-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QxWpBNRvo3pY/C+wooznK1nq7SQcn/oqQhfuHoSTPmWYDLTSvyXRGKpkjRnRyRCX LxhDCbiABGL/eBeNpLcfiQ== 0000950109-95-004531.txt : 19951201 0000950109-95-004531.hdr.sgml : 19951201 ACCESSION NUMBER: 0000950109-95-004531 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951108 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FULTON FINANCIAL CORP CENTRAL INDEX KEY: 0000700564 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 232195389 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10587 FILM NUMBER: 95588177 BUSINESS ADDRESS: STREET 1: ONE PENN SQ STREET 2: PO BOX 4887 CITY: LANCASTER STATE: PA ZIP: 17604 BUSINESS PHONE: 7172912411 MAIL ADDRESS: STREET 1: ONE PENN SQ STREET 2: PO BOX 4887 CITY: LANCASTER STATE: PA ZIP: 17604 10-Q 1 FORM 10-Q 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 September 30, 1995 ------------------------------------------------- OR - - ---------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- ------------------- Commission file number 0-10587 -------------------------------------------------------- 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) Not Applicable - - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $2.50 Par -------------------------- Value -- 28,410,163 shares outstanding as of October 31, 1995. - - -------------------------------------------------------------- FULTON FINANCIAL CORPORATION AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED September 30, 1995 INDEX ----- PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements (Unaudited) (a) Consolidated Balance Sheets - September 3 30, 1995 and December 31, 1994 (b) Consolidated Statements of Income - 4 Three and nine months ended September 30, 1995 and 1994 (c) Consolidated Statements of Cash Flows - 5 Nine months ended September 30, 1995 and 1994 (d) Notes to Consolidated Financial 6 Statements - September 30, 1995 Item 2. Management's Discussion and Analysis of 9 Financial Condition and Results of Operations. PART II. OTHER INFORMATION Items 1, 2, 3, 4, and 5 have been omitted since they are not applicable to the registrant. Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 2
Fulton Financial Corporation Consolidated Balance Sheets (Unaudited) - - -------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per-share data) September 30 December 31 1995 1994 - - -------------------------------------------------------------------------------------------------------------------------- ASSETS - - -------------------------------------------------------------------------------------------------------------------------- Cash and due from banks....................................................................... $ 151,279 $ 148,241 Interest-bearing deposits with other banks.................................................... 4,432 2,539 Federal funds sold............................................................................ - 6,075 Mortgage loans held for sale.................................................................. 994 650 Investment securities: Securities held to maturity................................................................. 546,790 507,486 Securities available for sale............................................................... 165,244 174,211 Loans......................................................................................... 2,297,305 2,244,846 Less: Allowance for loan losses............................................................ (36,162) (35,775) Unearned income...................................................................... (5,432) (10,952) ---------- ---------- Net Loans.......................................................................... 2,255,711 2,198,119 ---------- ---------- Premises and equipment........................................................................ 42,275 42,452 Accrued interest receivable................................................................... 22,676 20,727 Other assets.................................................................................. 77,411 78,196 ---------- ---------- Total Assets....................................................................... $3,266,812 $3,178,696 ========== ========== - - -------------------------------------------------------------------------------------------------------------------------- LIABILITIES - - -------------------------------------------------------------------------------------------------------------------------- Deposits: Noninterest-bearing......................................................................... $ 368,791 $ 359,895 Interest-bearing............................................................................ 2,335,054 2,231,153 ---------- ---------- Total Deposits..................................................................... 2,703,845 2,591,048 ---------- ---------- Short-term borrowings: Federal funds purchased and securities sold under agreements to repurchase.................. 110,583 191,523 Demand notes of U.S. Treasury............................................................... 5,000 5,000 ---------- ---------- Total Short-Term Borrowings........................................................ 115,583 196,523 ---------- ---------- Accrued interest payable...................................................................... 23,332 12,857 Other liabilities............................................................................. 55,201 42,653 Long-term debt................................................................................ 35,912 27,283 ---------- ---------- Total Liabilities.................................................................. 2,933,873 2,870,364 ---------- ---------- - - -------------------------------------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY - - -------------------------------------------------------------------------------------------------------------------------- Common stock ($2.50 par) Shares: Authorized 100,000,000 Issued 28,423,962 (28,678,316 in 1994) Outstanding 28,394,380 (28,420,648 in 1994)........................................ 71,060 65,240 Capital surplus............................................................................... 167,628 132,588 Retained earnings............................................................................. 87,977 113,401 Net unrealized holding gain on securities..................................................... 6,837 1,577 Less: Treasury stock (29,582 in 1995 and 257,668 shares in 1994) - at cost.................... (563) (4,474) ---------- ---------- Total Shareholders' Equity......................................................... 332,939 308,332 ---------- ---------- Total Liabilities and Shareholders' Equity......................................... $3,266,812 $3,178,696 ========== ==========
See notes to consolidated financial statements. 3
Fulton Financial Corporation Consolidated Statements of Income (Unaudited) - - ----------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per-share data) Three Months Ended Nine Months Ended September 30 September 30 1995 1994 1995 1994 ----------------------------------------------------- INTEREST INCOME Loans, including fees................................................ $ 49,840 $ 39,705 $ 146,725 $ 114,240 Investment securities: Taxable......................................................... 7,807 7,946 21,930 23,707 Tax-exempt...................................................... 1,128 1,375 3,632 4,238 Dividends....................................................... 490 361 1,466 1,017 Federal funds sold................................................... 423 92 1,124 289 Interest-bearing deposits with other banks........................... 65 32 195 139 ----------- ----------- ----------- ----------- Total Interest Income...................................... 59,753 49,511 175,072 143,630 INTEREST EXPENSE Deposits............................................................. 24,096 17,002 69,076 48,711 Short-term borrowings................................................ 1,464 1,338 4,750 3,233 Long-term debt....................................................... 605 208 1,453 683 ----------- ----------- ----------- ----------- Total Interest Expense..................................... 26,165 18,548 75,279 52,627 ----------- ----------- ----------- ----------- Net Interest Income........................................ 33,588 30,963 99,793 91,003 - - --------------------------------------------------------------------- PROVISION FOR LOAN LOSSES............................................ 538 500 1,572 1,570 ----------- ----------- ----------- ----------- Net Interest Income After Provision for Loan Losses........ 33,050 30,463 98,221 89,433 - - ----------------------------------------------------------------------------------------------------------------------------- OTHER INCOME Trust department..................................................... 1,846 1,733 5,568 5,387 Service charges on deposit accounts.................................. 2,485 2,355 7,231 6,925 Other service charges and fees....................................... 2,087 1,486 5,584 4,441 Gain on sale of mortgage loans....................................... 152 213 811 1,143 Investment securities gains.......................................... 390 206 1,409 1,912 ----------- ----------- ----------- ----------- 6,960 5,993 20,603 19,808 - - ----------------------------------------------------------------------------------------------------------------------------- OTHER EXPENSES Salaries and employee benefits....................................... 13,006 12,207 38,402 36,400 Net occupancy expense................................................ 2,540 2,180 7,552 6,604 Equipment expense.................................................... 1,362 1,439 4,264 4,319 FDIC assessment expense.............................................. 101 1,368 2,919 4,039 Special services..................................................... 1,364 1,181 3,967 3,553 Other................................................................ 6,238 4,745 17,237 15,137 ----------- ----------- ----------- ----------- 24,611 23,120 74,341 70,052 ----------- ----------- ----------- ----------- Income Before Income Taxes................................... 15,399 13,336 44,483 39,189 Income taxes 3,876 3,088 10,861 9,462 ----------- ----------- ----------- ----------- Net Income.................................................... $ 11,523 $ 10,248 $ 33,622 $ 29,727 =========== =========== =========== =========== - - ----------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA Net Income........................................................... $ .41 $ .36 $ 1.18 $ 1.06 =========== =========== =========== =========== Cash dividends....................................................... $ .165 $ .158 $ .486 $ .438 Weighted average shares outstanding.................................. 28,381,047 28,186,515 28,405,454 28,100,151
See notes to consolidated financial statements. 4
Fulton Financial Corporation Consolidated Statements of Cash Flows (Unaudited) - - -------------------------------------------------------------------------------- (Dollars in thousands) Nine Months Ended September 30 1995 1994 - - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 33,622 $ 29,727 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Provision for loan losses 1,572 1,570 Depreciation and amortization of premises and equipment 3,886 3,439 Net amortization of investment security premiums 1,482 1,387 Gain on sale of investment securities (1,409) (1,912) Increase in mortgage loans held for sale (344) 10,294 Amortization of intangible assets 1,180 338 Increase in accrued interest receivable (1,949) (1,618) (Increase) decrease in other assets (2,023) (7,923) Increase in accrued interest payable 10,475 4,374 Increase (decrease) in other liabilities 8,553 (51) --------- --------- Total adjustments 21,423 9,898 --------- --------- Net cash provided by operating activities 55,045 39,625 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of securities available for sale 5,003 9,452 Proceeds from maturities of securities held to maturity 136,646 219,247 Proceeds from maturities of securities available for sale 50,276 - Purchase of securities held to maturity (170,905) (233,605) Purchase of securities available for sale (40,547) - Decrease in short-term investments 4,182 19,176 Net increase in loans (59,164) (108,930) Purchase of premises and equipment (3,709) (4,492) --------- --------- Net cash used in investing activities (78,218) (99,152) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in total deposits 112,797 31,529 Increase (decrease) in long-term debt 8,629 (184) (Decrease) increase in short-term borrowings (80,940) 62,147 Dividends paid (13,804) (12,023) Net proceeds from issuance of common stock 2,108 971 Acquisition of treasury stock (2,579) - --------- --------- Net cash provided by financing activities 26,211 82,440 --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,038 22,913 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 148,241 134,546 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 151,279 $ 157,459 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 64,804 $ 44,580 Income taxes 10,331 11,096
See notes to consolidated financial statements. 5 FULTON FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-1 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. NOTE B - Net Income Per Share Net income per share is computed on the basis of the weighted average number of common shares outstanding. NOTE C - Stock Dividend The Board of Directors declared a 10% stock dividend on April 17, 1995 payable September 9, 1995 to shareholders of record as of May 15, 1995. All share and per-share information has been restated to reflect the effect of this stock dividend. NOTE D - Adoption of SFAS No. 114 Allowance for Loan Losses - - ------------------------- The Corporation adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" effective January 1, 1995. Under the new standard, the 1995 allowance for credit losses related to loans that are impaired as defined by Statement 114 is evaluated based on the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral for certain collateral dependent loans. Prior to 1995, the allowance for credit losses related to these loans was evaulated based on undiscounted cash flows or the fair value of the collateral for collateral dependent loans. The allowance for loan losses is maintained at a level believed adequate by management to absorb potential losses in the loan portfolio. Management's determination of the adequacy of the allowance is based on the risk characteristics of the portfolio, past loan loss experience, local economic conditions, and such other relevant factors. The allowance is increased by provisions 6 for loan losses charged against income and is reduced by net charge-offs. The allowance is based on management's estimates, and actual losses may vary from the current estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. At September 30, 1995, the recorded investment in loans that are considered to be impaired as defined by Statement 114 was $14.7 million (of which $11.5 million were on a nonaccrual basis). Included in this amount is $14.5 million of impaired loans for which the related allowance for credit losses is $2.7 million and $148,000 of impaired loans that as a result of write-downs do not have an allowance for credit losses. The average recorded investment in impaired loans during the quarter ended September 30, 1995 was approximately $15.5 million. Interest Income Recognition - - --------------------------- The Corporation applies all payments received on impaired loans to principal until such time as the principal is paid off, after which time any additional payments received are recognized as interest income. For the quarter ended September 30, 1995, the Corporation recognized such interest income using the cash basis of income recognition of approximately $162,000. Other Real Estate Owned and In-Substance Foreclosures - - ----------------------------------------------------- Assets acquired in settlement of mortgage loan indebtedness are recorded as other real estate owned and are included in other assets initially at the lower of the estimated fair value of the asset or the carrying amount of the loan. Loans identified as in-substance foreclosures are also included in other assets at the lower of their carrying or estimated fair value. In accordance with Statement 114, a loan is classified as in-substance foreclosure when the Company has taken possession of the collateral regardless of whether formal foreclosure proceedings take place. There are no in-substance foreclosures at September 30, 1995. Loans previously classified as in-substance foreclosure but for which the Company had not taken possession of the collateral have been reclassified to loans. This reclassification did not impact the Company's financial condition or results of operations. Costs to maintain the assets and subsequent gains and losses attributable to their disposal are included in other income or other expenses. 7 Note E - Acquisitions On August 31, 1995, the Corporation completed the previously announced acquisition of Delaware National Bankshares Corp. (DNB) of Georgetown, Delaware. The acquisition was carried out in accordance with the terms of the Merger Agreement, as amended and restated, and has been accounted for as a pooling of interests. All financial statements and financial information contained herein have been restated to include the amounts and results of DNB for all periods presented. As provided in the Merger Agreement, each of the 766,913 shares outstanding of the $5.00 par value common stock of DNB has been converted to 1.244 shares of the $2.50 par value common stock of the Corporation. On October 25, 1995, the Corporation entered into a merger agreement with Gloucester County Bankshares, Inc. (Gloucester), under the terms of which the Corporation would acquire each of the 970,279 outstanding shares of common stock of Gloucester in exchange for shares of the Corporation's common stock based upon an exchange ratio, as defined in the merger agreement. The minimum exchange ratio is 1.53 and the maximum exchange ratio is 1.73. Gloucester is headquartered in Woodbury, New Jersey and operates 5 branch offices through its wholly-owned subsidiary, The Bank of Gloucester County, which has approximately $190 million in total assets. 8 FULTON FINANCIAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION - - ------------------- At September 30, 1995, total assets were $3,266,812,000, increasing $88,116,000 or 2.8% since December 31, 1994. Net loans increased by $57,592 or 2.6% as loans originated exceeded scheduled maturities and sales of mortgage loans. Investment securities increased $19,820,000 or 2.9%, as purchases of securities have exceeded maturities and sales of securities. Total deposits at September 30, 1995 increased $112,797,000 or 4.3% from year- end 1994 totals. These funds were used to reduce Federal funds purchased and securities sold under agreements to repurchase, which decreased $80,940,000 or 42.3%, as well as to fund a portion of the increase in net loans and investment securities. The Corporation has used short-term borrowings (Federal funds purchased and securities sold under agreements to repurchase) as required to fund asset growth, as deposit growth has lagged loan growth in recent years. Although the first nine months of 1995 have seen a reversal of this trend, the Corporation continues to focus on increasing deposit levels and minimizing the use of short- term volatile funding sources. Capital Resources - - ----------------- The capital resources of the Corporation as represented by the two major components of regulatory capital, shareholders' equity and allowance for loan losses, continued to grow during 1995, increasing 8.0% and 1.1%, respectively, during the nine months ended September 30, 1995. Current capital guidelines attempt to measure the adequacy of a bank holding company's capital by taking into consideration the differences in risk associated with holding various types of assets as well as exposure to off- balance sheet commitments. The guidelines call for a minimum Tier I risk-based capital percentage of 4.0% and a minimum total risk-based capital of 8.0%. Tier I 9 capital includes common shareholders' equity, non-cumulative preferred stock, a percentage of cumulative preferred stock, and minority interests less goodwill and non-qualified intangible assets. Total capital includes all Tier I capital components plus total cumulative preferred stock, hybrid debt-capital securities, qualified subordinated debt and the allowance for loan losses. The Corporation is also subject to "leverage capital" requirements, which compares capital (using the definition of Tier I capital) to total balance sheet assets and is intended to supplement the risk-based capital ratios in measuring capital adequacy. The minimum acceptable leverage capital ratio is 3% for institutions which are highly-rated in terms of safety and soundness and which are not experiencing or anticipating any significant growth. Other institutions are expected to maintain capital levels at least one or two percent above the minimum. As of September 30, 1995, the Corporation's capital ratios exceed all of the minimum ratios as set forth above. Liquidity and Interest Rate Sensitivity Management - - -------------------------------------------------- The goals of the Corporation's asset/liability management function are to ensure adequate liquidity and to maintain an appropriate balance between the relative sensitivity of interest-earning assets and interest-bearing liabilities. The Corporation maintains adequate liquidity. On the asset side, liquidity is provided primarily by cash, short-term investments, securities available for sale and scheduled maturities of securities held to maturity. On the liability side, liquidity is provided primarily by short-term borrowings. Management monitors the interest sensitivity position of the Corporation continually to ensure proper adherence to its established policy regarding interest rate risk. The following table shows the interest sensitivity gaps for four different time intervals based on scheduled amortization, maturity, and repricing opportunities as of September 30, 1995.
Daily 0-90 91-180 181-365 Adjustable Days Days Days ---------------------------------- GAP 1.16 1.07 1.01 1.28 CUMULATIVE GAP 1.16 1.13 1.11 1.15
The Corporation's policy provides for the cumulative six month gap to be maintained between .85 and 1.15. 10 RESULTS OF OPERATIONS - - --------------------- Quarter Ended September 30, 1995 versus Quarter Ended September 30, 1995 - - ------------------------------------------------------------------------ Fulton Financial Corporation's net income increased by $1,275,000, or 12.4%, to $11,523,000 during the third quarter of 1995 compared to the same quarter in 1994. This increase was attributable primarily to increases in net interest income and other income which were partially offset by increases in other expenses and income taxes. Net Interest Income - - ------------------- Net interest income increased by $2,625,000 or 8.5%. The following table presents the components of this increase:
Three Months Ended September 30 Change ------------------------------- ------ 1995 1994 $ % ---- ---- --- --- (dollars in thousands) Interest income $59,753 $49,511 $10,242 20.7 Interest expense 26,165 18,548 7,617 41.1 ------- ------- ------- Net interest income $33,588 $30,963 $ 2,625 8.5 ======= ======= =======
As summarized in the following table, the 20.7% increase in interest income reflects the effect of the growth in average interest-earning assets and the increase in the yield on these assets. The 41.1% increase in interest expense reflects the effect of the growth in interest-bearing liabilities and the increase in the cost of these funds.
Three Months Ended September 30 % 1995 1994 Change ------------------------------- (Dollars in Thousands) Average interest-earning assets $2,971,088 $2,672,417 11.2% Yield on earning assets 8.19% 7.58% 8.0% Average interest-bearing liabilities $2,463,737 $2,214,772 11.2% Cost of interest-bearing liabilities 4.21% 3.32% 26.8%
The increase in both average interest-earning assets and average interest- bearing liabilities is primarily due to the acquisition of Central Pennsylvania Financial Corp. (CPFC), which was effective October 1, 1994 and was accounted for as a purchase of assets and assumption of liabilities. CPFC had approximately $260 million in assets as of the acquisition date. 11 The increase in yield and cost of funds from 1994 to 1995 reflects the impact of the increasing interest rates experienced during 1994 and early 1995. The Corporation's average prime rate increased over 16%, from 7.50% for the third quarter of 1994 to 8.77% for the third quarter of 1995. The Corporation has experienced a greater increase in its cost of funds than in its yields, primarily as a result of continuing competition from both bank and nonbank providers. Provision and Allowance for Loan Losses - - --------------------------------------- The provision for loan losses for the third quarter of 1995 was $538,000 compared to $500,000 for the similar period of 1994 and is reflective of the continuing low levels of nonperforming loans and related charge-offs. The 1.58% ratio representing the loan loss allowance in relation to gross loans less unearned income as of September 30, 1995 is consistent with that ratio of 1.60% at December 31, 1994 and is considered prudent by management in light of the current economic conditions and the quality of the loan portfolio. The following table summarizes the Corporation's nonperforming assets. Note that amounts which would have been presented as in-substance foreclosures as of December 31, 1994 are included in nonaccrual loans as of September 30, 1995.
September 30 Dec. 31 1995 1994 ---- ---- (Dollars in Thousands) Nonaccrual loans $13,107 $13,055 90 days past due loans & accruing 7,389 5,462 Other real estate owned 1,607 2,767 In-substance foreclosures - 1,818 ------- ------- $22,103 $23,102 ======= ======= Nonperforming Assets/Total Assets .68% .73% Nonperforming Assets/Gross Loans .96% 1.03%
Other Income - - ------------ During the third quarter of 1995, other income increased by $967,000, or 16.1%, when compared to the same period of 1994. This increase reflects the increases in trust department income of $113,000 or 6.5%, service charges on deposit accounts of $130,000 or 5.5%, other service charges and fees of $601,000 or 40.4%, and investment security gains of $184,000, or 89.3%. 12 The increase in other service charges and fees includes a significant increase in mortgage servicing fees as a result of the servicing portfolio acquired from CPFC in the fourth quarter of 1994. This category also reflects the fees from a debit card introduced by one of the Corporation's affiliate banks during 1994. Other Expenses - - -------------- For the third quarter of 1995, total other expenses were $24,611,000, an increase of $1,491,000 or 6.4%, over the similar period in 1994. The categories contributing to this increase were salaries and employee benefits, increasing $799,000, or 6.5%, net occupancy expense, increasing $360,000, or 16.5%, and special services, increasing $183,000, or 15.5% These increases are primarily due to the operating expenses related to the branches which were acquired from CPFC on October 1, 1994. Also contributing to the increase in other expenses is approximately $260,000 of goodwill amortization as a result of this acquisition. Offsetting the above mentioned increases was the refund of FDIC insurance premiums received during the third quarter of 1995. The FDIC reduced the assessment rate for Bank Insurance Fund (BIF) deposits from 23 basis points to 4 basis points, effective June 1, 1995, resulting in a total refund to the Corporation of $1,327,000, which was credited to FDIC insurance expense. Legislation has been proposed for a significant one-time FDIC assessment on Savings Association Insurance Fund (SAIF) insured deposits, of which the Corporation has approximately $400 million. This assessment will result in a significant increase of the Corporation's other expenses when and if such legislation is approved. Income Taxes - - ------------ Income tax expense increased $788,000, to $3,876,000, for the quarter ended September 30, 1995. This increase is directly attributable to the increase in pretax income and the decreasing levels of tax-exempt interest income. The effective tax rate was 25.2% in 1995 compared to 23.2% in 1994. Nine Months Ended September 30, 1995 versus Nine Months Ended September 30, 1994 - - -------------------------------------------------------------------------------- Fulton Financial Corporation's net income increased by $3,895,000, or 13.1%, to $33,622,000 for the nine months ended September 30, 1995 compared to the nine months ended September 30, 1994. This increase was attributable primarily to increases in net interest income and other income which were partially offset by increases in other expenses and income taxes. Net Interest Income - - ------------------- Net interest income increased by $8,790,000 or 9.7%. The following table presents the components of this increase: 13
Nine Months Ended September 30 Change ------------------------------ ------ 1995 1994 $ % ---- ---- --- --- (Dollars in Thousands) Interest income $175,072 $143,630 $31,442 21.9 Interest expense 75,279 52,627 22,652 43.0 -------- -------- ------- Net interest income $ 99,793 $ 91,003 $ 8,790 9.7 ======== ======== =======
As summarized in the following table, the 21.9% increase in interest income reflects the effect of the growth in average interest-earning assets and the increase in the yield on these assets. The 43.0% increase in interest expense reflects the effect of the growth in interest-bearing liabilities and the increase in the cost of these funds.
Nine Months Ended September 30 % 1995 1994 Change ------------------------------- (Dollars in Thousands) Average interest-earning assets $2,928,402 $2,643,999 10.8% Yield on earning assets 8.16% 7.44% 9.7% Average interest-bearing liabilities $2,434,317 $2,195,339 10.9% Cost of interest-bearing liabilities 4.13% 3.20% 29.1%
The increase in both average interest-earning assets and average interest- bearing liabilities is primarily due to the acquisition of Central Pennsylvania Financial Corp. (CPFC), which was effective October 1, 1994 and was accounted for as a purchase of assets and assumption of liabilities. CPFC had approximately $260 million in assets as of the acquisition date. The increase in yield and cost of funds from 1994 to 1995 reflects the impact of the increasing interest rates experienced during 1994 and early 1995. The Corporation's average prime rate increased over 30%, from 6.80% for the nine months ended September 30, 1994 to 8.87% for the nine months ended September 30, 1995. The Corporation has experienced a greater increase in its cost of funds than in its yields, primarily as a result of continuing competition from both bank and nonbank providers. Provision for Loan Losses - - ------------------------- The provision for loan losses for the nine months ended September 30, 1995 was $1,572,000 compared to $1,570,000 for the similar period of 1994 and is reflective of the continuing low levels of nonperforming loans and related charge-offs. 14 Other Income - - ------------ Other income increased by $795,000, or 4.0%, for the nine months ended September 30, 1995 compared to the same period of 1994. This increase reflects increases in trust department income of $181,000 or 3.4%, service charges on deposit accounts of $306,000 or 3.9% and other service charges and fees of $1,143,000 or 25.7%, offset by the decreases in investment security gains of $503,000 or 26.3% and gain on sale of mortgage loans of $332,000, or 29.0%. The increase in other service charges and fees includes a significant increase in mortgage servicing fees as a result of the servicing portfolio acquired from CPFC in the fourth of 1994, as well as fees from a debit card introduced by one of the Corporation's affiliate bank during 1994. The decrease in investment securities gains is a result of management's policy of realizing such gains only when deemed prudent to do so, based upon the current and expected fair market values of the individual securities within the equity portfolio. Other Expenses - - -------------- For the nine months ended September 30, 1995, total other expenses were $74,371,000, an increase of $4,289,000, or 6.1%, over the similar period in 1994. The categories contributing to this increase were salaries and employee benefits, increasing $2,002,000, or 5.5%, net occupancy expense, increasing $948,000 or 14.4%; special services, increasing $414,000 or 11.7%; and other expenses, increasing $2,050,000 or 13.5%. These increases were primarily due to the operating expenses related to the branches which were acquired from CPFC on October 1, 1994. Also contributing to the increase in other expenses is approximately $780,000 of goodwill amortization as a result of this acquisition. Offsetting the above mentioned increases was the refund of FDIC insurance premiums received during the third quarter of 1995. The FDIC reduced the assessment rate for Bank Insurance Fund (BIF) deposits from 23 basis points to 4 basis points, effective June 1, 1995, resulting in a total refund to the Corporation of $1,327,000, which was credited to FDIC insurance expense. Legislation has been proposed for a significant one-time FDIC assessment on Savings Association Fund (SAIF) deposits, of which the Corporation has approximately $400 million. This assessment will result in a significant increase of the Corporation's other expenses when and if such legislation is approved. Income Taxes - - ------------ Income tax expense increased $1,400,000, to $10,862,000, for the nine months ended September 30, 1995. This increase was directly attributable to the increase in pretax income and the decreasing level of tax-exempt interest income. The effective tax rate was 24.4% in 1995 compared to 24.1% in 1994. 15 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits -- The following is a list of the exhibits required by Item 601 of Regulation S-K and filed as part of this report: (1) Instruments defining the right of securities holders, including indentures: (a) Rights Agreement dated September 20, 1989 between Fulton Financial Corporation and Fulton Bank -- Incorporated by reference to Exhibit 1 of the Fulton Financial Corporation Current Report on Form 8-K dated June 21, 1989. (2) Material Contracts - Executive Compensation Agreements and Plans: (a) Severance Agreements entered into as of April 17, 1984 and as of May 17, 1988 between Fulton Financial Corporation and the following executive officers: Robert D. Garner, Rufus A. Fulton, Jr., James K. Sperry and R. Scott Smith, Jr. - Incorporated by reference from Exhibit 28 (a) of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1990. (b) Incentive Stock Option Plan and Amendment No.1 to that Plan adopted February 17, 1987--Incorporated by reference from Exhibit (a) (i) of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1987. (c) Severance Agreement entered into as of November 19, 1992 between Fulton Financial Corporation and Charles J. Nugent, Executive Vice President and Chief Financial Officer, incorporated by reference from Exhibit 10 (c) to the Fulton Financial Corporation Annual Report on Form 10-K for the year ended December 31, 1992. (b) Reports on Form 8-K - (1) Form 8-K dated October 17, 1995 reporting results of combined operations of Fulton Financial Corporation and Delaware National Bankshares Corp. (2) Form 8-K dated November 3, 1995 reporting merger agreement with Gloucester County Bankshares, Inc. 16 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 November 3, 1995 /s/ Rufus A. Fulton, Jr. --------------------------- ---------------------------- Rufus A. Fulton, Jr. President and Chief Executive Officer Date November 3, 1995 /s/ Charles J. Nugent --------------------------- ---------------------------- Charles J. Nugent Executive Vice President; Chief Financial Officer 17 EXHIBIT INDEX Page (in accordance with Exhibits Required Pursuant sequential numbering to Item 601 of Regulation S-K system) - - ----------------------------- -------------------- 4. Instruments defining the rights of security holders, including indentures. (a) Rights Agreement dated September 20, 1989 between Fulton Financial Corporation and Fulton Bank -- Incorporated by reference to Exhibit 1 of the Fulton Financial Corporation Current Report on Form 8-K dated June 21, 1989. 10. Material Contracts (a) Severance Agreements entered into as of April 17, 1984 and as of May 17, 1988 between Fulton Financial Corporation and the following executive officers: Robert D. Garner, Rufus A. Fulton, Jr., James K. Sperry and R. Scott Smith, Jr. - Incorporated by reference from Exhibit 28(a) of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1990. (b) Incentive Stock Option Plan and Amendment No. 1 to that Plan adopted February 17, 1987 -Incorporated by reference from Exhibit (a) (i) of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1987. (c) Severance Agreement entered into as of November 19, 1992 between Fulton Financial Corporation and Charles J. Nugent, Executive Vice President and Chief Financial Officer, filed as Exhibit 10(c) to the Fulton Financial Corporation Annual Report on Form 10-K for the year ended December 31, 1992. 27. Financial Data Sheet -- Article 9 18 EX-27.1 2 FINANCIAL DATA SCHEDULE ARTICLE 9
9 This schedule contains summary financial information extracted from The Fulton Financial Corporation consolidated balance sheet as of September 30, 1995 and the related consolidated statement of income for the nine months ending September 30, 1995 and other financial data included within management's discussion and analysis of financial condition and results of operations as of and for the nine months ending September 30, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 151,279 4,432 0 0 165,244 546,790 546,133 2,297,305 36,162 3,266,812 2,703,845 115,583 55,201 35,912 71,060 0 0 261,879 3,266,812 146,725 27,028 1,319 175,072 69,076 75,279 99,793 1,572 1,409 74,341 44,483 33,622 0 0 33,622 1.18 1.18 4.73 13,107 7,389 0 0 35,775 2,932 1,737 36,162 36,162 0 0
EX-27.2 3 FINANCIAL DATA SCHEDULE ARTICLE 9
9 This schedule contains summary financial information extracted from The Fulton Financial Corporation consolidated balance sheet as of June 30, 1995 and the related consolidated statement of income for the six months ending June 30, 1995 and other financial data included within management's discussion and analysis of financial condition and results of operations as of and for the six months ending June 30, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 164,947 4,018 38,400 0 187,692 483,236 479,835 2,267,189 36,019 3,242,955 2,684,551 119,717 56,463 37,586 70,899 0 0 254,099 3,242,955 96,885 17,603 831 115,319 44,980 49,114 66,205 1,034 1,019 49,730 29,084 22,098 0 0 22,098 0.78 0.78 4.74 16,415 5,514 0 0 35,775 1,974 1,185 36,019 36,019 0 0
-----END PRIVACY-ENHANCED MESSAGE-----