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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 March 31, 2004
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 April 30, 2004
- ----------------------------------- -------------------------------
(Common stock, .625 par value) 492,800
Page 1 of 25
FULTON BANCSHARES CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets - March 31, 2004
and December 31, 2003 4
Condensed consolidated statements of income - three months
ended March 31, 2004 and 2003 5
Condensed consolidated statements of comprehensive income -
three months ended March 31, 2004 and 2003 6
Condensed consolidated statements of cash flows - three
months ended March 31, 2004 and 2003 7
Notes to condensed consolidated financial statements 8 - 9
Management's discussion and analysis of financial
condition and results of operations 10 - 15
PART II - OTHER INFORMATION 17
Signatures 18
Exhibits 19 - 25
Page 2 of 25
PART I - FINANCIAL INFORMATION
Page 3 of 25
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2004 2003*
(Unaudited)
(000 Omitted)
ASSETS
Cash and due from banks $ 5,250 $ 3,853
Available-for-sale securities 30,676 29,680
Federal Reserve, Atlantic Central Bankers Bank,
Federal Home Loan Bank, at cost which
approximates market 1,286 1,401
Loans, net of allowance for loan losses 99,934 101,389
Bank building, equipment, furniture & fixtures, net 3,688 3,759
Accrued interest/dividends receivable 728 657
Cash surrender value of life insurance 5,282 5,230
Other assets 1,536 1,775
--------- -----------
Total assets $ 148,380 $ 147,744
========= ===========
LIABILITIES
Deposits:
Noninterest-bearing deposits $ 14,219 $ 13,925
Interest-bearing deposits:
Savings deposits 39,015 36,131
Time deposits 59,570 61,069
--------- -----------
Total deposits 112,804 111,125
Accrued interest payable 166 255
Other borrowed money 17,150 18,825
Other liabilities 1,347 1,261
--------- -----------
Total liabilities 131,467 131,466
--------- -----------
STOCKHOLDERS' EQUITY
Capital stock, common, par value - $ 0.625;
4,000,000 shares authorized; 495,000 shares
issued 309 309
Surplus 2,051 2,051
Retained earnings 14,746 14,576
Net unrealized gains/(losses) available - for-sale
securities ( 105) ( 570)
Treasury stock: 2,185 and 2,185 shares,
respectively, at cost ( 88) ( 88)
--------- -----------
Total stockholders' equity 16,913 16,278
--------- -----------
Total liabilities and
stockholders' equity $ 148,380 $ 147,744
========= ===========
* Condensed from audited financial statements
The accompanying notes are an integral part of these
condensed financial statements.
Page 4 of 25
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
2004 2003
(000 Omitted)
Interest & Dividend Income $ 1,608 $ 1,798
Interest & fees on loans
Interest & dividends on investment
securities:
U.S. Government securities 67 140
Obligations of state & political
subdivisions 52 23
Other interest & dividend income 189 344
--------- ---------
Total interest & dividend income 1,916 2,305
--------- ---------
Interest Expense
Interest on deposits 498 575
Interest on other borrowed money 236 274
--------- ---------
Total interest expense 734 849
--------- ---------
Net interest income before
provision for loan losses 1,182 1,456
Provision for loan losses 0 30
--------- ---------
Net interest income after provision
for loan losses 1,182 1,426
--------- ---------
Other Income
Service charges on deposit accounts 45 55
Other fee income 31 74
Other noninterest income 83 65
Securities gains (losses) 4 0
--------- ---------
Total other income 163 194
--------- ---------
Other Expense
Salaries and employee benefits 431 398
Fixed asset expenses (including
depreciation) 212 216
FDIC insurance premiums 4 5
Other noninterest expenses 367 350
--------- ---------
Total other expenses 1,014 969
--------- ---------
Net income before income taxes 331 651
Applicable income taxes 48 144
--------- ---------
Net income $ 283 $ 507
========= =========
Weighted average number of shares
Outstanding $ 492,815 $ 492,810
Net income per share $ .57 $ 1.03
Cash dividends declared per share $ .23 $ 0.23
The accompanying notes are an integral part of these
condensed financial statements.
Page 5 of 25
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2004 and 2003
(UNAUDITED)
2004 2003
Net income $ 283 $ 507
Unrealized gain (loss) on investments
available for sale, net of tax 465 ( 1)
Reclassification adjustment for gains
(losses) included in net income 4 0
------- -------
Comprehensive income $ 752 $ 506
======= =======
The accompanying notes are an integral part of these
condensed financial statements.
Page 6 of 25
FULTON BANCSHARES, CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2004 and 2003
(UNAUDITED)
2004 2003
Cash flows from operating activities:
Net income $ 283 $ 507
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 108 91
Provision for loan losses 0 30
Other - Net ( 158) ( 379)
--------- --------
Net cash provided by operating activities 233 249
--------- --------
Cash flows from investing activities:
Purchase of investment securities -
Available-for-sale ( 3,523) ( 1,995)
FHLB stock redemption/(purchase) ( 115) ( 62)
Sales of available-for-sale securities 1,004 0
Maturities of available-for-sale securities 2,213 6,747
Net (increase) decrease in loans 1,455 346
Purchases of & deposits on bank premises
and equipment - net ( 18) ( 43)
Proceeds - Sale of OREO 27 0
--------- --------
Net cash provided (used) by investing activities 1,273 4,993
--------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 1,679 ( 2,828)
Dividends paid ( 113) ( 113)
Net increase (decrease) in other borrowed money ( 1,675) ( 3,525)
--------- --------
Net cash provided (used) by financing activities ( 109) ( 6,466)
--------- --------
Net increase (decrease) in cash and cash
equivalents 1,397 ( 1,224)
Cash and cash equivalents, beginning balance 3,853 5,214
--------- --------
Cash and cash equivalents, ending balance $ 5,250 $ 3,990
========= ========
Supplemental disclosure of cash flows
information:
Cash paid during the period for:
Interest $ 823 $ 966
Income taxes 0 0
Supplemental schedule of noncash investing and
financing activities:
Change in net unrealized gain on investments
available for sale (net of deferred taxes) 465 ( 1)
Transfer to OREO 0 0
The accompanying notes are an integral part of these
condensed financial statements.
Page 7 of 25
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
Review of Interim Financial Statements
The condensed consolidated financial statements as of and for the
three months ended March 31, 2004 and 2003 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 months ended
March 31, 2004 and 2003 is unaudited. Information presented at
December 31, 2003 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.
Page 8 of 25
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. Investment Securities
The carrying amounts of investment securities and their approximate
fair values at March 31, 2004 were as follows:
Amortized Gross Gross Fair Value
Cost Unrealized Unrealized
Gains (Losses)
Debt securities available for sale:
FNMA/FHLMC non -
cumulative
preferred stocks $ 11,653,669 $ 0 ($ 322,244) $ 11,331,425
State & municipal
Securities 5,395,371 96,380 ( 5,292) 5,486,459
U.S. Government
Agencies 10,743,081 66,263 0 10,809,344
Mortgage-backed
Securities 2,911,313 7,128 ( 4,596) 2,913,845
Equity securities 132,000 5,400 ( 2,500) 134,900
------------ ------------ ----------- ------------
$ 30,835,434 $ 175,171 ($ 334,632) $ 30,675,973
============ ============ =========== ============
There were no securities categorized "Held-to-maturity" or "Trading" at
March 31, 2004.
Note 7. Comprehensive Income
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.
Page 9 of 25
FULTON BANCSHARES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Net after tax income for the first quarter of 2004 was $ 283,000 compared
to $ 507,000 for the same period in 2003, representing a decrease of $ 224,000,
or 44.2%. Net income on an adjusted per share basis for the first three months
of 2004 was $ 0.57 compared to $ 1.03 per share realized during the first
quarter of 2003.
INTEREST INCOME
Interest income for the first quarter of 2004 was $ 1,916,000 compared to
$ 2,305,000 earned during the same period in 2003, for a decrease of $ 389,000,
or 16.9%. The decrease was due primarily to a significant decrease in the
average balance of loans and investments in 2004 compared to the same period in
2003. Management expects moderate growth in the average balance of loans and
investments during the rest of 2004. Management also expects average rates
earned on loans and investments to increase slowly over the rest of 2004.
INTEREST EXPENSE
Interest expense for the first quarter of 2004 was $ 734,000, a decrease of
$ 115,000, or 13.5%. The decrease was due primarily to a significant decrease
in the average balance of time deposits, which typically pay higher yields, and
a decrease in interest rates paid on deposits and short-term borrowings.
Management expects to control growth in the average balance of time deposits and
concentrate on increasing noninterest-bearing demand deposits, interest-bearing
demand deposits and savings deposits. Management also expects average rates
paid on deposits to slowly increase over the rest of 2004.
NET INTEREST MARGIN
Net interest income is the difference between total interest income and
total interest expense. Interest income is generated through earning assets,
which include loans, deposits with other banks, and investments. Interest
income is dependent on many factors including the volume of earning assets;
level of interest rates; changes in interest rates; and volumes of nonperforming
loans. The cost of funds varies with the volume of funds necessary to support
earning assets; rates paid to maintain deposits; rates paid on borrowed funds;
and level of interest-free deposits.
The net interest margin for the first quarter of 2004 was 3.57% compared to
4.00% for the first quarter of 2003. Liquidity and interest rate risk are
continuously monitored through Asset-Liability Committee reports. Management
plans to protect its net interest margin by competitively pricing its loans and
deposits and by structuring interest-earning assets and liabilities so they can
be repriced in response to changes in market interest rates.
Page 10 of 25
NONINTEREST INCOME
First quarter 2004 noninterest income decreased to $ 163,000 from
$ 194,000, or 16.0%. Service charges on deposits decreased $ 10,000, or 18.2%,
primarily due to a decrease in overdraft charges. Other fee income decreased
$ 43,000, or 58.1%, primarily due to decreases in fee income on the sale of
mortgage loans to the Federal Home Loan Bank and fee income from a partnership
with a title insurance company. Other noninterest income increased $ 18,000, or
27.7%, primarily due to a $ 13,000 gain on sale of student loans and a $ 4,000
gain on sale of other real estate owned. Securities gains of $ 4,000 were
reported during the first quarter of 2004 while no securities gains or losses
were reported for the same period in 2003.
NONINTEREST EXPENSE
Noninterest expenses for the first quarter of 2004 totaled $ 1,014,000, an
increase of $ 45,000, or 4.6%, over the $ 969,000 for the first quarter of 2003.
Salaries and employee-related expenses increased $ 33,000, or 8.3%, primarily
due to merit pay increases and temporary full-time training of part-time staff..
Fixed asset expenses decreased less than 1.0%. Other noninterest expenses
increased by $ 16,000, or 4.5%, primarily due to increases in data processing,
deferred director compensation, printing and supplies, and repossession and
collections costs.
INCOME TAXES
The income tax provision for the first quarter of 2004 was $ 48,000
compared to $ 144,000 for the first quarter of 2003. Effective tax rates
(compared to the marginal federal income tax bracket of 34% applicable to each
period) were as follows:
Three Months Ended
March 31
2004 2003
14.5% 22.1%
Applicable income taxes changed between 2003 and 2004 because of changes in
pretax accounting income and taxable income. The decrease in the effective
income tax rate for 2004 was primarily due to a significant decrease in pretax
accounting income in which taxable income was reduced further by tax-exempt
interest, the dividends received deduction for FNMA/FHLMC preferred stock and
non-taxable cash surrender value of life insurance.
PROVISION FOR LOAN LOSSES
No provision for loan losses was made for the first three months of 2004
compared with $ 30,000 for the first three months of 2003. Provisions were
based on management's evaluation of the adequacy of the reserve for possible
loan losses at March 31, 2004 and 2003 and represents amounts deemed necessary
to maintain the reserve at the appropriate level based on the quality of the
loan portfolio and economic conditions. Management intends to maintain the
reserve at appropriate levels based on an ongoing evaluation of the loan
portfolio.
Page 11 of 25
A summary of the allowance for loan losses is as follows:
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(In 000's)
March 31, March 31,
2004 2003
Allowance for loan losses
Beginning of period $ 1,900 $ 1,031
--------- ---------
Loans charged-off during the period:
Real estate loans 0 0
Installment loans 12 7
Commercial and all other loans 0 0
--------- ---------
Total charge-offs 12 7
--------- ---------
Recoveries of loans previously charged-off:
Real estate loans 1 0
Installment loans 4 3
Commercial and all other loans 0 0
--------- ---------
Total recoveries 5 3
--------- ---------
Net loans (charged-off) recovered ( 7) ( 4)
Provision for loan losses charged to operations 0 30
--------- ---------
Allowance for loan losses - end of period $ 1,893 $ 1,057
========= =========
Loans 90 days or more past due (still accruing interest) and those on
nonaccrual status were as follows at March 31:
NONPERFORMING LOANS
(In 000's)
90 Days or More
Past Due and Still
Accruing Nonaccrual Status
2004 2003 2004 2003
Real estate loans $ 182 $ 1,269 $ 3,289 $ 1,515
Installment loans 0 11 75 0
Commercial and all other loans 0 1,151 771 37
-------- -------- -------- --------
Total loans $ 182 $ 2,431 $ 4,135 $ 1,552
======== ======== ======== ========
There were no restructured loans for any of the time periods set forth
above.
Page 12 of 25
The bank utilizes a comprehensive systematic review of its loan portfolio
on a quarterly basis in order to determine the adequacy of the allowance for
loan losses. Each quarter the loan portfolio is categorized into various pools
as follows:
Pool #1 Specific allowances for any individually identified
problem loans
Pool #2 Commercial
Pool #3 Residential real estate
Pool #4 Consumer demand and installment
Pool #5 Farm loans
Business lines of credit over $ 75,000, agribusiness borrowers with lending
relationships over $ 250,000 and commercial borrowers with lending relationships
over $ 500,000 are individually reviewed. Also, loans that are 90 days or more
past due or have been previously classified as substandard are individually
reviewed. Allocations to the allowance for loan losses are based upon
classifications assigned to those specific loans.
Loan classifications utilized are based on past experience and are as
follows:
Allowance Factors
Loss Charge-off
Doubtful 50%
Substandard 5%
Special Mention 1%
The remaining portion of the pools are evaluated as groups with allocations
made to the allowance based on historical loss experience, current and
anticipated trends in delinquencies, trends in volume and terms of loans,
concentrations of credit, and general economic conditions within the bank's
trading area. Management is not aware of any problem loans that are indicative
of trends, events, or uncertainties that would significantly impact operations,
liquidity, or capital.
FINANCIAL CONDITION
Assets
Total assets on March 31, 2004 were $ 148,380,000 compared to $ 147,744,000
at December 31, 2003, an increase of 0.4%. Management intends to contain growth
and concentrate on maintaining adequate profit margins. Net loans on March 31,
2004 stood at $ 99,934,000, a decrease of 1.4% from $ 101,389,000 on December
31, 2003. The loan loss reserve at March 31, 2004 was $ 1,893,000 and is
considered adequate, in management's judgment, to absorb possible loan losses on
existing loans.
Liabilities
Total deposits increased 1.5% to $ 112,804,000 as of March 31, 2004
compared with $ 111,125,000 at December 31, 2003. Noninterest-bearing demand
deposits increased 2.1% and interest-bearing savings deposits increased 8.0%,
while interest-bearing time deposits decreased 2.5%.
Page 13 of 25
Capital
Stockholders' equity was $ 16,913,000 at March 31, 2004 compared with
$ 16,278,000 at December 31, 2003, an increase of 3.90%. Accumulated earnings
and a $ 465,000 decrease in net unrealized losses (net of tax effect) for the
first quarter of 2004 were partially offset by dividends declared and paid of
$ 113,000. Total stockholders' equity represented 11.40% of total assets at
March 31, 2004. Cash dividends of $0.23 were paid the first quarter of 2004 and
2003. On July 20, 2000, the Board of Directors announced the approval of a plan
to purchase, in open market and privately negotiated transactions, up to 2% of
its shares of outstanding common stock. Additionally, on December 18, 2003, the
company announced the approval of a plan to purchase, in open market and
privately negotiated transactions, up to 1,000 shares of outstanding common
stock. As of March 31, 2004, the company had repurchased 2,185 shares,
representing 0.44% of its shares of 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 March 31, 2004 is as
follows:
Fulton Regulatory
Bancshares Minimum
Corporation Requirements
Leverage ratio 11.6% 4.0%
Risk based capital ratios:
Tier I (core capital) 16.0% 4.0%
Combined tier I and tier II (core
capital plus allowance for loan losses) 17.3% 8.0%
Page 14 of 25
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 Sheets Condensed
Average
First Quarter First Quarter
2004 2003
ASSETS
Federal funds sold $ 0 $ 0
Securities available for sale 30,530 36,868
Other investments 1,335 1,798
Loans 102,726 108,102
---------- -----------
Total interest-earning assets 134,591 146,768
Cash and due from banks 4,200 3,749
Bank premises and equipment 3,734 3,913
All other assets 6,468 5,987
Allowance for loan losses ( 1,901) ( 1,038)
---------- -----------
Total assets $ 147,092 $ 159,379
========== ===========
LIABILITIES
Interest-bearing deposits in
domestic offices $ 97,426 $ 97,081
Federal funds purchased 250 0
Other short-term borrowings 18,714 29,496
---------- -----------
Total interest-bearing
liabilities 116,390 126,577
Noninterest-bearing deposits 13,675 14,835
All other liabilities 426 1,058
---------- -----------
Total liabilities 130,491 142,470
---------- -----------
STOCKHOLDERS' EQUITY
Common stockholders' equity 16,923 16,638
Net unrealized holding losses, net of tax ( 322) 271
---------- -----------
Total stockholders' equity 16,601 16,909
---------- -----------
Total liabilities and
stockholders' equity $ 147,092 $ 159,379
========== ===========
CONTROLS AND PROCEDURES
The company's Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of the company's disclosure controls and procedures (as such
term is defined in Rules 13a-14(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) as of March 31, 2004. Based on such evaluation,
such officers have concluded that, as of March 31, 2004, the company's
disclosure controls and procedures are effective in alerting them on a timely
basis to material information relating to the company (including its
consolidated subsidiaries) required to be included in the company's periodic
filings under the Exchange Act.
CHANGES IN INTERNAL CONTROLS
There have not been any significant changes in the company's internal control
over financial reporting or in other factors that could significantly affect
such control during the first quarter of 2004.
Page 15 of 25
PART II - OTHER INFORMATION
Page 16 of 25
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
Item 601 of
Regulation S-K: Description of Exhibit:
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350
99 Report of Independent Accountant on Interim Financial
Statements
(b) Reports on Form 8-K
None
Page 17 of 25
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.
Date May 12, 2004 /s/Clyde H. Bookheimer
------------- ----------------------------------
Clyde H. Bookheimer,
President and Chief
Executive Officer
Date May 12, 2004 /s/Doriann Hoffman
------------- ----------------------------------
Doriann Hoffman, Vice
President (Chief
Financial Officer)
Page 18 of 25
Exhibit 31.1
CERTIFICATION
I, Clyde H. Bookheimer, President/CEO, certify, that:
1. I have reviewed this quarterly report on Form 10-Q of Fulton
Bancshares Corporation.
2. Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this quarterly report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this quarterly report based on such evaluation; and
(c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Page 19 of 25
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 12, 2004 By: /s/Clyde H. Bookheimer
------------- ----------------------------------
Clyde H. Bookheimer,
President and Chief
Executive Officer, Director
Page 20 of 25
Exhibit 31.2
CERTIFICATION
I, Doriann Hoffman, Vice President and CFO, certify, that:
1. I have reviewed this quarterly report on Form 10-Q of Fulton
Bancshares Corporation.
2. Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this quarterly report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this quarterly report based on such evaluation; and
(c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Page 21 of 25
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 12, 2004 By: /s/Doriann Hoffman
------------- ----------------------------------
Doriann Hoffman
Vice President and
Treasurer
(Chief Financial Officer)
Page 22 of 25
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF 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 March 31, 2004 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 financial condition and results of operations of the
Company.
/s/ Clyde H. Bookheimer
--------------------------------
Clyde H. Bookheimer
President and Chief Executive
Officer, Director
Dated: May 12, 2004
------------
Page 23 of 25
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF 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 March 31, 2004 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 financial condition and results of operations of the
Company.
/s/ DoriAnn Hoffman
-----------------------------------
DoriAnn Hoffman
Vice President and Treasurer
(Chief Financial Officer)
Dated: May 12, 2004
-------------
Page 24 of 25
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 March 31, 2004 and the related
consolidated statements of income and comprehensive income for the three and
nine month periods ended March 31, 2004 and 2003, and consolidated statements of
cash flows for the three months ended March 31, 2004 and 2003. These 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 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
May 10, 2004
Page 25 of 25