Page 30 of 30 pages
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2003
Commission file number: 33-850626
FULTON BANCSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 25-1598464
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
100 Lincoln Way East
McConnellsburg, Pennsylvania 17233
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (717) 485-3144
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 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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 2003
(Common stock, .625 par value) 492,810
Page 1
FULTON BANCSHARES CORPORATION
INDEX
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets - March 31, 2003
and December 31, 2002 4
Condensed consolidated statements of income - three months
ended March 31, 2003 and 2002 5
Condensed consolidated statements of comprehensive income -
three months ended March 31, 2003 and 2002 6
Condensed consolidated statements of cash flows - three
months ended March 31, 2003 and 2002 7
Notes to condensed consolidated financial statements 8 - 9
Management's discussion and analysis of financial
condition and results of operations 10 - 16
PART II - OTHER INFORMATION 18
Signatures 19
Certifications of Principal Executive Officer
and Principal Financial Officer 20 - 23
Exhibits 24 - 26
Page 2
PART I - FINANCIAL INFORMATION
Page 3
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 December 31
2003 2002*
(Unaudited)
(000 Omitted)
ASSETS
Cash and due from banks $ 3,990 $ 5,214
Available-for-sale securities 32,921 37,675
Federal Reserve, Atlantic Central Bankers Bank, Federal
Home Loan Bank, at cost which approximates market 1,834 1,772
Loans, net of allowance for loan losses 106,860 107,236
Bank building, equipment, furniture & fixtures, net 3,890 3,938
Accrued interest/dividends receivable 842 939
Cash surrender value of life insurance 4,711 4,658
Other assets 1,335 850
--------- -----------
Total assets $ 156,383 $ 162,282
========= ===========
LIABILITIES
Deposits:
Noninterest-bearing deposits $ 15,075 $ 16,155
Interest-bearing deposits:
Savings deposits 34,367 32,877
Time deposits 60,755 63,993
--------- -----------
Total deposits 110,197 113,025
Accrued interest payable 197 314
Other borrowed money 27,725 31,250
Other liabilities 1,212 1,034
--------- -----------
Total liabilities 139,331 145,623
--------- -----------
STOCKHOLDERS' EQUITY
Capital stock, common, par value - $ 0.625;
4,000,000 shares authorized; 492,810 and 492,770
shares issued and outstanding, at March 31, 2003
and December 31, 2002, respectively 310 310
Surplus 2,051 2,051
Retained earnings 14,656 14,262
Net unrealized gains/(losses) available - for-sale
Securities 123 124
Treasury stock: 2,190 and 2,230 shares,
respectively at cost ( 88) ( 88)
Total stockholders' equity 17,052 16,659
--------- -----------
Total liabilities and
stockholders' equity $ 156,383 $ 162,282
========= ===========
* Condensed from audited financial statements
The accompanying notes are an integral part of these
condensed financial statements.
Page 4
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
(000 Omitted)
Interest & Dividend Income $ 1,798 $ 1,932
Interest & fees on loans
Interest & dividends on investment
securities:
U.S. Government securities 140 178
Obligations of state & political
Subdivisions 23 26
Other interest & dividend income 344 307
--------- -----------
Total interest & dividend income 2,305 2,443
--------- -----------
Interest Expense
Interest on deposits 575 833
Interest on other borrowed money 274 231
--------- -----------
Total interest expense 849 1,064
--------- -----------
Net interest income before
provision for loan losses 1,456 1,379
Provision for loan losses 30 15
--------- -----------
Net interest income after provision
for loan losses 1,426 1,364
--------- -----------
Other Income
Service charges on deposit accounts 55 43
Other fee income 74 46
Other noninterest income 65 67
Securities gains (losses) 0 1
--------- -----------
Total other income 194 157
--------- -----------
Other Expense
Salaries and employee benefits 398 448
Fixed asset expenses (including
depreciation) 216 187
FDIC insurance premiums 5 5
Other noninterest expenses 350 296
--------- -----------
Total other expenses 969 936
--------- -----------
Net income before income taxes 651 585
Applicable income taxes 144 151
--------- -----------
Net income $ 507 $ 434
========= ===========
Weighted average number of shares
Outstanding $ 492,810 $ 492,770
Net income per share $ 1.03 $ 0.88
Cash dividends declared per share $ 0.23 $ 0.22
The accompanying notes are an integral part of these
condensed financial statements.
Page 5
FULTON BANCSHARES CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
Net income $ 507 $ 434
Unrealized gain (loss) on investments
available for sale, net of tax ( 1)( 166)
Reclassification adjustment for gains
(losses) included in net income 0 1
------- -------
Comprehensive income $ 506 $ 269
======= =======
The accompanying notes are an integral part of these
condensed financial statements.
Page 6
FULTON BANCSHARES, CORPORATION AND ITS WHOLLY-OWNED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2003 and 2002
(UNAUDITED)
2003 2002
Cash flows from operating activities:
Net income $ 507 $ 434
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 91 80
Provision for loan losses 30 15
Other - Net ( 379) ( 190)
------- -------
Net cash provided by operating activities 249 339
------- -------
Cash flows from investing activities:
Purchase of investment securities -
Available-for-sale ( 1,995) ( 3,797)
FHLB stock redemption/(purchase) ( 62) 50
Sales of available-for-sale securities 0 601
Maturities of available-for-sale securities 6,747 3,889
Net (increase) decrease in loans 346 248
Purchases of & deposits on bank premises
and equipment - net ( 43) ( 201)
------- -------
Net cash provided (used) by investing activities 4,993 790
------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits ( 2,828) ( 1,217)
Dividends paid ( 113) ( 108)
Net increase (decrease) in other borrowed money ( 3,525) 375
------- -------
Net cash provided (used) by financing activities ( 6,466) ( 950)
------- -------
Net increase (decrease) in cash and cash
Equivalents ( 1,224) 179
Cash and cash equivalents, beginning balance
Cash and cash equivalents, ending balance $ 3,990 $ 5,708
Supplemental disclosure of cash flows
information:
Cash paid during the period for:
Interest $ 966 $ 956
Income taxes 0 52
Supplemental schedule of noncash investing and
financing activities:
Change in net unrealized gain on investments
available for sale (net of deferred taxes) ( 1) ( 166)
Transfer to OREO 0 ( 242)
The accompanying notes are an integral part of these
condensed financial statements.
Page 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(UNAUDITED)
Review of Interim Financial Statements
The condensed consolidated financial statements as of
and for the three months ended March 31, 2003 and 2002
have been reviewed by independent certified public
accountants. Their report on the review is attached as
Exhibit 99 to the 10-Q filing.
Note 1. Basis of Presentation
The financial information presented at and for the
three months ended March 31, 2003 and 2002 is
unaudited. Information presented at December 31, 2002
is condensed from audited year-end financial
statements. However, unaudited information reflects
all adjustments (consisting solely of normal recurring
adjustments) that are, in the opinion of management,
necessary for a fair presentation of the financial
position, results of operations and cash flows for the
interim period.
Note 2. Principles of Consolidation
The consolidated financial statements include the
accounts of the corporation and its wholly-owned
subsidiaries, Fulton County National Bank & Trust
Company and the Fulton County Community Development
Corporation. All significant intercompany transactions
and accounts have been eliminated.
Note 3. Cash Flows
For purposes of the statements of cash flows, the
corporation has defined cash and cash equivalents as
those amounts included in the balance sheet captions
"cash and due from banks" and "federal funds sold". As
permitted by Statement of Financial Accounting
Standards No. 104, the corporation has elected to
present the net increase or decrease in deposits in
banks, loans and time deposits in the statements of
cash flows.
Note 4. Federal Income Taxes
For financial reporting purposes the provision for loan
losses charged to operating expense is based on
management's judgment, whereas for federal income tax
purposes, the amount allowable under present tax law is
deducted. Additionally, certain expenses are charged
to operating expense in the period the liability is
incurred for financial reporting purposes, whereas for
federal income tax purposes, these expenses are
deducted when paid. As a result of these timing
differences, deferred income taxes are provided in the
financial statements. Federal income taxes were
computed after reducing pretax accounting income for
nontaxable municipal and loan income.
Page 8
Note 5. Other Commitments
In the normal course of business, the Corporation makes
various commitments and incurs certain contingent
liabilities which are not reflected in the accompanying
financial statements. These commitments include
various guarantees and commitments to extend credit and
the Corporation does not anticipate any losses as a
result of these transactions.
Note 6. Investment Securities
The carrying amounts of investment securities and their
approximate fair values at March 31, 2003 were as
follows:
Amortized Gross Gross Fair
Cost Unrealized Unrealized Value
Gains (Losses)
Debt securities available for sale:
FNMA/FHLMC non -
cumulative
preferred stocks $ 16,450,000 $ 281,750 ($ 348,723) $ 16,383,027
State & municipal
Securities 1,500,786 56,583 ( 23,789) 1,533,580
U.S. Government
Agencies 9,207,328 50,443 0 9,257,771
Mortgage-backed
Securities 4,447,121 62,391 0 4,509,512
Corporate bonds 997,501 119,354 0 1,116,855
Equity securities 132,000 2,300 ( 14,100) 120,200
------------ ------------ ----------- ------------
$ 32,734,736 $ 572,821 ($ 386,612) $ 32,920,945
============ ============ =========== ============
There were no securities categorized "Held-to-maturity"
or "Trading" at March 31, 2003.
Note 7. Comprehensive Income
Comprehensive income is defined as the change in equity
from transactions and other events from nonowner
sources. It includes all changes in equity except those
resulting from investments by owners and distributions
to owners.
Consequently, a "Statement of Comprehensive Income" has
been included in this filing.
Page 9
FULTON BANCSHARES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Net after tax income for the first quarter of 2003 was
$ 507,000 compared to $ 434,000 for the same period in 2002,
representing an increase of $ 73,000, or 16.8%. Net income on an
adjusted per share basis for the first three months of 2003 was
$ 1.03 compared to $ .88 per share realized during the first
quarter of 2002.
INTEREST INCOME
Interest income for the first quarter of 2003 was
$ 2,305,000 compared to $ 2,443,000 earned during the same period
in 2002, for a decrease of $ 138,000, or 5.6%. The decrease was
due primarily to a significant decrease in interest rates earned
on loans and investments in 2003 compared with the same period in
2002. Management expects average rates earned to increase slowly
over the rest of 2003.
INTEREST EXPENSE
Interest expense for the quarter of 2003 was $ 849,000, a
decrease of $ 215,000, or 20.2% over the $ 1,064,000 incurred for
the same period in 2002. The decrease was due primarily to a
decrease in interest rates paid on deposits and short-term
borrowings. Management expects average rates paid to slowly
increase over the rest of 2003.
NET INTEREST MARGIN
The net interest margin for the first quarter of 2003 was
4.00% compared with 4.10% for the first quarter of 2002.
Management plans to protect its net interest margin by
competitively pricing its loans and deposits and by structuring
interest-earning assets and liabilities so they can be repriced
in response to changes in market interest rates.
NON-INTEREST INCOME
First quarter 2003 non-interest income increased to
$ 194,000 from $ 157,000, or 23.6%. Service charges on deposit
accounts increased $ 12,000, or 27.9%. Other fee income
increased $ 28,000, or 60.9%, primarily as a result of fee income
generated on the sale of mortgages to the Federal Home Loan Bank.
Other non-interest income decreased 3.0%. No securities gains or
losses were reported for the first quarter of 2003 compared to
securities gains of $ 1,000 for the same period in 2002.
Page 10
NONINTEREST EXPENSES
Noninterest expenses for the first quarter of 2003
totaled $ 969,000, an increase of $ 33,000, or 3.5%, over the
$ 936,000 for the first quarter of 2002. Salaries and employee-
related expenses were down $ 50,000, primarily due to the fact
that January 2002 had 3 pay periods while there were only 2 pay
periods in January 2003. Fixed asset expenses increased
$ 29,000, or 15.5%, primarily due to increased equipment and
building maintenance costs and depreciation expense. Other non-
interest expenses increased by $ 54,000, or 18.2%, due to
increases in advertising and promotion costs, auditing fees, PA
shares tax, telephone, and other operating expenses.
INCOME TAXES
The income tax provision for the first quarter of 2003
was $ 144,000 compared to $ 151,000 for the first quarter of
2002. Effective income tax rates (compared to the marginal
federal income tax bracket of 34% applicable to each period) were
as follows:
Three Months Ended
March 31
2003 2002
22.1% 25.8%
The decrease in the effective income tax rate for 2003
was due primarily to increases in the dividends received
deduction for FNMA/FHLMC preferred stock.
PROVISION FOR LOAN LOSSES
A $ 30,000 provision for loan losses was made for the
first three months of 2003 compared with $ 15,000 for the first
three months of 2002. The provisions were based on management's
evaluation of the reserve for possible loan losses at March 31,
2003 and 2002.
Page 11
PROVISION FOR LOAN LOSSES (Continued)
A summary of the allowance for loan losses is as follows:
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(In 000's)
March 31, March 31,
2003 2002
Allowance for loan losses
Beginning of period $ 1,031 $ 845
--------- ---------
Loans charged-off during the period:
Real estate loans 0 0
Installment loans 7 28
Commercial and all other loans 0 3
--------- ---------
Total charge-offs 7 31
--------- ---------
Recoveries of loans previously charged-off:
Real estate loans 0 0
Installment loans 3 2
Commercial and all other loans 0 0
--------- ---------
Total recoveries 3 2
--------- ---------
Net loans (charged-off) recovered ( 4) ( 29)
Provision for loan losses charged to operations 30 15
--------- ---------
Allowance for loan losses - end of period $ 1,057 $ 831
========= =========
Loans 90 days or more past due (still accruing interest)
and those on nonaccrual status were as follows at March 31:
NONPERFORMING LOANS
(In 000's)
90 Days or More Nonaccrual Status
Past Due and
Still Accruing
2003 2002 2003 2002
Real estate loans $ 1,269 $ 321 $ 1,515 $ 29
Installment loans 11 10 0 0
Commercial and all other loans 1,151 0 37 0
-------- ------ -------- ------
Total loans $ 2,431 $ 331 $ 1,552 $ 29
======== ====== ======== ======
There were no restructured loans for any of the time
periods set forth above.
Page 12
The bank utilizes a comprehensive systematic review of
its loan portfolio on a quarterly basis in order to determine the
adequacy of the allowance for loan losses. Each quarter the loan
portfolio is categorized into various pools as follows:
Pool #1 Specific allowances for any individually
identified problem loans
Pool #2 Commercial
Pool #3 Residential Real Estate
Pool #4 Consumer Demand and Installment
Pool #5 Farm Loans
Pool #6 Off-Balance Sheet Commitments
Lines of credit and non-secured commercial loans with
balances of $ 250,000 and over are individually reviewed. Also,
loans that are 90 days or more past due or have been previously
classified as substandard are individually reviewed. Allocations
to the allowance for loan losses are based upon classifications
assigned to those specific loans.
Loan classifications utilized are based on past
experience and are as follows:
Allowance Factors
-----------------
Loss Charge-off
Doubtful 50%
Substandard 5%
Special mention 1%
The remaining portion of the pools are evaluated as
groups with allocations made to the allowance based on historical
loss experience, current and anticipated trends in delinquencies,
trends in volume and terms of loans, concentrations of credit,
and general economic conditions within the bank's trading area.
Management is not aware of any problem loans that are indicative
of trends, events, or uncertainties that would significantly
impact operations, liquidity, or capital.
The reasons for the increase in the provision for loan
losses for the three months ended March 31, 2003 compared to 2002
are significant increases in delinquent and classified loans.
Loans past due 90 days or more still accruing interest have
increased 634.4$ over the past four quarters and represent 2.3%
of total loans at March 31, 2003 compared with 0.3% at March 31,
2002. Fifty-two percernt of the total loans 90 days or more
delinquent were fulling secured by real estate. Classified loans
on March 31, 2003 were $ 4,408,000 compared with $ 2,026,000 on
March 31, 2002, an increase of 117.6%. The Bank has identified
farm loans as a concentration of credit. At March 31, 2003, farm
loans comprised $ 3,680,000, or 83.5%, of the classified loans.
Page 13
FINANCIAL CONDITION
Assets
Total assets on March 31, 2003 were $ 156,383,000
compared to $ 162,282,000, on December 31, 2002, a decrease of
3.6%. Management intends to contain growth and concentrate on
maintaining adequate profit margins. Net loans on March 31, 2003
stood at $ 106,860,000, a decrease of 0.4% from $ 107,236,000 on
December 31, 2002. The loan loss reserve at March 31, 2003 was
$ 1,057,000 and is considered adequate, in management's judgment,
to absorb possible loan losses on existing loans.
Liabilities
Total deposits decreased 2.5% to $ 110,197,000 as of
March 31, 2003 compared with $ 113,025,000 at December 31, 2002.
Interest-bearing savings deposits increased 4.5%, while non-
interest-bearing demand deposits and interest-bearing time
deposits decreased 6.7%and 5.1%, respectively.
Capital
Total equity as of March 31, 2003 was $ 17,052,000
representing 10.9% of total assets, an increase of $ 393,000 from
the $ 16,659,000 reported on December 31, 2002. Accumulated
earnings for the first three months of 2003 were partially offset
by dividends declared and paid of $ 113,000. On July 20, 2000,
the Board of Directors announced the approval of a plan to
purchase, in open market and private negotiated transactions, up
to 2% of its shares of outstanding common stock. As of March 31,
2003, the company had repurchased 2,190 shares, representing
0.44% of its outstanding common stock. It is the intention of
management and the Board of Directors to continue to pay a fair
return on the stockholders' investment while retaining adequate
earnings to allow for continued growth.
Page 14
REGULATORY CAPITAL
The company maintains capital ratios that are well above
the minimum total capital levels required by federal regulatory
authorities, including risk-based capital guidelines. A
comparison of Fulton Bancshares Corporation's capital ratios to
regulatory minimum requirements at March 31, 2003 is as follows:
Fulton Regulatory
Bancshares Minimum
Corporation Requirements
Leverage ratio 10.6% 4.0%
Risk based capital ratios:
Tier I (core capital) 14.4% 4.0%
Combined tier I and tier II (core
capital plus allowance for loan losses) 15.4% 8.0%
BALANCE SHEET ANALYSIS
The following table highlights the changes in the balance
sheet. Since quarter-end balances can be distorted by one-day
fluctuations, an analysis of changes in the quarterly averages is
provided to show balance sheet trends.
Balance Sheets Condensed
Average
First Quarter First Quarter
2003 2002
ASSETS
Federal funds sold $ 0 $ 12
Securities available for sale 36,868 30,938
Other investments 1,798 1,046
Loans 108,102 103,698
---------- ----------
Total interest-earning assets 146,768 135,694
Cash and due from banks 3,749 3,668
Bank premises and equipment 3,913 3,714
All other assets 5,987 5,834
Allowance for loan losses ( 1,038) ( 843)
---------- ----------
Total assets $ 159,379 $ 148,067
========== ==========
LIABILITIES
Interest-bearing deposits in
domestic offices $ 97,081 $ 101,325
Federal funds purchased 0 10
Other short-term borrowings 29,496 16,808
---------- ----------
Total interest-bearing
liabilities 126,577 118,143
Noninterest-bearing deposits 14,835 13,554
All other liabilities 1,058 950
---------- ----------
Total liabilities 142,470 132,647
---------- ----------
STOCKHOLDERS' EQUITY
Common stockholders' equity 16,638 15,372
Net unrealized holding losses, net of tax 271 48
---------- ----------
Total stockholders' equity 16,909 15,420
---------- ----------
Total liabilities and
stockholders' equity $ 159,379 $ 148,067
========== ==========
Page 15
CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. The
company maintains controls and procedures designed to ensure
that information required to be disclosed in the reports
that the company files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized, and
reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed
within 90 days of the filing date of this report, the chief
executive and chief financial officers of the company
concluded that the company's disclosure controls and
procedures were adequate.
(b) Changes in internal controls. The Company made no
significant changes in its internal controls or in other
factors that could significantly affect these controls
subsequent to the date of the evaluation of the controls by
the Chief Executive or Chief Financial officers.
Page 16
PART II - OTHER INFORMATION
Page 17
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number Referred to Description
Item 601 of Regulation S-K of Exhibit
Financial Data Schedule
99 Report of Independent
Accountant's on Interim
Financial Statements
99.1 Certification of Chief
Executive Officer pursuant to
18 U.S.C. Section 1350
99.2 Certification of Chief
Executive Officer pursuant to
18 U.S.C. Section 1350
(b) Reports on Form 8-K
None
Page 18
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.
Date: May 13, 2003 /s/Clyde H. Bookheimer
--------------------------- -----------------------
Clyde H. Bookheimer,
President and Chief
Executive Officer
Date May 13, 2003 /s/Doriann Hoffman
--------------------------- -----------------------
Doriann Hoffman,
Vice President (Chief
Financial Officer)
Page 19
CERTIFICATION
I, Clyde H. Bookheimer, President and CEO, certify, that:
1. I have reviewed this quarterly report on Form 10-Q of
Fulton Bancshares Corporation.
2. Based on my knowledge, the quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report.
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report.
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
(a) designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
(c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date.
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or
operation of the internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in
internal controls; and
Page 20
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls.
6. The registrant's other certifying officer and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect the internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Date: April 30, 2003 By: /s/Clyde H. Bookheimer
-------------------- -------------------------------
Clyde H. Bookheimer
President & CEO
(Chief Executive Officer)
Page 21
CERTIFICATION
I, Doriann Hoffman, Vice President and CFO, certify, that:
1. I have reviewed this quarterly report on Form 10-Q of
Fulton Bancshares Corporation.
2. Based on my knowledge, the quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report.
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report.
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
(a) designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly
during the period in which this quarterly report is being
prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
(c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date.
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or
operation of the internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in
internal controls; and
Page 22
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls.
6. The registrant's other certifying officer and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect the internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Date: April 30, 2003 By: /s/Doriann Hoffman
-------------------- -------------------------------
Doriann Hoffman
Vice President and CFO
(Chief Financial Officer)
Page 23
EXHIBIT 99
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
Fulton Bancshares Corporation and Subsidiaries
McConnellsburg, Pennsylvania
We have reviewed the accompanying condensed
consolidated balance sheet of Fulton Bancshares Corporation and
Subsidiaries as of March 31, 2003 and the related condensed
consolidated statements of income, comprehensive income, and cash
flows for the interim periods ended March 31, 2003 and 2002.
These condensed consolidated financial statements are the
responsibility of the corporation's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the condensed consolidated financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ Smith Elliott Kearns & Company, LLC
SMITH ELLIOTT KEARNS & COMPANY, LLC
Chambersburg, Pennsylvania
May 9, 2003
Page 24
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fulton Bancshares
Corporation (the "Company") on Form 10-Q for the period ending
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Clyde H.
Bookheimer, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly
presents, in all material respects, the final condition and
results of operations of the Company.
/s/ Clyde H. Bookheimer
---------------------------
Chief Executive Officer
April 30, 2003
Page 25
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fulton Bancshares
Corporation (the "Company") on Form 10-Q for the period ending
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Doriann Hoffman,
Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly
presents, in all material respects, the final condition and
results of operations of the Company.
/s/Doriann Hoffman
----------------------------
Chief Financial Officer
April 30, 2003
Page 26