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, 1999, or
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No. 0-10587
-------
FULTON FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2195389
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Penn Square, P.O. Box 4887 Lancaster, Pennsylvania 17604
- ------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(717) 291-2411
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $2.50 Par Value - 69,208,549 shares outstanding as of April
-------------------------------------------------------------------------
30, 1999.
- --------
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
-----
Description Page
- ----------- ----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
(a) Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998................................. 3
(b) Consolidated Statements of Income -
Three months ended March 31, 1999 and 1998........................... 4
(c) Consolidated Statements of Shareholders' Equity -
Three months ended March 31, 1999 and 1998........................... 5
(d) Consolidated Statements of Cash Flows -
Three months ended March 31, 1999 and 1998........................... 6
(e) Notes to Consolidated Financial Statements - March 31, 1999.......... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 17
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
1999 1998
-------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
Cash and due from banks............................................................... $ 225,586 $ 247,558
Interest-bearing deposits with other banks............................................ 5,090 2,975
Mortgage loans held for sale.......................................................... 9,328 7,987
Investment securities:
Held to maturity (Fair value: $139,341 in 1999 and $177,939 in 1998)............. 138,182 176,623
Available for sale............................................................... 1,204,742 1,206,121
Loans................................................................................. 4,059,655 4,040,455
Less: Allowance for loan losses................................................. (58,440) (57,415)
Unearned income........................................................ (9,646) (10,064)
------------ ------------
Net Loans.................................................... 3,991,569 3,972,976
------------ ------------
Premises and equipment................................................................ 75,941 75,715
Accrued interest receivable........................................................... 33,897 34,942
Other assets.......................................................................... 102,246 113,766
------------ ------------
Total Assets................................................. $ 5,786,581 $ 5,838,663
============ ============
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------------
Deposits:
Noninterest-bearing.............................................................. $ 706,152 $ 759,585
Interest-bearing................................................................. 3,802,271 3,833,384
------------ ------------
Total Deposits............................................... 4,508,423 4,592,969
------------ ------------
Short-term borrowings:
Securities sold under agreements to repurchase................................... 229,981 212,225
Federal funds purchased.......................................................... 19,840 19,521
Demand notes of U.S. Treasury.................................................... 5,186 3,839
------------ ------------
Total Short-Term Borrowings.................................. 255,007 235,585
------------ ------------
Accrued interest payable.............................................................. 34,229 34,255
Other liabilities..................................................................... 74,547 71,502
Long-term debt........................................................................ 295,826 296,018
------------ ------------
Total Liabilities............................................ 5,168,032 5,230,329
------------ ------------
SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
Common stock ($2.50 par)
Shares: Authorized 400,000,000
Issued 69,360,146 (69,360,146 in 1998)
Outstanding 69,198,686 (69,185,120 in 1998)............................ 173,365 157,638
Capital surplus....................................................................... 408,461 293,897
Retained earnings..................................................................... 19,925 136,668
Accumulated other comprehensive income................................................ 20,156 23,619
Treasury stock, at cost (161,460 shares in 1999 and 175,026 shares in 1998)........... (3,358) (3,488)
------------ ------------
Total Shareholders' Equity................................... 618,549 608,334
------------ ------------
Total Liabilities and Shareholders' Equity................... $ 5,786,581 $ 5,838,663
============ ============
- ----------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
3
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
THREE MONTHS ENDED
MARCH 31
-------------------------------
1999 1998
-------------------------------
INTEREST INCOME
- -----------------------------------------------------------------------------------------------------
Loans, including fees.............................................. $ 82,280 $ 84,245
Investment securities:
Taxable......................................................... 16,219 13,708
Tax-exempt...................................................... 1,792 892
Dividends....................................................... 993 844
Federal funds sold................................................. 37 225
Interest-bearing deposits with other banks......................... 29 70
----------- ----------
Total Interest Income............................... 101,350 99,984
INTEREST EXPENSE
- -----------------------------------------------------------------------------------------------------
Deposits........................................................... 36,030 39,752
Short-term borrowings.............................................. 2,870 2,270
Long-term debt..................................................... 3,782 1,251
----------- ----------
Total Interest Expense.............................. 42,682 43,273
----------- ----------
Net Interest Income................................. 58,668 56,711
PROVISION FOR LOAN LOSSES.......................................... 1,967 1,611
----------- ----------
Net Interest Income After
Provision for Loan Losses......................... 56,701 55,100
----------- ----------
OTHER INCOME
- -----------------------------------------------------------------------------------------------------
Investment management and trust services........................... 3,417 3,037
Service charges on deposit accounts................................ 4,770 4,359
Other service charges and fees..................................... 3,069 2,702
Mortgage banking income............................................ 1,283 1,156
Investment securities gains........................................ 3,057 3,382
----------- ----------
Total Other Income.................................. 15,596 14,636
OTHER EXPENSES
- -----------------------------------------------------------------------------------------------------
Salaries and employee benefits..................................... 21,362 20,968
Net occupancy expense.............................................. 3,275 3,138
Equipment expense.................................................. 2,293 2,428
Special services................................................... 2,880 2,285
Other.............................................................. 9,213 10,180
----------- ----------
Total Other Expenses................................ 39,023 38,999
----------- ----------
Income Before Income Taxes.......................... 33,274 30,737
INCOME TAXES....................................................... 9,747 9,564
----------- ----------
Net Income.......................................... $ 23,527 $ 21,173
=========== ==========
- -----------------------------------------------------------------------------------------------------
PER-SHARE DATA:
Net income (basic)................................................. $ 0.34 $ 0.31
Net income (diluted)............................................... $ 0.34 $ 0.30
Cash dividends..................................................... $ 0.136 $ 0.125
- -----------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
4
FULTON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
ACCUMULATED
OTHER
COMPREHEN-
COMMON CAPITAL RETAINED SIVE
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA) STOCK SURPLUS EARNINGS INCOME
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998..................................... $ 157,638 $ 293,897 $ 136,668 $ 23,619
Comprehensive income:
Net income..................................................... 23,527
Other - unrealized loss on securities (net of $1.9 million
tax benefit)........................................... (3,463)
Total comprehensive income..................................
Stock dividends declared - 10% (6,290,826 shares)................ 15,727 115,122 (130,849)
Stock issued (53,266 shares of treasury stock)................... (558)
Acquisition of treasury stock (39,700 shares)....................
Cash dividends - $0.136 per share................................ (9,421)
--------------------------------------------------------
Balance at March 31, 1999........................................ $ 173,365 $ 408,461 $ 19,925 $ 20,156
========================================================
Balance at December 31, 1997..................................... $ 126,497 $ 326,402 $ 84,634 $ 28,257
Comprehensive income:
Net income..................................................... 21,173
Other - unrealized gain on securities (net of $1.5 million
tax expense)............................................ 2,783
Total comprehensive income..................................
Stock issued (114,645 shares, including 67,194 shares of
treasury stock)................................................ 114 (464)
Acquisition of treasury stock (48,813 shares)....................
Cash dividends - $0.125 per share................................ (8,574)
--------------------------------------------------------
Balance at March 31, 1998........................................ $ 126,611 $ 325,938 $ 97,233 $ 31,040
========================================================
TREASURY
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA) STOCK TOTAL
- --------------------------------------------------------------------------------------------
Balance at December 31, 1998..................................... $ (3,488) $ 608,334
Comprehensive income:
Net income..................................................... 23,527
Other - unrealized loss on securities (net of $1.9 million
tax benefit)........................................... (3,463)
-----------
Total comprehensive income.................................. 20,064
-----------
Stock dividends declared - 10% (6,290,826 shares)................ -
Stock issued (53,266 shares of treasury stock)................... 910 352
Acquisition of treasury stock (39,700 shares).................... (780) (780)
Cash dividends - $0.136 per share................................ (9,421)
-------------------------
Balance at March 31, 1999........................................ $ (3,358) $ 618,549
=========================
Balance at December 31, 1997..................................... $ (1,299) $ 564,491
Comprehensive income:
Net income..................................................... 21,173
Other - unrealized gain on securities (net of $1.5 million
tax expense)............................................ 2,783
-----------
Total comprehensive income.................................. 23,956
-----------
Stock issued (114,645 shares, including 67,194 shares of
treasury stock)................................................ 1,442 1,092
Acquisition of treasury stock (48,813 shares).................... (1,112) (1,112)
Cash dividends - $0.125 per share................................ (8,574)
-------------------------
Balance at March 31, 1998........................................ $ (969) $ 579,853
=========================
- --------------------------------------------------------------------------------------------
See notes to consolidated financial statements
5
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31
------------------------------
1999 1998
------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................................................... $ 23,527 $ 21,173
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses.......................................................... 1,967 1,611
Depreciation and amortization of premises and equipment............................ 2,383 2,332
Net amortization of investment security premiums................................... 405 59
Investment security gains.......................................................... (3,057) (3,382)
Net increase in mortgage loans held for sale....................................... (1,341) (3,027)
Amortization of intangible assets.................................................. 325 395
Decrease (increase) in accrued interest receivable................................. 1,045 (1,405)
Decrease in other assets........................................................... 12,784 12,325
(Decrease) increase in accrued interest payable.................................... (26) 2,390
Increase (decrease) in other liabilities........................................... 7,273 (1,938)
---------- ----------
Total adjustments.............................................................. 21,758 9,360
---------- ----------
Net cash provided by operating activities....................................... 45,285 30,533
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale................................. 7,070 7,844
Proceeds from maturities of securities held to maturity.............................. 38,524 55,266
Proceeds from maturities of securities available for sale............................ 73,018 47,899
Purchase of securities held to maturity.............................................. (121) (5,338)
Purchase of securities available for sale............................................ (85,307) (120,418)
Increase in short-term investments................................................... (2,115) (58,570)
Net (increase) decrease in loans..................................................... (20,560) 20,990
Purchase of premises and equipment................................................... (2,609) (3,074)
---------- ----------
Net cash provided by (used in) investing activities............................. 7,900 (55,401)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand and savings deposits............................... (70,551) 7,751
Net (decrease) increase in time deposits............................................. (13,995) 7,902
(Decrease) increase in long-term debt................................................ (192) 84,018
Increase (decrease) in short-term borrowings......................................... 19,422 (56,598)
Dividends paid....................................................................... (9,413) (8,574)
Net proceeds from issuance of common stock........................................... 352 1,092
Acquisition of treasury stock........................................................ (780) (1,112)
---------- ----------
Net cash (used in) provided by financing activities............................. (75,157) 34,479
---------- ----------
NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS................................... (21,972) 9,611
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD....................................... 247,558 208,289
---------- ----------
CASH AND DUE FROM BANKS AT END OF PERIOD............................................. $ 225,586 $ 217,900
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest........................................................................... $ 42,708 $ 40,883
Income taxes....................................................................... - 500
- -----------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
6
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
NOTE B - 10% STOCK DIVIDEND
The Corporation declared a 10% stock dividend on April 20, 1999 which will be
paid on June 1, 1999 to shareholders of record on May 10, 1999. 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 62,908,000 shares are outstanding
on the payment date.
NOTE C - NET INCOME PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
requires dual presentation of basic and diluted earnings per share on the face
of the income statement for all entities with complex capital structures. The
Corporation's basic net income per share is calculated as net income divided by
the weighted average number of shares outstanding. For diluted net income per
share, net income is divided by the weighted average number of shares
outstanding plus the incremental number of shares added as a result of
converting common stock equivalents, calculated using the treasury stock method.
The Corporation's common stock equivalents consist solely of outstanding stock
options.
A reconciliation of the weighted average shares outstanding used to calculate
basic net income per share and diluted net income per share follows (in
thousands):
THREE MONTHS ENDED
MARCH 31
-----------------------
1999 1998
---- ----
Weighted average shares outstanding (basic)....... 69,170 68,822
Impact of common stock equivalents................ 406 1,041
--------- -------
Weighted average shares outstanding (diluted)..... 69,576 69,863
========= =======
NOTE D - MERGERS AND ACQUISITIONS
Ambassador Bank of the Commonwealth. - On September 11, 1998, the Corporation
completed its acquisition of Ambassador Bank of the Commonwealth (Ambassador), a
$275 million bank located in Allentown, Pennsylvania. As provided under the
terms of the merger agreement, each of the 1.9 million shares of Ambassador's
common stock were exchanged for 1.54 shares of the Corporation's common stock.
In addition, the 417,000 options and warrants to acquire Ambassador stock were
exchanged for approximately 450,000 shares of the Corporation's common stock.
The Corporation issued approximately 3.4 million shares of its common stock in
connection with the merger, which was accounted for as a pooling of interests.
As a result of the acquisition, Ambassador was merged with and into Lafayette
Bank, one of the Corporation's existing affiliate banks, which thereupon changed
its name to "Lafayette Ambassador Bank."
7
Keystone Heritage Group, Inc. - On March 27, 1998, the Corporation completed its
acquisition of Keystone Heritage Group, Inc. (Keystone Heritage), a $650 million
bank holding company located in Lebanon, Pennsylvania. As provided under the
terms of the merger agreement, each of the approximately 4.0 million shares of
Keystone Heritage's common stock was exchanged for 2.517 shares of the
Corporation's common stock. In addition, each of the 70,000 options to acquire
Keystone Heritage stock was converted to options to acquire the Corporation's
stock. The Corporation issued 10.0 million shares of its common stock in
connection with the merger, which was accounted for as a pooling of interests.
In order to effect the acquisition, Keystone Heritage was merged with and into
the Corporation. Its sole banking subsidiary, Lebanon Valley National Bank
(Lebanon Valley), was merged with and into Farmers Trust Bank, one of the
Corporation's existing affiliate banks, which changed its name to "Lebanon
Valley Farmers Bank." Lebanon Valley's deposits, loans and branches located in
Lancaster and Dauphin Counties were transferred by Lebanon Valley Farmers Bank
to Fulton Bank, the Corporation's Lancaster-based affiliate bank, immediately
after the merger was completed.
NOTE E - NEW ACCOUNTING STANDARDS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and for Hedging Activities" (Statement 133), was issued in July, 1998. Statement
133 replaces existing accounting practices with a single, integrated accounting
framework for derivatives and hedging activities. Under Statement 133, every
derivative is recorded in the balance sheet as either an asset or liability
measured at its fair value and changes in fair value are recognized currently in
earnings unless specific hedge accounting criteria are met. Statement 133 is
effective for years beginning after June 15, 1999. The Corporation does not
expect the adoption of Statement 133 to have a material impact on its balance
sheet or net income.
REPORTING COMPREHENSIVE INCOME: The Corporation adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (Statement 130)
in 1998. Statement 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The objective of Statement 130 is to report a measure of
all changes in equity that result from economic events of the period other than
transactions with owners. Comprehensive income is the total of net income and
all other non-owner changes in equity. Currently, other non-owner changes in
equity include only unrealized gains and losses on available for sale investment
securities.
The following table summarizes the reclassification adjustment for realized
security gains (net of taxes) for each of the indicated periods:
1999 1998
---- ----
(in thousands)
Unrealized holding (losses) gains arising during period....... $ (1,476) $ 4,981
Less: reclassification adjustment for gains included
in net income............................................. 1,987 2,198
---------- ---------
Net unrealized (losses) gains on securities................... $ (3,463) $ 2,783
========== =========
NOTE F - SUBSEQUENT EVENTS
On June 20, 1989, the Board of Directors of the Corporation declared a dividend
of one common share purchase right (Original Rights) for each outstanding share
of common stock, par value $2.50 per share of the Corporation. The dividend was
paid to the shareholders of record as of the close of business on July 6, 1989.
On April 27, 1999, the Board of Directors approved an amendment to the Original
Rights
8
and the agreement. The significant terms of the amendment included extending
expiration date from June 20, 1999 to April 27, 2009 and resetting the purchase
price to $90.00 per share.
The Rights are not exercisable or transferable apart from the common stock prior
to distribution. Distribution of the Rights will occur ten business days
following (1) a public announcement that a person or group of persons
("Acquiring Person") has acquired or obtained the right to acquire beneficial
ownership of 20% or more of the outstanding shares of common stock (the "Stock
Acquisition Date") or (2) the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 25% or more of such
outstanding shares of common stock. The Rights are redeemable in full, but not
in part, by the Corporation at any time until ten business days following the
Stock Acquisition Date, at a price of $0.01 per Right.
9
FULTON FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
This discussion concerns Fulton Financial Corporation (the Corporation), a bank
holding company incorporated under the laws of the Commonwealth of Pennsylvania
in 1982, and its wholly-owned subsidiaries. This discussion and analysis should
be read in conjunction with the consolidated financial statements and other
financial information presented in this report.
The Corporation has made, and may continue to make, certain forward-looking
statements with respect to its management of net interest income and margin,
allowance and provision for loan losses and its progress in addressing Year 2000
issues. The Corporation cautions that these forward-looking statements are
subject to various assumptions, risks and uncertainties. Because of the
possibility of changes in these assumptions, risks and uncertainties, actual
results could differ materially from forward-looking statements.
In addition to the factors identified herein, the following could cause actual
results to differ materially from such forward looking statements: pricing
pressures on loan and deposit products, actions of bank and nonbank competitors,
changes in local and national economic conditions, changes in regulatory
requirements and regulatory oversight of the Corporation, actions of the Federal
Reserve Board, the Corporation's success in merger and acquisition integration
and the progress of the Corporation in its efforts to ensure Year 2000
compliance.
The Corporation's forward-looking statements are relevant only as of the date on
which such statements are made. By making any forward-looking statements, the
Corporation assumes no duty to update them to reflect new, changing or
unanticipated events or circumstances.
MERGER AND ACQUISITIONS
- -----------------------
Ambassador Bank of the Commonwealth. - On September 11, 1998, the Corporation
completed its acquisition of Ambassador Bank of the Commonwealth (Ambassador), a
$275 million bank located in Allentown, Pennsylvania. As provided under the
terms of the merger agreement, each of the 1.9 million shares of Ambassador's
common stock were exchanged for 1.54 shares of the Corporation's common stock.
In addition, the 417,000 options and warrants to acquire Ambassador stock were
exchanged for approximately 450,000 shares of the Corporation's common stock.
The Corporation issued approximately 3.4 million shares of its common stock in
connection with the merger, which was accounted for as a pooling of interests.
As a result of the acquisition, Ambassador was merged with and into Lafayette
Bank, one of the Corporation's existing affiliate banks, which thereupon changed
its name to "Lafayette Ambassador Bank."
Keystone Heritage Group, Inc. - On March 27, 1998, the Corporation completed its
acquisition of Keystone Heritage Group, Inc. (Keystone Heritage), a $650 million
bank holding company located in Lebanon, Pennsylvania. As provided under the
terms of the merger agreement, each of the approximately 4.0 million shares of
Keystone Heritage's common stock was exchanged for 2.517 shares of the
Corporation's common stock. In addition, each of the 70,000 options to acquire
Keystone Heritage stock was converted to options to acquire the Corporation's
stock. The Corporation issued 10.0 million shares of its common stock in
connection with the merger, which was accounted for as a pooling of interests.
In order to effect the acquisition, Keystone Heritage was merged with and into
the Corporation. Its sole banking subsidiary, Lebanon Valley National Bank
(Lebanon Valley), was merged with and into Farmers Trust Bank, one of the
Corporation's existing affiliate banks, which changed its name to "Lebanon
Valley Farmers Bank." Lebanon Valley's deposits, loans and branches located in
Lancaster and Dauphin Counties were transferred by Lebanon Valley Farmers Bank
to Fulton Bank, the Corporation's Lancaster-based affiliate bank, immediately
after the merger was completed.
10
RESULTS OF OPERATIONS
- ---------------------
Quarter ended March 31, 1999 versus Quarter ended March 31, 1998
- ------------------------------------------------------------------
Fulton Financial Corporation's net income for the first quarter of 1999
increased $2.4 million, or 11.1%, in comparison to net income for the first
quarter of 1998. Diluted net income per share increased $0.04, or 13.3%,
compared to 1998. First quarter net income of $23.5 million, or $0.34 per share
(basic and diluted), represented a return on average assets (ROA) of 1.66% and a
return on average equity (ROE) of 15.62%. This compares to 1998 net income of
$21.2 million, or $0.31 per share (basic) and $0.30 per share (diluted) (1.60%
ROA and 15.06% ROE). Excluding the impact of unrealized gains on investment
securities, return on average equity was 16.25% in 1999 and 15.85% in 1998.
The increase in net income in 1999 was a result of continued growth of the
Corporation's core banking business, as shown by increases in both net interest
income and non-interest income. The Corporation's expense levels also remained
flat in comparison to prior year.
Net Interest Income
- -------------------
Net interest income increased $2.0 million, or 3.5%, for the quarter. Overall,
this increase was a result of growth in the Corporation's balance sheet, offset
by declines in interest rates. The following tables summarize the components of
the increase in net interest income as well as the changes in average balances
of interest-earning assets and interest-bearing liabilities from the first
quarter of 1998 to the first quarter of 1999 and the average interest rates
thereon. All dollar amounts are in thousands.
THREE MONTHS ENDED MARCH 31 CHANGE
------------------------------- --------------------------------
1999 1998 DOLLAR PERCENT
----------- ----------- ----------- -------------
Interest income................. $ 101,350 $ 99,984 $ 1,366 1.4%
Interest expense................ 42,682 43,273 (591) (1.4%)
----------- ----------- ----------- ------------
Net interest income............. $ 58,668 $ 56,711 $ 1,957 3.5%
=========== =========== =========== ===========
THREE MONTHS ENDED MARCH 31
----------------------------------- ---------------
1999 1998 % CHANGE
------------- ------------ ---------------
Average interest-earning assets.................... $ 5,362,577 4,998,954 7.3%
Yield on earning assets............................ 7.66% 8.11% (5.5%)
Average interest-bearing liabilities............... $ 4,364,970 $ 4,071,187 7.2%
Cost of interest-bearing liabilities............... 3.97% 4.31% (7.9%)
Net interest margin (fully taxable equivalent)..... 4.56% 4.70% (3.0%)
The 7.3% increase in average earning assets accounted for an interest income
increase of approximately $7.3 million. However, this was offset by a $5.9
million reduction due to the 45 basis point decline in yield. Overall yields on
earning assets declined from the first quarter of 1998 to the first quarter of
1999 as a result of several factors. First, interest rates in general declined
as evidenced by the decrease in the Fulton Bank prime lending rate from 8.50% in
1998 to 7.75% in 1999. Second, the mix of earning assets changed from 79% loans
and 21% investments in 1998 to 75% loans and 25% investments in 1999. In
general, the yields on investments are lower.
The Corporation's average loan portfolio grew by approximately $74 million, or
1.9%, mainly in commercial mortgages ($120 million or 12.4% increase). Overall
loan growth has been negatively impacted by the relatively low interest rate
environment as borrowers have been refinancing residential mortgage
11
loans to fixed rates. These loans are generally sold by the Corporation to
reduce its interest rate risk. As a result, residential mortgages decreased $46
million or 5.1% from 1998 to 1999. The majority of the growth in earning assets
was realized in investment securities which increased $296 million, or 28.0%.
The 7.2% increase in average interest-bearing liabilities resulted in a $3.1
million increase in interest expense. This was offset by a $3.7 million decrease
in interest expense as a result of a 34 basis point decrease in the overall cost
of interest-bearing liabilities. The majority of the increase in interest-
bearing liabilities occurred in long-term debt, which grew $208 million or 237%,
as the Corporation borrowed from the Federal Home Loan Bank to take advantage of
lower fixed interest rates.
Due to the decline in interest rates, the shift in the mix of earning assets,
and the increase in long-term debt, the Corporation's net interest margin
decreased 14 basis points, from 4.70% in 1998 to 4.56% in 1999. The financial
services industry has become increasingly competitive in recent years.
Competition for loans has resulted in downward pressure on yields and
competition for deposits has resulted in upward pressure on rates. In the
future, the ability to maintain the net interest margin while growing the
balance sheet will continue to be a challenge for the Corporation. Management
believes, however, that the Corporation has an effective asset/liability
management function. See "Liquidity and Interest Rate Risk."
Provision and Allowance for Loan Losses
- ---------------------------------------
The following table summarizes loans outstanding (including unearned income) as
of the dates shown:
MARCH 31 December 31
1999 1998
------------ ---------------
(in thousands)
Commercial, financial and agricultural....... $ 589,046 $ 559,517
Real estate - construction................... 132,061 130,051
Real estate - mortgage....................... 2,600,769 2,596,364
Consumer..................................... 676,969 698,323
Leasing and other............................ 60,810 56,200
----------- ------------
Totals.................................... $ 4,059,655 $ 4,040,455
=========== ============
12
The following table summarizes the activity in the Corporation's allowance for
loan losses:
Three Months Ended March 31
--------------------------------
1999 1998
-------------- ---------------
(dollars in thousands)
............................................................
Loans outstanding at end of period (net of unearned)........... $ 4,050,009 $ 3,939,564
============ ============
Daily average balance of loans and leases...................... $ 4,040,545 $ 3,966,607
============ ============
Balance of allowance for loan losses
at beginning of period...................................... $ 57,415 $ 57,557
Loans charged-off:
Commercial, financial and agricultural...................... 624 399
Real estate - mortgage...................................... 157 245
Consumer.................................................... 1,403 978
Leasing and other........................................... 17 27
------------ ------------
Total loans charged-off..................................... 2,201 1,649
------------ ------------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural...................... 560 166
Real estate - mortgage...................................... 284 61
Consumer.................................................... 415 331
Leasing and other........................................... - 1
------------ ------------
Total recoveries............................................ 1,259 559
------------ ------------
Net loans charged-off.......................................... 942 1,090
Provision for loan losses...................................... 1,967 1,611
------------ ------------
Balance at end of period....................................... $ 58,440 $ 58,078
============ =============
Net charge-offs to average loans (annualized).................. 0.09% 0.11%
============ =============
Allowance for loan losses to loans outstanding................. 1.44% 1.47%
============ =============
The following table summarizes the Corporation's non-performing assets as of the
periods shown:
MARCH 31 DEC. 31 MARCH 31
(Dollars in thousands) 1999 1998 1998
-------------- -------------- -------------
Nonaccrual loans............................... $ 18,149 $ 19,281 $ 20,707
Loans 90 days past due and accruing............ 11,009 11,109 8,950
Other real estate owned (OREO)................. 1,478 1,420 1,949
-------------- -------------- --------------
Total non-performing assets.................... $ 30,636 $ 31,810 $ 31,606
============== ============== ==============
Non-performing loans/Total loans............... 0.72% 0.75% 0.75%
Non-performing assets/Total assets............. 0.53% 0.54% 0.58%
Non-performing assets/Gross loans and OREO..... 0.76% 0.81% 0.80%
Additions to the allowance for loan losses are charged to income through the
provision for loan losses when, in the opinion of management and based on
continuing analyses of the loan portfolio, it is believed that the allowance is
not adequate. Management considers various factors in assessing the adequacy of
the allowance for loan losses and determining the provision for the period.
Among these are charge-off history and trends, risk classification of
significant credits, adequacy of collateral, the mix and risk
13
characteristics of loan types in the portfolio, and the balance of the allowance
relative to total and nonperforming loans. Additional consideration is given to
local and national economic conditions. The Corporation's policy is individually
applied to each of the eleven affiliate banks. Resulting provisions and
allowances are aggregated for consolidated financial reporting.
For the first quarter of 1999, net charge-offs totaled $942,000, or 0.09%, of
average loans on an annualized basis. This compares to $1.1 million, or 0.11%,
for the first quarter of 1998 and 0.14% for all of 1998. Non-performing loans
to total loans were 0.72% at March 31, 1999 as compared to 0.75% at both
December 31, 1998 and March 31, 1998.
Although there were slight improvements in the loan quality measures described
above, the provision for loan losses increased $356,000 or 22.1% in comparison
to the first quarter of 1998. This increase was due to several factors. First,
the $942,000 in charge-offs for the first quarter includes four commercial
recoveries totaling approximately $300,000. Excluding these items, which are not
considered to be indicative of the Corporation's normal recovery history,
annualized net charge-offs to average loans would be 0.12%.
Second, since focusing on indirect lending as a loan growth strategy over the
last few years, the Corporation's consumer charge-offs have continued to grow.
In the first quarter of 1998, consumer charge-offs were 59% of total net charge-
offs, or 0.39% of average consumer loans on an annualized basis. For the first
quarter of 1999, consumer charge-offs accounted for 79% of the total (as
adjusted for the $300,000 in commercial charge-offs discussed in the preceding
paragraph) or 0.66% of total consumer loans. Although the growth in consumer
loans has slowed significantly as a result of rate competition, much of the
remaining portfolio consists of loans originated in the past three years. These
loans are believed to include additional losses consistent with recent charge-
off history.
The Corporation's periodic loan portfolio review and allowance calculation
resulted in an unallocated allowance for loan losses of 32% at March 31, 1999
and 30% at December 31, 1998. This fairly stable unallocated level supports the
provision for loan losses for the quarter and the balance of the allowance for
loan losses as of March 31, 1999. Management believes that the allowance balance
of $58.4 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, 1999 was $15.6 million. This was an
increase of $960,000 or 6.6% over the comparable period in 1998. Excluding
investment security gains, which decreased from $3.4 million in 1998 to $3.1
million in 1999, other income increased $1.3 million or 11.4%. Increases were
realized in all major categories of other income. Investment management and
trust services income increased $380,000, or 12.5%, due to the introduction of
new trust products and services, such as investment brokerage services, and
continued emphasis on the Corporation's traditional trust services. Service
charges on deposit accounts increased $411,000, or 9.4%, as a result of the $132
million or 6.1% growth in average savings and demand deposit accounts which
generate the majority of service charges.
Other service charges and fees increased $367,000, or 13.6%, as a result of
higher debit card revenue ($134,000, or 40.0% increase), and other special fee
revenue. Mortgage banking income increased $127,000, or 11.0%, as relatively low
interest rates continued to support higher than normal refinance volumes.
Other Expenses
- --------------
Total other expenses for the first quarter of 1999 of $39.0 million showed an
increase of only $24,000 or 0.1% over 1998. This small increase was
attributable to expense management efforts in 1999 as well as certain non-
recurring items in 1998. In 1998, the Corporation incurred $895,000 in
professional fee expenses related to its acquisition of Keystone Heritage Group,
Inc. Excluding these expenses, the increase in total other expenses was
moderate at $919,000, or 2.4%.
14
Salaries and employee benefits increased $394,000, or 1.9%, in comparison to the
first quarter of 1998. Salaries expense decreased slightly ($43,000, or 0.2%),
reflecting the absorption of employees from Keystone Heritage and Ambassador
into the Corporation over the past year. Employee benefits expense increased
$437,000, or 12.8%, mainly due to increased medical insurance costs.
Net occupancy expense increased $137,000, or 4.4%, due to growth. Equipment
expense decreased $135,000, or 5.6%, and special services expense, which
represents the cost of data processing, increased $595,000, or 26.0%. The
decrease in equipment expense and the increase in special services reflect the
conversion of Lebanon Valley to the Corporation's outside data processing
servicer upon merging with the Corporation in March, 1998. Prior to the merger,
Lebanon Valley's core data processing function was in-house, using bank-owned
equipment, software and personnel. Subsequent to the merger, Lebanon Valley was
added to the Corporation's organization-wide third party data processing system.
Other expenses decreased $967,000, or 9.5%, in 1999 to $9.0 million, as compared
to $10.0 million for the same period in 1998. This decrease was mainly due to
the merger related professional fees discussed above.
Income Taxes
- ------------
Income tax expense for the quarter was $9.7 million as compared to $9.6 million
for the comparable period in 1998, a $183,000 or 1.9% increase. The effective
tax rate was 29.3% for 1999 and 31.1% in 1998. The 1998 effective rate was
higher due to the impact of the non-deductible merger-related expenses incurred
in 1998. In addition, federal tax credits from the Corporation's investments in
qualifying low income housing projects increased to $1.5 million in 1999 from
$1.3 million in 1998. Adjusting for these factors, the 1998 effective tax rate
would have been 29.4%.
FINANCIAL CONDITION
- -------------------
At March 31, 1999, the Corporation had total assets of $5.8 billion, reflecting
a decrease of $52.1 million, or 0.9%, from December 31, 1998.
During the first quarter of 1999, the decrease in assets was generally a
function of lower funding levels. Non-interest bearing deposits decreased $53.4
million, or 7.0%, and interest-bearing deposits decreased $31.1 million or 0.8%.
However, with net loans increasing only $19.6 million or 0.5% as a result of
competition and residential mortgage run-off (see "Net Interest Income"), the
Corporation did not have to replace these all of these lost funds with higher-
cost alternatives. Short-term borrowings increased only $19.4 million or 8.2%.
In addition, cash balances decreased by $22.0 million and funds from maturities
of investment securities held to maturity, totaling $38.5 million, were not
reinvested.
Capital Resources
- -----------------
Shareholders' equity increased $10.2 million or 1.7% during the first three
months of 1999. This increase was a result of net income for the quarter, offset
by cash dividends paid to shareholders. As of March 31, 1999, retained earnings
was reduced by the value of stock to be issued for the 10% stock dividend to be
paid on June 1, 1999. Common stock and capital surplus were adjusted
accordingly.
Current capital guidelines measure the adequacy of a bank holding company's
capital by taking into consideration the differences in risk associated with
holding various types of assets as well as exposure to off-balance sheet
commitments. The guidelines call for a minimum risk-based Tier I capital
percentage of 4.0% and a minimum risk-based total capital of 8.0%. Tier I
capital includes common shareholders' equity less goodwill and non-qualified
intangible assets. Total capital includes all Tier I capital components plus
the allowance for loan losses.
The Corporation is also subject to a "leverage capital" requirement, which
compares capital (using the definition of Tier I capital) to total balance sheet
assets and is intended to supplement the risk based capital
15
ratios in measuring capital adequacy. The minimum acceptable leverage capital
ratio is 3.0% for institutions which are highly-rated in terms of safety and
soundness and which are not experiencing or anticipating any significant growth.
Other institutions are expected to maintain capital levels at least one or two
percent above the minimum.
As of March 31, 1999, the Corporation and each of its subsidiaries met the
minimum capital requirements. In addition, the Corporation and each of its
subsidiaries' capital ratios exceeded the amounts required to be considered
"well-capitalized" as defined in the regulations.
The Corporation's total and Tier I risk-based capital ratios have placed the
Corporation in the top half of its self-defined peer group over the past year.
The Corporation's ratio of Tier I capital to average assets, however, has placed
it in the top quartile in comparison to its peers.
On April 27, 1999, the Board of Directors approved a plan to repurchase up to
770,000 shares of the Corporation's common stock through March 31, 2000.
Treasury stock acquired under this plan will be used for the Corporation's
Employee Stock Purchase Plan, Incentive Stock Option Plan and other benefit
plans. Through March 31, 1999, 266,630 shares had been repurchased under a
previous plan which expired on March 31, 1999.
YEAR 2000
- ---------
The Corporation's business, operations and financial condition may be affected
by the "Year 2000 Problem" where certain computer and other electronic
information processing systems may not be able to properly recognize dates after
1999. A financial institution's ability to process financial data such as
deposits, loans and trust accounts through its various data processing systems
is the most obvious area of exposure to the Year 2000 Problem. In addition, a
financial institution's ability to collect payments on loans could be impacted
if borrowers are unable to make payments as a result of their own Year 2000
deficiencies. Furthermore, financial institutions could be affected by the Year
2000 readiness of business customers, vendors and correspondents, customer
perception of the problem, and regulatory influences, among other things.
In 1997, the Corporation formed committees at each subsidiary bank and at the
Corporation to identify, evaluate and manage the risks related to the Year 2000
Problem. A comprehensive plan adopted by the Board of Directors of the
Corporation established a five step process - awareness, assessment, renovation,
validation and implementation - to address the Year 2000 Problem. The plan
established priorities for addressing the Year 2000 Problem, with systems
classified as being most mission critical receiving the highest priority
treatment. The primary focus of the plan is on assuring that information
technology systems will be operable, but it also addresses non-information
technology issues such as embedded technology in security and other systems.
Federal bank regulatory agencies have issued Year 2000 project guidelines for
financial institutions and have conducted examinations of the Corporation and
its banks on the Corporation's plans to address the Year 2000 Problem. The
Corporation has used such guidance to establish Year 2000 work tasks for each
phase.
The awareness and assessment phases of the plan have been completed. The
renovation of all mission critical systems, including third party systems, is
substantially complete. The Corporation is currently in the validation and
implementation phases for its mission critical systems, which will be
substantially complete by June 30, 1999. The Corporation is also in the process
of completing business contingency plans for all critical processes within the
organization. These plans will be substantially complete by June 30, 1999.
During the last half of 1999, the Corporation will re-inspect all processes,
beginning with the most critical, for continual assurance that contingency
planning adequately addresses potential disruptions. In addition, the
Corporation will validate its documented business contingency plans.
16
Since the beginning of the Corporation's Year 2000 efforts, the Corporation has
incurred approximately $1.1 million in expenses related to the Year 2000. In
addition, capital expenditures to replace non-compliant hardware, software and
other equipment have totaled approximately $3.0 million. Through 1999, the
Corporation anticipates incurring an additional $1.5 million in expenses and
$2.7 million in capital expenditures.
While these costs are related to the Year 2000 Problem, many also represent
significant improvements to the technology infrastructure for Fulton Financial
Corporation and its bank subsidiaries. Improvements at Fulton Bank include
finishing migration to a new branch automation solution and completing the wide
area telecommunications network for both branch and security communication.
Since third-party service providers perform most major data processing functions
of the Corporation, the Corporation does not anticipate that it will incur any
material costs to address the Year 2000 Problem other than those discussed
above. The Corporation expects, at this time, that the Year 2000 Problem should
have no material adverse effect on the products and services it offers or on
competitive conditions; however, further testing with mission critical third-
party service providers will validate the readiness of these providers for this
change. Similarly, the Corporation believes that the Year 2000 Problem should
have no material adverse effect on the Corporation's business, operations or
financial condition, based on surveys of its major business loan customers and
other actions designed to evaluate the risks associated with the Year 2000
Problem, however, it cannot rule out the possibility that the Year 2000 Problem
might have such an effect. The Corporation will continue to evaluate such risks
throughout 1999.
Federal bank regulators have initiated a series of examinations of all financial
institutions to assess their progress in addressing the Year 2000 Problem and
have indicated that institutions which have not adequately addressed the issue
will be subject to various sanctions, including denial of, or delay in acting
on, regulatory applications. The Corporation believes that it has made
sufficient progress on the Year 2000 Problem to minimize the likelihood of
regulatory sanctions.
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 $54.3 million) and U.S. Government and agency stock (cost basis of
approximately $26.9 million). The Corporation's financial institutions stock
portfolio had unrealized gains of approximately $26.4 million at March 31, 1999.
Although the book value of equity investments accounted for only 1.9% 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 only 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
here since none of them have maturity dates.
17
Interest Rate Risk
- ------------------
Interest rate risk creates exposure in two primary areas. First, changes in
rates have an impact on the Corporation's liquidity position and could affect
its ability to meet obligations and continue to grow. Second, movements in
interest rates can create fluctuations in the Corporation's net income and
changes in the economic value of its equity.
The Corporation employs various management techniques to minimize its exposure
to interest rate risk. An Asset/Liability Management Committee (ALCO),
consisting of key financial and senior management personnel, meets on a weekly
basis. The ALCO is responsible for reviewing the interest rate sensitivity
position of the Corporation, approving asset and liability management policies,
and overseeing the formulation and implementation of strategies regarding
balance sheet positions and earnings. The primary goal of asset/liability
management is to address the liquidity and net income risks noted above.
From a liquidity standpoint, the Corporation must maintain a sufficient level of
liquid assets to meet the ongoing cash flow requirements of customers, who, as
depositors, may want to withdraw funds or who, as borrowers, need credit
availability. Liquidity sources are found on both sides of the balance sheet.
Liquidity is provided on a continuous basis through scheduled and unscheduled
principal reductions and interest payments on outstanding loans and investments.
Liquidity is also provided through the availability of deposits and borrowings.
The Corporation uses three complementary methods to measure and manage interest
rate risk. They are static gap analysis, simulation of net interest income, and
estimates of economic value of equity. Using these measurements in tandem
provides a reasonably comprehensive summary of the magnitude of interest rate
risk in the Corporation, level of risk as time evolves, and exposure to changes
in interest rate relationships.
Static gap analysis provides a measurement of repricing risk in the
Corporation's balance sheet as of a point in time. This measurement is
accomplished through stratification of the Corporation's assets and liabilities
into predetermined repricing periods. The assets and liabilities in each of
these periods are summed and compared for mismatches within that maturity
segment. Core deposits having noncontractual maturities are placed into
repricing periods based upon historical balance performance. Repricing for
mortgage loans held and for mortgage-backed securities includes the effect of
expected cash flows. Estimated prepayment effects are applied to these balances
based upon industry projections for prepayment speeds. The Corporation's policy
limits the cumulative 6-month gap to plus or minus 15 percent of total earning
assets. The Corporation was positioned within this range throughout the first
quarter of 1999.
Simulation of net interest income and of net income is performed for the next
twelve-month period. A variety of interest rate scenarios is used to measure
the effects of sudden and gradual movements upward and downward in the yield
curve. These results are compared to the results obtained in a flat or
unchanged interest rate scenario. Simulation of earnings is used primarily to
measure the Corporation's short-term earnings exposure to rate movements. The
Corporation's policy limits the potential exposure of net interest income to 10%
of the base case net interest income for every 100 basis point "shock" in
interest rates. A "shock' is an immediate upward or downward movement of
interest rates across the yield curve based upon changes in the prime rate. As
of March 31, 1999, the Corporation was within policy limits for potential
exposure of net interest income.
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
18
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, 1999, the Corporation was within
policy limits of economic value of equity at risk.
Since December 31, 1998, the Corporation's market risk position has not
experienced a material change, based on expected cash flows and weighted average
interest rates for each significant interest rate sensitive financial instrument
in specific maturity periods.
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.
(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
to 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;
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.
(4) Financial Data Schedule - March 31, 1999
(5) Financial Data Schedule - March 31, 1998 (restated).
(b) Reports on Form 8-K:
(1) Form 8-K dated April 27, 1999 reporting the Amended and
Restated Rights Agreement.
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 7, 1999 /s/ Rufus A. Fulton, Jr.
------------------ -----------------------------
Rufus A. Fulton, Jr.
Chairman, President and
Chief Executive Officer
Date: May 7, 1999 /s/ Charles J. Nugent
------------------ -----------------------------
Charles J. Nugent
Executive Vice
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.
27 Financial data schedule - March 31, 1999.
27.1 Financial data schedule - March 31, 1998 (restated).
22