<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, 2000 , 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 - 67,419,917 shares outstanding as of
- -------------------------------------------------------------------
April 30, 2000.
- ---------------
<PAGE>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
-----
Description Page
----------- ----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
(a) Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999.................................3
(b) Consolidated Statements of Income -
Three months ended March 31, 2000 and 1999...........................4
(c) Consolidated Statements of Shareholders' Equity -
Three months ended March 31, 2000 and 1999...........................5
(d) Consolidated Statements of Cash Flows -
Three months ended March 31, 2000 and 1999...........................6
(e) Notes to Consolidated Financial Statements - March 31, 2000..........7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk.....15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................19
SIGNATURES..............................................................20
2
<PAGE>
<TABLE>
<CAPTION>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per-share data)
March 31 December 31
2000 1999
--------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks ............................................................. $ 258,415 $ 245,572
Interest-bearing deposits with other banks .......................................... 2,309 1,798
Mortgage loans held for sale ........................................................ 1,419 1,016
Investment securities:
Held to maturity (Fair value: $75,776 in 2000 and $84,777 in 1999) ............. 76,543 85,474
Available for sale ............................................................. 1,113,466 1,137,846
Loans ............................................................................... 4,513,407 4,432,030
Less: Allowance for loan losses ............................................... (58,034) (57,631)
Unearned income ...................................................... (9,838) (9,623)
--------------- ---------------
Net Loans .................................................. 4,445,535 4,364,776
--------------- ---------------
Premises and equipment .............................................................. 81,452 79,217
Accrued interest receivable ......................................................... 31,611 31,496
Other assets ........................................................................ 119,164 122,824
--------------- ---------------
Total Assets ............................................... $ 6,129,914 $ 6,070,019
=============== ===============
LIABILITIES
- ------------------------------------------------------------------------------------- --------------------------------------
Deposits:
Noninterest-bearing ............................................................ $ 793,563 $ 724,778
Interest-bearing ............................................................... 3,853,965 3,822,035
--------------- ---------------
Total Deposits ............................................. 4,647,528 4,546,813
--------------- ---------------
Short-term borrowings:
Securities sold under agreements to repurchase.................................. 303,899 309,790
Federal funds purchased......................................................... 143,890 172,250
Demand notes of U.S. Treasury .................................................. 3,607 5,506
--------------- ---------------
Total Short-Term Borrowings ................................ 451,396 487,546
--------------- ---------------
Accrued interest payable ............................................................ 33,526 32,313
Other liabilities ................................................................... 64,532 60,803
Long-term debt ...................................................................... 323,194 328,250
--------------- ---------------
Total Liabilities .......................................... 5,520,176 5,455,725
--------------- ---------------
SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
Common stock ($2.50 par)
Shares: Authorized 400,000,000
Issued 72,824,439; Outstanding 71,335,092 (71,924,447 in 1999)........ 181,884 173,392
Capital surplus ..................................................................... 451,729 394,234
Retained earnings ................................................................... 24,154 75,482
Accumulated other comprehensive income............................................... (21,910) (11,846)
Treasury stock, at cost (1,489,347 shares in 2000 and 899,992 shares in 1999)........ (26,119) (16,968)
--------------- ---------------
Total Shareholders' Equity ................................. 609,738 614,294
--------------- ---------------
Total Liabilities and Shareholders' Equity.................. $ 6,129,914 $ 6,070,019
=============== ===============
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
<TABLE>
<CAPTION>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- ------------------------------------------------------------------------------------------------
(Dollars in thousands, except per-share data)
Three Months Ended
March 31
----------------------------------
2000 1999
----------------------------------
INTEREST INCOME
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans, including fees ...................................... $ 91,368 $ 82,238
Investment securities:
Taxable ............................................... 14,189 16,219
Tax-exempt ............................................ 2,205 1,792
Dividends ............................................. 1,105 993
Federal funds sold ......................................... 100 37
Interest-bearing deposits with other banks ................. 44 29
-------------- -------------
Total Interest Income ............ 109,011 101,308
INTEREST EXPENSE
- ------------------------------------------------------------------------------------------------
Deposits ................................................... 37,226 36,030
Short-term borrowings ...................................... 6,256 2,870
Long-term debt ............................................. 4,409 3,782
-------------- -------------
Total Interest Expense ............ 47,891 42,682
-------------- -------------
Net Interest Income ............... 61,120 58,626
PROVISION FOR LOAN LOSSES .................................. 2,025 1,967
-------------- -------------
Net Interest Income After
Provision for Loan Losses ...... 59,095 56,659
-------------- -------------
OTHER INCOME
- ------------------------------------------------------------------------------------------------
Investment management and trust services.................... 4,921 3,417
Service charges on deposit accounts ........................ 5,584 4,770
Other service charges and fees ............................. 3,081 2,786
Mortgage banking income..................................... 590 1,283
Investment securities gains ................................ 2,476 3,057
-------------- -------------
Total Other Income ................ 16,652 15,313
OTHER EXPENSES
- ------------------------------------------------------------------------------------------------
Salaries and employee benefits ............................. 22,745 21,362
Net occupancy expense ...................................... 3,591 3,275
Equipment expense .......................................... 2,483 2,293
Special services ........................................... 2,773 2,880
Other ...................................................... 8,194 8,888
-------------- -------------
Total Other Expenses .............. 39,786 38,698
-------------- -------------
Income Before Income Taxes ........ 35,961 33,274
INCOME TAXES................................................ 10,647 9,747
-------------- -------------
Net Income ........................ $ 25,314 $ 23,527
============== =============
- ------------------------------------------------------------------------------------------------
PER-SHARE DATA:
Net income (basic).......................................... $ 0.35 $ 0.32
Net income (diluted)........................................ 0.35 0.32
Cash dividends ............................................. 0.143 0.130
- ------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
FULTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<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, 1999 ......................... $ 173,392 $ 394,234 $ 75,482 $ (11,846)
Comprehensive income:
Net income ...................................... 25,314
Other - net unrealized loss on securities (net of
$5.4 million tax benefit) (10,064)
Total comprehensive income .................
Stock dividends declared - 5% (3,396,909 shares) ..... 8,492 57,929 (66,421)
Stock issued (59,125 shares of treasury stock) ....... (434)
Acquisition of treasury stock (648,480 shares) .......
Cash dividends - $0.143 per share .................... (10,221)
------------------------------------------------
Balance at March 31, 2000 ............................ $ 181,884 $ 451,729 $ 24,154 $ (21,910)
================================================
Balance at December 31, 1998 ......................... $ 157,638 $ 293,897 $ 136,668 $ 23,619
Comprehensive income:
Net income ...................................... 23,527
Other - net unrealized gain on securities (net of
$1.9 million tax benefit) ..................... (3,463)
Total comprehensive income .................
Stock dividends issued - 10% (6,605,367 shares) ...... 15,727 115,122 (130,849)
Stock issued (55,929 shares of treasury stock) ....... (558)
Acquisition of treasury stock (41,685 shares) ........
Cash dividends - $0.130 per share .................... (9,421)
------------------------------------------------
Balance at March 31, 1999 ............................ $ 173,365 $ 408,461 $ 19,925 $ 20,156
================================================
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Treasury
(Dollars in thousands, except per-share data) Stock Total
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1999 ......................... (16,968) $ 614,294
Comprehensive income:
Net income ...................................... 25,314
Other - net unrealized loss on securities (net of
5.4 million tax benefit) (10,064)
----------
Total comprehensive income ................. 15,250
----------
Stock dividends declared - 5% (3,396,909 shares) ..... --
Stock issued (59,125 shares of treasury stock) ....... 1,002 568
Acquisition of treasury stock (648,480 shares) ....... (10,153) (10,153)
Cash dividends - $0.143 per share .................... (10,221)
----------------------
Balance at March 31, 2000 ............................ $ (26,119) $ 609,738
======================
Balance at December 31, 1998 ......................... $ (3,488) $ 608,334
Comprehensive income:
Net income ...................................... 23,527
Other - net unrealized gain on securities (net of
$1.9 million taxbenefit ....................... (3,463)
----------------------
Total comprehensive income ................. 20,064
----------------------
Stock dividends issued - 10% (6,605,367 shares) ...... --
Stock issued (55,929 shares of treasury stock) ....... 910 352
Acquisition of treasury stock (41,685 shares) ........ (780) (780)
Cash dividends - $0.130 per share .................... (9,421)
----------------------
Balance at March 31, 1999 ............................ $ (3,358) $ 618,549
======================
- ---------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
Three Months Ended
March 31
----------------------------------
2000 1999
----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................................................ $ 25,314 $ 23,527
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses ................................................... 2,025 1,967
Depreciation and amortization of premises and equipment ..................... 2,536 2,383
Net amortization of investment security premiums ............................ 131 405
Investment security gains ................................................... (2,476) (3,057)
Net increase in mortgage loans held for sale................................. (403) (1,341)
Amortization of intangible assets ........................................... 328 325
(Increase) decrease in accrued interest receivable .......................... (115) 1,045
Decrease in other assets .................................................... 8,718 12,784
Increase (decrease) in accrued interest payable ............................. 1,213 (26)
Increase in other liabilities................................................ 3,796 7,273
------------- -------------
Total adjustments...................................................... 15,753 21,758
------------- -------------
Net cash provided by operating activities .............................. 41,067 45,285
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale ............................. 4,809 7,070
Proceeds from maturities of securities held to maturity .......................... 9,285 38,524
Proceeds from maturities of securities available for sale ........................ 40,422 73,018
Purchase of securities held to maturity .......................................... (346) (121)
Purchase of securities available for sale ........................................ (33,964) (85,307)
Increase in short-term investments ............................................... (511) (2,115)
Net increase in loans ............................................................ (82,784) (20,560)
Purchase of premises and equipment................................................ (4,771) (2,609)
------------- -------------
Net cash (used in) provided by investing activities .................... (67,860) 7,900
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand and savings deposits ........................... 88,673 (70,551)
Net increase (decrease) in time deposits ......................................... 12,042 (13,995)
Decrease in long-term debt........................................................ (5,056) (192)
(Decrease) increase in short-term borrowings ..................................... (36,150) 19,422
Dividends paid ................................................................... (10,288) (9,413)
Net proceeds from issuance of common stock ....................................... 568 352
Acquisition of treasury stock .................................................... (10,153) (780)
------------- -------------
Net cash provided by (used in) financing activities..................... 39,636 (75,157)
------------- -------------
Net Increase (Decrease) in Cash and Due From Banks ............................... 12,843 (21,972)
Cash and Due From Banks at Beginning of Period ................................... 245,572 247,558
------------- -------------
Cash and Due From Banks at End of Period ......................................... $ 258,415 $ 225,586
============= =============
Supplemental Disclosures of Cash Flow Information Cash paid during the
period for:
Interest .................................................................... $ 46,678 $ 42,708
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, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
NOTE B - Stock Dividends
The Corporation declared a 5% stock dividend on April 18, 2000 which will be
paid on May 31, 2000 to shareholders of record on May 8, 2000. All share and
per-share information has been restated to reflect the effect of this stock
dividend. In addition, shareholders' equity accounts have been adjusted to
reflect the impact of the dividend, assuming 67,938,000 shares are outstanding
on the payment date.
NOTE C - Net Income Per Share
The Corporation's basic net income per share is calculated as net income divided
by the weighted average number of shares outstanding. For diluted net income per
share, net income is divided by the weighted average number of shares
outstanding plus the incremental number of shares added as a result of
converting common stock equivalents, calculated using the treasury stock method.
The Corporation's common stock equivalents consist solely of outstanding stock
options.
A reconciliation of the weighted average shares outstanding used to calculate
basic net income per share and diluted net income per share follows (in
thousands):
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Weighted average shares outstanding (basic)....... 71,648 72,628
Impact of common stock equivalents................ 307 427
-------- --------
Weighted average shares outstanding (diluted)..... 71,955 73,055
======== ========
</TABLE>
NOTE D - Comprehensive Income
The following table summarizes the reclassification adjustment for realized
security gains (net of taxes) for each of the indicated periods (in thousands):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Unrealized holding losses arising during period....... $ (8,455) $ (1,476)
Less: reclassification adjustment for gains included
in net income................................. 1,609 1,987
------------- -------------
Net unrealized losses on securities................... $ (10,064) $ (3,463)
============= =============
</TABLE>
7
<PAGE>
NOTE E - New Accounting Standards
Accounting for Derivative Instruments and Hedging Activities: In June, 1998, the
FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (Statement 133). This statement
expanded the previous definition of derivatives to include certain additional
transactions. Entities are required to record derivatives at their fair values
and recognize any changes in fair value in current period earnings, unless
specific hedge criteria are met. Statement 133, as amended by Statement 137, is
effective for years beginning after June 15, 2000. The Corporation does not
expect the adoption of Statement 133 to have a material effect on its balance
sheet or net income.
NOTE F - Reclassifications
Certain amounts in the 1999 consolidated financial statements and notes have
been reclassified to conform to the 2000 presentation.
8
<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, the
ability to realize gains on equity investments, allowance and provision for loan
losses and expected levels of certain non-interest expenses. The Corporation
cautions that these forward-looking statements are subject to various
assumptions, risks and uncertainties. Because of the possibility of changes in
these assumptions, risks and uncertainties, actual results could differ
materially from forward-looking statements.
In addition to the factors identified herein, the following could cause actual
results to differ materially from such forward looking statements: pricing
pressures on loan and deposit products, actions of bank and 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 impact of changes in third-party contracts.
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 ACQUISITION ACTIVITY
- -------------------------------
On February 23, 2000, the Corporation entered into a merger agreement to acquire
Skylands Financial Corporation (SFC) of Hackettstown, New Jersey. SFC is a $225
million bank holding company whose sole banking subsidiary, Skylands Community
Bank (Skylands), operates eight community banking offices in Morris, Warren and
Sussex counties.
Under the terms of the merger agreement, each of the 2.5 million shares of SFC's
common stock will be exchanged for 0.819 shares of the Corporation's common
stock. In addition, the 308,000 options to acquire SFC stock will also be
exchanged for options to purchase the Corporation's common stock. If the price
of the Corporation's stock as of a defined pricing period prior to the merger is
higher or lower than specified maximum and minimum prices, the agreement may be
terminated or the exchange ratio may be modified.
The acquisition is subject to approval by bank regulatory authorities and SFC
shareholders. The transaction is expected to be completed in the third quarter
of 2000 and will be accounted for as a purchase. As a result of the acquisition,
SFC will be merged with and into Fulton Financial Corporation (parent company)
and Skylands will become the Corporation's twelfth banking subsidiary.
RESULTS OF OPERATIONS
- ---------------------
Quarter ended March 31, 2000 versus Quarter ended March 31, 1999
- -----------------------------------------------------------------
The Corporation's net income for the first quarter of 2000 increased $1.8
million, or 7.6%, in comparison to net income for the first quarter of 1999.
Diluted net income per share increased $0.03, or 9.4%, compared to 1999. First
quarter net income of $25.3 million, or $0.35 per share (basic and diluted),
represented a
9
<PAGE>
return on average assets (ROA) of 1.67% and a return on average equity (ROE) of
16.57%. This compares to 1999 net income of $23.5 million, or $0.32 per share
(basic and diluted) (1.66% ROA and 15.62% ROE).
The increase in net income in 2000 resulted from continued expansion of the
Corporation's core banking business, as shown by increases in both net interest
income and non-interest income. Offsetting these increases were modest increases
in the provision for loan losses and other expenses as well as a decrease in
investment securities gains.
Net Interest Income
- -------------------
Net interest income increased $2.5 million, or 4.3%, for the quarter. Overall,
this increase was a result of growth in the Corporation's balance sheet, offset
by a decline in net interest margin. The following tables summarize the
components of the increase in net interest income as well as the changes in
average balances of interest-earning assets and interest-bearing liabilities
from the first quarter of 1999 to the first quarter of 2000 and the average
interest rates thereon. All dollar amounts are in thousands.
<TABLE>
<CAPTION>
Three Months Ended
March 31 Change
-------------------------------------- -------------------------------------
2000 1999 $ %
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Interest income ................. $ 109,011 $ 101,308 $ 7,703 7.6%
Interest expense................. 47,891 42,682 5,209 12.2%
----------------- ----------------- ---------------- -----------------
Net interest income.............. $ 61,120 $ 58,626 $ 2,494 4.3%
================= ================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------------------
2000 1999 Change
----------------- ----------------- ----------------
<S> <C> <C> <C>
Loans................................................. $ 4,468,516 $ 4,040,547 $ 427,969
Investment securities................................. 1,232,289 1,315,965 (83,676)
Other earning assets.................................. 8,991 6,067 2,924
----------------- ----------------- ----------------
Total interest-earning assets......................... $ 5,709,796 $ 5,362,579 $ 347,217
================= ================= ================
Yield on earning assets (fully taxable equivalent).... 7.79% 7.74% 0.05%
Deposits.............................................. $ 3,821,613 $ 3,790,317 $ 31,296
Short-term borrowings................................. 478,442 268,398 210,044
Long-term debt........................................ 340,692 295,900 44,792
----------------- ----------------- ----------------
Total interest-bearing liabilities.................... $ 4,640,747 $ 4,354,615 $ 286,132
================= ================= ================
Cost of interest-bearing liabilities.................. 4.15% 3.97% 0.18%
Net interest margin (fully taxable equivalent)........ 4.42% 4.52% (0.10%)
</TABLE>
The 7.6% increase in interest income was mainly volume driven as the growth in
the Corporation's balance sheet, particularly average loans, accounted for an
interest income increase of approximately $6.7 million. The five basis point
increase in the average yield and an additional day in the 2000 quarter as a
result of leap year accounted for the remaining $1.0 million increase.
The average balance sheet growth was fueled mainly by loans, which increased
$428 million, or 10.6%, in 2000 as compared to 1999. Commercial lending
continued to be strong, as shown by a $314 million, or 15.7%, increase in the
average balances of commercial loans and mortgages. Although the Corporation has
had success in growing its loan portfolio, overall yields on loans have remained
flat over the past year, despite an increase in the Corporation's average prime
lending rate from 7.75% in 1999 to 8.68% in 2000. This has resulted from the
continuing competition for new loans in the Corporation's markets. The increase
10
<PAGE>
in the prime rate was related to the actions of the Federal Reserve Board, and
reflects the changes in the interest rate environment in general.
Average investment securities decreased $84 million, or 6.4%. In general, this
decrease resulted from maturities and payoffs of United States obligations and
mortgage-backed securities being reinvested in loans. The Corporation did
continue its recent strategy of investing in tax-free municipal securities
which, over the past year, have had taxable equivalent rates which were at least
comparable to other investment alternatives. The average balance of these
investments increased $45 million, or 28.1%, to $204 million.
The 12.2% increase in interest expense was a result of both volume and rate
increases. The 6.6% increase in average interest-bearing liabilities resulted in
a $2.8 million increase in interest expense. The remaining $2.4 million increase
resulted from the 18 basis point increase in the cost of funds as well as an
additional day during the 2000 quarter. Deposit growth continued to be a
challenge as shown by an average balance increase of only $31 million, or 0.8%.
To support the strong loan growth, the Corporation looked to alternative funding
sources. Short-term borrowings increased $210 million, or 78.3%, mainly in
federal funds purchased. Long-term debt, which consists almost entirely of
advances from the Federal Home Loan Bank, increased $45 million, or 15.1%.
The Corporation's average cost of interest-bearing liabilities increased 18
basis points from the first quarter of 1999 to 4.15% in 2000. This increase,
which is 13 basis points higher than the change experienced on interest earning
assets, was the result of a shift in funding toward borrowings and strong
competition for deposits.
Overall, the Corporation's net interest margin on a fully taxable equivalent
basis decreased ten basis points to 4.42% in 2000 from 4.52% in 1999. This
reflects the pricing competition for loans and deposits and an increase in
borrowings as a funding source. Despite these factors, however, management
believes that its asset/liability management strategies documented in the
"Market Risk" discussion have been successful in minimizing the net interest
margin decline.
Provision and Allowance for Loan Losses
- ---------------------------------------
The following table summarizes loans outstanding (including unearned income) as
of the dates shown:
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
---------------- ----------------
(in thousands)
<S> <C> <C>
Commercial, financial and agricultural............. $ 1,095,176 $ 1,051,958
Real estate - construction......................... 181,899 164,583
Real estate - mortgage............................. 2,396,110 2,371,764
Consumer .......................................... 770,431 774,098
Leasing and other.................................. 69,791 69,627
---------------- ----------------
Totals.......................................... $ 4,513,407 $ 4,432,030
================ ================
</TABLE>
The loans summary as of December 31, 1999 as shown above has been restated to
conform to the presentation adopted in 2000 as a result of changes in the
Corporation's financial reporting system. In addition to some immaterial
classification changes, approximately $400 million of loans previously
classified as commercial mortgages are now being shown as commercial loans.
This reclassification has no impact on the Corporation's assessment of the risk
of these loans for allowance evaluation purposes. The allowance for loan loss
procedures as documented in the following section are applied to categories of
loans based on source system classification or to individually large credits.
These procedures are not dependent upon the ultimate classification of the loans
for financial reporting purposes.
11
<PAGE>
The following table summarizes the activity in the Corporation's allowance for
loan losses:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------------
2000 1999
--------------- ---------------
(dollars in thousands)
<S> <C> <C>
Loans outstanding at end of period (net of unearned)............... $ 4,503,569 $ 4,050,009
=============== ===============
Daily average balance of loans and leases.......................... $ 4,468,516 $ 4,040,547
=============== ===============
Balance of allowance for loan losses
at beginning of period........................................ $ 57,631 $ 57,415
Loans charged-off:
Commercial, financial and agricultural......................... 816 624
Real estate - mortgage......................................... 349 157
Consumer....................................................... 1,777 1,403
Leasing and other.............................................. 93 17
--------------- ---------------
Total loans charged-off........................................ 3,035 2,201
--------------- ---------------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural......................... 376 560
Real estate - mortgage......................................... 288 284
Consumer....................................................... 748 415
Leasing and other.............................................. 1 -
--------------- ---------------
Total recoveries............................................... 1,413 1,259
--------------- ---------------
Net loans charged-off.............................................. 1,622 942
Provision for loan losses.......................................... 2,025 1,967
--------------- ---------------
Balance at end of period........................................... $ 58,034 $ 58,440
=============== ===============
Net charge-offs to average loans (annualized)...................... 0.15% 0.09%
=============== ===============
Allowance for loan losses to loans outstanding..................... 1.29% 1.44%
=============== ===============
</TABLE>
The following table summarizes the Corporation's non-performing assets as of the
indicated dates.
<TABLE>
<CAPTION>
March 31 Dec. 31 March 31
(Dollars in thousands) 2000 1999 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
Nonaccrual loans..................................... $ 18,914 $ 18,653 $ 18,149
Loans 90 days past due and accruing.................. 6,864 8,516 11,009
Other real estate owned (OREO)....................... 816 917 1,478
--------------- --------------- ---------------
Total non-performing assets.......................... $ 26,594 $ 28,086 $ 30,636
=============== =============== ===============
Non-performing loans/Total loans..................... 0.57% 0.61% 0.72%
Non-performing assets/Total assets................... 0.43% 0.46% 0.53%
Non-performing assets/Gross loans and OREO........... 0.59% 0.63% 0.76%
</TABLE>
Additions to the allowance for loan losses are charged to income through the
provision for loan losses when, in the opinion of management and based on
continuing analyses of the loan portfolio, it is believed that the allowance is
not adequate. Management considers various factors in assessing the adequacy of
the allowance for loan losses and determining the provision for the period.
Among these are charge-off history and trends, risk classification of
significant credits, adequacy of collateral, the mix and risk
12
<PAGE>
characteristics of loan types in the portfolio, and the balance of the allowance
relative to total and nonperforming loans. Additional consideration is given to
local and national economic conditions. The Corporation's policy is individually
applied to each of its eleven affiliate banks. Resulting provisions and
allowances are aggregated for consolidated financial reporting.
For the first quarter of 2000, net charge-offs totaled $1.6 million, or 0.15%,
of average loans on an annualized basis. This compares to $942,000, or 0.09%,
for the first quarter of 1999. Non-performing loans, including loans 90 days
past due and still accruing, to total loans were 0.57% at March 31, 2000 as
compared to 0.61% at December 31, 1999 and 0.72% at March 31, 1999.
The provision for loan losses increased $58,000, or 2.9%, to $2.0 million in
2000. This increase was due to an increase in net charge-offs. However, given
that overall loan quality continued to be strong, as reflected by the
non-performing assets ratios at March 31, 2000, the provision did not increase
relative to the level of charge-offs.
The Corporation's periodic loan portfolio review and allowance calculation
resulted in an unallocated allowance for loan losses of 28% at March 31, 2000
and 32% at December 31, 1999. This fairly stable unallocated level supports the
provision for loan losses for the quarter and the balance of the allowance for
loan losses as of March 31, 2000. Management believes that the allowance balance
of $58.0 million is sufficient to cover losses incurred in the loan portfolio
and appropriate based on applicable accounting standards.
Other Income
- ------------
Other income for the quarter ended March 31, 2000 was $16.7 million. This was a
increase of $1.3 million, or 8.7%, over the comparable period in 1999. Excluding
investment security gains, which decreased from $3.1 million in 1999 to $2.5
million in 2000, other income increased $1.9 million, or 15.7%. Increases were
realized in every major category, except mortgage banking income.
Investment management and trust services income increased $1.5 million, or
44.0%, primarily due to the continued roll-out of investment brokerage services
at all eleven of the Corporation's subsidiary banks. Service charges on deposit
accounts increased $814,000, or 17.1%, as a result of an increase in cash
management income ($331,000, or 41.5%, increase) and overdraft fees (234,000, or
13.9%, increase). Other service charges and fees increased $295,000, or 10.6%,
mainly due to debit card income.
Mortgage banking income, which consists of gains on mortgage loan sales and
servicing income, decreased $693,000, or 54.0%. This decline was almost entirely
due to a drop in sale volume as interest rates have risen and refinance activity
has therefore decreased.
Other Expenses
- --------------
Total other expenses for the first quarter of 2000 of $39.8 million increased
$1.1 million, or 2.8%, from 1999. The Corporation's efficiency ratio, which is
the ratio of noninterest expense to fully taxable equivalent revenues (excluding
security gains), decreased to 51.6% in 2000 from 53.4% in 1999.
Salaries and employee benefits increased $1.4 million, or 6.5%, in comparison to
the first quarter of 1999. This increase reflects normal merit increases, an
increase in average full-time equivalent employees from 2,328 in 1999 to 2,356
in 2000, a lower volume of mortgage originations, resulting in lower deferred
salary expense, and the addition of manager level staff to support expanding
business initiatives, primarily in investment management and trust services.
Other expenses, excluding salaries and benefits, remained fairly stable,
decreasing $295,000, or 1.7%, from $17.3 million in 1999 to $17.0 million in
2000.
13
<PAGE>
Income Taxes
- ------------
Income tax expense for the first quarter of 2000 was $10.6 million, a $900,000,
or 9.2%, increase from $9.7 million in 1999. The Corporation's effective tax
rates remained stable at 29.6% in 2000 and 29.3% in 1999. The effective rate is
lower than the federal statutory rate of 35% due mainly to investments in
tax-free municipal securities and federal tax credits from investments in low
and moderate income housing partnerships.
FINANCIAL CONDITION
- -------------------
At March 31, 2000, the Corporation had total assets of $6.1 billion, reflecting
an increase of $59.9 million, or 1.0%, from December 31, 1999.
The increase in assets was almost entirely due to loan growth, with loans (net
of unearned) growing $81.2 million, or 1.8%, to $4.5 billion at March 31, 2000.
As discussed in the "Net Interest Income" section, recent loan growth has been
realized primarily in commercial loans and mortgages. These loan types increased
$66.0 million, or 2.9%, from December 31, 1999 to March 31, 2000.
Offsetting the increase in loans was a $33.3 million, or 2.7%, decrease in
investment securities. This decrease resulted from a $15.6 million increase in
the net unrealized loss on investment securities as a result of interest rate
and market conditions. The remaining decrease in investment securities balances
resulted from the net effect of normal maturities and payoffs.
Deposits increased $100.7 million, or 2.2%, to $4.6 billion at March 31, 2000.
Of this increase, $68.8 million was realized in noninterest-bearing (a 9.5%
increase), while the remainder was interest-bearing deposits (a 0.8% increase).
The growth in noninterest-bearing deposits was somewhat distorted by large
deposits by certain commercial customers on March 31, 2000. This also
contributed to the $12.8 million, or 5.2%, increase in cash and due from banks.
Short-term borrowings, which include federal funds purchased and repurchase
agreements with customers and other third parties, declined $36.2 million, or
7.4%, to $451.4 million at March 31, 2000. Long-term debt also decreased, ending
the quarter at $323.4, down $5.1 million. The Corporation was able to fund the
strong loan growth during the quarter primarily with deposits, thus temporarily
reducing its reliance on borrowings.
Capital Resources
- -----------------
Shareholders' equity decreased $4.6 million, or 0.7%, during the first three
months of 2000. This decrease was due to: 1) the Corporation continuing to buy
back its stock pursuant to repurchase plans discussed later
14
<PAGE>
in this section, resulting in a $9.2 million, or 53.4%, increase in treasury
stock; and 2) the net unrealized losses on available for sale investment
securities, which resulted in a $10.1 million, or 85.0%, increase in the
shareholders' equity portion of the loss.
Offsetting these decreases was the net increase to retained earnings as a result
of net income for the period, less dividends paid to shareholders. The 40.4%
dividend payout ratio on total net income of $25.3 million for the quarter
resulted in a net increase to retained earnings of $15.1 million.
Common stock, capital surplus and retained earnings were also adjusted during
the quarter for the estimated impact of the 5% stock dividend declared on April
18, 2000. See Note B to the financial statements.
On December 31, 1999, the Corporation's Board of Directors approved an open
market repurchase program for the Corporation's common stock for up to 1.05
million shares. In January, 2000, the Board approved a second open market
repurchase program of up to 2.1 million shares. The second plan was adopted as a
means to minimize any increase in the number of outstanding shares of the
Corporation as a result of its merger with SFC. To consummate the merger, the
Corporation will issue treasury shares acquired under these repurchase programs
and, if necessary, shares acquired under prior repurchase programs or authorized
but unissued shares.
Through March 31, 2000, 376,000 shares had been repurchased under the 1.05
million share program (310,000 shares during the first quarter of 2000) and
338,000 shares had been repurchased under the 2.1 million share program.
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 percentage 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 3.0% for
institutions such as the Corporation which are highly-rated in terms of safety
and soundness. Other institutions are expected to maintain capital levels at
least one or two percent above the minimum.
As of March 31, 2000, 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.
The Corporation's total and Tier I risk-based capital ratios have placed the
Corporation in the top half of its self-defined peer group over the past year.
The Corporation's ratio of Tier I capital to average assets has placed it in the
top quartile in comparison to its peers.
MARKET RISK
- -----------
Market risk is the exposure to economic loss that arises from changes in the
values of certain financial instruments. The types of market risk exposures
generally faced by banking entities include interest rate risk, equity market
price risk, foreign currency risk and commodity price risk. Due to the nature of
its operations, only equity market price risk and interest rate risk are
significant to the Corporation.
15
<PAGE>
Equity Market Price Risk
- ------------------------
Equity market price risk is the risk that changes in the values of equity
investments could have a material impact on the financial position or results of
operations of the Corporation. The Corporation's equity investments consist of
common stocks of publicly traded financial institutions (cost basis of
approximately $52.0 million) and U.S. Government agency stock (cost basis of
approximately $33.3 million). The Corporation's financial institutions stock
portfolio had net unrealized gains of approximately $5.0 million at March 31,
2000.
Although the book value of equity investments accounted for only 1.5% of the
Corporation's total assets, the unrealized gains on the portfolio represent a
potential source of revenue. The Corporation has a history of periodically
realizing gains from this portfolio and, if values were to decline
significantly, this revenue source could be lost. Although the net unrealized
gains at the end of the quarter were less than $5 million, gross unrealized
gains were $10.0 million.
The Corporation manages its equity market price risk by investing primarily in
regional financial institutions. Management continuously monitors the fair value
of its equity investments and evaluates current market conditions and operating
results of the companies. Periodic sale and purchase decisions are made based on
this monitoring process. None of the Corporation's equity securities are
classified as trading. Future cash flows from these investments are not provided
in the "Interest Rate Sensitivity" table on the following page since none have
maturity dates.
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. Second, movements in
interest rates can create fluctuations in the Corporation's net income and
changes in the economic value of its equity.
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. The ALCO is responsible for reviewing the interest rate sensitivity
position of the Corporation, approving asset and liability management policies,
and overseeing the formulation and implementation of strategies regarding
balance sheet positions and earnings. The primary goal of asset/liability
management is to address the liquidity and net income risks noted above.
From a liquidity standpoint, 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. Liquidity sources are found on both sides of the balance sheet.
Liquidity is provided on a continuous basis through scheduled and unscheduled
principal reductions and interest payments on outstanding loans and investments.
Liquidity is also provided through the availability of deposits and borrowings.
The following table provides information about the Corporation's interest rate
sensitive financial instruments. The table provides expected cash flows and
weighted average rates for each significant interest rate sensitive financial
instrument, by expected maturity period. None of the Corporation's financial
instruments are classified as trading.
16
<PAGE>
FULTON FINANCIAL CORPORATION
INTEREST RATE SENSITIVITY
(dollars in thousands)
<TABLE>
<CAPTION>
Expected Maturity Period
---------------------------------------------------------------------------------
(less than)
1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years
------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Fixed rate loans (1) $ 728,750 $ 552,897 $ 454,580 $ 340,432 $ 239,803
Average rate (1) 8.03% 7.80% 7.77% 7.78% 7.78%
Floating rate loans (2) 409,199 148,292 124,700 113,439 82,807
Average rate 9.43% 9.22% 9.07% 9.07% 8.37%
Fixed rate investments (3) 189,027 175,444 225,625 143,132 124,405
Average rate 6.07% 6.06% 6.15% 6.10% 6.19%
Floating rate investments (3) 250 50 - 1,000 -
Average rate 8.00% 7.50% - 4.17% -
Other interest-earning assets 3,728 - - - -
Average rate 6.55% - - - -
--------------------------------------------------------------------------------
Total $ 1,330,954 $ 876,683 $ 804,905 $ 598,003 $ 447,015
Average rate 8.18% 7.69% 7.52% 7.62% 7.45%
--------------------------------------------------------------------------------
Fixed rate deposits (4) $ 1,343,407 $ 549,976 $ 176,116 $ 41,331 $ 39,062
Average rate 5.15% 5.68% 5.84% 5.51% 5.88%
Floating rate deposits (5) 583,369 79,911 76,167 76,167 76,167
Average rate 3.59% 1.59% 1.52% 1.52% 1.52%
Fixed rate borrowings (6) 83,322 70,780 85,280 67,780 280
Average rate 5.84% 4.60% 5.43% 5.05% 5.76%
Floating rate borrowings (7) 451,396 - - - -
Average rate 5.34% - - - -
--------------------------------------------------------------------------------
Total $ 2,461,494 $ 700,667 $ 337,563 $ 185,278 $ 115,509
Average rate 4.84% 5.10% 4.76% 3.70% 3.00%
--------------------------------------------------------------------------------
<CAPTION>
Expected Maturity Date Estimated
(greater than) 5 Years Total Fair Value
---------------------- --------------- -------------
<S> <C> <C> <C>
Fixed rate loans (1) $ 794,588 $ 3,111,050 $ 3,040,069
Average rate (1) 7.73% 7.83%
Floating rate loans (2) 514,082 1,392,519 1,390,405
Average rate 8.72% 9.02%
Fixed rate investments (3) 264,361 1,121,994 1,083,507
Average rate 6.14% 6.12%
Floating rate investments (3) 15,145 16,445 16,232
Average rate 6.35% 6.25%
Other interest-earning assets - 3,728 3,728
Average rate - 6.55%
-------------------------------------------------------
Total $ 1,588,176 $ 5,645,736 $ 5,533,941
Average rate 7.77% 7.78%
-------------------------------------------------------
Fixed rate deposits (4) $ 17,056 $ 2,166,948 $ 2,152,130
Average rate 5.54% 5.36%
Floating rate deposits (5) 795,236 1,687,017 1,686,671
Average rate 1.39% 2.18%
Fixed rate borrowings (6) 15,752 323,194 310,106
Average rate 5.04% 5.26%
Floating rate borrowings (7) - 451,396 451,396
Average rate - 5.34%
-------------------------------------------------------
Total $ 828,044 $ 4,628,555 $ 4,600,303
Average rate 1.54% 4.19%
-------------------------------------------------------
</TABLE>
Assumptions:
1) Amounts are based on contractual payments and maturities, adjusted for
expected prepayments.
2) Average rates are shown on a fully taxable equivalent basis using an
effective tax rate of 35%.
3) Amounts are based on contractual maturities, adjusted for expected
prepayments on mortgage-backed securities, and expected calls on
other securities.
4) Amounts are based on contractual maturities of time deposits.
5) Money market, Super NOW, NOW and savings accounts are placed based on
history of deposit flows.
6) Amounts are based on contractual maturities of Federal Home Loan Bank
advances.
7) Amounts are Federal Funds purchased and securities sold under
agreements to repurchase, which mature in less than one year.
17
<PAGE>
The Corporation uses three complementary methods to measure and manage interest
rate risk. They are static gap analysis, simulation of net interest income, and
estimates of economic value of equity. Using these measurements in tandem
provides a reasonably comprehensive summary of the magnitude of interest rate
risk in the Corporation, level of risk as time evolves, and exposure to changes
in interest rate relationships.
Static gap analysis provides a measurement of repricing risk in the
Corporation's balance sheet as of a point in time. This measurement is
accomplished through stratification of the Corporation's assets and liabilities
into predetermined repricing periods. The assets and liabilities in each of
these periods are summed and compared for mismatches within that maturity
segment. Core deposits having noncontractual maturities are placed into
repricing periods based upon historical balance performance. Repricing for
mortgage loans held for sale and for mortgage-backed securities includes the
effect of expected cash flows. Estimated prepayment effects are applied to these
balances based upon industry projections for prepayment speeds. The
Corporation's policy limits the cumulative 6-month gap to plus or minus 15
percent of total earning assets. The Corporation was positioned within this
range throughout the first quarter of 2000. At March 31, 2000, the cumulative
6-month gap was 0.94.
Simulation of net interest income and of net income is performed for the next
twelve-month period. A variety of interest rate scenarios is used to measure the
effects of sudden and gradual movements upward and downward in the yield curve.
These results are compared to the results obtained in a flat or unchanged
interest rate scenario. Simulation of earnings is used primarily to measure the
Corporation's short-term earnings exposure to rate movements. The Corporation's
policy limits the potential exposure of net interest income to 10% of the base
case net interest income for every 100 basis point "shock" in interest rates. A
"shock' is an immediate upward or downward movement of interest rates across the
yield curve based upon changes in the prime rate. As of March 31, 2000, the
Corporation had a larger exposure to upward rate shocks, with net interest
income at risk of loss over the next twelve months of 0.2%, 4.0% and 5.1% where
interest rates are shocked upward by 100, 200 and 300 basis points,
respectively.
Economic value of equity estimates the discounted present value of asset cash
flows and liability cash flows. Discount rates are based upon market prices for
like assets and liabilities. Upward and downward shocks of interest rates are
used to determine the comparative effect of such interest rate movements
relative to the unchanged environment. This measurement tool is used primarily
to evaluate the longer term repricing risks and options in the Corporation's
balance sheet. A policy limit of 10% of economic equity may be at risk for every
100 basis point shock in interest rates. As of March 31, 2000, upward shocks of
100, 200 and 300 basis points were estimated to have negative effects upon
economic value of 0.4%, 0.3% and 0.3%, respectively. Downward shocks of 100 and
200 basis points were estimated to have negative effects upon economic value of
0.9% and 0.6%, respectively.
18
<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 and restated, and Bylaws
of Fulton Financial Corporation, as amended - Incorporated by
reference from Exhibit 3 of the Fulton Financial Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
(2) Instruments defining the right of securities holders,
including indentures:
(a) Rights Agreement dated June 20, 1989, as amended and
restated on April 27, 1999 between Fulton Financial
Corporation and Fulton Bank - Incorporated by reference
from Exhibit 1 of the Fulton Financial Corporation Current
Report on Form 8-K dated April 27, 1999.
(3) Material Contracts - Executive Compensation Agreements and
Plans:
(a) Severance Agreements entered into between Fulton Financial
and: Rufus A. Fulton, Jr., as of April 17, 1984; R. Scott
Smith, Jr., as of May 17, 1988; Richard J Ashby, Jr., as
of May 17, 1988; and Charles J. Nugent, as of November 19,
1992- Incorporated by reference from Exhibit 10(a) of the
Fulton Financial Corporation Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999.
(b) Incentive Stock Option Plan adopted September 19, 1995 -
Incorporated by reference from Exhibit A of Fulton
Financial Corporation's 1996 Proxy Statement.
(4) Financial Data Schedule - March 31, 2000
(b) Reports on Form 8-K:
(1) Form 8-K dated March 7, 2000 reporting the execution of an
Agreement and Plan of Merger between Fulton Financial
Corporation and Skylands Financial Corporation.
19
<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, 2000 /s/ Rufus A. Fulton, Jr.
-------------------------- ---------------------------------
Rufus A. Fulton, Jr.
Chairman, President and
Chief Executive Officer
Date: May 8, 2000 /s/ Charles J. Nugent
-------------------------- ---------------------------------
Charles J. Nugent
Executive Vice President and
Chief Financial Officer
20
<PAGE>
EXHIBIT INDEX
Exhibits Required Pursuant
to Item 601 of Regulation S-K
-----------------------------
3. Articles of incorporation, as amended and restated, and Bylaws of Fulton
Financial Corporation as amended.
4. Instruments defining the rights of security holders, including indentures.
(a) Rights Agreement dated June 20, 1989, as amended and restated on April
27, 1999 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 April 27, 1999.
10. Material Contracts
(a) Severance Agreements entered into between Fulton Financial and: Rufus
A. Fulton, Jr., as of April 17, 1984; R. Scott Smith, Jr., as of May
17, 1988; Charles J. Nugent, as of November 19, 1992; and Richard J
Ashby, Jr., as of May 17, 1988.
(b) Incentive Stock Option Plan adopted September 19, 1995 - Incorporated
by reference from Exhibit A of Fulton Financial Corporation's 1996
Proxy Statement.
27. Financial data schedule - March 31, 2000.
21
<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, 2000 and the
related consolidated statement of income for the three months ended March 31,
2000 and other financial data included within management's discussion and
analysis of financial condition and results of operations as of and for the
three months ended March 31, 2000 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-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 258,415
<INT-BEARING-DEPOSITS> 2,309
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,113,466
<INVESTMENTS-CARRYING> 76,543
<INVESTMENTS-MARKET> 75,776
<LOANS> 4,503,569
<ALLOWANCE> 58,034
<TOTAL-ASSETS> 6,129,914
<DEPOSITS> 4,647,528
<SHORT-TERM> 451,396
<LIABILITIES-OTHER> 98,058
<LONG-TERM> 323,194
0
0
<COMMON> 181,884
<OTHER-SE> 427,869
<TOTAL-LIABILITIES-AND-EQUITY> 6,129,914
<INTEREST-LOAN> 91,368
<INTEREST-INVEST> 17,499
<INTEREST-OTHER> 144
<INTEREST-TOTAL> 109,011
<INTEREST-DEPOSIT> 37,226
<INTEREST-EXPENSE> 47,891
<INTEREST-INCOME-NET> 61,120
<LOAN-LOSSES> 2,025
<SECURITIES-GAINS> 2,476
<EXPENSE-OTHER> 39,786
<INCOME-PRETAX> 35,961
<INCOME-PRE-EXTRAORDINARY> 25,314
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,314
<EPS-BASIC> 0.35
<EPS-DILUTED> 0.35
<YIELD-ACTUAL> 4.42
<LOANS-NON> 18,914
<LOANS-PAST> 6,864
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 57,631
<CHARGE-OFFS> 3,035
<RECOVERIES> 1,413
<ALLOWANCE-CLOSE> 58,034
<ALLOWANCE-DOMESTIC> 58,034
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 16,390
</TABLE>
