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, 2001 , or
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[_] 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
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FULTON FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2195389
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Penn Square, P.O. Box 4887 Lancaster, Pennsylvania 17604
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(Address of principal executive offices) (Zip Code)
(717) 291-2411
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(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 - 75,901,281 shares outstanding as of
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May 4, 2001.
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FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001
INDEX
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Description Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
(a) Consolidated Balance Sheets -
March 31, 2001 and December 31, 2000............................................ 3
(b) Consolidated Statements of Income -
Three months ended March 31, 2001 and 2000...................................... 4
(c) Consolidated Statements of Shareholders' Equity -
Three months ended March 31, 2001 and 2000...................................... 5
(d) Consolidated Statements of Cash Flows -
Three months ended March 31, 2001 and 2000...................................... 6
(e) Notes to Consolidated Financial Statements - March 31, 2001..................... 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................. 16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................... 20
SIGNATURES.......................................................................... 21
2
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------------------------------------
(Dollars in thousands, except per-share data)
March 31 December 31
2001 2000
-------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks................................................................ $ 245,496 $ 267,178
Interest-bearing deposits with other banks............................................. 1,885 3,199
Mortgage loans held for sale........................................................... 14,233 5,241
Investment securities:
Held to maturity (estimated fair value: $68,667 in 2001 and $83,836 in
2000)............................................................................ 68,132 84,762
Available for sale................................................................ 1,140,779 1,140,646
Loans, net of unearned income.......................................................... 4,846,995 4,866,767
Less: Allowance for loan losses.................................................. (60,357) (60,269)
----------- -----------
Net Loans..................................................... 4,786,638 4,806,498
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Premises and equipment................................................................. 101,027 97,147
Accrued interest receivable............................................................ 38,887 40,411
Other assets........................................................................... 127,575 126,073
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Total Assets.................................................. $ 6,524,652 $ 6,571,155
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LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------
Deposits:
Noninterest-bearing............................................................... $ 839,536 $ 857,696
Interest-bearing.................................................................. 4,170,491 4,076,709
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Total Deposits................................................ 5,010,027 4,934,405
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Short-term borrowings:
Securities sold under agreements to repurchase.................................... 262,284 248,375
Federal funds purchased........................................................... 48,000 155,000
Demand notes of U.S. Treasury..................................................... 4,189 4,791
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Total Short-Term Borrowings................................... 314,473 408,166
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Accrued interest payable............................................................... 41,846 41,637
Other liabilities...................................................................... 70,872 65,638
Long-term debt......................................................................... 382,005 441,973
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Total Liabilities............................................. 5,819,223 5,891,819
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SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------------------
Common stock, $2.50 par; Authorized - 400 million shares; Issued - 76.5 million;
Outstanding - 75.8 million in 2001 and 75.5 million in 2000....................... 191,070 182,052
Capital surplus........................................................................ 505,358 444,570
Retained earnings...................................................................... 12,469 67,201
Accumulated other comprehensive income................................................. 9,195 2,358
Treasury stock, at cost (709,000 shares in 2001 and 944,000 shares in 2000)............ (12,663) (16,845)
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Total Shareholders' Equity.................................... 705,429 679,336
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Total Liabilities and Shareholders' Equity.................... $ 6,524,652 $6,571,155
=========== ===========
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See notes to consolidated financial statements
3
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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(Dollars in thousands, except per-share data)
Three Months Ended
March 31
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2001 2000
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INTEREST INCOME
- ----------------------------------------------------------------------------------------------------------------
Loans, including fees................................................... $ 101,005 $ 91,368
Investment securities:
Taxable................................................................. 14,043 14,189
Tax-exempt.............................................................. 2,144 2,205
Dividends............................................................... 1,132 1,105
Other interest income.................................................... 182 144
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Total Interest Income................................................. 118,506 109,011
INTEREST EXPENSE
- ----------------------------------------------------------------------------------------------------------------
Deposits................................................................. 44,017 37,226
Short-term borrowings.................................................... 5,304 6,256
Long-term debt........................................................... 5,281 4,409
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Total Interest Expense................................................ 54,602 47,891
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Net Interest Income................................................... 63,904 61,120
PROVISION FOR LOAN LOSSES................................................ 2,779 2,025
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Net Interest Income After
Provision for Loan Losses............................................ 61,125 59,095
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OTHER INCOME
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Investment management and trust services................................. 6,103 4,921
Service charges on deposit accounts...................................... 6,467 5,584
Other service charges and fees........................................... 3,641 3,081
Mortgage banking income.................................................. 1,689 590
Investment securities gains.............................................. 3,908 2,476
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Total Other Income..................................................... 21,808 16,652
OTHER EXPENSES
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Salaries and employee benefits........................................... 25,549 22,745
Net occupancy expense.................................................... 3,831 3,591
Equipment expense........................................................ 2,526 2,483
Data processing.......................................................... 2,714 2,773
Other.................................................................... 9,909 8,194
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Total Other Expenses................................................... 44,529 39,786
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Income Before Income Taxes............................................. 38,404 35,961
INCOME TAXES............................................................. 11,160 10,647
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Net Income............................................................. $ 27,244 $ 25,314
=========== ==========
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PER-SHARE DATA:
Net income (basic)....................................................... $ 0.36 $ 0.34
Net income (diluted)..................................................... 0.36 0.34
Cash dividends........................................................... 0.152 0.136
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See notes to consolidated financial statements
4
FULTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
Accumulated
Other
Comprehen-
Common Capital Retained sive
(Dollars in thousands, except per-share data) Stock Surplus Earnings Income
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000.................................. $ 182,052 $ 444,570 $ 67,201 $ 2,358
Comprehensive income:
Net income............................................... 27,244
Other - net unrealized gain on securities (net of $3.7
million tax expense)............................. 6,837
Total comprehensive income..........................
Stock dividends declared - 5% (3.6 million shares)............ 9,018 61,410 (70,428)
Stock issued (232,000 shares of treasury stock)............... (622)
Cash dividends - $0.152 per share............................. (11,548)
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Balance at March 31, 2001..................................... $ 191,070 $ 505,358 $ 12,469 $ 9,195
===================================================================
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% (3.6 million shares)............ 8,492 57,929 (66,421)
Stock issued (62,000 shares of treasury stock)................ (434)
Acquisition of treasury stock (681,000 shares)................
Cash dividends - $0.136 per share............................. (10,221)
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Balance at March 31, 2000..................................... $ 181,884 $ 451,729 $ 24,154 $ (21,910)
===================================================================
Treasury
Stock Total
------------------------------------
Balance at December 31, 2000.................................. $ (16,845) $ 679,336
Comprehensive income:
Net income............................................... 27,244
Other - net unrealized gain on securities (net of $3.7
million tax expense)............................. 6,837
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Total comprehensive income.......................... 34,081
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Stock dividends declared - 5% (3.6 million shares)............ -
Stock issued (232,000 shares of treasury stock)............... 4,182 3,560
Cash dividends - $0.152 per share............................. (11,548)
---------------------------------
Balance at March 31, 2001..................................... $ (12,663) $ 705,429
=================================
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)
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Total comprehensive income.......................... 15,250
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Stock dividends declared - 5% (3.6 million shares)............ -
Stock issued (62,000 shares of treasury stock)................ 1,002 568
Acquisition of treasury stock (681,000 shares)................ (10,153) (10,153)
Cash dividends - $0.136 per share............................. (10,221)
---------------------------------
Balance at March 31, 2000..................................... $ (26,119) $ 609,738
==================================
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See notes to consolidated financial statements
5
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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(In thousands)
Three Months Ended
March 31
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2001 2000
---------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................................. $ 27,244 $ 25,314
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses............................................. 2,779 2,025
Depreciation and amortization of premises and equipment............... 2,627 2,536
Net amortization of investment security premiums...................... 61 131
Investment security gains............................................. (3,908) (2,476)
Net increase in mortgage loans held for sale.......................... (8,992) (403)
Amortization of intangible assets..................................... 826 328
Decrease (increase) in accrued interest receivable.................... 1,524 (115)
Decrease in other assets.............................................. 8,615 8,718
Increase in accrued interest payable.................................. 209 1,213
Increase in other liabilities......................................... 5,215 3,796
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Total adjustments............................................... 8,956 15,753
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Net cash provided by operating activities........................ 36,200 41,067
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale....................... 17,193 4,809
Proceeds from maturities of securities held to maturity.................... 17,556 9,285
Proceeds from maturities of securities available for sale.................. 159,528 40,422
Purchase of securities held to maturity.................................... (926) (346)
Purchase of securities available for sale.................................. (162,489) (33,964)
Increase (decrease) in short-term investments.............................. 1,314 (511)
Net decrease (increase) in loans........................................... 17,081 (82,784)
Purchase of Dearden Maguire................................................ (14,624) -
Purchase of premises and equipment......................................... (6,507) (4,771)
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Net cash provided by (used in) investing activities.............. 28,126 (67,860)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Decrease) increase in demand and savings deposits..................... (24,753) 88,673
Net increase in time deposits.............................................. 100,375 12,042
Decrease in long-term debt................................................. (59,968) (5,056)
Decrease in short-term borrowings.......................................... (93,693) (36,150)
Dividends paid............................................................. (11,529) (10,288)
Net proceeds from issuance of common stock................................. 3,560 568
Acquisition of treasury stock.............................................. - (10,153)
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Net cash (used in) provided by financing activities.............. (86,008) 39,636
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Net (Decrease) Increase in Cash and Due From Banks......................... (21,682) 12,843
Cash and Due From Banks at Beginning of Period............................. 267,178 245,572
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Cash and Due From Banks at End of Period................................... $ 245,496 $ 258,415
=============== ==============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest.............................................................. $ 54,393 $ 46,678
Income taxes.......................................................... - 500
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See notes to consolidated financial statements
6
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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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, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001.
NOTE B - Stock Dividends
The Corporation declared a 5% stock dividend on April 12, 2001 which will be
paid on May 25, 2001 to shareholders of record on May 2, 2001. 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 72.1 million 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):
Three months ended
March 31,
---------------------
2001 2000
---- ----
Weighted average shares outstanding (basic)..... 75,663 75,230
Impact of common stock equivalents.............. 477 323
------ ------
Weighted average shares outstanding (diluted)... 76,140 75,553
====== ======
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):
2001 2000
---- ----
Unrealized holding gains (losses) arising during period.............. $ 9,377 $ (8,455)
Less: reclassification adjustment for gains included
in net income.................................................. 2,540 1,609
---------------- ---------------
Net unrealized gains (losses) on securities.......................... $ 6,837 $ (10,064)
================ ===============
7
NOTE E - New Accounting Standards
Accounting for Derivative Instruments and Hedging Activities: In June, 1998, the
Financial Accounting Standards Board 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, was effective for years beginning after June
15, 2000. The Corporation adopted Statement 133 on January 1, 2001 and there was
no material impact on its balance sheet, comprehensive income or net income.
NOTE F - Reclassifications
Certain amounts in the 2000 consolidated financial statements and notes have
been reclassified to conform to the 2001 presentation.
8
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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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 (FRB) and the Corporation's success in merger and acquisition
integration.
The Corporation's forward-looking statements are relevant only as of the date on
which such statements are made. By making any forward-looking statements, the
Corporation assumes no duty to update them to reflect new, changing or
unanticipated events or circumstances.
MERGER AND ACQUISITION ACTIVITY
- -------------------------------
Skylands Financial Corporation - On August 1, 2000, the Corporation completed
its acquisition of Skylands Financial Corporation (SFC) of Hackettstown, New
Jersey. SFC's sole subsidiary, Skylands Community Bank (Skylands), had
approximately $240 million in total assets on the acquisition date. This
acquisition allowed the Corporation to expand its geographical reach into
northern New Jersey through Skylands's eight community banking offices located
in Morris, Warren and Sussex counties.
Under the terms of the merger agreement, each of the 2.5 million outstanding
shares of SFC's common stock was exchanged for 0.86 shares of the Corporation's
common stock. In addition, options to acquire shares of SFC stock were also
exchanged for options to purchase the Corporation's common stock. SFC was merged
with and into the Corporation and, as a result, Skylands became the
Corporation's third banking subsidiary located in New Jersey.
The acquisition was accounted for as a purchase, and goodwill of approximately
$17.5 million was recorded as the purchase price paid in excess of the net
assets acquired. The goodwill is being amortized to expense on a straight-line
basis over 15 years. Since the acquisition was accounted for as a purchase, the
accounts and results of operations of Skylands are included in the financial
statements of the Corporation for the first quarter of 2001 only.
Dearden, Maguire, Weaver and Barrett, Inc. - On January 2, 2001, the Corporation
completed its previously announced acquisition of investment management and
advisory company Dearden, Maguire, Weaver and Barrett, Inc. (Dearden Maguire).
Dearden Maguire provides investment advice to, and manages the assets of,
clients in the mid-Atlantic region. The firm has approximately $1.3 billion in
assets under management. Dearden Maguire retained its name and operates in
conjunction with Fulton Financial Advisors, N.A. (Advisors), the Corporation's
investment management and trust services subsidiary.
9
The acquisition was accounted for as a purchase, and goodwill of approximately
$14.4 million was recorded as the initial purchase price paid in excess of the
net assets acquired. Additional payments of up to $6.6 million may become
payable upon Dearden Maguire achieving certain revenue goals through December
31, 2005. The goals and the dates of such payments are specified in the purchase
agreement.
The goodwill is being amortized to expense on a straight-line basis over 20
years. Since the acquisition was accounted for under the purchase method of
accounting, the accounts and results of operations of Dearden Maguire are not
included in the financial statements of the Corporation for periods prior to
January 2, 2001.
Drovers Bancshares Corporation - On December 27, 2000, the Corporation entered
into a merger agreement to acquire Drovers Bancshares Corporation (Drovers), of
York, Pennsylvania. Drovers is an $825 million bank holding company whose
primary subsidiary is The Drovers & Mechanics Bank (Drovers Bank), which has 16
community banking offices in York County, Pennsylvania and one office in
Frederick County, Maryland.
Under the terms of the merger agreement, each of the approximately 5.1 million
shares of Drover's common stock outstanding will be exchanged for 1.302 shares
of the Corporation's common stock. In addition, each of the options to acquire
Drovers stock will be converted to options to purchase the Corporation's stock.
The acquisition is subject to approval by bank regulatory authorities and
Drovers' shareholders and is expected to be completed in the third quarter of
2001. The acquisition will be accounted for as a pooling of interests.
Drovers will be merged into the Corporation and, shortly thereafter, Drovers
Bank will be merged into Fulton Bank, the Corporation's largest subsidiary bank.
The Frederick County, Maryland office of Drovers Bank will be transferred to
Hagerstown Trust Company, another subsidiary bank of the Corporation. The trust
business of Drovers Bank will be transferred to Advisors. This acquisition will
allow the Corporation to expand its presence in the York County, Pennsylvania
market.
Sovereign Bank Branches - On January 29, 2001, the Corporation entered into a
definitive agreement with Sovereign Bank (Sovereign) to acquire 18 branch
offices located in Delaware, New Jersey and Pennsylvania. These branch offices,
which include approximately $300 million in deposits and $50 million in loans,
will be operated through the following existing banking subsidiaries of the
Corporation: Fulton Bank (1), Delaware National Bank (6), The Bank of Gloucester
County (2), and the Woodstown National Bank and Trust Company (9). All required
regulatory approvals have been obtained and the acquisition is expected to be
completed in the second quarter of 2001.
RESULTS OF OPERATIONS
- ---------------------
Quarter ended March 31, 2001 versus Quarter ended March 31, 2000
- ------------------------------------------------------------------
The Corporation's net income for the first quarter of 2001 increased $1.9
million, or 7.6%, in comparison to net income for the first quarter of 2000.
Diluted net income per share increased $0.02, or 5.9%, compared to 2000. First
quarter net income of $27.2 million, or $0.36 per share (basic and diluted),
represented an annualized return on average assets (ROA) of 1.70% and an
annualized return on average equity (ROE) of 16.11%. This compares to 2000 net
income of $25.3 million, or $0.34 per share (basic and diluted -- 1.67% ROA and
16.57% ROE).
The increase in net income was impacted by the net contributions of Skylands
(net income of $794,000 for the quarter) and Dearden Maguire (net income of
$165,000 for the quarter) whose results of operations were not included in 2000
amounts as these acquisitions were accounted for as purchases. The Corporation
also benefited from growth in other income, mainly as a result of mortgage sale
gains. These increases were offset
10
by a higher provision for loan losses, increases in expenses and a decrease in
net interest income (after excluding the impact of Skylands).
Net Interest Income
- -------------------
Net interest income is the Corporation's largest revenue source, accounting for
almost 80% of total revenues. For the quarter, net interest income increased
$2.8 million, or 4.6%. Excluding the impact of Skylands, which added $3.2
million during the quarter, net interest income actually decreased by $402,000,
or 0.7%. This decline resulted mainly from continued pressure on the
Corporation's net interest margin due to loan and deposit competition and
changes in the general interest rate environment. The following table provides a
comparative average balance sheet and net interest income analysis for the first
quarter of 2001 as compared to the same period in 2000. All dollar amounts are
in thousands.
Quarter Ended March 31, 2001 Quarter Ended March 31, 2000
------------------------------------------ ---------------------------------------------
Average Yield/ Average Yield/
ASSETS Balance Interest Rate (1) Balance Interest Rate (1)
- --------------------------------------- ------------ ------------ ---------- ------------- ----------- --------------
Interest-earning assets:
Loans and leases..................... $ 4,870,855 $ 101,005 8.41% $ 4,468,516 $ 91,368 8.22%
Taxable investment securities........ 912,370 14,043 6.24 943,467 14,189 6.05
Tax-exempt investment securities..... 198,963 2,144 4.37 204,122 2,205 4.34
Equity securities.................... 83,673 1,132 5.49 84,700 1,105 5.25
Short-term investments............... 11,786 182 6.26 8,991 144 6.44
Total interest-earning assets.......... ------------- ----------- ----- ------------ ----------- ----
6,077,647 118,506 7.91 5,709,796 109,011 7.68
Noninterest-earning assets:
Cash and due from banks.............. 222,272 225,788
Premises and equipment............... 99,822 80,551
Other assets......................... 165,315 122,492
Less: Allowance for loan losses...... (61,252) (58,476)
------------- ------------
Total Assets................. $ 6,503,804 $ 6,080,151
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits...................... $ 617,218 $ 2,285 1.50% $ 583,476 $ 2,136 1.47%
Savings deposits..................... 1,047,247 6,221 2.41 1,020,293 6,019 2.37
Time deposits........................ 2,440,054 35,511 5.90 2,217,844 29,071 5.27
Short-term borrowings................ 406,598 5,304 5.29 478,442 6,256 5.26
Long-term debt....................... 401,952 5,281 5.33 340,692 4,409 5.20
------------- ----------- ---- ------------ ----------- ----
Total interest-bearing liabilities..... 4,913,069 54,602 4.51 4,640,747 47,891 4.15
Noninterest-bearing liabilities:
Demand deposits...................... 798,814 730,625
Other................................ 106,212 94,358
------------- ------------
Total Liabilities............ 5,818,095 5,465,730
Shareholders' equity................... 685,709 614,421
------------- ------------
Total Liabilities and
Shareholders' Equity....... $ 6,503,804 $ 6,080,151
============= ============
Net interest income.................... $ 63,904 $ 61,120
========== ===========
Net interest margin (FTE).............. 4.36% 4.42%
==== ====
(1) Yields on tax-exempt securities are not fully taxable equivalent (FTE).
The increases in average balances from 2000 to 2001 were positively impacted
by the acquisition of Skylands. Approximately $175.6 million of the $402.3
million increase in average loans and $243.9 million of the $367.9 million
increase in average total interest-earning assets resulted from the
inclusion of Skylands in the 2001 average balances. Similarly, approximately
$236.2 million of the $351.1 million increase in average deposits is
attributable to Skylands.
11
Although the balance increases were affected, the yields and costs for each
period were not significantly impacted, as the total assets of Skylands account
for less than 5% of the total assets of the Corporation.
Total interest income increased $9.5 million, or 8.7%. Of this increase,
approximately $7.0 million was attributable to the increase in average earning
assets. The remaining $2.5 million increase resulted from the 23 basis point
increase in average yields to 7.91% in 2001 from 7.68% in 2000, offset by one
less day in 2001 as a result of leap year in 2000.
The average balance sheet growth was fueled mainly by loans, which increased
$402 million, or 9.0%, in 2001 as compared to 2000 ($227 million, or 5.1%,
excluding the impact of Skylands). Commercial loans increased $168 million, or
15.6%, and commercial mortgages increased $191 million, or 15.8%, to provide the
majority of the growth.
Average investment securities decreased $37 million, or 3.0% as a portion of the
funds from maturing investments was used to support the loan growth.
Total interest expense increased $6.7 million, or 14.0%. Unlike interest income,
the increase was more evenly distributed between rate and volume. The 36 basis
point increase in the average cost of funds to 4.51% in 2001 from 4.15% in 2000
contributed $3.9 million to the increase, while the remaining $2.8 million
resulted from the growth in average interest-bearing liabilities.
Overall, the Corporation's net interest margin on a fully taxable equivalent
basis decreased six basis points to 4.36% in 2001 from 4.42% in 2000. This
reflects the pricing competition for loans and deposits and the volatility in
interest rates over the past two years as a result of interest rate decisions
made by the FRB. Despite these factors, however, the Corporation's net interest
margin remains strong compared to the industry in general. See "Market Risk" for
a discussion of the Corporation's asset/liability management strategies.
Provision and Allowance for Loan Losses
- ---------------------------------------
The following table summarizes loans outstanding as of the dates shown:
March 31 December 31 March 31
2001 2000 2000
---------------- ---------------- ----------------
(in thousands)
Commercial, financial and agricultural............. $ 1,259,140 $ 1,219,845 $ 1,095,176
Real estate - construction......................... 215,897 223,575 181,900
Real estate - residential mortgage................. 1,390,592 1,424,274 1,306,497
Real estate - commercial mortgage.................. 1,234,804 1,215,000 1,089,612
Consumer .......................................... 674,551 709,985 770,431
Leasing and other.................................. 84,566 87,004 69,792
Unearned income.................................... (12,555) (12,916) (9,839)
-------------- -------------- --------------
Total Loans..................................... $ 4,846,995 $ 4,866,767 $ 4,503,569
============== ============== ==============
As indicated by the above table, the Corporation maintained a diversified loan
portfolio despite recent growth realized mainly in commercial loans and
commercial mortgages.
12
The following table summarizes the activity in the Corporation's allowance for
loan losses:
Three Months Ended
March 31
-------------------------------------
2001 2000
---------------- ----------------
(dollars in thousands)
Loans outstanding at end of period (net of unearned)............... $ 4,846,995 $ 4,503,569
================ ================
Daily average balance of loans and leases.......................... $ 4,870,855 $ 4,468,516
================ ================
Balance of allowance for loan losses
at beginning of period........................................ $ 60,269 $ 57,631
Loans charged-off:
Commercial, financial and agricultural......................... 1,716 816
Real estate - mortgage......................................... 234 349
Consumer....................................................... 1,726 1,777
Leasing and other.............................................. 154 93
---------------- ----------------
Total loans charged-off........................................ 3,830 3,035
---------------- ----------------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural......................... 142 376
Real estate - mortgage......................................... 189 288
Consumer....................................................... 803 748
Leasing and other.............................................. 5 1
---------------- ----------------
Total recoveries............................................... 1,139 1,413
---------------- ----------------
Net loans charged-off.............................................. 2,691 1,622
Provision for loan losses.......................................... 2,779 2,025
---------------- ----------------
Balance at end of period........................................... $ 60,357 $ 58,034
================ ================
Net charge-offs to average loans (annualized)...................... 0.22% 0.15%
================ ================
Allowance for loan losses to loans outstanding..................... 1.25% 1.29%
================ ================
The following table summarizes the Corporation's non-performing assets as of the
indicated dates.
March 31 Dec. 31 March 31
(Dollars in thousands) 2001 2000 2000
--------------- --------------- ---------------
Nonaccrual loans..................................... $ 20,499 $ 19,465 $ 18,914
Loans 90 days past due and accruing.................. 8,953 7,127 6,864
Other real estate owned (OREO)....................... 846 931 816
--------------- --------------- ---------------
Total non-performing assets.......................... $ 30,298 $ 27,523 $ 26,594
=============== =============== ===============
Non-performing loans/total loans..................... 0.61% 0.55% 0.57%
Non-performing assets/total assets................... 0.46% 0.42% 0.43%
Non-performing assets/loans and OREO................. 0.62% 0.57% 0.59%
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
internal credit quality reviews and analyses, it is believed that the allowance
is not adequate to absorb the losses inherent in the portfolio. Management
considers various factors in completing its analyses, 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 characteristics of
loan types in
13
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 subsidiary banks. Resulting provisions and allowances are aggregated for
consolidated financial reporting.
For the first quarter of 2001, net charge-offs totaled $2.6 million, or 0.22% of
average loans on an annualized basis. This compares to $1.6 million, or 0.15%,
for the first quarter of 2000. The increase was attributable to one commercial
loan, which offset the improvements that the Corporation continued to realize in
the quality of its consumer loan portfolio. Non-performing loans, including
loans 90 days past due and still accruing, to total loans were 0.61% at March
31, 2000 as compared to 0.55% at December 31, 2000 and 0.57% at March 31, 2000.
The provision for loan losses increased $754,000, or 37.2%, to $2.8 million in
2001. The total provision for the quarter approximated net charge-offs and
increased mainly in response to the higher charge-off level. Despite the
increase in net charge-offs and the slight increase in its non-performing assets
ratios, the Corporation's overall loan quality remains strong when such measures
are compared to the industry in general.
The Corporation's periodic loan portfolio review and allowance calculation
resulted in an unallocated allowance for loan losses of 21% at March 31, 2001,
as compared to 28% at March 31, 2000 and 30% at December 31, 2000. Management
believes that the allowance balance of $60.4 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, 2001 was $21.8 million, an increase
of $5.2 million, or 31.0%, over the comparable period in 2000. Excluding
investment security gains, which increased from $2.5 million in 2000 to $3.9
million in 2001, other income increased $3.7 million, or 26.3%. Skylands did not
contribute significantly to the increase in other income.
The most significant increase, in terms of percentage growth, was realized in
mortgage banking income, which increased $1.1 million, or 186.3%. With
relatively low mortgage rates in place during the quarter, many consumers
refinanced to lower rate loans. The Corporation sold all qualifying fixed rate
mortgage loans it originated during the quarter in order to limit interest rate
risk, resulting in an increase in mortgage sale gains of $1.1 million.
Investment management and trust services income also showed strong growth, with
an increase of $1.2 million, or 24.0%, mainly as a result of the Dearden Maguire
acquisition. Service charges on deposit accounts increased $906,000, or 16.3%,
as deposit balances grew during the period. Other service charges also realized
a moderate increase of $537,000, or 17.3%.
Other Expenses
- --------------
Total other expenses for the first quarter of 2001 of $44.5 million increased
$4.7 million, or 11.9%, from 2000. The acquisitions of Skylands and Dearden
Maguire contributed $2.7 million to the increase. Excluding these amounts, other
expenses increased $2.0 million, or 5.0%. The Corporation's efficiency ratio,
which is the ratio of noninterest expense to fully taxable equivalent revenues
(excluding security gains), increased to 53.3% in 2001 from 51.6% in 2000.
Salaries and employee benefits increased $2.8 million, or 12.3%, in comparison
to the first quarter of 2000 ($993,000, or 4.3%, excluding Skylands and Dearden
Maguire). Benefits expense generated much of the increase, as health plan
expenses increased approximately 30% due to rising medical insurance costs. The
increase in salaries expense was a less dramatic 3.2% and resulted from normal
merit increases.
14
Net occupancy and equipment expenses increased $240,000, or 6.7%, and $43,000,
or 1.7%, respectively. These increases resulted mainly from the addition of
Skylands. The Corporation will complete its $25 million headquarters office
space construction project in the second quarter of 2001, which will contribute
to an increase in occupancy costs in future periods. The Corporation will
recover a portion of these costs by leasing available space to third parties.
Data processing expense decreased $59,000, or 2.1% as the Corporation continued
to realize a benefit from its renegotiated outside data processing services
contract. Other expense increased $1.7 million, or 20.9%, to $9.9 million in
2001. Excluding Skylands and Dearden Maguire, the increase was $891,000, or
10.9%, mainly due to goodwill amortization resulting from these acquisitions.
Income Taxes
- ------------
Income tax expense for the first quarter of 2001 was $11.2 million, a $513,000,
or 4.8%, increase from $10.6 million in 2000. The Corporation's effective tax
rate was approximately 29.1% in 2001 as compared to 29.6% in 2000. 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, 2001, the Corporation had total assets of $6.5 billion, reflecting
a decrease of $46.5 million, or 0.07%, from December 31, 2000 and an increase of
$395 million, or 6.4% from March 31, 2000 ($275 million of this increase
resulted from the Skylands acquisition).
The decrease in assets from December 31, 2000 to March 31, 2001 resulted mainly
from a net decrease in loans. Moderate growth in commercial loans and commercial
mortgages ($59.0 million, or 2.4%, increase) was more than offset by runoff in
the residential mortgage portfolio ($33.7 million, or 2.4%, decrease) and
consumer loans ($35.4 million, or 5.0%). Residential mortgage balances decreased
due to continued refinance activity and consumer loans decreased due to a lower
volume of indirect lending.
Total cash and due from banks decreased $21.7 million, or 8.1%, and total
investment securities decreased $16.5 million, or 1.4%. Available funds were
used to reduce the Corporation's net short-term borrowing position. Other assets
remained essentially unchanged at $127.6 million as a result of the $14.4
million increase in goodwill from the Dearden Maguire acquisition being offset
by a $10.3 million decrease in the accumulated cash value of corporate-owned
life insurance.
Total deposits saw moderate growth during the first quarter of 2001, increasing
$75.6 million, or 1.5%, primarily in interest-bearing types. Since these
additional funds were not needed to support loan growth, the Corporation's
borrowings were reduced. Short-term borrowings, primarily Federal funds
purchased, decreased $93.7 million, or 23.0%. Long-term debt, consisting mainly
of advances from the Federal Home Loan Bank, decreased $60.0, or 13.6%.
Other liabilities increased $5.2 million, or 8.0% due to accrued federal income
taxes which were not due until April, 2001.
Capital Resources
- -----------------
Total shareholders' equity increased $26.1 million, or 3.8%, during the first
three months of 2001. This increase was due to net income of $27.2 million, a
$6.8 million improvement in the net unrealized gain on investment securities and
$3.6 million in stock issuances. These increases were offset by $11.5 million in
cash dividends to shareholders. In addition, the Corporation did not have any
stock repurchase plans in place during the first quarter and, consequently, no
shares were repurchased.
15
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
12, 2001. See Note B to the financial statements.
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, 2001, 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.
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.
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 $51.7 million) and U.S. Government agency stock (cost basis of
approximately $34.5 million). The Corporation's financial institutions stock
portfolio had net unrealized gains of approximately $7.4 million at March 31,
2001.
Although the carrying value of equity investments accounted for only 1.4% 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.
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.
16
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.
17
FULTON FINANCIAL CORPORATION
INTEREST RATE SENSITIVITY
(dollars in thousands)
Expected Maturity Period
------------------------
*1 Year 1-2 Years 2-3 Years 3-4 Years
------- --------- --------- ---------
Fixed rate loans (1) $ 932,629 $ 645,564 $ 485,051 $ 311,916
Average rate (1) 7.93% 8.01% 8.01% 8.01%
Floating rate loans (2) 539,860 199,815 162,717 130,338
Average rate 8.77% 8.76% 8.96% 9.06%
Fixed rate investments (3) 203,631 207,327 248,137 176,980
Average rate 6.33% 6.30% 6.26% 6.25%
Floating rate investments (3) 50 - 1,000 -
Average rate 7.51% - 5.55% -
Other interest-earning assets 16,118 - - -
Average rate 5.53% - - -
------------------------------------------------------------------
Total $ 1,692,288 $ 1,052,706 $ 896,905 $ 619,234
Average rate 7.98% 7.82% 7.25% 7.73%
------------------------------------------------------------------
Fixed rate deposits (4) $ 1,705,382 $ 482,754 $ 127,564 $ 59,473
Average rate 5.77% 5.97% 5.88% 5.83%
Floating rate deposits (5) 599,231 126,166 121,843 121,843
Average rate 3.06% 1.10% 1.05% 1.05%
Fixed rate borrowings (6) 71,409 280 27,780 280
Average rate 4.60% 5.76% 5.00% 5.76%
Floating rate borrowings (7) 314,473 - - -
Average rate 4.85% - - -
------------------------------------------------------------------
Total $ 2,690,495 $ 609,200 $ 277,187 $ 181,596
Average rate 5.03% 4.96% 3.67% 2.62%
------------------------------------------------------------------
-------------------------- Estimated
4-5 Years **5 Years Total Fair Value
----------- ---------- ------- ------------
Fixed rate loans (1) $ 215,395 $ 676,261 $ 3,266,816 $ 3,354,608
Average rate (1) 8.05% 7.64% 7.91%
Floating rate loans (2) 107,298 440,151 1,580,179 1,568,954
Average rate 8.72% 8.45% 8.47%
Fixed rate investments (3) 129,397 128,693 1,094,165 1,100,873
Average rate 6.08% 5.70% 6.15%
Floating rate investments (3) - 13,379 14,429 14,441
Average rate - 6.86% 6.77%
Other interest-earning assets - - 16,118 16,118
Average rate - - 5.53%
--------------------------------------------------------------------
Total $ 452,090 $ 1,258,484 $ 5,971,707 $ 6,054,994
Average rate 7.64% 7.72% 7.73%
--------------------------------------------------------------------
Fixed rate deposits (4) $ 37,690 $ 15,251 $ 2,428,114 $ 2,466,475
Average rate 6.15% 5.52% 5.82%
Floating rate deposits (5) 121,843 1,490,987 2,581,913 2,581,733
Average rate 1.05% 0.85% 1.40%
Fixed rate borrowings (6) 73,280 208,976 382,005 384,195
Average rate 6.36% 5.46% 5.44%
Floating rate borrowings (7) - - 314,473 314,473
Average rate - 4.85%
-------------------------------------------------------------------
Total $ 232,813 $ 1,715,214 $ 5,706,505 $ 5,746,876
Average rate 3.55% 1.45% 3.74%
-------------------------------------------------------------------
* Less than
** Greater than
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 and Super NOW deposits are shown in first year. NOW and
savings accounts are spread 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 90 days.
18
The Corporation uses three complementary methods to measure and manage interest
rate risk. They are static gap analysis, simulation of earnings, 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 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 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% of total earning assets. The cumulative 6-month gap as
of March 31, 2001 was 1.15.
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. At March 31, 2001 the
Corporation had a larger exposure to downward rate shocks, with net interest
income at risk of loss over the next twelve months of 1%, 2% and 4% where
interest rates are shocked downward 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" movement in interest rates. As of March 31, 2001,
downward shocks of 100, 200 or 300 basis points were estimated to have negative
effects upon economic value of 1%, 3%, and 6%, respectively.
19
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.
(b) Reports on Form 8-K:
(1) Form 8-K dated January 2, 2001 reporting the execution of an
Agreement and Plan of Merger by and between Fulton Financial
Corporation and Drovers Bankshares Corporation.
20
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 11, 2001 /s/ Rufus A. Fulton, Jr.
----------------------- ------------------------------------------
Rufus A. Fulton, Jr.
Chairman and
Chief Executive Officer
Date: May 11, 2001 /s/ Charles J. Nugent
-------------------------- ----------------------------------------
Charles J. Nugent
Senior Executive Vice President and
Chief Financial Officer
21
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.
22