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 June 30, 1995
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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___________
Commission file number 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)
Not Applicable
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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 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_____
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes_____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 -- 27,432,858 shares outstanding as of July 31, 1995.
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FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995
INDEX
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PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
(a) Consolidated Balance Sheets - June 30, 3
1995 and December 31, 1994
(b) Consolidated Statements of Income - 4
Three and six months ended June 30,
1995 and 1994
(c) Consolidated Statements of Cash Flows - 5
Six months ended June 30, 1995 and
1994
(d) Notes to Consolidated Financial 6
Statements - June 30, 1995
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of
Operations.
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, and 5 have been omitted since they
are not applicable to the registrant.
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
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Fulton Financial Corporation
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA) JUNE 30 December 31
1995 1994
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ASSETS
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Cash and due from banks....................................................................... $ 160,800 $ 144,759
Interest-bearing deposits with other banks.................................................... 1,813 2,328
Federal funds sold............................................................................ 23,000 -
Mortgage loans held for sale.................................................................. 242 650
Investment securities:
Securities held to maturity................................................................. 471,134 497,651
Securities available for sale............................................................... 187,692 170,476
Loans......................................................................................... 2,193,637 2,175,438
Less: Allowance for loan losses............................................................ (35,045) (34,775)
Unearned income...................................................................... (9,906) (10,952)
---------- ----------
NET LOANS.......................................................................... 2,148,686 2,129,711
---------- ----------
Premises and equipment........................................................................ 39,909 39,344
Accrued interest receivable................................................................... 21,425 20,113
Other assets.................................................................................. 78,696 77,541
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TOTAL ASSETS....................................................................... $3,133,397 $3,082,573
========== ==========
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LIABILITIES
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Deposits:
Noninterest-bearing......................................................................... $ 374,264 $ 345,072
Interest-bearing............................................................................ 2,215,519 2,157,615
---------- ----------
TOTAL DEPOSITS..................................................................... 2,589,783 2,502,687
---------- ----------
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase.................. 108,717 191,523
Demand notes of U.S. Treasury............................................................... 9,000 5,000
---------- ----------
TOTAL SHORT-TERM BORROWINGS........................................................ 117,717 196,523
---------- ----------
Accrued interest payable...................................................................... 18,839 12,380
Other liabilities............................................................................. 56,022 42,529
Long-term debt................................................................................ 33,586 27,283
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TOTAL LIABILITIES.................................................................. 2,815,947 2,781,402
---------- ----------
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SHAREHOLDERS' EQUITY
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Common stock ($2.50 par)
Shares: Authorized 100,000,000
Issued 27,474,727 (27,191,049 in 1994)
Outstanding 27,464,527 (27,137,081 in 1994)........................................ 68,687 63,028
Capital surplus............................................................................... 164,730 129,721
Retained earnings............................................................................. 78,989 111,304
Net unrealized holding gain on securities..................................................... 5,229 1,592
Less: Treasury stock (10,200 in 1995 and 53,968 shares in 1994) - at cost..................... (185) (4,474)
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TOTAL SHAREHOLDERS' EQUITY......................................................... 317,450 301,171
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................................... $3,133,397 $3,082,573
========== ==========
See notes to consolidated financial statements.
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Fulton Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
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INTEREST INCOME
Loans, including fees........................................... $ 47,165 $ 36,652 $ 93,598 $ 71,722
Investment securities:
Taxable.................................................... 6,905 8,148 13,791 15,508
Tax-exempt................................................. 1,209 1,391 2,479 2,831
Dividends.................................................. 500 339 967 654
Federal funds sold.............................................. 506 100 528 188
Interest-bearing deposits with other banks...................... 27 40 70 102
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME................................. 56,312 46,670 111,433 91,005
INTEREST EXPENSE
Deposits........................................................ 22,456 15,431 43,298 30,635
Short-term borrowings........................................... 1,349 1,180 3,292 1,894
Long-term debt.................................................. 412 238 841 469
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE................................ 24,217 16,849 47,431 32,998
----------- ----------- ----------- -----------
NET INTEREST INCOME................................... 32,095 29,821 64,002 58,007
PROVISION FOR LOAN LOSSES....................................... 503 501 1,033 1,010
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 31,592 29,320 62,969 56,997
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OTHER INCOME
Trust department................................................ 1,850 1,831 3,722 3,613
Service charges on deposit accounts............................. 2,317 2,240 4,579 4,409
Other service charges and fees.................................. 1,687 1,557 3,358 2,974
Gain on sale of mortgage loans.................................. 334 285 665 930
Investment securities gains..................................... 739 748 1,019 1,682
----------- ----------- ----------- -----------
6,927 6,661 13,343 13,608
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OTHER EXPENSES
Salaries and employee benefits.................................. 12,325 11,852 24,442 23,348
Net occupancy expense........................................... 1,897 1,721 3,898 3,538
Equipment expense............................................... 1,275 1,253 2,499 2,514
FDIC assessment expense......................................... 1,347 1,248 2,723 2,584
Special services................................................ 1,488 1,256 2,701 2,481
Other........................................................... 5,815 6,001 11,430 10,829
----------- ----------- ----------- -----------
24,147 23,331 47,693 45,294
----------- ----------- ----------- -----------
14,372 12,650 28,619 25,311
INCOME BEFORE INCOME TAXES.............................. 3,416 3,181 6,773 6,200
INCOME TAXES ----------- ----------- ----------- -----------
NET INCOME............................................... $ 10,956 $ 9,469 $ 21,846 $ 19,111
=========== =========== =========== ===========
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PER-SHARE DATA
Net income...................................................... $ .40 $ .35 $ .80 $ .71
Cash dividends.................................................. $ .170 $ .146 $ .340 $ .283
Weighted average shares outstanding............................. 27,465,996 27,118,789 27,468,626 27,107,018
See notes to consolidated financial statements.
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FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months
Ended June 30
1995 1994
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(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,846 $ 19,111
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Provision for loan losses 1,033 1,010
Depreciation and amortization of premises and equipment 2,442 2,258
Net amortization of investment security premiums 1,189 1,041
Gain on sale of investment securities (1,019) (1,682)
Decrease in mortgage loans held for sale 408 9,529
Amortization of intangible assets 774 226
Increase in accrued interest receivable (1,312) (2,266)
(Increase) decrease in other assets (3,888) 472
Increase in accrued interest payable 6,459 1,560
Increase (decrease) in other liabilities 2,849 (2,804)
-------- ---------
Total adjustments 8,935 9,344
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 30,781 28,455
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 4,351 8,942
Proceeds from maturities of securities held to maturity 100,303 158,472
Proceeds from maturities of securities available for sale 13,349 -
Purchase of securities held to maturity (64,975) (214,062)
Purchase of securities available for sale (28,081) -
(Increase) decrease in short-term investments (22,485) 4,002
Net increase in loans (20,008) (61,376)
Purchase of premises and equipment (3,007) (2,385)
-------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (20,553) (106,407)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in non-interest deposits 29,192 18,126
Net increase (decrease) in interest bearing deposits 57,904 (1,351)
Net proceeds from issuance (repayment) of long-term debt 6,303 (6)
(Decrease) increase in short-term borrowings (78,806) 72,956
Dividends paid (8,495) (3,984)
Net proceeds from issuance of common stock 421 796
Cash paid in lieu of fractional shares (61) -
Acquisition of treasury stock (645) (353)
-------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 5,813 86,184
-------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 16,041 8,232
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 144,759 131,719
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 160,800 $ 139,951
======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 40,972 $ 24,284
Income taxes 7,001 16,750
See notes to consolidated financial statements.
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FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-1 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 six month period ended June 30, 1995
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1995.
NOTE B - NET INCOME PER SHARE
Net income per share is computed on the basis of the weighted average number of
common shares outstanding.
NOTE C - STOCK DIVIDEND
The Board of Directors declared a 10% stock dividend on April 17, 1995 payable
June 9, 1995 to shareholders of record as of May 15, 1995. All share and per-
share information has been restated to reflect the effect of this stock
dividend. This stock dividend has been reflected in the accompanying
consolidated balance as of June 30, 1995.
NOTE D - ADOPTION OF SFAS NO. 114
Allowance for Loan Losses
-------------------------
The Corporation has adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" effective January 1, 1995.
Under the new standard, the 1995 allowance for credit losses related to loans
that are identified for evaluation in accordance with Statement 114 is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans. Prior to
1995, the allowance for credit losses related to these loans was based on
undiscounted cash flows or the fair value of the collateral for collateral
dependent loans.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on the risk
characteristics of the portfolio, past loan loss experience, local economic
conditions, and such other relevant factors. The allowance is increased by
provisions for loan losses charged against income. The allowance is based on
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management's estimates, and actual losses may vary from the current estimates.
These estimates are reviewed periodically, and, as adjustments become necessary,
they are reported in earnings in the periods in which they become known.
At June 30, 1995, the recorded investment in loans that are considered to be
impaired under Statement 114 was $16.2 million (of which $12.7 million were on a
nonaccrual basis). Included in this amount is $16.1 million of impaired loans
for which the related allowance for credit losses is $3.1 million and $153,000
of impaired loans that as a result of write-downs do not have an allowance for
credit losses. The average recorded investment in impaired loans during the
quarter ended June 30, 1995 was approximately $17.0 million.
Interest Income Recognition
---------------------------
The Corporation applies all payments received on impaired loans to principal
until such time as the principal is paid off, after which time any additional
payments received are recognized as interest income. For the quarter ended June
30, 1995, the Corporation recognized such interest income using the cash basis
of income recognition of approximately $223,210.
Other Real Estate Owned and In-Substance Foreclosures
-----------------------------------------------------
Assets acquired in settlement of mortgage loan indebtedness are recorded as
other real estate owned and are included in other assets at the lower of the
estimated net realizable value of the asset or the carrying amount of the loan.
Loans identified as in-substance foreclosures are also included in other assets
at their estimated net realizable value.
In accordance with Statement 114, a loan is classified as in-substance
foreclosure when the Company has taken possession of the collateral regardless
of whether formal foreclosure proceedings take place. Loans previously
classified as in-substance foreclosure but for which the Company had not taken
possession of the collateral have been reclassified to loans. This
reclassification did not impact the Company's financial condition or results of
operations.
Costs to maintain the assets and subsequent gains and losses attributable to
their disposal are included in other income or other expenses.
NOTE E - MERGERS
Management anticipates that the pending merger with Delaware Bankshares Corp.
will be effective in the third quarter of 1995. The effect of the merger, which
will be accounted for as a pooling of interests, will be to increase total
assets by approximately $100 million.
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FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION
-------------------
At June 30, 1995, total assets were $3,133,397,000, reflecting an increase of
$50,824,000 or 1.6% from December 31, 1994.
Loans increased by $18,975,000 or .9% as loans originated exceeded scheduled
maturities and sales of mortgage loans. Investment securities decreased
$9,301,000 or 1.4%, reflecting the maturities of held to maturity securities,
maturities and sales of available for sale securities, offset somewhat by the
increase in the market value of available for sale securities.
A portion of the funds generated from the decrease in investment securities were
invested in Federal funds sold, which reflected an increase of $23,000,000.
On the liability side of the balance sheet, total deposits at June 30, 1995
showed an increase of $87,096,000 or 3.5% from year-end 1994 totals. These
funds, along with a portion of the funds generated from the decrease in
securities, were used to reduce Federal funds purchased and securities sold
under agreements to repurchase, which decreased $82,806,000 or 43.2%.
Recently, the Corporation has used Federal funds purchased and securities sold
under agreements to repurchase to fund asset growth, as deposit growth has
lagged loan growth. Although the first and second quarters of 1995 have seen a
reversal of this trend, the Corporation continues to focus on increasing deposit
levels and minimizing the use of more short-term volatile funding sources.
Capital Resources
-----------------
The capital resources of the Corporation as represented by the two major
components of regulatory capital, shareholders' equity and allowance for loan
losses continued to grow during 1995, increasing 5.4% and .8%, respectively,
during the six months ended June 30, 1995.
Current capital guidelines attempt to 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 Tier I risk-based
capital percentage of 4.0% and a minimum total risk-based capital of 8.0%. Tier
I capital includes common shareholders' equity, non-cumulative preferred stock,
a percentage of cumulative preferred stock, and minority interests less goodwill
and non-qualified intangible assets. Total capital includes all Tier I capital
components plus
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total cumulative preferred stock, hybrid debt-capital securities, qualified
subordinated debt and the allowance for loan losses.
The Corporation is also subject to "leverage capital" requirements, which
compares capital (using the definition of Tier I capital) to total balance sheet
assets and is intended to supplement the risk-based capital ratios in measuring
capital adequacy. The minimum acceptable leverage capital ratio is 3% for
institutions which are highly-rated in terms of safety and soundness and which
are not experiencing or anticipating any significant growth. Other institutions
are expected to maintain capital levels at least one or two percent above the
minimum.
As of June 30, 1995, the Corporation's capital ratios exceed all of the minimum
ratios as set forth above.
RESULTS OF OPERATIONS
---------------------
Fulton Financial Corporation's net income increased by $1,487,000, or 15.7%, to
$10,956,000 during the second quarter of 1995 compared to the same quarter in
1994. This increase was attributable primarily to an increase in net interest
income which was partially offset by an increase in other expenses.
Net Interest Income
-------------------
Net interest income increased by $2,274,000 or 7.6%. The following table
presents the components of this increase:
Three Months Ended June 30 Change
-------------------------- ------------
1995 1994 $ %
---- ---- - -
(Dollars in Thousands)
Interest income $56,312 $46,670 $9,642 20.7
Interest expense 24,217 16,849 7,368 43.7
------- ------- ------ ----
Net interest income $32,095 $29,821 $2,274 7.6
======= ======= ====== ====
As summarized in the following table, the 20.7% increase in interest income
reflects the effect of the growth in average interest-earning assets and the
increase in the yield on these assets. The 43.7% increase in interest expense
reflects the effect of the growth in interest-bearing liabilities and the
increase in the cost of these funds.
-9-
Three Months Ended June 30 %
1995 1994 Change
---------------------------------
(Dollars in Thousands)
Average interest-earning assets $2,819,214 $2,583,043 9.1%
Yield on earning assets 8.18% 7.42% 10.2%
Average interest-bearing
liabilities $2,335,108 $2,145,169 8.8%
Cost of interest-bearing
liabilities 4.15% 3.15% 31.7%
The increase in both average interest-earning assets and average interest-
bearing liabilities is primarily due to the acquisition of Central Pennsylvania
Financial Corp. (CPFC), which was effective October 1, 1994 and was accounted
for as a purchase of assets and assumption of liabilities. CPFC had
approximately $260 million in assets as of the acquisition date.
The increase in yield and cost of funds from 1994 to 1995 reflects the impact of
the increasing interest rates experienced during 1994 and 1995. The
Corporation's average prime rate increased over 30%, from 6.89% for the second
quarter of 1994 to 9.00% for the second quarter of 1995. The Corporation has
experienced a greater increase in its cost of funds than in its yields,
primarily as a result of continuing competition from both bank and nonbank
providers.
Management monitors the interest sensitivity position of the Corporation
continually to ensure proper adherence to its established policy regarding
interest rate risk. The following table shows the interest sensitivity gaps for
four different time intervals based on scheduled amortization, maturity, and
repricing opportunities as of June 30, 1995.
Daily 0-90 91-180 181-365
Adjustable Days Days Days
------------------------------------------
GAP 1.16 1.07 1.01 1.28
CUMULATIVE GAP 1.16 1.13 1.11 1.15
The Corporation's policy provides for the cumulative six month gap to be
maintained between .85 and 1.15.
Provision and Allowance for Loan Losses
---------------------------------------
The provision for loan losses for the second quarter of 1995 was $503,000
compared to $501,000 for the similar period of 1994 and is reflective of the
continuing low levels of nonperforming loans and related charge-offs. The 1.60%
ratio representing the loan loss allowance in relation to gross loans less
unearned income as of June 30, 1995 is consistent with that ratio of 1.61% at
December
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31, 1994 and is considered prudent by management in light of the current
economic conditions and the quality of the loan portfolio.
The following table summarizes the Corporation's nonperforming assets. Note
that amounts which would have been presented as in-substance foreclosures as of
December 31, 1994 are included in nonaccrual loans as of June 30, 1995.
June 30 Dec. 31
1995 1994
-------- -------
(Dollars in Thousands)
Nonaccrual loans $16,367 $12,952
90 days past due loans
& accruing 5,381 5,361
Other real estate owned 2,910 2,495
In-substance foreclosures - 1,818
------- -------
$24,658 $22,626
======= =======
Nonperforming Assets/Total Assets .79% .73%
Nonperforming Assets/Gross Loans .89% .84%
Other Income
------------
During the second quarter of 1995, other income increased by $266,000, or 4.0%,
when compared to the same period of 1994. This increase reflects the increases
in service charges on deposit accounts of $77,000 or 3.4%, other service charges
and fees of $130,000 or 8.3%, and the gain on sale of mortgage loans of $49,000,
or 17.2%.
The increase in other service charges and fees reflects a significant increase
in mortgage servicing fees as a result of the servicing portfolio acquired from
CPFC in the fourth quarter of 1994.
Other Expenses
--------------
For the second quarter of 1995, total other expenses were $24,147,000, an
increase of $816,000, or 3.5%, over the similar period in 1994. The categories
contributing to this increase were salaries and employee benefits, increasing
$473,000, or 4.0%, net occupancy expense, increasing $176,000, or 10.2%, and
special services, increasing $232,000 or 18.47%. These increases are primarily
due to the operating expenses related to the branches which were acquired from
CPFC on October 1, 1994. Also contributing to the increase in other expenses is
approximately $266,000 of goodwill amortization as a result of the acquisition.
-11-
Income Taxes
------------
Income tax expense increased $235,000, to $3,416,000, for the quarter ended June
30, 1995. This increase is directly attributable to the increase in pretax
income. The effective tax rate was 23.8% in 1995 compared to 25.2% in 1994.
Six Months 1995 versus Six Months 1994
--------------------------------------
Fulton Financial Corporation's net income increased by $2,735,000, or 14.3%, to
$21,846,000 for the six months ended June 30, 1995 compared to the six months
ended June 30, 1994. This increase was attributable primarily to an increase in
net interest income which was partially offset by an increase in other expenses
and a decrease in other income.
Net Interest Income
-------------------
Net interest income increased by $5,995,000 or 10.3%. The following table
presents the components of this increase:
Six Months Ended June 30 Change
------------------------- ------------
1995 1994 $ %
---- ---- - -
(Dollars in Thousands)
Interest income $111,433 $91,005 $20,428 22.4
Interest expense 47,431 32,998 14,433 43.7
-------- ------- ------- ----
Net interest income $ 64,002 $58,007 $ 5,995 10.3
======== ======= ======= ====
As summarized in the following table, the 22.4% increase in interest income
reflects the effect of the growth in average interest-earning assets and the
increase in the yield on these assets. The 43.7% increase in interest expense
reflects the effect of the growth in interest-bearing liabilities and the
increase in the cost of these funds.
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Six Months Ended June 30 %
1995 1994 Change
-----------------------------------
(Dollars in Thousands)
Average interest-earning assets $2,815,538 $2,552,703 10.3%
Yield on earning assets 8.13% 7.34% 10.8%
Average interest-bearing
liabilities $2,343,732 $2,123,264 10.4%
Cost of interest-bearing
liabilities 4.07% 3.13% 30.0%
The increase in both average interest-earning assets and average interest-
bearing liabilities is primarily due to the acquisition of Central Pennsylvania
Financial Corp. (CPFC), which was effective October 1, 1994 and was accounted
for as a purchase of assets and assumption of liabilities. CPFC had
approximately $260 million in assets as of the acquisition date.
The increase in yield and cost of funds from 1994 to 1995 reflects the impact of
the increasing interest rates experienced during 1994 and 1995. The
Corporation's average prime rate increased over 38%, from 6.45% for the six
months ended June 30, 1994 to 8.91% for the six months ended June 30, 1995. The
Corporation has experienced a greater increase in its cost of funds than in its
yields, primarily as a result of continuing competition from both bank and
nonbank providers.
Provision for Loan Losses
-------------------------
The provision for loan losses for the six months ended June 30, 1995 was
$1,033,000 compared to $1,010,000 for the similar period of 1994 and is
reflective of the continuing low levels of nonperforming loans and related
charge-offs.
Other Income
------------
Other income decreased by $265,000, or 1.9%, for the six months ended June 30,
1995 compared to the same period of 1994. This decrease reflects the decrease
in investment securities gains of $663,000 or 39.4% and gain on sale of mortgage
loans of $265,000, or 28.5%, offset by increases in trust department income of
$109,000 or 3.0%, service charges on deposit accounts of $170,000 or 3.9% and
other service charges and fees of $384,000 or 12.9%.
The increase in other service charges and fees reflects a significant increase
in mortgage servicing fees as a result of the servicing portfolio acquired from
CPFC in the fourth of 1994. The decrease in investment securities gains is a
result of management's policy of realizing such gains only when deemed prudent
to do so, based upon the current and expected fair market values of the
individual securities within the equity portfolio.
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The decrease in gain on sale of mortgage loans reflects the impact of the higher
interest rates in effect during the second quarter of 1995 as compared to the
second quarter of 1994, when the Corporation was benefitting from continuing
significant refinancing activity.
Other Expenses
--------------
For the six months ended June 30, 1995, total other expenses were $47,692,000,
an increase of $2,398,000, or 5.3%, over the similar period in 1994. The
categories contributing to this increase were salaries and employee benefits,
increasing $1,094,000, or 4.7%, net occupancy expense, increasing $1,360,000 or
38.4%; and other service charges and fees, increasing $384,000 or 12.9% These
increases were primarily due to the operating expenses related to the branches
which were acquired from CPFC on October 1, 1994. Also contributing to the
increase in other expenses is approximately $266,000 of goodwill amortization as
a result of the acquisition.
Income Taxes
------------
Income tax expense increased $573,000, to $6,773,000, for the six months ended
June 30, 1995. This increase was directly attributable to the increase in pretax
income. The effective tax rate was 23.7% in 1995 compared to 24.5% in 1994.
-14-
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) Instruments defining the right of securities holders, including
indentures:
(a) Rights Agreement dated June 20, 1989 between Fulton Financial
Corporation and Fulton Bank -- Incorporated by reference to
Exhibit 1 of the Fulton Financial Corporation Current Report on
Form 8-K dated June 21, 1989.
(2) Material Contracts - Executive Compensation Agreements and Plans:
(a) Severance Agreements entered into as of April 17, 1984 and as of
May 17, 1988 between Fulton Financial Corporation and the
following executive officers: Robert D. Garner, Rufus A. Fulton,
Jr., James K. Sperry and R. Scott Smith, Jr. - Incorporated by
reference from Exhibit 28 (a) of the Fulton Financial Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31,
1990.
(b) Incentive Stock Option Plan and Amendment No.1 to that Plan
adopted February 17, 1987--Incorporated by reference from Exhibit
(a) (i) of the Fulton Financial Corporation Quarterly Report on
Form 10-Q for the quarter ended March 31, 1987.
(c) Severance Agreement entered into as of November 19, 1992 between
Fulton Financial Corporation and Charles J. Nugent, Executive
Vice President and Chief Financial Officer, incorporated by
reference from Exhibit 10 (c) to the Fulton Financial Corporation
Annual Report on Form 10-K for the year ended December 31, 1992.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended June 30,
1995.
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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 August 11, 1995 /s/ Rufus A. Fulton, Jr.
--------------------- ----------------------------
Rufus A. Fulton, Jr.
President and Chief
Executive Officer
Date August 11, 1995 /s/ Charles J. Nugent
---------------------- ----------------------------
Charles J. Nugent
Executive Vice President;
Chief Financial Officer
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EXHIBIT INDEX
Page
(in accordance with
Exhibits Required Pursuant sequential numbering
to Item 601 of Regulation S-K system)
----------------------------- --------------------
4. Instruments defining the rights
of security holders, including
indentures.
(a) Rights Agreement dated June 20, 1989
between Fulton Financial Corporation
and Fulton Bank -- Incorporated by
reference to Exhibit 1 of the Fulton
Financial Corporation Current Report
on Form 8-K dated June 21, 1989.
10. Material Contracts
(a) Severance Agreements entered into as
of April 17, 1984 and as of May 17,
1988 between Fulton Financial Corporation
and the following executive officers:
Robert D. Garner, Rufus A. Fulton, Jr.,
James K. Sperry and R. Scott Smith, Jr. -
Incorporated by reference from Exhibit
28(a) of the Fulton Financial Corporation
Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990.
(b) Incentive Stock Option Plan and Amendment
No. 1 to that Plan adopted February 17,
1987 - Incorporated by reference from
Exhibit (a) (i) of the Fulton Financial
Corporation Quarterly Report on Form 10-Q
for the quarter ended March 31, 1987.
(c) Severance Agreement entered into as
of November 19, 1992 between Fulton
Financial Corporation and Charles J.
Nugent, Executive Vice President and
Chief Financial Officer, filed as
Exhibit 10(c) to the Fulton Financial
Corporation Annual Report on Form 10-K
for the year ended December 31, 1992.
27. Financial Data Sheet -- Article 9
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