UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 1997
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-21273
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Fulton Bancorp, Inc.
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(Exact name of small business
issuer as specified in its charter)
Delaware 43-1754577
- ----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 Market Street, Fulton, MO 65251
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
573-682-6617
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(Registrant's telephone number)
None
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(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports). and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of November 10, 1997, there were 1,719,250 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.
Transitional Small Business Disclosure Format
Yes No X
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FULTON BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
September 30, 1997
INDEX PAGE
- ----- ----
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 1
CONSOLIDATED STATEMENTS OF INCOME 2
CONSOLIDATED STATEMENTS OF CASH FLOWS 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4-6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7-10
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1 - LEGAL PROCEEDINGS 11
ITEM 2 - CHANGES IN SECURITIES 11
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY-HOLDERS 11
ITEM 5 - OTHER INFORMATION 11
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES
FULTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
September 30, June 30,
1997 1997
----------------------------
(Unaudited)
ASSETS
Cash, including interest-bearing accounts
of $8,282 and $6,318 respectively $ 8,973 $ 7,095
Investment securities, available-for-sale 1,901 1,899
Stock in Federal Home Loan Bank of Des Moines 637 637
Loans held for sale 3,017 4,463
Loans receivable 86,428 83,714
Accrued interest receivable 735 729
Premises and equipment 1,449 1,483
Foreclosed real estate 178 198
Other assets 395 339
-------- --------
TOTAL ASSETS $103,713 $100,557
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 67,740 $ 67,509
Advances from Federal Home Loan Bank of
Des Moines 8,497 6,500
Advances from borrowers for property
taxes and insurance 1,298 757
Accrued interest payable 142 97
Other liabilities 451 437
-------- --------
TOTAL LIABILITIES 78,128 75,300
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value per
share, 1,000,000 authorized, none issued --- ---
Common stock, $.01 par value per share,
6,000,000 shares authorized,
1,719,250 issued and outstanding 17 17
Paid-in capital 16,640 16,601
Retained earnings - substantially restricted 10,163 9,911
Unrealized gain (loss) on securities
available-for-sale, net of taxes 2 ---
Unearned ESOP shares (1,237) (1,272)
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TOTAL STOCKHOLDERS' EQUITY 25,585 25,257
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $103,713 $100,557
======== ========
See accompanying notes to Consolidated Financial Statements
-1-
FULTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
Three Months Ended
September 30,
1997 1996
---------------------
(Unaudited)
INTEREST INCOME
Mortgage loans $1,592 $1,379
Consumer and other loans 226 213
Investment securities 29 62
Interest-earning deposits 97 22
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TOTAL INTEREST INCOME 1,944 1,676
INTEREST EXPENSE
Deposits 861 917
Advances from Federal Home Loan Bank of Des Moines 108 125
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969 1,042
NET INTEREST INCOME 975 634
PROVISION FOR LOAN LOSSES 40 ---
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 935 634
NON-INTEREST INCOME
Loan servicing fees 81 79
Income from sale of loans 91 ---
Service charges and other fees 22 33
Income from foreclosed assets (19) 12
Gain on sale of other assets --- ---
Other 16 13
------ ------
TOTAL NON-INTEREST INCOME 191 137
NON-INTEREST EXPENSE
Employee salaries and benefits 279 226
Occupancy costs 67 61
Advertising 15 14
Data processing 42 44
Federal insurance premiums 12 454
Directors' fees 22 22
Other 155 90
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TOTAL NON-INTEREST EXPENSE 592 911
INCOME BEFORE INCOME TAXES ------ ------
534 (140)
INCOME TAXES 195 (53)
------ ------
NET INCOME (LOSS) $ 339 $ (87)
====== ======
NET INCOME PER SHARE $ 0.19 *
====== ======
* Operating as a mutual institution.
See accompanying notes to Consolidated Financial Statements
-2-
FULTON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended
September 30,
1997 1996
---------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 339 $ (87)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 40 28
Provisions for loan losses 40 ---
Provision for loss on foreclosed real estate 20 ---
Proceeds from sales of loans held for sale 7,612 5,038
Origination of loans held for sale (6,166) (3,520)
ESOP shares released 74 ---
Change to assets and liabilities increasing
(decreasing) cash flows
Accrued interest receivable (6) (13)
Other assets (60) (825)
Accrued interest payable 46 17
Other liabilities 14 449
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NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES 1,953 1,087
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities
Available-for-sale --- 500
Loans originated, net of repayments (2,754) (5,384)
Purchase of premises and equipment (4) (111)
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NET CASH USED IN INVESTING ACTIVITIES (2,758) (4,995)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 231 6,774
Advances from Federal Home Bank of Des Moines:
Borrowings 2,000 5,000
Repayments (3) (4,000)
Net increase (decrease) in advance payments
by borrowers for taxes and insurance 541 232
Dividends paid (86) ---
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NET CASH PROVIDED BY FINANCING ACTIVITIES 2,683 8,006
NET INCREASE (DECREASE) IN CASH ------- -------
1,878 4,098
Cash, beginning of period 7,095 3,154
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CASH, END OF PERIOD $ 8,973 $ 7,252
======= =======
See accompanying notes to Consolidated Financial Statements
-3-
FULTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--Basis of Presentation
- -----------------------------
The consolidated interim financial statements as of September 30, 1997,
included in this report have been prepared by Fulton Bancorp, Inc. ("Company")
without audit. In the opinion of management, all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation are reflected
in the September 30, 1997, interim financial statements. The results of
operations for the period ended September 30, 1997, are not necessarily
indicative of the operating results for the full year.
NOTE B--Formation of Holding Company and Conversion to Stock Form
- -----------------------------------------------------------------
On October 17, 1996, the Company became the holding company for Fulton Savings
Bank, FSB (the "Bank") upon the Bank's conversion from a federally chartered
mutual savings bank to a federally chartered capital stock savings bank. The
conversion was accomplished through the sale and issuance by the Company of
1,719,250 shares of common stock at $10 per share. Proceeds from the sale of
common stock, net of expenses incurred of $643,370 was $16,549,130, inclusive
of $1,375,400 related to shares held by the Bank's Employee Stock Ownership
Plan ("ESOP"). Prior period financial statements included herein have not been
restated as a result of the consummation of the conversion.
NOTE C--Earnings Per Share
- --------------------------
Earnings per share data is not relevant for any quarter prior to December 31,
1996, since the Company had no stockholders prior to the initial stock offering
completed October 17, 1996. Earnings per share is presented for the quarter
ended September 30, 1997, based on the average shares issued and outstanding
during the period.
NOTE D--Employee Stock Ownership Plan
- -------------------------------------
In connection with the conversion to stock form as described in Note B, the
Bank established an ESOP for the exclusive benefit of participating employees
(all salaried employees who have completed at least 1,000 hours of service in a
twelve-month period and have attained the age of 21). The ESOP borrowed funds
from the Company in an amount sufficient to purchase 137,450 shares (8% of the
Common Stock issued in the stock offering). The loan is secured by the shares
purchased and will be repaid by the ESOP with funds from contributions made by
the Bank, dividends received by the ESOP and any other earnings on ESOP assets.
The Bank presently expects to contribute approximately $203,300 including
interest, annually to the ESOP. Contributions will be applied to repay
interest on the loan first, then the remainder will be applied to principal.
The loan is expected to be repaid in approximately 10 years. Shares purchased
with the loan proceeds are held in a suspense account for allocation among
participants as the loan is repaid. Contributions to the ESOP and shares
released from the suspense account are allocated among participants in
proportion to their compensation relative to total compensation of all active
participants. Benefits generally become 20% vested after three years of
credited service and then 20% per year thereafter until 100% vested. Vesting
is accelerated upon retirement, death or disability of the participant.
Forfeitures are returned to the Company or reallocated to other participants to
reduce future funding costs. Benefits may be payable upon retirement, death,
disability or separation from service. Since the Bank's annual contributions
are discretionary, benefits payable under the ESOP cannot be estimated.
-4-
FULTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE D--Employee Stock Ownership Plan (Continued)
- -------------------------------------------------
The Company accounts for its ESOP in accordance with Statement of Position
93-6, Employers' Accounting for Employee Stock Ownership Plans. Accordingly,
the debt of the ESOP is eliminated in consolidation and the shares pledged as
collateral are reported as unearned ESOP shares in the consolidated balance
sheets. Contributions to the ESOP shall be sufficient to pay principal and
interest currently due under the loan agreement. As shares are committed to be
released from collateral, the Company reports compensation expense equal to the
average market price of the shares for the respective period, and the shares
become outstanding for earnings per share computations. Dividends on allocated
ESOP shares are recorded as a reduction of retained earnings; dividends on
unallocated ESOP shares are recorded as a reduction of debt and accrued
interest. ESOP compensation expense was $74,000 for the three months ended
September, 1997.
A summary of ESOP shares at September 30, 1997, is as follows:
Shares allocated 3,458
Shares released for allocation 10,374
Unreleased shares 123,708
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TOTAL 137,540
=======
Fair value of unreleased shares $2,968,992
==========
NOTE E--Accounting Changes
- --------------------------
Effective October 1996, the Company adopted Statement of Position ("SOP") 93-6,
"Employers' Accounting for Employee Stock Ownership Plans". SOP 93-6 applies
to shares acquired by employee stock ownership plans after December 31, 1992,
but not yet committed to be released as of the beginning of the year SOP 93-6
is adopted. SOP 93-6 changes the measure of compensation expenses recorded by
employers for leveraged employee stock ownership plans from the cost of the
ESOP shares to the fair value of the ESOP shares during the periods in which
they become committed to be released. To the extent that fair value of the
Bank's ESOP shares differs from the cost of such shares, the differential will
be charged or credited to equity. Employers with internally leveraged employee
stock ownership plans such as the Company will not report the loans receivable
from the ESOP as an asset and will not report the ESOP debt from the employer
as a liability.
The Bank adopted Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan" and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures, an amendment of SFAS No. 114", effective May 1, 1995. These
statements address the accounting by creditors for impairment of certain loans.
They apply to all creditors and to all loans, uncollateralized as well as
collateralized, except for large groups of small-balance homogeneous loans that
are collectively evaluated for impairment, loans measured at fair value or at
lower of cost or fair value, leases, and debt securities. The Bank considers
all one-to four-family residential mortgage loans, construction loans, and all
consumer and other loans to be smaller homogeneous loans.
These statements apply to all loans that are restructured involving a
modification of terms. Loans within the scope of these statements are
considered impaired when, based on current information and events, it is
probable that all principal and interest will not be collected in accordance
with the contractual terms of the loans. Management determines the impairment
of loans based on knowledge of the borrower's ability to repay the loan
according to the contractual agreement as well as the borrower's repayment
history.
-5-
FULTON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE E--Accounting Changes (Continued)
- --------------------------------------
Management applies its normal loan review procedures in determining when a loan
is impaired. The Bank applies SFAS No. 114 on a loan by loan basis. All
nonaccrual loans are considered impaired. Impaired loans are measured based on
present value of expected cash flows, the loan's observable market price or the
fair value of the underlying collateral. If the value computed is less than
the recorded value, a valuation allowance is recorded for the difference as a
component of the provision for loan loss expense. Management has elected to
continue to use its existing nonaccrual methods for recognizing interest income
on impaired loans.
Effective May 1, 1996, the Company adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights" (an amendment to SFAS No. 65). SFAS No. 122 was
subsequently superseded by SFAS No. 125 "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities". SFAS No. 125 was
effective for transfers and servicing of financial assets and extinguishment of
liabilities occurring after December 31, 1996 and is to be applied
prospectively. Both statements generally require entities that sell or
securitize loans and retain mortgage servicing rights to allocate the total
cost of the mortgage loan to the mortgage servicing right and the loan based on
their relative fair value. Costs allocated to mortgage servicing rights should
be recognized as a separate asset and amortized over the period of estimated
net servicing income and evaluated for impairment based on fair value.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statements No. 128, Earnings per Share and No. 129, Disclosure of Information
about Capital Structure. Both statements are effective for financial
statements issued after December 15, 1997. Statement No. 128 establishes
standards for computing and presenting earnings per share (EPS). It replaces
the presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation. Statement No.
129 establishes standards for disclosing information about an entity's capital
structure.
In June 1997, the FASB issued Statements No. 130, Reporting of Comprehensive
Income and No. 131, Disclosures about Segments of an Enterprise and Related
Information. Both statements are effective for financial statements for
periods beginning after December 15, 1997. Statement No. 130 establishes
standards for reporting and display of comprehensive income in a full set of
general purpose financial statements. An enterprise shall continue to display
an amount for net income but will also be required to display other
comprehensive income, which includes other changes in equity. Statement No.
131 establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers.
Adoption of SFAS No. 128 and No. 130 will not have a significant effect upon
the presentation of the Company's financial statements.
Note F--Change in Fiscal Year-End
- ---------------------------------
On November 13, 1996, the Board of Directors of the Company determined to
change the Company's fiscal year-end from April 30 to June 30. The Company
began reporting on the basis of its new fiscal year-end with the quarter ended
December 31, 1996.
-6-
FULTON BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Fulton Bancorp, Inc. ("Company") is a Delaware corporation that was organized
for the purpose of becoming the holding company for Fulton Savings Bank, FSB
("Bank") upon the Bank's conversion from a federal mutual savings bank to a
federal capital stock savings bank. The Bank's conversion was completed on
October 17, 1996. The Bank is a community oriented financial institution that
engages primarily in the business of attracting deposits from the general
public and using those funds to originate residential and commercial mortgage
loans within its market area. The Bank's deposits are insured up to applicable
limits by the Savings Association Insurance Fund.
The Company's operating results depend primarily on its net interest income,
which is the difference between the income it receives on its loan and
investments portfolio, and its cost of funds, which consists of interest paid
on deposits and borrowings. The Company's operating results are also affected
by the level of non-interest income and expenses. Non-interest income consists
primarily of loan servicing fees, gain on sale of loans and service charges and
other fees. Non-interest expenses include employee salaries and benefits,
occupancy costs, deposit insurance premiums, data processing expenses and other
operating costs.
On September 30, 1996, the Bank recorded the effect of a one-time special
assessment to be paid by institutions whose deposit accounts are insured by the
Savings Association Insurance Fund ("SAIF"). The assessment was 0.657% of
assessable deposits as of March 31, 1995, which for the Bank totalled $427,000.
The assessment was designed to recapitalize the SAIF and permit the eventual
merger of the SAIF with the Bank Insurance Fund. As a result of the
recapitalization of the SAIF, the Bank's deposit insurance premiums were
reduced to $0.065 per $100 of deposits beginning January 1, 1997.
The discussion and analysis included herein covers certain changes in results
of operations during the three month periods ended September 30, 1997 and 1996,
as well as those material changes in liquidity and capital resources that have
occurred since June 30, 1997.
The following should be read in conjunction with the Company's 1997 Annual
Report to Shareholders which contains the latest audited financial statements
and notes thereto, together with Management's Discussion and Analysis of
Financial Condition and Results of Operations contained therein. Therefore,
only material changes in financial condition and results of operation are
discussed herein.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30 1997 AND JUNE 30, 1997
- ------------------------------------------------------------------------
The Company's assets increased $3.2 million to $103.7 million at September
30, 1997. The increase resulted primarily from $2.0 million in borrowings from
the Federal Home Loan Bank of Des Moines and $800,000 in higher deposits and
customer escrow for taxes and insurance.
Nonperforming assets totaled $1,213,000 or 1.16% of total assets at
September 30, 1997. The composition of the assets include eleven mortgage
loans totaling $875,000, twenty-one consumer loans totaling $160,000 and
foreclosed real estate. The mortgage loans are considered well secured and in
process of collection.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997, TO THE THREE MONTHS
- ----------------------------------------------------------------------------
ENDED SEPTEMBER 30, 1996
- ------------------------
NET INCOME. The Company earned net income of $339,000 for the quarter
ended September 30, 1997, a $426,000 increase from the $87,000 loss for the
quarter ended September 30, 1996. Lower deposit insurance premiums, higher net
interest income and recognition of gains on sales of loans from the
implementation of Statements of Financial Accounting Standards NO. 125 provided
the majority of the increase in net income. An increase in net interest income
added $341,000 to pretax net income, and gains on the sales of loans added
$91,000.
A one-time SAIF assessment of $427,000, $269,000 net of taxes, caused the
September 30, 1996 loss. Without the one-time assessment, net income for the
prior period would have been $182,000.
-7-
FULTON BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997, TO THE THREE MONTHS
- ----------------------------------------------------------------------------
ENDED SEPTEMBER 30, 1996 (CONTINUED)
- ------------------------------------
NET INTEREST INCOME. Net interest income increased to $975,000 from
$634,000 at September 30, 1996, a 53.8 percent increase. The increase of
$341,000 was primarily due to the investing of the proceeds from the October,
1996 stock offering in interest earning obligations. A decrease in
interest-bearing liabilities primarily resulted in a decrease of $73,000 in
interest expense.
INTEREST INCOME. Interest income for the quarter was $1.9 million, which
was $268,000 or 16.0 percent above interest income for the first quarter last
year. The increase primarily resulted from a higher average volume of mortgage
loans, higher loan rates and to a lesser amount, higher interest-earning
deposits.
INTEREST EXPENSE. Interest expense decreased $73,000 from the comparable
1996 period to $975,000. The decrease is attributable to a decline in average
interest-bearing liabilities and lower interest rates paid on interest-bearing
deposits. The lower average interest bearing liabilities is due primarily to
lower average borrowings from the FHLB.
PROVISION FOR LOAN LOSSES. Provision for loan losses increased $40,000
from the comparative 1996 period, which had no provision for loan losses. The
increase in the allowance for loan losses reflects management's commitment to
maintain adequate reserves as loan volume increases.
NONINTEREST INCOME. Noninterest income increased $54,000 to $191,000 in
1997. The increase results primarily from gains related to retained servicing
rights on the sale of loans. Provision for losses on foreclosed real estate
and lower rental income partially offset the increase.
NONINTEREST EXPENSE. Noninterest expense decreased $319,000 to $592,000
for the quarter ended September 30, 1997. The decrease was primarily the
result of the one-time deposit insurance premium totaling $427,000 recorded in
September, 1996, and the resulting lower insurance premiums beginning January
1, 1997. Employee expenses increased $53,000, resulting primarily from
implementation of the ESOP plan.
A $65,000 increase in other noninterest expense reflects the change in timing
of audit expenses and legal fees and expenses related to operating as a public
company.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Bank's primary sources of funds are deposits, proceeds from principal and
interest payments on loans, mortgage-backed securities, investment securities
and net operating income. While maturities and scheduled amortization of loans
and mortgage-backed securities are a somewhat predictable source of funds,
deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Bank utilizes
advances from the Federal Home Loan Bank to supplement its supply of lendable
funds. At September 30, 1997, FHLB advances totaled $8,497,000.
The Bank must maintain an adequate level of liquidity to ensure availability of
sufficient funds to support loan growth and deposit withdrawals, satisfy
financial commitments and to take advantage of investment opportunities. At
September 30, 1997, the Bank had approved loan commitments totaling $7.4
million and had undisbursed loans in process of $5.7 million.
-8-
FULTON BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
- -------------------------------------------
Liquid funds necessary for normal daily operations are maintained in a working
checking account and a daily time account with the Federal Home Loan Bank of
Des Moines. It is the Bank's current policy to maintain adequate collected
balances in those deposit accounts to meet daily operating expenses, customer
withdrawals, and fund loan demand. Funds received from daily operating
activities are deposited on a daily basis in the checking account and
transferred, when appropriate, to the daily time account to enhance income.
At September 30, 1997, certificates of deposit amounted to $52.4 million or
70.2% of total deposits, including $20.9 million of fixed rate certificates
scheduled to mature within twelve months. Historically, the Bank has been able
to retain a significant amount of its deposits as they mature. Management
believes it has adequate resources to fund all loan commitments from savings
deposits, loan payments, maturities of investment securities and ability to
obtain advances from the Federal Home Loan Bank of Des Moines.
The Office of Thrift Supervision requires a thrift institution to maintain an
average daily balance of liquid assets (cash and eligible investments) equal to
at least 5% of the average daily balance of its net withdrawable deposits and
short-term borrowing. The Bank's liquidity ratio was 12.32% at September
30,1997. The Bank consistently maintains liquidity levels in excess of
regulatory requirements, and believes this is an appropriate strategy for
proper asset and liability management.
The Office of Thrift Supervision requires institutions such as the Bank to meet
certain tangible, core, and risk-based capital requirements. Tangible capital
generally consists of stockholders' equity minus certain intangible assets.
Core capital generally consists of stockholders' equity. The risk-based
capital requirements presently address risk related to both recorded assets and
off-balance sheet commitments and obligations. The following table summarizes
the Bank's capital ratios and the ratios required by regulation (dollars in
thousands) at September 30, 1997.
Percent of Adjusted
Amount Total Assets
-------------------------------
(Unaudited)
Tangible capital $17,354 16.7%
Tangible capital requirement 1,557 1.5
------ ----
EXCESS $15,797 15.2%
======= ====
Core capital $17,016 16.4%
Core capital requirement 3,115 3.0
------- ----
EXCESS $13,901 13.4%
======= ====
Risk-based capital $17,783 29.1%
Risk-based capital requirement 4,893 8.0
------- ----
EXCESS $12,890 21.1%
======= ====
-9-
FULTON BANCORP, INC AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor the Bank is a party to any material legal proceedings
at this time. From time to time the Bank is involved in various claims and
legal actions arising in the ordinary course of business.
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
- --------
27 -- Financial Data Schedule
-10-
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FULTON BANCORP, INC.
Date 11/12/97 By: /s/ Kermit D. Gohring
----------------- --------------------------------
Kermit D. Gohring
President
Date 11/12/97 By: /s/ Bonnie K. Smith
----------------- --------------------------------
Bonnie K. Smith
Secretary - Treasurer
(Principal Accounting Officer)