EXHIBIT 13 CONTINUED

Drovers Bancshares Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion focuses on information about Drovers Bancshares Corporation ("Drovers"), its financial condition and results of operations not otherwise apparent in the consolidated financial statements of this Annual Report.  You shouldrefer to those statements and other selected financial data presented elsewhere in the report to fully understand the following discussion and analysis.

RESULTS OF OPERATIONS

Drovers Bancshares Corporation derives its consolidated earnings primarily from its wholly-owned subsidiary, The Drovers & Mechanics Bank ("Drovers Bank").  Drovers Bank is a Pennsylvania state-chartered, FDIC insured bank and hastwo wholly-owned subsidiaries: 96 South George Street, Inc and Drovers Investment Company.  96 South's primary asset is an office building attached to Drovers Bank's main office, which houses our corporate headquarters.  Drovers Investment Company'sassets consist of investment securities, primarily municipal bonds.  In addition, Drovers Bank is 60% owner of Drovers Settlement Services ("DSS"), a joint venture with Abstracting Company of York.  DSS offers real estate title insurance andsettlement services.  The minority interest was $20,000 as of December 31, 2000 and was included in other liabilities.

Drovers Bancshares Corporation also wholly owns two other subsidiaries: Drovers Realty Company and Drovers Capital Trust I.  Drovers Realty Company has various real estate holdings, including ground and building leases.  It rents the real estate toDrovers Bank for use as branch offices.  Drovers Capital Trust I (the "Trust") owns junior subordinated deferrable interest debentures due from Drovers Bancshares Corporation.  The debentures are the sole asset of the Trust.  The Trust issued$7,500,000 of preferred securities to investors secured by the debentures.  For additional information on the Trust, see Note 14 of the consolidated financial statements.  In addition, Drovers entered into a joint venture with seven other Pennsylvaniabanks to form Pennbanks Insurance Company, an offshore reinsurance company.  Each bank in the venture owns a segregated cell through which its respective premiums and losses from credit life and accident and health insurance are funded and for which eachbank has sole responsibility.  The Drovers' cell has been consolidated into the financial statements since we are the sole owner of that cell.

In addition to historical information, this Annual Report on Form 10-K contains statements that constitute forward-looking statements (within the meaning of the Private Litigation Reform Act of 1995), which involve significant risks and uncertainties. The words "believes", "expects", "may", "will", "should", "projects", "contemplates", "anticipates", "forecasts", "intends" or other similar words orterms are intended to identify forward-looking statements.  Actual results may differ materially from the results discussed in these forward-looking statements.  Factors that might cause such a difference might include, but are not limited to, generaleconomic conditions, changes in interest rates, deposit flow, loan demand, real estate values and competition, changes in accounting or tax principles, policies or guidelines, changes in legislation or regulation and other economic competitive,government, regulatory and technological factors affecting Drovers' operations, pricing, products and services.  Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our analysis only as of the date hereof.Drovers undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

FINANCIAL SUMMARY

Drovers recorded net income of $3,108,000 in 2000 compared to $7,601,000 in 1999. Our provision for loan losses for 2000 was $6,379,000 compared to $1,727,000 a year ago, an increase of $4,652,000. The increase in the provision was due to anincrease in net chargeoffs during 2000 and to the weakening economy, which caused us to increase our reserve for loan losses in the fourth quarter of 2000.  Additionally, we incurred a $1,150,000 charge associated with the pending merger with FultonFinancial Corporation.

NET INTEREST INCOME

Net interest income is a measurement of how well we balance our interest rate sensitive assets and liabilities while maintaining adequate interest margins.  Net interest income rose $1,049,000, or 4.7%, in 2000 compared to $3,021,000, or 15.7%, in1999 and $2,242,000, or 13.2%, 1998. 

 

Drovers Bancshares Corporation and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations, (continued)

NET INTEREST INCOME (continued)