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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20459

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2004,

or

For the transition period from              to             

Commission File No. 0-10587

FULTON FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

(717) 291-2411

(Registrant’s telephone number, including area code)

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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $2.50 Par Value – 116,418,000 shares outstanding as of April 30, 2004.

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FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2004

INDEX

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Item 1. Financial Statements

FULTON FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands, except per-share data)

See Notes to Consolidated Financial Statements

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FULTON FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands, except per-share data)

See Notes to Consolidated Financial Statements

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FULTON FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Dollars in thousands, except per-share data)

See Notes to Consolidated Financial Statements

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FULTON FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

See Notes to Consolidated Financial Statements

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FULTON FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A – Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

NOTE B – Net Income Per Share

The Corporation’s basic net income per share is calculated as net income divided by the weighted average number of shares outstanding. For diluted net income per share, net income is divided by the weighted average number of shares outstanding plus the incremental number of shares added as a result of converting common stock equivalents, calculated using the treasury stock method. The Corporation’s common stock equivalents consist solely of outstanding stock options.

A reconciliation of the weighted average shares outstanding used to calculate basic net income per share and diluted net income per share follows:

NOTE C – Stock Dividend

The Corporation declared a 5% stock dividend on April 22, 2004, which will be paid on June 4, 2004 to shareholders of record on May 14, 2004. Since the market price of the Corporation’s stock will not adjust as a result of the stock dividend until subsequent to the filing of these financial statements, the stock dividend has not been recorded in shareholders’ equity and share and per-share information has not been restated. The following table provides share and per-share amounts reflecting the impact of the stock dividend:

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NOTE D – Disclosures about Segments of an Enterprise and Related Information

The Corporation does not have any operating segments which require disclosure of additional information. While the Corporation owns twelve separate banks, each engages in similar activities, provides similar products and services, and operates in the same general geographical area. The Corporation’s non-banking activities are immaterial and, therefore, separate information has not been disclosed.

NOTE E – Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (Statement 148). Statement 148 clarifies the accounting for options issued in prior periods when a company elects to transition from Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) accounting to Statement 123, “Accounting for Stock-Based Compensation” (Statement 123) accounting. It also requires additional disclosures with respect to accounting for stock-based compensation. Finally, Statement No. 148 amends Accounting Principles Board Opinion No. 28, “Interim Financial Reporting,” to require disclosure about those effects in interim financial information.

The Corporation has elected to continue application of APB 25 and related interpretations in accounting for its stock-based employee compensation plans and, accordingly, no compensation expense is reflected in net income. Had compensation cost for these plans been recorded consistent with the fair value provisions of Statements 123 and 148, the Corporation’s net income and net income per share would have been reduced to the following pro-forma amounts:

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NOTE F – Employee Benefit Plans

The Corporation maintains a defined benefit pension plan (Pension Plan) for certain employees. Contributions to the Pension Plan are actuarially determined and funded annually. Pension Plan assets are invested in money markets, fixed income securities, including corporate bonds, U.S. Treasury securities and common trust funds, and equity securities, including common stocks and common stock mutual funds. The Pension Plan has been closed to new participants, but existing participants continue to accrue benefits according to the terms of the plan. The Corporation expects to contribute approximately $2.6 million to the Pension Plan in 2004.

The Corporation currently provides medical and life insurance benefits to retired full-time employees who were employees of the Corporation prior to January 1, 1998. Full-time employees may become eligible for these discretionary benefits if they reach retirement while working for the Corporation. Benefits are based on a graduated scale for years of service after attaining the age of 40.

The net periodic benefit cost for the Corporation’s Pension Plan and Post-Retirement Plan, as determined by consulting actuaries, consisted of the following components for the quarters ended March 31:

NOTE G – New Accounting Standards

Variable Interest Entities: In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51”, which was revised in December 2003 (FIN-46). FIN-46 provides guidance on when to consolidate certain Variable Interest Entities (VIE’s) in the financial statements of the Corporation. VIE’s are entities in which equity investors do not have a controlling financial interest or do not have sufficient equity at risk for the entity to finance activities without additional financial support from other parties. Under FIN-46, a company must consolidate a VIE if the company has a variable interest that will absorb a majority of the VIE’s losses, if they occur, and/or receive a majority of the VIE’s residual returns, if they occur.

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The provisions of FIN-46 which relate to the Corporation’s investments in low and moderate income partnerships (LIH Investments) were effective as of December 31, 2003 for LIH Investments made by the Corporation after January 31, 2003 and March 31, 2004 for all other partnerships. Based on its review, the Corporation concluded that none of its LIH Investments met the criteria for consolidation and, as such, did not consolidate any LIH Investments as of March 31, 2004 or December 31, 2003.

LIH Investments continue to be amortized under the effective interest method over the life of the Federal income tax credits generated as a result of such investments, generally ten years. At March 31, 2004 and 2003, the Corporation’s LIH Investments totaled $43.9 million and $40.0 million, respectively. The net income tax benefit associated with these investments was $1.1 million and $1.0 million for the quarters ended March 31, 2004 and 2003, respectively.

Accounting for Certain Loans or Debt Securities Acquired in a Transfer: In December 2003, the Accounting Standards Executive Committee issued Statement of Position 03-3 (SOP 03-3), “Accounting for Certain Loans or Debt Securities Acquired in a Transfer”. SOP 03-3 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities acquired in a transfer, including business combinations, if those differences are attributable, at least in part, to credit quality.

SOP 03-3 is effective for loans or debt securities acquired in fiscal years beginning after December 15, 2004. The Corporation intends to adopt the provisions of SOP 03-3 effective January 1, 2005, and does not expect the initial implementation to have a material effect on the Corporation’s consolidated financial statements.

Application of Accounting Principles to Loan Commitments. In March 2004, the SEC staff issued Staff Accounting Bulletin No. 105 (SAB 105), “Application of Accounting Principles to Loan Commitments”. SAB 105 provides specific guidance on fair value measurement of mortgage loan commitments that are accounted for as derivatives. SAB 105 must be applied to mortgage loan commitments that are accounted for as derivatives entered into after March 31, 2004. The Corporation does not expect SAB 105 to have a material effect on its consolidated financial statements.

NOTE H – Reclassifications

Certain amounts in the 2003 consolidated financial statements and notes have been reclassified to conform to the 2004 presentation.

NOTE I – Acquisition of Resource Bankshares Corporation

On April 1, 2004, the Corporation completed its acquisition of Resource Bankshares Corporation (Resource), of Virginia Beach, Virginia. Resource was an $885 million financial holding company whose primary subsidiary was Resource Bank, which operates six community banking offices in Newport News, Chesapeake, Herndon, Virginia Beach, and Richmond, VA and 14 loan production and residential mortgage offices in Virginia, North Carolina, Maryland and Florida.

Under the terms of the merger agreement, each of the approximately 6.1 million shares of Resource’s common stock was exchanged for 1.4667 shares of the Corporation’s common stock. In addition, each of the options to acquire Resource’s stock was converted to options to purchase the Corporation’s stock. As a result of the acquisition, Resource was merged into the Corporation and Resource Bank became a wholly owned subsidiary.

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The acquisition is being accounted for as a purchase. Purchase accounting requires the Corporation to allocate the total purchase price of the acquisition to the assets acquired and liabilities assumed, based on their respective fair values at the acquisition date, with any remaining acquisition cost being recorded as goodwill. Resulting goodwill balances are then subject to an impairment review on at least an annual basis. The results of Resource’s operations will be included in the Corporation’s financial statements prospectively from the date of the acquisition.

The total purchase price of approximately $200 million includes the value (based on the price as of the announcement date) of the Corporation’s stock issued, Resource options converted, and certain acquisition related costs. The carrying value of the net assets of Resource as of April 1, 2004 was approximately $60 million and, accordingly, the purchase price exceeds the carrying value of the net assets by $140 million. The total purchase price will be allocated to the net assets acquired, based on fair market values. The Corporation expects to record a core deposit intangible asset and goodwill as a result of the acquisition accounting. The Corporation is in the process of completing its fair value analysis and will determine the allocation of the purchase price to the fair value of net assets acquired and goodwill during the second quarter of 2004.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Management’s Discussion) concerns Fulton Financial Corporation (the Corporation), a financial holding company incorporated under the laws of the Commonwealth of Pennsylvania in 1982, and its wholly-owned subsidiaries. This discussion and analysis should be read in conjunction with the consolidated financial statements and other financial information presented in this report.

FORWARD-LOOKING STATEMENTS

The Corporation has made, and may continue to make, certain forward-looking statements with respect to its acquisition and growth strategies, management of net interest income and margin, the ability to realize gains on equity investments, allowance and provision for loan losses, expected levels of certain non-interest expenses and the liquidity position of the Corporation and Parent Company. The Corporation cautions that these forward-looking statements are subject to various assumptions, risks and uncertainties. Because of the possibility of changes in these assumptions, risks and uncertainties, actual results could differ materially from forward-looking statements.

In addition to the factors identified herein, the following could cause actual results to differ materially from such forward-looking statements: pricing pressures on loan and deposit products, actions of bank and non-bank competitors, changes in local and national economic conditions, changes in regulatory requirements and regulatory oversight of the Corporation, actions of the Federal Reserve Board (FRB) and the Corporation’s success in merger and acquisition integration.

The Corporation’s forward-looking statements are relevant only as of the date on which such statements are made. By making any forward-looking statements, the Corporation assumes no duty to update them to reflect new, changing or unanticipated events or circumstances.

RESULTS OF OPERATIONS

Overview

As a financial institution with a focus on traditional banking activities, Fulton Financial Corporation generates the majority of its revenue through net interest income, or the difference between interest income earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is net interest income as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through sales of assets, such as loans or investments. Offsetting these revenue sources are provisions for credit losses on loans, administrative expenses and income taxes.

The Corporation’s net income for the first quarter of 2004 increased $1.8 million, or 5.3%, from $34.0 million in 2003 to $35.8 million in 2004. Diluted net income per share increased $0.01, or 3.1%, from $0.32 per share in 2003 to $0.33 per share in 2004. In 2004, the Corporation realized annualized returns on average assets of 1.49% and average equity of 15.18%.

The increase in net income compared to the first quarter of 2003 resulted from a $7.3 million increase in net interest income, a $3.6 million increase in investment securities gains and a $1.1 million decrease in the provision for loan losses, offset by a $3.0 million decrease in other income, primarily mortgage banking income, and a $6.6 million increase in other expenses. Net interest income growth resulted from increases in average earning assets, largely due to the acquisition of Premier Bank in the third quarter of 2003. While the net interest margin decreased compared to the first quarter of 2003, it has increased in each of the last two calendar quarters.

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The following summarizes some of the more significant factors that influenced the Corporation’s first quarter 2004 results.

Interest Rates - Short-term interest rates remained low throughout the first quarter of 2004, with the overnight borrowing rate, or Federal funds rate, and the prime lending rate at 1.00% and 4.00%, respectively, both historic lows. Over the past year, the low short-term interest rates had a negative impact on the Corporation’s net interest income and net interest margin, as reducing the rates paid on deposits became exceedingly difficult. As a result, average rates on earning assets decreased more than the average rates paid on liabilities, and the net interest margin and net interest income both decreased in 2004 compared to 2003.

Longer-term interest rates, including residential mortgage rates, while remaining relatively low during 2004, were higher than the historic lows reached during 2003. Lower long-term interest rates continued to affect the Corporation’s deposit mix as funds from maturing time deposits were deposited in core demand and savings accounts as customers were reluctant to lock into the relatively low rates being offered on time deposit products.

If the current interest rate environment continues, the Corporation will be challenged to maintain and grow its net interest margin and to increase net interest income. Most of the Corporation’s balance sheet has repriced to current rates, however, and management does not expect further significant erosion of the net interest margin if rates remain low. In such an environment, however, growth in net interest income will be more reliant on growth in balances than changes in rates. In a rising rate environment, the Corporation expects improvements in net interest income, as discussed in the “Market Risk” section of Management’s Discussion. Increasing long-term rates, however, tend to have a detrimental impact on mortgage loan origination volumes and related gains on sales of mortgage loans.

Earning Assets - The Corporation experienced significant earning asset growth due to the acquisition of Premier Bank (Premier) in August 2003 and the purchase of a $165 million agricultural loan portfoilo in December 2003, as well as internal growth.

Asset Quality - Asset quality refers to the underlying credit characteristics of borrowers and the likelihood that defaults on contractual payments will result in charge-offs of account balances. Asset quality is generally a function of economic conditions, but can be managed through conservative underwriting and sound collection policies and procedures.

The Corporation continues to maintain excellent asset quality, attributable to its credit culture and underwriting policies. Asset quality measures such as non-performing assets to total assets and net charge-offs to average loans improved in comparison to 2003, resulting in a lower provision for loan losses in the first quarter of 2004. While overall asset quality has remained strong, deterioration in quality of one or several significant accounts could have a detrimental impact and result in losses that may not be foreseeable based on current information. In addition, rising interest rates could increase the total payments of borrowers and could have a negative impact on their ability to pay according to the terms of their loans.

Equity Markets - During much of the first quarter of 2004, equity markets in general remained strong and, specifically, bank stocks showed very strong valuations. This resulted in decisions to sell certain securities, which allowed additional gains to be realized.

Gains on sales of equities have been a recurring component of the Corporation’s earnings for many years. The contribution of these gains to earnings in the first quarter of 2004, however, exceeded the first quarter of 2003 due to the aforementioned improving values. If equity markets do not continue to perform, this component of earnings could contract.

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Acquisitions - During 2003, the Corporation completed two acquisitions. In August, Premier Bank of Doylestown, Pennsylvania became a wholly-owned subsidiary and strengthened the Corporation’s presence in eastern Pennsylvania markets. In December, the Corporation acquired approximately $165 million of agricultural loans in Central Pennsylvania and Delaware. Both acquisitions strengthen the Corporation’s core banking franchise and contributed to balance sheet and earnings growth in 2004 compared to 2003.

On April 1, 2004, the Corporation completed its acquisition of Resource Bankshares Corporation, located in Virginia Beach, Virginia. This is the Corporation’s first acquisition in Virginia, allowing it to enter a new geographic market.

Acquisitions have long been a supplement to the Corporation’s internal growth. These recent acquisitions provide opportunity for additional growth as they will allow the Corporation’s existing products and services to be sold in new markets. The Corporation’s acquisition strategy focuses on high growth areas with strong market demographics and targets organizations that have a comparable corporate culture, strong performance and good asset quality, among other factors. Under its “super-community” banking philosophy, acquired organizations generally retain their status as separate legal entities, unless consolidation with an existing affiliate bank is practical. Back office functions are generally consolidated to maximize efficiencies.

Merger and acquisition activity in the financial services industry has become very competitive and the prices paid for certain acquisitions have increased recently. While the Corporation has been an active acquirer, management is committed to basing its pricing on rational economic models. Management will continue to focus on generating growth in the most cost-effective manner.

Net Interest Income

Net interest income increased $7.3 million, from $75.6 million in 2003 to $83.0 million in 2004. This increase was due primarily to average balance growth, with total earnings assets increasing 16.6%, and was offset by the impact of the low interest rate environment. The Corporation’s average prime lending rate decreased from 4.25% in the first quarter of 2003 to 4.00% in the first quarter of 2004 as a result of FRB actions. This reduction in an already low interest rate environment negatively impacted the Corporation’s net interest margin as average yields on earning-assets decreased further than the average cost of deposits.

The average yield on earning assets decreased 70 basis points (a 12.1 % decline) during the period while the cost of interest-bearing liabilities decreased 55 basis points (a 24.6% decline). This resulted in a 27 basis point decrease in net interest margin compared to the same period in 2003. The Corporation continues to manage its asset/liability position and interest rate risk through the methods discussed in the “Market Risk” section of Management’s Discussion.

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The following table provides a comparative average balance sheet and net interest income analysis for the first quarter of 2004 as compared to the same period in 2003 (dollars in thousands):