June
30, 2002 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Doriann Hoffman, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. section 1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the final condition and results of operations of
the Company.
/s/Doriann Hoffman
Chief Financial Officer
July 31, 2002
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