UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-21273
Fulton Bancorp, Inc.
(Exact name of small business
issuer as specified in its charter)
Delaware 43-1754577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 Market Street, Fulton, MO 65251
(Address of principal executive offices) (Zip Code)
573-682-6617
(Registrant's telephone number)
None
(Former name, former address and former
fiscal year, if changed since last report)
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 twelve 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 [ ]
As of May 9, 1997, there were 1,719,250 shares of the Registrant's Common Stock,
$.01 par value per share, outstanding.
Transitional Small Business Disclosure Format
Yes [ ] No [X]
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FULTON BANCORP, INC. AND SUBSIDIARY
FORM 10-QBS
March 31, 1997
INDEX PAGE
- ----- ----
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 1
CONSOLIDATED STATEMENTS OF INCOME 2
CONSOLIDATED STATEMENTS OF CASH FLOWS 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4-6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7-10
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 11
ITEM 2 - CHANGES IN SECURITIES 11
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY-HOLDERS 11
ITEM 5 - OTHER INFORMATION 11
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES
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FULTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
March 31, June 30,
1997 1996
--------- --------
(Unaudited)
ASSETS
Cash, including interest-bearing accounts of $8,172
at March 31, 1997 and $1,306 at June 30, 1996 $10,019 $ 3,154
Investment securities, available-for-sale 1,890 3,207
Stock in Federal Home Loan Bank of Des Moines 637 637
Loans held for sale 745 548
Loans receivable (allowance for loan losses of
$861 at March 31, 1997 and $800 at June 30, 1996) 83,703 78,541
Accrued interest receivable 704 705
Premises and equipment 1,509 1,398
Foreclosed real estate 198 198
Other assets 59 383
-------- --------
TOTAL ASSETS $99,464 $88,771
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $67,096 $71,288
Advances from Federal Home Loan Bank of Des Moines 6,500 7,000
Advances from borrowers for property taxes and insurance 531 746
Accrued interest payable 130 100
Other liabilities 332 363
-------- -------
TOTAL LIABILITIES 74,589 79,497
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value per share, 1,000,000
authorized, none issued --- ---
Common stock, $.01 par value per share, 6,000,000 shares
authorized, 1,719,250 issued and outstanding at March 31,
none issued and outstanding at June 30 17 ---
Paid-in capital 16,570 ---
Retained earnings - substantially restricted 9,599 9,260
Unrealized gain (loss) on securities available-for-sale,
net of taxes (5) 14
Unearned ESOP shares (1,306) ---
------- --------
TOTAL STOCKHOLDERS' EQUITY 24,875 9,274
------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,464 $88,771
======= =======
See accompanying notes to Consolidated Financial Statements
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FULTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---------------------- --------------------
(Unaudited)
INTEREST INCOME
Mortgage loans $1,512 $1,301 $4,352 $3,678
Consumer and other loans 205 202 631 591
Investment securities 56 69 204 215
Interest-earning deposits 92 20 296 146
------- ------- ------- ------
TOTAL INTEREST INCOME 1,865 1,592 5,483 4,630
INTEREST EXPENSE
Deposits 863 882 2,689 2,659
Advances from Federal Home Loan
Bank of Des Moines 100 81 337 238
------ ------ ------ ------
963 963 3,026 2,897
------ ------ ------ ------
NET INTEREST INCOME 902 629 2,457 1,733
Provision for loan losses 60 --- 60 25
------ ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 842 629 2,397 1,708
NON-INTEREST INCOME
Loan servicing fees 82 73 240 212
Service charges and other fees 34 34 102 95
Income from foreclosed assets 2 5 8 6
Other 7 15 26 79
------ ------ ------- -------
TOTAL NON-INTEREST INCOME 125 127 376 392
NON-INTEREST EXPENSE
Employee salaries and benefits 295 237 820 652
Occupancy costs 57 43 205 153
Advertising 11 9 40 20
Data processing 46 44 138 114
Federal insurance premiums 4 36 499 112
Directors' fees 22 21 65 67
Other 172 99 337 255
------ ------ ------ ------
TOTAL NON-INTEREST EXPENSE 607 489 2,104 1,373
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 360 267 669 727
Income Taxes 134 95 245 270
------- ------- ------- -------
NET INCOME $ 226 $ 172 $ 424 $ 457
======= ======= ======= =======
Net Income Per Share $ 0.14 * $ 0.27 *
======= ======= ======= =======
*Operating as Fulton Savings Bank, FSB, a mutual institution.
See accompanying notes to Consolidated Financial Statements
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FULTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine Months Ended
March 31,
1997 1996
-----------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 424 $ 457
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 120 99
Amortization of premiums and discounts (9) ---
Provisions for loan losses 60 25
Proceeds from sales of loans held for sale 18,681 17,625
Origination of loans held for sale (18,878) (19,085)
Stock and patronage dividends --- (45)
ESOP shares released 69 ---
Change to assets and liabilities increasing
(decreasing) cash flows
Accrued interest receivable --- (73)
Other assets (90) (15)
Accrued interest payable 30 40
Other liabilities (20) 37
--------- ---------
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES 387 (935)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities
Available-for-sale 2,500 1,201
Purchase of securities available-for-sale (1,203) ---
Loans originated, net of repayments (5,222) (6,669)
Purchase of premises and equipment (226) (211)
Expenditures on foreclosed real estate --- (1)
Carrying value of other real estate investment disposal 409 ---
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (3,742) (5,680)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (4,192) 3,990
Advances from Federal Home Bank of Des Moines:
Borrowings 11,500 ---
Repayments (12,000) ---
Net increase (decrease) in advance payments
by borrowers for taxes and insurance (214) (276)
Proceeds from sale of common stock 16,587 ---
Loan to ESOP (1,375) ---
Dividends paid (86) ---
-------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,220 3,714
-------- ----------
NET INCREASE (DECREASE) IN CASH 6,865 (2,901)
Cash, beginning of period 3,154 5,998
-------- --------
CASH, END OF PERIOD $10,019 $ 3,097
======= ========
See accompanying notes to Consolidated Financial Statements
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FULTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--Basis of Presentation
The consolidated interim financial statements as of March 31, 1997, included in
this report have been prepared by Fulton Bancorp, Inc. ("Company") without
audit. In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation are reflected in the March
31, 1997, interim financial statements. The results of operations for the period
ended March 31, 1997, are not necessarily indicative of the operating results
for the full year.
NOTE B--Formation of Holding Company and Conversion to Stock Form
On October 17, 1996, the Company became the holding company for Fulton Savings
Bank, FSB (the "Bank") upon the Bank's conversion from a federally chartered
mutual savings bank to a federally chartered capital stock savings bank. The
conversion was accomplished through the sale and issuance by the Company of
1,719,250 shares of common stock at $10 per share. Proceeds from the sale of
common stock, net of expenses incurred of $643,370 was $16,549,130, inclusive of
$1,375,400 related to shares held by the Bank's Employee Stock Ownership Plan
("ESOP"). The financial statements included herein have not been restated as a
result of the consummation of the conversion.
NOTE C--Earnings Per Share
Earnings per share data is not relevant for any quarter prior to December 31,
1996, since the Company had no stockholders prior to the initial stock offering
completed October 17, 1996. Earnings per share is presented for the quarter and
nine months March 31,1997, based on the average shares issued and outstanding
during the period.
NOTE D--Employee Stock Ownership Plan
In connection with the conversion to stock form as described in Note B, the Bank
established an ESOP for the exclusive benefit of participating employees (all
salaried employees who have completed at least 1,000 hours of service in a
twelve-month period and have attained the age of 21). The ESOP borrowed funds
from the Company in an amount sufficient to purchase 137,450 shares (8% of the
Common Stock issued in the stock offering). The loan is secured by the shares
purchased and will be repaid by the ESOP with funds from contributions made by
the Bank, dividends received by the ESOP and any other earnings on ESOP assets.
The Bank presently expects to contribute approximately $203,300 including
interest, annually to the ESOP. Contributions will be applied to repay interest
on the loan first, then the remainder will be applied to principal. The loan is
expected to be repaid in approximately 10 years. Shares purchased with the loan
proceeds are held in a suspense account for allocation among participants as the
loan is repaid. Contributions to the ESOP and shares released from the suspense
account are allocated among participants in proportion to their compensation
relative to total compensation of all active participants. Benefits generally
become 25% vested after each year of credited service beyond one year. Vesting
is accelerated upon retirement, death or disability of the participant.
Forfeitures are returned to the Company or reallocated to other participants to
reduce future funding costs. Benefits may be payable upon retirement, death,
disability or separation from service. Since the Bank's annual contributions are
discretionary, benefits payable under the ESOP cannot be estimated.
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FULTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE D--Employee Stock Ownership Plan (Continued)
The Company accounts for its ESOP in accordance with Statement of Position 93-6,
Employers' Accounting for Employee Stock Ownership Plans. Accordingly, the debt
of the ESOP is eliminated in consolidation and the shares pledged as collateral
are reported as unearned ESOP shares in the consolidated balance sheets.
Contributions to the ESOP shall be sufficient to pay principal and interest
currently due under the loan agreement. As shares are committed to be released
from collateral, the Company reports compensation expense equal to the average
market price of the shares for the respective period, and the shares become
outstanding for earnings per share computations. Dividends on allocated ESOP
shares are recorded as a reduction of retained earnings; dividends on
unallocated ESOP shares are recorded as a reduction of debt and accrued
interest. ESOP compensation expense was $58,000 for the three months ended March
31, 1997 and $107,000 for the nine months ended March 31, 1997.
A summary of ESOP shares at March 31, 1997, is as follows:
Shares allocated 3,458
Shares released for allocation 3,458
Unreleased shares 130,624
-------
TOTAL 137,540
=======
Fair value of unreleased shares $2,334,904
==========
NOTE E--Accounting Changes
Effective October 1996, the Company adopted Statement of Position ("SOP") 93-6,
"Employers' Accounting for Employee Stock Ownership Plans". SOP 93-6 applies to
shares acquired by employee stock ownership plans after December 31, 1992, but
not yet committed to be released as of the beginning of the year SOP 93-6 is
adopted. SOP 93-6 changes the measure of compensation expenses recorded by
employers for leveraged employee stock ownership plans from the cost of the ESOP
shares to the fair value of the ESOP shares during the periods in which they
become committed to be released. To the extent that fair value of the Bank's
ESOP shares differs from the cost of such shares, the differential will be
charged or credited to equity. Employers with internally leveraged employee
stock ownership plans such as the Company will not report the loans receivable
from the ESOP as an asset and will not report the ESOP debt from the employer as
a liability.
The Bank adopted Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures, an
amendment of SFAS No. 114", effective May 1, 1995. These statements address the
accounting by creditors for impairment of certain loans. They apply to all
creditors and to all loans, uncollateralized as well as collateralized, except
for large groups of small-balance homogeneous loans that are collectively
evaluated for impairment, loans measured at fair value or at lower of cost or
fair value, leases, and debt securities. The Bank considers all one-to
four-family residential mortgage loans, construction loans, and all consumer and
other loans to be smaller homogeneous loans.
These statements apply to all loans that are restructured involving a
modification of terms. Loans within the scope of these statements are considered
impaired when, based on current information and events, it is probable that all
principal and interest will not be collected in accordance with the contractual
terms of the loans. Management determines the impairment of loans based on
knowledge of the borrower's ability to repay the loan according to the
contractual agreement as well as the borrower's repayment history.
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FULTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE E--Accounting Changes (Continued)
Management applies its normal loan review procedures in determining when a loan
is impaired. The Bank applies SFAS No. 114 on a loan by loan basis. All
nonaccrual loans are considered impaired. Impaired loans are measured based on
present value of expected cash flows, the loan's observable market price or the
fair value of the underlying collateral. If the value computed is less than the
recorded value, a valuation allowance is recorded for the difference as a
component of the provision for loan loss expense. Management has elected to
continue to use its existing nonaccrual methods for recognizing interest income
on impaired loans.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF
LIABILITIES. In June 1996, the Financial Accounting Standards Board, ("FASB")
issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities". SFAS No. 125 provides accounting and
reporting standards for transfers and servicing of financial assets and the
extinguishment of liabilities based on consistent application of a financial
components approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings.
Under the financial components approach, after a transfer of financial assets,
an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial components
approach focuses on the assets and liabilities that exist after the transfer.
Many of these assets and liabilities are components of financial assets that
existed prior to the transfer. If a transfer does not meet the criteria for a
sale, the transfer is accounted for as a secured borrowing with pledge of
collateral.
SFAS No. 125 extends the "available for sale" or "trading" approach in SFAS No.
115 to nonsecurity financial assets that can contractually be repaid or
otherwise settled in such a way that the holder of the assets would not recover
substantially all of its recorded investment. SFAS No. 125 also amends SFAS No.
115 to prevent a security from being classified as held to maturity if the
security can be prepaid or otherwise settled in such a way that the holder of
the security would not recover substantially all of its recorded investment.
SFAS No. 125 provides implementation guidance for accounting for (i)
securitizations, (ii) transfers of partial interests, (iii) servicing of
financial assets, (iv) securities lending transactions, (v) repurchase
agreements including "dollar rolls", (vi) loan syndications and participations,
(vii) risk participations in banker's acceptances, (viii) factoring
arrangements, (ix) transfers of receivables with recourse, (x) transfers of
sales type and direct financing lease receivables, and (xi) extinguishments of
liabilities.
SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted. In
addition, the extension of the SFAS No. 125 approach to certain nonsecurity
financial assets and the amendment of SFAS No. 115 is effective for financial
assets held on or acquired after January 1, 1997. Reclassifications that are
necessary because of the amendment do not call into question an entity's ability
to hold other debt securities to maturity in the future. Management of the
Company does not expect the adoption of SFAS No.
125 will have a material effect on the Company's financial position or results
of operations.
Note F--Change in Fiscal Year-End
On November 13, 1996, the Board of Directors of the Company determined to change
the Company's fiscal year-end from April 30 to June 30. The Company began
reporting on the basis of its new fiscal year-end with the quarter ended
December 31, 1996.
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FULTON BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Fulton Bancorp, Inc. ("Company") is a Delaware corporation that was organized
for the purpose of becoming the holding company for Fulton Savings Bank, FSB
("Bank") upon the Bank's conversion from a federal mutual savings bank to a
federal capital stock savings bank. The Bank's conversion was completed on
October 17, 1996. The Bank is a community oriented financial institution that
engages primarily in the business of attracting deposits from the general public
and using those funds to originate residential and commercial mortgage loans
within its market area. The Bank's deposits are insured up to applicable limits
by the Savings Association Insurance Fund.
The Company's operating results depend primarily on its net interest income,
which is the difference between the income it receives on its loan and
investments portfolio, and its cost of funds, which consists of interest paid on
deposits and borrowings. The Company's operating results are also affected by
the level of non-interest income and expenses. Non-interest income consists
primarily of loan servicing fees and service charges and other fees.
Non-interest expenses include employee salaries and benefits, occupancy costs,
deposit insurance premiums, data processing expenses and other operating costs.
On September 30, 1996, the Bank recorded the effect of a one-time special
assessment to be paid by institutions whose deposit accounts are insured by the
Savings Association Insurance Fund ("SAIF"). The assessment was 0.657% of
assessable deposits as of March 31, 1995, which for the Bank totalled $427,000.
The assessment was designed to recapitalize the SAIF and permit the eventual
merger of the SAIF with the Bank Insurance Fund. As a result of the
recapitalization of the SAIF, the Bank's deposit insurance premiums were reduced
to $0.065 per $100 of deposits beginning January 1, 1997.
The discussion and analysis included herein covers certain changes in results of
operations during the three and nine month periods ended March 31, 1997 and
1996, as well as those material changes in liquidity and capital resources that
have occurred since June 30, 1996.
The following should be read in conjunction with the Company's Prospectus dated
September 6, 1996, which contains the latest audited financial statements and
notes thereto, together with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained therein. Therefore, only material
changes in financial condition and results of operation are discussed herein.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31 1997 AND JUNE 30, 1996
Assets of the Company increased from $88.8 million at June 30, 1996, to
$99.5 million at March 31 1996, primarily as the result of the public stock
offering. Cash and interest-bearing deposits increased $6.9 million and loans,
including loans held for sale, increased $5.4 million as the Company was able to
lend a portion of offering proceeds. Deposits of the Company decreased $4.2
million from $71.3 million at June 30, 1996, to $67.1 million at March 31, 1997,
due in part from customers using amounts from their deposits accounts to
purchase stock at the conversion. Advances from Federal Home Loan Bank of Des
Moines decreased $0.5 million to $6.5 million. Stockholders' equity increased
from $9.3 million at June 30, 1996, to $24.9 million at March 31, 1997.
Nonperforming assets of $396,000 or 0.45% of total assets at June 30,
1996, increased to $400,000 or 0.40% of total assets at
March 31, 1997.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997, TO THE THREE MONTHS ENDED
MARCH 31, 1996
NET INCOME. The Company experienced net income of $226,000 for the quarter
ended March 31, 1997, compared to net income of $172,000 for the quarter ended
March 31, 1996. The increase primarily results from investment of the conversion
proceeds in new loans and interest-earning assets.
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FULTON BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997, TO THE THREE MONTHS ENDED
MARCH 31, 1996 (CONTINUED)
NET INTEREST INCOME. Net interest income was $902,000 for the quarter ended
March 31, 1997, an increase of $273,000 or 43% from $629,000 for the quarter
ended March 31, 1996. Interest income increased $273,000 while interest expense
was $963,000 for the quarter ended March 31, 1997 and March 31, 1996,
respectively.
INTEREST INCOME. Interest income increased by $273,000 or 17% from
$1,592,000 for the quarter ended March 31, 1996, to $1,865,000 for the quarter
ended March 31, 1997. Interest income from mortgage loans receivable increased
$211,000 from $1,301,000 for the quarter ended March 31, 1996, to $1,512,000 for
the quarter ended March 31, 1997. The increase was due to an increase in
mortgage loans and adjustments on adjustable-rate mortgages. Interest income on
interest-bearing deposits increased $72,000 from $20,000 for the quarter ended
March 31, 1996, to $92,000 for the quarter ended March 31, 1997. This increase
was due to the investment of a portion of the proceeds from the public offering
in interest-bearing deposits.
INTEREST EXPENSE. Interest expense was $963,000 for the quarter ended March
31, 1996 and 1997, respectively. Interest expense on deposits decreased by
$19,000 or 2.2% from $882,000 for the quarter ended March 31, 1996 to $863,000
for the quarter ended March 31, 1997, while interest expense on advances from
Federal Home Loan Bank of Des Moines increased by $19,000 or 23.5% from $81,000
for the quarter ended March 31, 1996, to $100,000 for the quarter ended March
31, 1997.
PROVISION FOR LOAN LOSSES. There was no provision for loan losses during
the quarter ended March 31, 1996, as compared to a $60,000 provision for loan
losses for the quarter ended March 31, 1997. The Company provided a monthly
provision of $20,000 during the quarter to increase the allowance for loan
losses because of the increase in loans receivable.
NON-INTEREST INCOME. Non-interest income for the quarter ended March 31,
1997, decreased $2,000 from $127,000 for the quarter ended March 31, 1996, to
$125,000 for the quarter ended March 31, 1997. Loan servicing fees increased
$9,000 while income from foreclosed assets decreased $3,000 and other
non-interest income decreased $8,000.
NON-INTEREST EXPENSE. Non-interest expense increased $118,000 or 24% from
$489,000 for the quarter ended March 31, 1996, to $607,000 for the quarter ended
March 31, 1997. The increase was primarily due to increases in employee salaries
and benefits of $58,000, which resulted primarily resulting from implementation
of the ESOP plan, in occupancy costs of $14,000, and in other expenses of
$73,000, which primarily related to operating as a public company.
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1997, TO THE NINE MONTHS ENDED
MARCH 31, 1996
NET INCOME. Net income for the nine months ended March 31, 1997, decreased
$33,000 from $457,000 for the nine months ended March 31, 1996 to $424,000 for
the nine months ended March 31, 1997. The decrease was primarily due to the
$427,000 one-time SAIF assessment. Without the one-time SAIF assessment, net
income for the nine months ended March 31, 1997, would have been $693,000, or
$0.44 per share.
NET INTEREST INCOME. Net interest income was $2,457,000 for the nine months
ended March 31, 1997, an increase of $724,000 from net interest income of
$1,733,000 for the nine months ended March 31, 1996. Total interest income and
interest expense increased $853,000 and $129,000, respectively, for the nine
months ended March 31, 1997.
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FULTON BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1997, TO THE NINE MONTHS ENDED
MARCH 31, 1996 (CONTINUED)
INTEREST INCOME. Total interest income increased $853,000 from $4,630,000
for the nine months ended March 31, 1996, to $5,483,000 for the nine months
ended March 31, 1997. The increase was due primarily from increases in interest
income on mortgage loans, consumer and other loans and investment of a portion
of the conversion proceeds in interest-bearing deposits. The interest income
from mortgage loans increased by $674,000 from $3,678,000 for the nine months
ended March 31, 1996, to $4,352,000 for the nine months ended March 31, 1997.
This increase was primarily due to an increase in loan rates and adjustments on
adjustable-rate mortgages. The interest income on consumer and other loans
increased $40,000 from $591,000 for the nine months ended March 31, 1996, to
$631,000 for the nine months ended March 31,1996. This increase was due to an
increase in loans and rates on loans.
Interest income on interest-earning deposits increased $150,000 from
$146,000 for the nine months ended March 31, 1996, to $296,000 for the nine
months ended March 31, 1997, primarily due to the investment of proceeds from
the public offering.
INTEREST EXPENSE. Interest expense on deposits increased $30,000 from
$2,659,000 for the nine months ended March 31, 1996, to $2,689,000 for the nine
months ended March 31, 1997. The increase was due primarily to higher customer
deposits for most of the nine months ended March 31, 1997, which, in turn, was
due to community interest in the conversion and stock offering. Interest on
advances from Federal Home Loan Bank of Des Moines increased $99,000 from
$238,000 for the nine months ended March 31, 1996, to $337,000 for the nine
months ended March 31, 1997, resulting from additional borrowings to meet
liquidity and loan demands.
PROVISION FOR LOAN LOSSES. Provision for loan losses increased by $60,000
for the nine months ended March 31, 1997, compared to $25,000 for the nine
months ended March 31, 1996. The Company provided a monthly provision of $20,000
during the quarter to increase the allowance for loan losses because of the
increase in loans receivable
NON-INTEREST INCOME. Non-interest income decreased by $16,000 from $392,000
for the nine months ended March 31, 1996, to $376,000 for the nine months ended
March 31, 1997. The decrease was primarily from a $47,000 patronage dividend
received in the nine months ended March 31, 1996, and no patronage dividend
received in the nine months ended March 31, 1997 and loan servicing fees
increasing $28,000 from $212,000 for the nine months ended March 31, 1996, to
$240,000 for the nine months ended March 31, 1997 from servicing a larger
servicing portfolio.
NON-INTEREST EXPENSE. Non-interest expense increased by $731,000 from
$1,373,000 for the nine months ended March 31, 1996, to $2,104,000 for the nine
months ended March 31, 1997. Federal deposit insurance premiums increased
$387,000 from the one-time SAIF assessment. Employee salaries and benefits
increased by $168,000, primarily resulting form implementation of the ESOP plan;
occupancy costs increased $52,000; advertising costs increased $20,000; data
processing costs increased $24,000; and, other non-interest expense increased
$82,000, primarily related to operating as a public company.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, proceeds from principal and
interest payments on loans, mortgage-backed securities, investment securities
and net operating income. While maturities and scheduled amortization of loans
and mortgage-backed securities are a somewhat predictable source of funds,
deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Bank utilizes advances
from the Federal Home Loan Bank to supplement its supply of lendable funds. At
March 31, 1997, FHLB advances totaled $6,500,000.
The Bank must maintain an adequate level of liquidity to ensure availability of
sufficient funds to support loan growth and deposit withdrawals, satisfy
financial commitments and to take advantage of investment opportunities. At
March 31, 1997, the Bank had approved loan commitments totaling $3.3 million and
had undisbursed loans in process of $7.8 million.
-9-
<PAGE>
<PAGE>
FULTON BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Liquid funds necessary for normal daily operations are maintained in a working
checking account and a daily time account with the Federal Home Loan Bank of Des
Moines. It is the Bank's current policy to maintain adequate collected balances
in those deposit accounts to meet daily operating expenses, customer
withdrawals, and fund loan demand. Funds received from daily operating
activities are deposited on a daily basis in the checking account and
transferred, when appropriate, to the daily time account to enhance income.
At March 31, 1997, certificates of deposit amounted to $67.1 million or 77.9% of
total deposits, including $21.2 million of fixed rate certificates scheduled to
mature within twelve months. Historically, the Bank has been able to retain a
significant amount of its deposits as they mature. Management believes it has
adequate resources to fund all loan commitments from savings deposits, loan
payments, maturities of investment securities and ability to obtain advances
from the Federal Home Loan Bank of Des Moines.
The Office of Thrift Supervision requires a thrift institution to maintain an
average daily balance of liquid assets (cash and eligible investments) equal to
at least 5% of the average daily balance of its net withdrawable deposits and
short-term borrowing. The Bank's liquidity ratio was 13.00% at March 31, 1997.
The Bank consistently maintains liquidity levels in excess of regulatory
requirements, and believes this is an appropriate strategy for proper asset and
liability management.
The Office of Thrift Supervision requires institutions such as the Bank to meet
certain tangible, core, and risk-based capital requirements. Tangible capital
generally consists of stockholders' equity minus certain intangible assets. Core
capital generally consists of stockholders' equity. The risk-based capital
requirements presently address risk related to both recorded assets and
off-balance sheet commitments and obligations. The following table summarizes
the Bank's capital ratios and the ratios required by regulation (dollars in
thousands) at March 31, 1997.
Percent of Adjusted
Amount Total Assets
-----------------------------
(Unaudited)
Tangible capital $16,267 16.4%
Tangible capital requirement 1,492 1.5
------- -----
EXCESS $14,775 14.7%
======= ====
Core capital $16,267 16.4%
Core capital requirement 2,984 3.0
-------- -----
EXCESS $13,283 13.4%
======= ====
Risk-based capital $16,990 29.4%
Risk-based capital requirement 4,631 8.0
-------- -----
EXCESS $12,359 21.4%
======= ====
-10-
<PAGE>
<PAGE>
FULTON BANCORP, INC AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank is a party to any material legal proceedings at
this time. From time to time the Bank is involved in various claims and legal
actions arising in the ordinary course of business.
ITEM 2. CHANGES IN SECURITIES
Not applicable
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
Exhibits
27 -- Financial Data Schedule
-11-
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FULTON BANCORP, INC
Date: May 14, 1997 By:/s/KERMIT D. GOHRING
---------------------
Kermit D. Gohring
President
Date: May 14, 1997 By:/s/BONNIE K. SMITH
------------------
Bonnie K. Smith
Secretary - Treasurer
(Principal Accounting Officer)
<PAGE>
<PAGE>
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