<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20459
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998 , 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 No. 0-10587
-------
FULTON FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2195389
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Penn Square, P.O. Box 4887 Lancaster, Pennsylvania 17604
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(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 [_]
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 -- 47,941,520 shares outstanding as of April 30,
- ------------------------------------------------------------------------------
1998.
- ----
<PAGE>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
-----
Description Page
----------- ----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
(a) Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997.................................3
(b) Consolidated Statements of Income -
Three months ended March 31, 1998 and 1997...........................4
(c) Consolidated Statements of Shareholders' Equity -
Three months ended March 31, 1998 and 1997...........................5
(d) Consolidated Statements of Cash Flows -
Three months ended March 31, 1998 and 1997...........................6
(e) Notes to Consolidated Financial Statements - March 31, 1998..........7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................17
SIGNATURES..............................................................18
2
<PAGE>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------------------------------------
(Dollars in thousands, except per-share data)
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
--------------- --------------
ASSETS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks .............................................................. $ 206,797 $ 197,006
Interest-bearing deposits with other banks ........................................... 3,049 1,242
Federal funds sold.................................................................... 49,260 -
Mortgage loans held for sale ......................................................... 4,973 1,946
Investment securities:
Held to maturity (Fair value: $285,619 in 1998 and $334,145 in 1997) ............ 284,517 333,351
Available for sale .............................................................. 744,381 658,243
Loans ................................................................................ 3,769,379 3,796,706
Less: Allowance for loan losses ................................................ (56,054) (55,593)
Unearned income .......................................................... (9,964) (9,968)
--------------- --------------
Net Loans ................................................... 3,703,361 3,731,145
--------------- --------------
Premises and equipment ............................................................... 70,152 69,615
Accrued interest receivable .......................................................... 30,782 30,539
Other assets ......................................................................... 82,870 88,302
--------------- --------------
Total Assets ................................................ $ 5,180,142 $ 5,111,389
=============== ==============
<CAPTION>
LIABILITIES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deposits:
Noninterest-bearing ............................................................. $ 632,528 $ 631,784
Interest-bearing ................................................................ 3,566,325 3,546,234
--------------- --------------
Total Deposits .............................................. 4,198,853 4,178,018
--------------- --------------
Short-term borrowings:
Securities sold under agreements to repurchase................................... 175,042 170,035
Federal funds purchased.......................................................... - 73,211
Demand notes of U.S. Treasury ................................................... 4,846 5,661
--------------- --------------
Total Short-Term Borrowings ................................. 179,888 248,907
--------------- --------------
Accrued interest payable ............................................................. 33,901 31,491
Other liabilities .................................................................... 75,337 59,500
Long-term debt ....................................................................... 134,063 50,045
--------------- --------------
Total Liabilities ........................................... 4,622,042 4,567,961
--------------- --------------
<CAPTION>
SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock ($2.50 par)
Shares: Authorized 200,000,000
Issued 59,950,786 (59,907,649 in 1997)
Outstanding 59,901,335 (59,841,488 in 1997)............................ 119,902 119,816
Capital surplus ...................................................................... 314,754 315,322
Retained earnings .................................................................... 93,915 81,890
Accumulated other comprehensive income................................................ 30,498 27,699
Treasury stock, at cost (49,451 shares in 1998 and 66,161 shares in 1997)............. (969) (1,299)
--------------- --------------
Total Shareholders' Equity .................................. 558,100 543,428
--------------- --------------
Total Liabilities and Shareholders' Equity .................. $ 5,180,142 $ 5,111,389
=============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See notes to consolidated financial statements
3
<PAGE>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
(Dollars in thousands, except per-share data)
<TABLE>
<CAPTION>
Three Months Ended March 31
--------------------------------------
1998 1997
----------------- ----------------
INTEREST INCOME
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans, including fees ............................................................. $ 80,523 $ 74,334
Investment securities:
Taxable ...................................................................... 12,778 11,670
Tax-exempt ................................................................... 715 975
Dividends .................................................................... 827 636
Federal funds sold ................................................................ 206 91
Interest-bearing deposits with other banks ........................................ 53 50
----------------- ----------------
Total Interest Income ................................... 95,102 87,756
<CAPTION>
INTEREST EXPENSE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deposits .......................................................................... 37,525 34,079
Short-term borrowings ............................................................. 2,336 2,268
Long-term debt .................................................................... 1,220 965
----------------- ----------------
Total Interest Expense ................................... 41,081 37,312
----------------- ----------------
Net Interest Income ...................................... 54,021 50,444
PROVISION FOR LOAN LOSSES ......................................................... 1,501 1,818
----------------- ----------------
Net Interest Income After Provision for Loan Losses ...... 52,520 48,626
----------------- ----------------
<CAPTION>
OTHER INCOME
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment management and trust services........................................... 2,967 2,656
Service charges on deposit accounts ............................................... 4,423 4,098
Other service charges and fees .................................................... 2,763 2,494
Gain on sale of mortgage loans .................................................... 805 443
Investment securities gains ....................................................... 3,382 2,154
----------------- ----------------
14,340 11,845
<CAPTION>
OTHER EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Salaries and employee benefits .................................................... 19,897 19,214
Net occupancy expense ............................................................. 3,031 3,038
Equipment expense ................................................................. 2,359 2,229
FDIC assessment expense ........................................................... 181 166
Special services .................................................................. 2,057 1,836
Other ............................................................................. 9,329 8,270
----------------- ----------------
36,854 34,753
----------------- ----------------
Income Before Income Taxes ............................... 30,006 25,718
INCOME TAXES....................................................................... 9,406 7,680
----------------- ----------------
Net Income ............................................... $ 20,600 $ 18,038
================= ================
- ---------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA:
Net income (basic)................................................................. $ 0.34 $ 0.30
Net income (diluted)............................................................... $ 0.34 $ 0.30
Cash dividends .................................................................... $ 0.143 $ 0.123
</TABLE>
- --------------------------------------------------------------------------------
See notes to consolidated financial statements
4
<PAGE>
FULTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
Accumulated
Other
Comprehen-
Common Capital Retained sive
(Dollars in thousands, except per-share data) Stock Surplus Earnings Income
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997................................... $ 119,816 $ 315,322 $ 81,890 $ 27,699
Comprehensive income:
Net income................................................ 20,600
Other comprehensive income - unrealized gain on
securities (net of taxes)............................ 2,799
Total comprehensive income...........................
Stock issued (104,223 shares, including
61,085 shares of treasury stock).......................... 86 (568)
Acquisition of treasury stock (44,375 shares)..................
Cash dividends - $0.143 per share.............................. (8,575)
------------------------------------------------------------
Balance at March 31, 1998...................................... $ 119,902 $ 314,754 $ 93,915 $ 30,498
============================================================
Balance at December 31, 1996................................... $ 110,380 $ 240,095 $ 121,578 $ 9,846
Comprehensive income:
Net income................................................ 18,038
Other comprehensive income - unrealized loss on
securities (net of taxes)............................ (893)
Total comprehensive income...........................
Stock issued (97,398 shares)................................... 176 52
Cash dividends - $0.123 per share.............................. (7,327)
------------------------------------------------------------
Balance at March 31, 1997...................................... $ 110,556 $ 240,147 $ 132,289 $ 8,953
============================================================
<CAPTION>
Treasury
(Dollars in thousands, except per-share data) Stock Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1997................................... $ (1,299) $ 543,428
Comprehensive income:
Net income................................................ 20,600
Other comprehensive income - unrealized gain on
securities (net of taxes)............................ 2,799
----------------
Total comprehensive income........................... 23,399
----------------
Stock issued (104,223 shares, including
61,085 shares of treasury stock).......................... 1,442 960
Acquisition of treasury stock (44,375 shares).................. (1,112) (1,112)
Cash dividends - $0.143 per share.............................. (8,575)
-----------------------------------
Balance at March 31, 1998...................................... $ (969) $ 558,100
===================================
Balance at December 31, 1996................................... $ (103) $ 481,796
Comprehensive income:
Net income................................................ 18,038
Other comprehensive income - unrealized loss on
securities (net of taxes)............................ (893)
----------------
Total comprehensive income........................... 17,145
----------------
Stock issued (97,398 shares)................................... 228
Cash dividends - $0.123 per share.............................. (7,327)
-----------------------------------
Balance at March 31, 1997...................................... $ (103) $ 491,842
===================================
</TABLE>
- --------------------------------------------------------------------------------
See notes to consolidated financial statements
5
<PAGE>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................................................$ 20,600 $ 18,038
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses ................................................... 1,501 1,818
Depreciation and amortization of premises and equipment ..................... 2,234 2,057
Net amortization of investment security premiums ............................ 59 117
Investment security gains ................................................... (3,382) (2,154)
Net (increase) decrease in mortgage loans held for sale...................... (3,027) 6,000
Amortization of intangible assets ........................................... 395 389
(Increase) decrease in accrued interest receivable .......................... (243) 1,017
Decrease in other assets .................................................... 3,601 3,959
Increase in accrued interest payable ........................................ 2,410 3,326
Increase in other liabilities................................................ 3,365 6,894
--------------- ---------------
Total adjustments...................................................... 6,913 23,423
--------------- ---------------
Net cash provided by operating activities .............................. 27,513 41,461
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale ............................. 7,844 56,220
Proceeds from maturities of securities held to maturity .......................... 54,163 72,549
Proceeds from maturities of securities available for sale ........................ 46,475 9,957
Purchase of securities held to maturity .......................................... (5,338) (2,086)
Purchase of securities available for sale ........................................ (120,418) (88,132)
Increase in short-term investments ............................................... (51,067) (3,255)
Net decrease (increase) in loans ................................................. 26,283 (96,726)
Purchase of premises and equipment................................................ (2,771) (3,038)
--------------- ---------------
Net cash used in investing activities .................................. (44,829) (54,511)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand and savings deposits ........................... 7,847 (9,627)
Net increase in time deposits .................................................... 12,988 108,449
Increase in long-term debt........................................................ 84,018 8,424
Decrease in short-term borrowings ................................................ (69,019) (69,815)
Dividends paid ................................................................... (8,575) (6,810)
Net proceeds from issuance of common stock ....................................... 960 228
Acquisition of treasury stock .................................................... (1,112) -
--------------- ---------------
Net cash provided by financing activities............................... 27,107 30,849
--------------- ---------------
Net Increase in Cash and Due From Banks .......................................... 9,791 17,799
Cash and Due From Banks at Beginning of Period ................................... 197,006 203,523
--------------- ---------------
Cash and Due From Banks at End of Period .........................................$ 206,797 $ 221,322
=============== ===============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest ....................................................................$ 38,671 $ 33,986
Income taxes ................................................................ 500 -
</TABLE>
- --------------------------------------------------------------------------------
See notes to consolidated financial statements
6
<PAGE>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
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, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
NOTE B - 5-for-4 Stock Split
The Board of Directors announced a 5-for-4 stock split on April 14, 1998. This
stock split will be paid in the form of a 25% stock dividend on May 27, 1998 to
shareholders of record as of May 6, 1998. All share and per-share information
has been restated to reflect the effect of this stock split.
NOTE C - Net Income Per Share
The Corporation adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (Statement 128), on December 31, 1997. Statement 128
requires dual presentation of basic and diluted earnings per share on the face
of the income statement for all entities with complex capital structures. 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 (in
thousands):
1998 1997
---- ----
Weighted average shares outstanding (basic)........ 59,876 59,711
Impact of common stock equivalents................. 523 409
-------- --------
Weighted average shares outstanding (diluted)...... 60,399 60,120
======== ========
NOTE D - Mergers and Acquisitions
Keystone Heritage Group, Inc. - On March 27, 1998, the Corporation completed its
acquisition of Keystone Heritage Group, Inc. (Keystone Heritage), a $650 million
bank holding company located in Lebanon, Pennsylvania. As provided under the
terms of the merger agreement, each of the approximately 4.0 million shares of
Keystone Heritage's common stock was exchanged for 2.288 shares of the
Corporation's common stock. In addition, each of the 70,000 options to acquire
Keystone Heritage stock was converted to options to acquire the Corporation's
stock. The Corporation issued 9.1 million shares of its common stock in
connection with the merger, which was accounted for as a pooling of interests.
7
<PAGE>
As a result of the acquisition, Keystone Heritage was merged with and into the
Corporation. Its sole banking subsidiary, Lebanon Valley National Bank (Lebanon
Valley), was merged with Farmers Trust Bank, one of the Corporation's existing
affiliate banks, to become Lebanon Valley Farmers Bank. Lebanon Valley's
deposits, loans and branches located in Lancaster and Dauphin Counties were
transferred to Fulton Bank as a result of the merger.
The following table sets forth selected unaudited financial data for the
Corporation and Keystone Heritage for the period January 1, 1998 through March
27, 1998:
Fulton Keystone
Financial Heritage
Corporation Group, Inc.
--------------- ---------------
Net interest income.................. $ 47,466 $ 6,555
Other income......................... 13,032 1,308
--------------- ---------------
Total income......................... $ 60,498 $ 7,863
=============== ===============
Net income........................... $ 19,066 $ 1,534
=============== ===============
The effect of the merger on the Corporation's previously reported revenues, net
income and net income per share for the three months ended March 31, 1997
follows:
Fulton Keystone
Financial Heritage
Corporation Group, Inc. Restated
------------- ------------- -----------
Net interest income................ $ 43,822 $ 6,622 $ 50,444
Other income....................... 10,308 1,537 11,845
------------ ----------- ----------
Total income....................... $ 54,130 $ 8,159 $ 62,289
============ =========== ==========
Net income......................... $ 15,700 $ 2,338 $ 18,038
============ =========== ==========
Net income per share (basic)....... $ 0.31 $ 0.59 $ 0.30
============ =========== ==========
Net income per share (diluted)..... $ 0.31 $ 0.58 $ 0.30
============ =========== ==========
The Peoples Bank of Elkton - On August 31, 1997, the Corporation completed its
acquisition of The Peoples Bank of Elkton (Elkton) of Elkton, Maryland. As
provided under the terms of the merger agreement, Elkton became a wholly-owned
subsidiary of the Corporation and each of the outstanding shares of the common
stock of Elkton was converted into 5.198 shares of the Corporation's common
stock. The Corporation issued 1.2 million shares of its common stock in
connection with the merger, which was accounted for as a pooling of interests.
Elkton, with approximately $103 million in assets as of March 31, 1998, operates
two branch offices in Cecil County, Maryland. As a result of the merger, Elkton
became the Corporation's second banking subsidiary in Maryland and eleventh
overall.
The Woodstown National Bank & Trust Company - On February 28, 1997, the
Corporation completed its acquisition of The Woodstown National Bank & Trust
Company (Woodstown) of Woodstown, New Jersey. As provided under the terms of the
merger agreement, Woodstown became a wholly-owned subsidiary of
8
<PAGE>
the Corporation and each of the outstanding shares of Woodstown common stock was
converted into 2.2 shares of the Corporation's common stock. The Corporation
issued 4.0 million shares of its common stock in connection with the merger,
which was accounted for as a pooling of interests. Woodstown, with approximately
$275 million in total assets as of March 31, 1998, operates seven branch offices
in Salem and Gloucester Counties. As a result of the merger, Woodstown became
the Corporation's second banking subsidiary in New Jersey and tenth overall.
Ambassador Bank of the Commonwealth. - On January 26, 1998, the Corporation
entered into a merger agreement to acquire Ambassador Bank of the Commonwealth
(Ambassador) of Allentown, Pennsylvania. Ambassador is a $275 million bank,
which operates eight community banking offices in Lehigh and Northampton
counties.
Under the terms of the merger agreement, each of the 1.9 million shares of
Ambassador's common stock will be exchanged for 1.4 shares of the Corporation's
common stock. In addition, the 417,000 options and warrants to acquire
Ambassador stock will be exchanged for approximately 409,000 shares of the
Corporation's common stock. The acquisition is subject to approval by bank
regulatory authorities and Ambassador shareholders. The transaction is expected
to be completed in the third quarter of 1998 and will be accounted for as a
pooling of interests. As a result of the acquisition, Ambassador will be merged
with and into Lafayette Bank, one of the Corporation's existing affiliate banks.
NOTE E - Reporting Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (Statement 130), was issued in July, 1997. Statement 130 established
standards for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The objective
of Statement 130 is to report a measure of all changes in equity that result
from economic events of the period other than transactions with owners.
Comprehensive income is the total of net income and all other nonowner changes
in equity. Statement 130 is effective for fiscal years beginning after December
15, 1997 and was adopted by the Corporation in the first quarter of 1998.
NOTE F - New Accounting Standards
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" (Statement
125), was issued in 1996 and was effective for 1997. SFAS No. 127 (Statement
127) was also issued in 1996 and amended Statement 125 by deferring for one year
the effective date for certain provisions of Statement 125. The Corporation
adopted the applicable provisions of Statement 125 on January 1, 1997 and the
remaining provisions on January 1, 1998. There was no material financial
statement impact.
Statement of Financial Accounting Standards No. 132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits" (Statement 132), was issued in
February, 1998. Statement 132 revises the required disclosures by employers with
respect to pensions and other postretirement plans which were previously
addressed by Statements 87, 88 and 106. Statement 132 does not change the
measurement or recognition of expense of such plans, but requires additional
disclosures about changes in benefit obligations and fair values of plan assets.
Statement 132 is effective for years beginning after December 31, 1997. The
Corporation will adopt the new disclosure requirements in its financial
statements and footnotes for the year ending December 31, 1998.
9
<PAGE>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
This discussion concerns Fulton Financial Corporation (the Corporation), a bank
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.
The Corporation has made, and may continue to make, certain forward-looking
statements with respect to its management of net interest income and margin and
its progress in addressing the Year 2000 problem. The Corporation cautions that
these forward-looking statements are subject to various assumptions, risks and
uncertainties. Because of the possibility of change 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 nonbank competitors,
changes in local and national economic conditions, changes in regulatory
requirements and regulatory oversight of the Corporation, actions of the Federal
Reserve Board, the Corporation's success in merger and acquisition integration
and the progress of the Corporation in its efforts to ensure Year 2000
compliance.
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.
MERGER AND ACQUISITIONS
- -----------------------
Keystone Heritage Group, Inc. - On March 27, 1998, the Corporation completed its
acquisition of Keystone Heritage Group, Inc. (Keystone Heritage), a $650 million
bank holding company located in Lebanon, Pennsylvania. As provided under the
terms of the merger agreement, each of the approximately 4.0 million shares of
Keystone Heritage's common stock was exchanged for 2.288 shares of the
Corporation's common stock. In addition, each of the 70,000 options to acquire
Keystone Heritage stock was converted to options to purchase the Corporation's
stock. The Corporation issued 9.1 million shares of its common stock in
connection with the merger, which was accounted for as a pooling of interests.
As a result of the acquisition, Keystone Heritage was merged with and into the
Corporation. Its sole banking subsidiary, Lebanon Valley National Bank (Lebanon
Valley), was merged with Farmers Trust Bank, one of the Corporation's existing
affiliate banks, to become Lebanon Valley Farmers Bank. Lebanon Valley's
deposits, loans and branches located in Lancaster and Dauphin Counties were
transferred to Fulton Bank as a result of the merger.
The Peoples Bank of Elkton - On August 31, 1997, the Corporation completed its
acquisition of The Peoples Bank of Elkton (Elkton) of Elkton, Maryland. As
provided under the terms of the merger agreement, Elkton became a wholly-owned
subsidiary of the Corporation and each of the outstanding shares of the common
stock of Elkton was converted into 5.198 shares of the Corporation's common
stock. The Corporation issued 1.2 million shares of its common stock in
connection with the merger, which was accounted for as a pooling of interests.
Elkton, with approximately $103 million in assets as of March 31, 1998, operates
two branch offices in Cecil County, Maryland. As a result of the merger, Elkton
became the Corporation's second banking subsidiary in Maryland and eleventh
overall.
10
<PAGE>
The Woodstown National Bank & Trust Company - On February 28, 1997, the
Corporation completed its acquisition of The Woodstown National Bank & Trust
Company (Woodstown) of Woodstown, New Jersey. As provided under the terms of the
merger agreement, Woodstown became a wholly-owned subsidiary of the Corporation
and each of the outstanding shares of Woodstown common stock was converted into
2.2 shares of the Corporation's common stock. The Corporation issued 4.0 million
shares of its common stock in connection with the merger, which was accounted
for as a pooling of interests. Woodstown, with approximately $275 million in
total assets as of March 31, 1998, operates seven branch offices in Salem and
Gloucester Counties. As a result of the merger, Woodstown became the
Corporation's second banking subsidiary in New Jersey and tenth overall.
Ambassador Bank of the Commonwealth. - On January 26, 1998, the Corporation
entered into a merger agreement to acquire Ambassador Bank of the Commonwealth
(Ambassador) of Allentown, Pennsylvania. Ambassador is a $275 million bank,
which operates eight community banking offices in Lehigh and Northampton
counties.
Under the terms of the merger agreement, each of the 1.9 million shares of
Ambassador's common stock will be exchanged for 1.4 shares of the Corporation's
common stock. In addition, the 417,000 options and warrants to acquire
Ambassador stock will be exchanged for approximately 409,000 shares of the
Corporation's common stock. The acquisition is subject to approval by bank
regulatory authorities and Ambassador shareholders. The transaction is expected
to be completed in the third quarter of 1998 and will be accounted for as a
pooling of interests. As a result of the acquisition, Ambassador will be merged
with and into Lafayette Bank, one of the Corporation's existing affiliate banks.
RESULTS OF OPERATIONS
- ---------------------
Quarter ended March 31, 1998 versus Quarter ended March 31, 1997
- ----------------------------------------------------------------
Fulton Financial Corporation's net income for the first quarter of 1998
increased $2.6 million, or 14.2%, in comparison to net income for the first
quarter of 1997. First quarter net income of $20.6 million, or $0.34 per share
(basic and diluted), represented a return on average assets (ROA) of 1.64% and a
return on average equity (ROE) of 15.24%. This compares to 1997 net income of
$18.0 million, or $0.30 per share (1.56% ROA and 14.99% ROE).
The increase in net income was a result of the continued steady growth of net
interest income and significantly higher other income. Increases in both income
categories continued to outpace the growth rate of operating expenses.
Net Interest Income
- -------------------
Net interest income increased $3.6 million, or 7.1%, for the quarter. Overall,
this increase was a result of growth in the Corporation's balance sheet. The
following tables summarize the components of this increase as well as the
changes in average interest-earning assets and interest-bearing liabilities and
the average interest rates thereon. All dollar amounts are in thousands.
Change
-------------------
1998 1997 Dollar Percent
---------- ---------- -------- --------
Interest income .................. $ 95,102 $ 87,756 $ 7,346 8.4%
Interest expense.................. 41,081 37,312 3,769 10.1
---------- ---------- -------- --------
Net interest income............... $ 54,021 $ 50,444 $ 3,577 7.1%
========== ========== ======== ========
11
<PAGE>
1998 1997 % Change
---------- ---------- --------
Average interest-earning assets................. $4,748,329 $4,384,732 8.3%
Yield on earning assets......................... 8.12% 8.12% 0.0%
Average interest-bearing liabilities............ $3,860,293 $3,584,155 7.7%
Cost of interest-bearing liabilities............ 4.32% 4.22% 2.4%
Net interest margin (fully taxable equivalent).. 4.67% 4.72% (1.1%)
The 8.4% increase in interest income was due primarily to an increase in average
interest-earning assets. The average yield on earning assets was 8.12% for both
quarterly periods, reflecting the generally stable interest rate environment
over the period. The majority of the growth in average interest-earning assets
was realized in the loan portfolio, which grew 8.8% compared to the first
quarter of 1997. Loan growth was realized mostly in commercial mortgages and
consumer loans. Loan growth was generally a result of favorable economic
conditions in the Corporation's markets.
The 10.1% increase in interest expense was a result of an increase in average
interest-bearing liabilities as well as a 10 basis point increase in the average
cost. Average deposits increased $303 million or 7.8%. Most of this increase was
in certificates of deposit with original maturities of three years or less. The
average balance of these CD's increased $203 million or 16.3%. The Corporation
also realized strong growth in non-interest bearing demand deposits, which
increased $51.7 million or 10%. See "Liquidity and Interest Rate Risk" below for
additional discussion of the Corporation's asset/liability management function.
Provision and Allowance for Loan Losses
- ---------------------------------------
The following table summarizes loans outstanding (including unearned income) as
of the dates shown:
March 31 December 31
1998 1997
------------- ------------
(in thousands)
Commercial, financial and agricultural...... $ 549,245 $ 518,034
Real estate - construction.................. 133,781 143,593
Real estate - mortgage...................... 2,354,845 2,407,915
Consumer ................................... 681,090 671,171
Leasing and other........................... 50,418 55,993
------------- ------------
Totals................................... $ 3,769,379 $ 3,796,706
============= ============
The following table summarizes the activity in the Corporation's allowance for
loan losses:
12
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------------
1998 1997
--------------- ---------------
(in thousands)
<S> <C> <C>
Loans outstanding at end of period................................ $ 3,759,415 $ 3,545,824
=============== ===============
Daily average balance of loans and leases......................... $ 3,799,940 $ 3,492,879
=============== ===============
Balance of allowance for loan losses
at beginning of period........................................ $ 55,593 $ 52,528
Loans charged-off:
Commercial, financial and agricultural........................ 399 448
Real estate - mortgage........................................ 202 124
Consumer...................................................... 978 836
Leasing and other............................................. 20 1
--------------- ---------------
Total loans charged-off....................................... 1,599 1,409
--------------- ---------------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural........................ 166 202
Real estate - mortgage........................................ 61 311
Consumer...................................................... 331 392
Leasing and other............................................. 1 1
--------------- ---------------
Total recoveries.............................................. 559 906
--------------- ---------------
Net loans charged-off............................................. 1,040 503
Provision for loan losses......................................... 1,501 1,818
--------------- ---------------
Balance at end of period.......................................... $ 56,054 $ 53,843
=============== ===============
Net charge-offs to average loans (annualized)..................... 0.11% 0.06%
=============== ===============
Allowance for loan losses to loans outstanding.................... 1.49% 1.52%
=============== ===============
</TABLE>
The provision for loan losses for the quarter ended March 31, 1998 was $1.5
million, a $317,000 or 17.4% decrease from $1.8 million for the same period of
1997. As shown in the preceding table, net charge-offs as a percentage of
average loans outstanding was 0.11% for the first quarter of 1998 as compared to
0.06% in the first quarter of 1997. The increase was due mainly to slightly
higher charge-offs on consumer loans and lower recoveries on real estate loans.
Although the charge-off percentage was higher for 1998, the ratio is still
consistent with that experienced by the Corporation over the past several years.
The allowance for loan losses as a percentage of gross loans (net of unearned
income) decreased slightly to 1.49% at March 31, 1998 from 1.52% at March 31,
1997.
The following table summarizes the Corporation's non-performing assets as of
March 31, 1998 and December 31, 1997:
March 31 Dec. 31
(Dollars in thousands) 1998 1997
--------------- ---------------
Nonaccrual loans........................... $ 19,877 $ 20,074
Loans 90 days past due and accruing........ 8,553 9,963
Other real estate owned.................... 1,510 1,292
--------------- ---------------
Total non-performing assets................ $ 29,940 $ 31,329
=============== ===============
Non-performing assets/Total assets......... 0.58% 0.61%
Non-performing assets/Gross loans.......... 0.76% 0.79%
13
<PAGE>
Since December 31, 1997, the Corporation's total nonperforming assets decreased
$1.4 million or 4.4%. Management considers various factors in assessing the
adequacy of the allowance for loan losses and determining the provision for the
period. Among these are the mix and risk characteristics of loan types in the
portfolio, charge-off history, risk classification of significant credits,
adequacy of collateral, the amount of the allowance that is not specifically
allocated to individual loans, and the balance of the allowance relative to
total and nonperforming loans. In management's opinion, based on its
consideration of these factors, the allowance for loan losses of $56.1 million
at March 31, 1998 is adequate.
Other Income
- ------------
Other income for the quarter ended March 31, 1998 was $14.3 million. This was an
increase of $2.5 million or 21.1% over the comparable period in 1997. Of this
increase, $1.2 million was a result of higher investment security gains.
Management monitors the Corporation's available for sale securities and makes
periodic purchase and sale decisions based on current and expected market
conditions. In the first quarter of 1998, certain investments in stock of other
financial institutions were sold due to management's assessment of current
market conditions.
Excluding investment security gains, other income increased $1.3 million or
13.1%. Trust department income ($311,000, or 11.7%, increase) and service
charges on deposit accounts ($325,000, or 7.9%, increase) accounted for a
portion of this growth as a result of the continued expansion of investment
management and trust services, changes in deposit fee structures at certain
affiliate banks and an increase in fee-based deposits. Gains on sales of
mortgage loans increased $362,000 or 81.7% as relatively low interest rates
caused an increase in refinance volume.
Other Expenses
- --------------
Total other expenses for the first quarter of 1998 increased $2.1 million, or
6.0%, to $36.9 million from $34.8 million in the comparable period of 1997.
Salaries and employee benefits increased $683,000 or 3.6% in comparison to the
first quarter of 1997. Adjusting 1997 for $600,000 in non-recurring expenses for
post-employment benefits results in a $1.3 million or 6.9% increase in salaries
and benefits in 1998. Additional staff expenses were incurred to facilitate the
conversion and transition of Lebanon Valley. Average full-time equivalent (FTE)
employees increased from 2,177 in 1997 to 2,230 in 1998, resulting in
approximately $450,000 of additional expense. The number of FTE's has been
declining since January as Lebanon Valley employees are absorbed into the
Corporation. The remaining increase in salaries and benefits, $833,000 or 4.5%,
is consistent with the Corporation's goals and reflects continued growth.
Equipment expense increased $130,000 or 5.8% and special services, which
represents the costs of data processing, increased $221,000 or 12.0%. Both of
these increases were a result of technology initiatives of the Corporation.
Other expenses increased $1.1 million or 12.8% in 1998 to $9.3 million as
compared to $8.3 million for the same period in 1997. The Corporation incurred
$870,000 and $620,000 in non-recurring merger related expenses in 1998 and 1997,
respectively. Excluding these expenses other expenses increased $809,000 or
10.6%. This increase was due mainly to the growth of the Corporation
14
<PAGE>
Income Taxes
- ------------
Income tax expense for the quarter was $9.4 million as compared to $7.7 million
for the comparable period in 1997, a $1.7 million or 22.5% increase. The
effective tax rate for 1998 was 31.3% as compared to 29.9% for 1997. Excluding
the impact of $870,000 in non-deductible merger-related expenses, the 1998
effective tax rate was 30.5%. The increase in the effective tax rate from 1997
was a result of a reduction in the Corporation's investments in tax-free
municipal bonds, offset by an increase in net tax credits on investments in low
and moderate income housing to $660,000 in 1998 from $570,000 in 1997.
FINANCIAL CONDITION
- -------------------
At March 31, 1998, the Corporation had total assets of $5.2 billion, reflecting
an increase of $69.8 million, or 1.4%, over December 31, 1997. The Corporation's
loan portfolio actually decreased by $27 million since December 31, 1997. This
net decrease was mainly a result of low interest rates increasing refinance
activity. The Corporation's adjustable rate mortgage portfolio decreased by $102
million or 24%. Any of these loans refinanced through the Corporation at fixed
rates were sold in the secondary market. This runoff of residential mortgages
was partially offset by commercial mortgage and consumer loan growth.
The net decrease in loans and a $21 million increase in deposits provided excess
funds to the Corporation during the first quarter of 1998. In addition, in
March, 1998, the Corporation borrowed $90 million in long-term fixed-rate
advances from the Federal Home Loan Bank. This borrowing was done to take
advantage of the relatively low interest rate environment and to adjust the
interest rate sensitivity of the Corporation's liabilities. With the net
decrease in loans, these borrowed funds were used to eliminate the Corporation's
federal funds purchased balance, which was $73.2 million at December 31, 1997.
Remaining funds were temporarily invested in federal funds sold to maintain a
liquid funding source for future loan growth.
Other liabilities increased $16.9 million or 28.9% as a result of the purchases
of investment securities which did not settle until after the end of the
quarter. Such purchases totaled approximately $12.5 million at March 31, 1998.
Liquidity and Interest Rate Risk
- --------------------------------
Interest rate risk creates exposure in two primary areas. First, changes in
rates have an impact on the Corporation's liquidity position and could affect
its ability to meet obligations and continue to grow. Secondly, movements in
interest rates can create fluctuations in the Corporation's net income.
The Corporation employs various management techniques to minimize its exposure
to interest rate risk. An Asset/Liability Management Committee (ALCO),
consisting of key financial and senior management personnel, meets on a weekly
basis. This committee's primary responsibility is to address the liquidity and
net income risks noted above.
The goals of the Corporation's asset/liability management function are to ensure
adequate liquidity and to maintain an appropriate balance between the relative
rate sensitivity of interest-earning assets and interest-bearing liabilities.
The Corporation must maintain a sufficient level of liquid assets to meet the
ongoing cash flow requirements of customers, who, as depositors, may want to
withdraw funds or who, as borrowers, need credit availability.
Adequate liquidity is provided by cash, short-term investments, securities
available for sale and scheduled payments and maturities of loans receivable and
securities held to maturity. Liquidity is also provided by deposits and short
and long-term borrowings.
15
<PAGE>
In order to manage the risk that changes in interest rates could have a
significant impact on net income, the Corporation, through its ALCO function,
relies on certain analytical tools, including "static gap" analyses and net
interest income forecasting. As required by banking regulators, the Corporation
also employs certain interest sensitivity, income volatility and market value of
equity analyses.
Static gap illustrates the expected repricing periods for all rate-sensitive
assets and liabilities and shows the difference (or gap) for each period.
Despite the fact that static gap only addresses rate risk at a point in time and
is not as sophisticated as certain modeling and forecasting methods, it remains
a popular tool in the industry and for the Corporation.
Interest rate sensitivity varies widely with different types of interest-earning
assets and interest-bearing liabilities. At the short end of the asset spectrum
are overnight Federal funds, on which rates change daily, and loans, whose rates
float with the prime rate or a similar index. At the other end are long-term
investment securities and fixed-rate loans. On the liability side, jumbo time
deposits and short-term borrowings are much more interest rate sensitive than
passbook savings and FHLB advances.
While the interest rate sensitivity gap (the difference between repricing
opportunities for interest-earning assets and interest-bearing liabilities) must
be managed over all time periods, the Corporation focuses on the 6-month period
as the key interval affecting net interest income. This shorter period is
monitored because a large percentage of the Corporation's interest-earning
assets and interest-bearing liabilities are subject to repricing within this
period. In addition, short-term interest rate swings can be more pronounced and
provide a shorter time for reaction or strategy adjustment.
The Corporation's policy provides for the six-month gap position to be
maintained between 0.85 and 1.15. The Corporation was positioned within this
range throughout the first three months of 1998.
Capital Resources
- -----------------
Shareholders' equity increased $14.7 million or 2.7% during the first quarter of
1998. This increase was a result of net income for the quarter -- offset by the
normal quarterly dividend to shareholders -- and an increase in the value of the
Corporation's available for sale investment securities.
Current capital guidelines measure the adequacy of a bank holding company's
capital by taking into consideration the differences in risk associated with
holding various types of assets as well as exposure to off-balance sheet
commitments. The guidelines call for a minimum risk-based Tier I capital
percentage of 4.0% and a minimum risk-based total capital of 8.0%. Tier I
capital includes common shareholders' equity less goodwill and non-qualified
intangible assets. Total capital includes all Tier I capital components plus the
allowance for loan losses.
The Corporation is also subject to a "leverage capital" requirement, which
compares capital (using the definition of Tier I capital) to total balance sheet
assets and is intended to supplement the risk based capital ratios in measuring
capital adequacy. The minimum acceptable leverage capital ratio is 3% for
institutions which are highly-rated in terms of safety and soundness and which
are not experiencing or anticipating any significant growth. Other institutions
are expected to maintain capital levels at least one or two percent above the
minimum.
As of March 31, 1998, the Corporation and each of its subsidiaries met the
minimum capital requirements. In addition, the Corporation and each of its
subsidiaries' capital ratios exceeded the amounts required to be considered
"well-capitalized" as defined in the regulations.
16
<PAGE>
The Corporation's total and Tier I risk-based capital ratios have generally
placed the Corporation near the middle of its self-defined peer group over the
past year. The Corporation's ratio of Tier 1 capital to average assets, however,
has generally placed it in the top quartile in comparison to its peers.
In March, 1997, the Board of Directors approved a Plan to repurchase up to
100,000 shares of the Corporation's common stock through March 31, 1998. On
April 21, 1998, the Board of Directors approved a plan to repurchase up to
250,000 shares of the Corporation' s common stock through October 31, 1998.
Treasury stock acquired under these plans is used for the Corporation's Employee
Stock Purchase Plan, Incentive Stock Option Plan and other benefit plans. The
Corporation purchased 77,500 shares under the plan which expired on March 31,
1998.
YEAR 2000
- ---------
The Corporation's business, operations and financial condition may be affected
by the "Year 2000 Problem"-a potential problem caused by certain computer and
other electronic information processing systems not being able to recognize
dates after 1999. A financial institution's ability to process financial data
such as deposit, loans and trust accounts through its various data processing
systems is the most obvious area of exposure to the Year 2000 Problem. In
addition, a financial institution's ability to collect payments on loans could
be impacted if borrowers are unable to make payments as a result of Year 2000
deficiencies. Furthermore, financial institutions could be affected by the Year
2000 readiness of vendors and correspondents, customer perception of the
problem, and regulatory influences, among other things.
The Corporation has formed committees to identify, evaluate and manage the risks
related to the Year 2000 Problem, including the preparation of a comprehensive
plan adopted by the Board of Directors of the Corporation which establishes a
five step process - awareness, assessment, renovation, validation and
implementation - to address the Year 2000 Problem. Since most of the major data
processing functions of the Corporation are performed by third-party service
providers, the Corporation does not anticipate that it will incur any material
costs to address the Year 2000 Problem. The Corporation does not expect, at this
time, that the Year 2000 Problem should have any material adverse effect on the
products and services it offers or on competitive conditions; however, it has
not yet begun the testing of mission critical third-party service providers.
Similarly, the Corporation does not believe that the Year 2000 Problem should
have any material adverse effect on the Corporation's business, operations or
financial condition, but until it has completed its survey of its major business
loan customers and other actions designed to evaluate the risks associated with
the Year 2000 Problem, it cannot rule out the possibility that the Year 2000
Problem might have such an effect.
Federal bank regulators have initiated a series of examinations of all financial
institutions to assess their progress in addressing the Year 2000 Problem and
have indicated that institutions which have not adequately addressed the issue
will be subject to various sanctions, including denial of, or delay in acting
on, regulatory applications. The Corporation believes that it has made
sufficient progress on the Year 2000 Problem to minimize the risk of regulatory
sanctions.
17
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits -- The following is a list of the exhibits required by
Item 601 of Regulation S-K and filed as part of this report:
(1) Articles of incorporation as amended on April 13, 1990 and
Bylaws of Fulton Financial Corporation as amended on April 17,
1990 - Incorporated by reference from Exhibits 19(a) and 19(b)
of the Fulton Financial Corporation Quarterly Report on Form
10-Q for the quarter ended March 31, 1990.
(2) Instruments defining the right of securities holders,
including indentures:
(a) Rights Agreement dated June 20, 1989 between Fulton
Financial Corporation and Fulton Bank - Incorporated by
reference to Exhibit 1 of the Fulton Financial Corporation
Current Report on Form 8-K dated June 21, 1989.
(3) Material Contracts - Executive Compensation Agreements and
Plans:
(a) Severance Agreements entered into as of April 17, 1984 and
as of May 17, 1988 between Fulton Financial Corporation
and the following executive officers: Robert D. Garner,
Rufus A. Fulton, Jr., James K. Sperry and R. Scott Smith,
Jr. - Incorporated by reference from Exhibit 28(a) of the
Fulton Financial Corporation Quarterly Report on Form 10-Q
for the quarter ended March 31, 1990.
(b) Incentive Stock Option Plan adopted September 19, 1995 -
Incorporated by reference from Exhibit A of Fulton
Financial Corporation's 1996 Proxy Statement.
(c) Severance Agreement entered into as of November 19, 1992
between Fulton Financial Corporation and Charles J.
Nugent, Executive Vice President and Chief Financial
Officer, incorporated by reference from Exhibit 10(c) to
the Fulton Financial Corporation Annual Report on Form
10-K for the year ended December 31, 1992.
(4) Financial Data Schedule - March 31, 1998
(5) Financial Data Schedule - March 31, 1997 (restated).
(b) Reports on Form 8-K:
(1) Form 8-K dated January 30, 1998 reporting execution of a
Merger Agreement between Fulton Financial Corporation and
Ambassador Bank of the Commonwealth.
(2) Form 8-K dated April 6, 1998 reporting consummation of the
merger of Fulton Financial Corporation and Keystone Heritage
Group, Inc.
18
<PAGE>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
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.
FULTON FINANCIAL CORPORATION
Date: May 8, 1998 /s/ Rufus A. Fulton, Jr.
----------------- -----------------------------
Rufus A. Fulton, Jr.
President and Chief Executive Officer
Date: May 8, 1998 /s/ Beth Ann L. Chivinski
----------------- ------------------------------
Beth Ann L. Chivinski
Senior Vice President-Controller
(Chief Accounting Officer)
19
<PAGE>
EXHIBIT INDEX
Exhibits Required Pursuant
to Item 601 of Regulation S-K
-----------------------------
3. Articles of Incorporation as amended on April 30, 1990, and Bylaws of
Fulton Financial Corporation as amended on April 17, 1990 -
Incorporated by reference from Exhibits 19(a) and 19(b) of the Fulton
Financial Corporation Quarterly Report on Form 10-Q for the quarter
ended March 31, 1990.
4. Instruments defining the rights of security holders, including
indentures.
(a) Rights Agreement dated June 20, 1989 between Fulton Financial
Corporation and Fulton Bank- Incorporated by reference to Exhibit
1 of the Fulton Financial Corporation Current Report on Form 8-K
dated June 21, 1989.
10. Material Contracts
(a) Severance Agreements entered into as of April 17, 1984 and as of
May 17, 1988 between Fulton Financial Corporation and the
following executive officers: Robert D. Garner, Rufus A. Fulton,
Jr., James K. Sperry and R. Scott Smith, Jr. - Incorporated by
reference from Exhibit 28(a) of the Fulton Financial Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31,
1990.
(b) Incentive Stock Option Plan adopted September 19, 1995 -
Incorporated by reference from Exhibit A of Fulton Financial
Corporation's 1996 Proxy Statement.
(c) Severance Agreement entered into as of November 19, 1992 between
Fulton Financial Corporation and Charles J. Nugent, Executive Vice
President and Chief Financial Officer, filed as Exhibit 10(c) to
the Fulton Financial Corporation Annual Report on Form 10-K for
the year ended December 31, 1992.
27. Financial data schedule - March 31, 1998.
27.1 Financial data schedule - March 31, 1997 (restated).
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FULTON
FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND THE
RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE QUARTER ENDED MARCH 31, 1998
AND OTHER FINANCIAL DATA INCLUDED WITHIN MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF AND FOR THE QUARTER ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 206,797
<INT-BEARING-DEPOSITS> 3,049
<FED-FUNDS-SOLD> 49,260
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 744,381
<INVESTMENTS-CARRYING> 284,517
<INVESTMENTS-MARKET> 285,619
<LOANS> 3,759,415
<ALLOWANCE> 56,054
<TOTAL-ASSETS> 5,180,142
<DEPOSITS> 4,198,853
<SHORT-TERM> 179,888
<LIABILITIES-OTHER> 109,238
<LONG-TERM> 134,063
0
0
<COMMON> 119,902
<OTHER-SE> 438,198
<TOTAL-LIABILITIES-AND-EQUITY> 5,180,142
<INTEREST-LOAN> 80,523
<INTEREST-INVEST> 14,320
<INTEREST-OTHER> 259
<INTEREST-TOTAL> 95,102
<INTEREST-DEPOSIT> 37,525
<INTEREST-EXPENSE> 41,081
<INTEREST-INCOME-NET> 54,021
<LOAN-LOSSES> 1,501
<SECURITIES-GAINS> 3,382
<EXPENSE-OTHER> 36,854
<INCOME-PRETAX> 30,006
<INCOME-PRE-EXTRAORDINARY> 20,600
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,600
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 4.67
<LOANS-NON> 19,877
<LOANS-PAST> 8,553
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 55,593
<CHARGE-OFFS> 1,599
<RECOVERIES> 559
<ALLOWANCE-CLOSE> 56,054
<ALLOWANCE-DOMESTIC> 56,054
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FULTON
FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE
RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE QUARTER ENDED MARCH 31, 1997
AND OTHER FINANCIAL DATA INCLUDED WITHIN MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF AND FOR THE QUARTER ENDED
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 221,322
<INT-BEARING-DEPOSITS> 1,818
<FED-FUNDS-SOLD> 3,695
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 448,970
<INVESTMENTS-CARRYING> 450,359
<INVESTMENTS-MARKET> 447,020
<LOANS> 3,545,824
<ALLOWANCE> 53,843
<TOTAL-ASSETS> 4,799,944
<DEPOSITS> 3,993,609
<SHORT-TERM> 151,702
<LIABILITIES-OTHER> 96,369
<LONG-TERM> 66,422
0
0
<COMMON> 110,556
<OTHER-SE> 381,286
<TOTAL-LIABILITIES-AND-EQUITY> 4,799,944
<INTEREST-LOAN> 74,334
<INTEREST-INVEST> 13,281
<INTEREST-OTHER> 141
<INTEREST-TOTAL> 87,756
<INTEREST-DEPOSIT> 34,079
<INTEREST-EXPENSE> 37,312
<INTEREST-INCOME-NET> 50,444
<LOAN-LOSSES> 1,818
<SECURITIES-GAINS> 2,154
<EXPENSE-OTHER> 34,753
<INCOME-PRETAX> 25,718
<INCOME-PRE-EXTRAORDINARY> 18,038
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,038
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
<YIELD-ACTUAL> 4.72
<LOANS-NON> 16,349
<LOANS-PAST> 7,855
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 52,528
<CHARGE-OFFS> 1,409
<RECOVERIES> 906
<ALLOWANCE-CLOSE> 53,843
<ALLOWANCE-DOMESTIC> 53,843
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
