FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549


                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2003
Commission file number:   33-85626


                          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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  [  X  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).  Yes [     ]  No [  X  ]

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 March 20, 2004
------------------------------                    -----------------------------
 (Common stock, .625 par value)                               492,815

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual shareholders' report for the year ended December 31, 2003
are incorporated by reference into Parts I and II.  Portions of the Proxy
Statement for the Annual Meeting of Security Holders to be held April 19, 2004
are incorporated by reference in Part III of this Form 10-K.








































                          FULTON BANCSHARES CORPORATION

                                    FORM 10-K

                                      INDEX

                                                              Page
Part I

   Item 1.  Business                                         4 - 16
   Item 2.  Properties                                           16
   Item 3.  Legal Proceedings                                    17
   Item 4.  Submission of Matters to a Vote of Security Holders  17

Part II

   Item 5.  Market for Registrant's Common Equity and Related
            Stockholder Matters                                  18
   Item 6.  Selected Financial Data                              18
   Item 7.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations                  18
   Item 8.  Financial Statements and Supplementary Data     18 - 26
   Item 9.  Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure               27
   Item 9a. Controls and Procedures                              27

Part III

   Item 10.  Directors and Executive Officers of the Registrant  28
   Item 11.  Executive Compensation                              28
   Item 12.  Security Ownership of Certain Beneficial Owners
             and Management                                      29
   Item 13.  Certain Relationships and Related Transactions      29
   Item 14.  Principal Accountant Fees and Services              29

Part IV

   Item 15.  Exhibits, Financial Statement Schedules, and
             Reports on Form 8-K                            30 - 31

   Signatures                                                    32






PART I

Item 1.   Business.

Description of the Company

          Fulton Bancshares Corporation (the "Company"), a Pennsylvania business
corporation, is a bank holding company registered with and supervised by the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
The Company was incorporated on March 29, 1989 under the business corporation
law of the Commonwealth of Pennsylvania for the purpose of becoming a bank
holding company.  Since commencing operations, the Company's business has
consisted primarily of managing and supervising the Fulton County National Bank
and Trust Company (the "Bank"), and its principal source of income has been
dividends paid by the Bank.  The Company has two wholly-owned subsidiaries - the
Bank, and Fulton County Community Development Corporation ("FCCDC"), which was
formed on June 7, 1996 to support efforts of the local downtown business
revitalization project by making low interest loans to eligible small businesses
for the purpose of facade improvement.  FCCDC had minimal activity in 2003, and
has no employees.

          The principal executive office of the Company is located at 100
Lincoln Way East, McConnellsburg, Fulton County, Pennsylvania  17233.  The
telephone number of the Company is (717) 485-3144.

          The Company has no employees.

Supervision and Regulation - The Company

          The Company is subject to the provisions of the Bank Holding Company
Act of 1956, as amended (the "Bank Holding Company Act"), and to supervision by
the Federal Reserve Board.  The Bank Holding Company Act requires the Company to
secure the prior approval of the Federal Reserve Board before it owns or
controls, directly or indirectly, more than five percent (5%) of the voting
shares or substantially all of the assets of any institution, including another
bank.  The Bank Holding Company Act prohibits acquisition by the Company of more
than five percent (5%) of the voting shares of, or interest in, all or
substantially all of the assets of any bank located outside of Pennsylvania
unless such acquisition is specifically authorized by the laws of the state in
which such bank is located.

          A bank holding company is prohibited from engaging in or acquiring
direct or indirect control of more than five percent (5%) of the voting shares
of any company engaged in nonbanking activities unless the Federal Reserve
Board, by order or regulation, has found such activities to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto.

          The Company is required to file an annual report with the Federal
Reserve Board and any additional information that the Federal Reserve Board may
require pursuant to the Bank Holding Company Act.  The Federal Reserve Board may
also make examinations of the Company and any or all of its subsidiaries.

          Federal law prohibits acquisitions of control of a bank holding
company without prior notice to certain federal bank regulators.  Control is
defined for this purpose as the power, directly or indirectly, to direct the
Management or policies of the bank or bank holding company or to vote 25% or
more of any class of voting securities of the bank holding company.  A person or
group holding revocable proxies to vote 25% or more of the stock of a bank or
its holding company would presumably be deemed to control the institution for
purposes of this federal law.

Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, on investments in the stock
or other securities of the bank holding company and on taking of such stock or
securities as collateral for loans to any borrower.

Permitted Activities

          The Federal Reserve Board permits bank holding companies to engage in
activities so closely related to banking or managing or controlling banks as to
be a proper incident thereto.  The Company does not at this time engage in any
of the permissible activities described below, nor does the Company have any
current plans to engage in these activities in the foreseeable future.

          While the types of permissible activities are subject to a variety of
limitations and to change by the Federal Reserve Board, the principal activities
that presently may be conducted by a bank holding company and may in the future
be engaged by the Company are:  (1) making, acquiring or servicing loans and
other extensions of credit for its own account or for the account of others,
such as would be made by consumer finance, credit card, mortgage, commercial
finance and factoring companies; (2) operating as an industrial bank or similar
entity in the manner authorized by state law so long as the institution does not
both accept demand deposits and make commercial loans; (3) operating as a trust
company in the manner authorized by federal or state law so long as the
institution does not make certain types of loans or investments or accept
deposits, except as may be permitted by the Federal Reserve Board; (4) acting as
an investment or financial advisor to investment companies and other persons;
(5) leasing personal and real property or acting as agent, broker or advisor in
leasing property; (6) making equity and debt investments in corporations or
projects designed primarily to promote community welfare; (7) providing to
others financially oriented data processing or bookkeeping services; (8) acting
as an insurance agent or broker in relation to insurance for itself and its
subsidiaries or for insurance directly related to extensions of credit; (9)
acting as underwriter for credit life insurance and credit accident and health
insurance: (10) providing courier services of a limited character; (11)
providing management consulting advice to nonaffiliated banks and nonbank
depository institutions; (12) selling money orders, travelers' checks and United
States savings bonds; (13) performing appraisals of real estate; (14) acting as
intermediary for the financing of commercial or industrial income-producing real
estate by arranging for the transfer of the title, control and risk of such a
real estate project to one or more investors; (15) providing securities
brokerage services, related securities credit activities and incidental
activities such as offering custodial services, individual retirement accounts
and cash management services, if the securities brokerage services are
restricted to buying and selling securities solely as agent for the account of
customers and do not include securities underwriting or dealing or investment
advice or research services; (16) underwriting and dealing in obligations of the
United States, general obligations of states and their political subdivisions
such as bankers' acceptances and certificates of deposit; (17) providing general
information, advisory services and statistical forecasting with respect to
foreign exchange markets; (18) acting as a futures commission merchant in the
execution and clearance on major commodity exchanges of futures contracts and
options on futures contracts for bullion, foreign exchange, government
securities, certificates of deposit and other money market instruments; (19)
performing personal property appraisals that require expertise regarding all
types of personal and business property, including intangible property such as
corporate securities; (20) providing commodity trading and futures commission
merchant advice; (21) providing consumer financial counseling to individuals on
consumer-oriented financial management matters, including debt consolidation,
mortgage applications, bankruptcy, budget management, real estate

tax shelters, tax planning, retirement and estate planning, insurance and
general investment management, so long as this activity does not include the
sale of specific products or investments; (22) providing tax planning and
preparation advice to corporations and individuals; (23) providing check
guaranty services to subscribing merchants; (24) operating a collection agency
and credit bureau; and (25) acquiring and operating thrift institutions,
including savings and loan associations, building and loan associations and
FDIC-insured savings banks.

Certain Provisions of Pennsylvania Banking Law

          Under the Pennsylvania Banking Code of 1965, as amended, (the "Code"),
the Company has been permitted since March 4, 1990 to control an unlimited
number of banks.  However, the Company would be subject to the requirements of
the Bank Holding Company Act as discussed in the "Supervision and Regulation -
The Company" section above.

          Also since March 4, 1990, the Code authorizes reciprocal interstate
banking without any geographic limitation.  Reciprocity between states exists
when a foreign state's law authorizes Pennsylvania bank holding companies to
acquire banks or bank holding companies located in that state on terms and
conditions substantially no more restrictive than those applicable to such an
acquisition by a bank holding company located in that state.  For a further
discussion of interstate banking and branching, see the section entitled
"Legislation and Regulatory Changes" below.

Legislation and Regulatory Changes

          From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions.  Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other financial
institutions are frequently made in Congress, and before various bank regulatory
agencies.  No prediction can be made as to the likelihood of any major changes
or the impact such changes might have on the Company and its subsidiary, the
Bank.  Certain changes of potential significance to the Company are discussed
below.

          The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking and Branch Act") permits interstate banking to
occur.  Bank holding companies, pursuant to an amendment to the Bank Holding
Company Act, can acquire a bank located in any state, as long as the acquisition
does not result in the bank holding company controlling more than 10% of the
deposits in the United States, or 30% of the deposits in the target bank's
state.  The legislation permits states to waive the concentration limits and
require that the target institution be in existence for up to five years before
it can be acquired by an out-of-state bank or bank holding company.  Interstate
branching and merging of existing banks has been permitted since September 29,
1997 if the bank is adequately capitalized and demonstrates good management.

          The Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") was enacted in August of 1989.  This law was enacted primarily
to improve the supervision of savings associations by strengthening capital,
accounting, and other supervisory standards.  In addition, FIRREA reorganized
the FDIC by creating two deposit insurance funds to be administered by the FDIC:
The Savings Association Insurance Fund and the Bank Insurance Fund.  Customers'
deposits held by the Bank are insured under the Bank Insurance Fund.  FIRREA
also regulates real estate appraisal standards and the supervisory/enforcement
powers and penalty provisions in connection with the regulation of the Bank.

Sarbanes-Oxley Act of 2002

          On July 30, 2002, President Bush signed into law the Sarbanes-Oxley
Act of 2002.  The Sarbanes-Oxley Act represents a comprehensive revision of laws
affecting corporate governance, accounting obligations and corporate reporting.
The Sarbanes-Oxley Act is applicable to all companies with equity securities
registered or that file reports under the Securities Exchange Act of 1934.  In
particular, the Sarbanes-Oxley Act establishes:  (i) new requirements for audit
committees, including independence, expertise, and responsibilities; (ii)
additional responsibilities regarding financial statements for the Chief
Executive Officer and Chief Financial Officer of the reporting company; (iii)
new standards for auditors and regulation of audits; (iv) increased disclosure
and reporting obligations for the reporting company and its directors and
executive officers; and (v) new and increased civil and criminal penalties for
violations of the securities laws.  Many of the provisions were effective
immediately while other provisions become effective over a period of time and
are subject to rulemaking by the SEC.  Because the Company's common stock is
registered with the SEC, it is currently subject to this Act.

Future Legislation

          Changes to the laws and regulations in the state where the Company and
the Bank do business can affect the operating environment of bank holding
companies and their subsidiaries in substantial and unpredictable ways.  The
Company cannot accurately predict whether those changes in laws and regulations
will occur, and, if those changes occur, the ultimate effect they would have
upon the financial condition or results of operations of the Company.

Effects of Inflation

          Inflation has some impact on the Company's, the Bank's, and FCCDC's
operating costs.  Unlike many industrial companies, however, substantially all
of the Bank's and FCCDC's assets and liabilities are monetary in nature.  As a
result, interest rates have a more significant impact on the Company's, the
Bank's, and FCCDC's performance than the general level of inflation.  Over short
periods of time, interest rates may not necessarily move in the same direction
or in the same magnitude as prices of goods and services.

Monetary Policy

          The earnings of the Company, the Bank, and FCCDC are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States Government and its agencies.  An important function of the Federal
Reserve System is to regulate the money supply and interest rates.  Among the
instruments used to implement those objectives are open market operations in
United States government securities and changes in reserve requirements against
member bank deposits.  These instruments are used in varying combinations to
influence overall growth and distribution of bank loans, investments and
deposits, and their use may also affect rates charged on loans or paid for
deposits.

          The Bank is a member of the Federal Reserve System and, therefore, the
policies and regulations of the Federal Reserve Board have a significant effect
on its deposits, loans and investment growth, as well as the rate of interest
earned and paid, and are expected to affect the Bank's operations in the future.
The effect of such policies and regulations upon the future business and
earnings of the Company, the Bank, and FCCDC cannot be predicted.

Environmental Regulation

          There are several federal and state statutes which regulate the
obligations and liabilities of financial institutions pertaining to
environmental issues.  In addition to the potential for attachment of liability
resulting from its own actions, a bank may be held liable under certain
circumstances for the actions of its borrowers, or third parties, when such
actions result in environmental problems on properties that collateralize loans
held by the Bank.  Further, the liability has the potential to far exceed the
original amount of the loan issued by the Bank.  Currently, the Company, the
Bank, and FCCDC are not party to any pending legal proceeding pursuant to any
environmental statute, nor is the Company, the Bank, or FCCDC aware of any
circumstances which may give rise to liability under any such statute.

Description of the Bank

          The Bank was organized on February 24, 1887 as a Pennsylvania state-
chartered banking institution.  It converted to a national banking association
on September 5, 1933, and is presently under the supervision of the Office of
the Comptroller of the Currency (the "Comptroller").  The Bank is a member of
the Federal Reserve System.  Customers' deposits held by the Bank are insured by
the FDIC to the maximum extent permitted by law.  The Bank's legal headquarters
are located at 100 Lincoln Way East, McConnellsburg, Fulton County, Pennsylvania
17233.

          The Bank engages in a full service commercial and consumer banking
business, including the acceptance of time and demand deposits and the making of
secured and unsecured commercial and consumer loans, and offers trust services
through its affiliation with Sentry Trust Company.  The Bank's primary service
area is located in Fulton County, Pennsylvania.  Specifically, the main office
of the Bank is located in McConnellsburg, the county seat.  Within the defined
service area of the Bank's main office, the banking business is highly
competitive.  In addition to local community banks, the Bank competes with
regionally-based commercial banks, all of which have greater assets, capital and
lending limits.  The Bank also competes with savings banks, savings and loan
associations, money market funds, insurance companies, stock brokerage firms,
regulated small loan companies, credit unions and with the issuers of commercial
paper and other securities.

          In order to compete effectively in this market and to obtain business
from individuals, small and medium-sized businesses and professionals, the Bank
offers specialized services such as extended hours of operation and personal and
business checking accounts at competitive rates in addition to traditional
commercial and consumer banking and trust services.  The Bank accepts time,
demand, and savings deposits, statement savings accounts, NOW accounts, money
market accounts, certificates of deposit, and club accounts.  The Bank makes
secured and unsecured commercial, consumer, mortgage, and construction loans.
Consumer loans include revolving credit lines.  The following support services
are offered by the Bank to make financial management more efficient and
convenient for its customers:  bank by mail, direct deposit, drive-in banking,
Federal Tax Depository, automatic teller machine, night deposit services, notary
public services, payroll deduction plan, bond coupon collections, safe deposit
boxes, signature guarantees, travelers checks, money orders, cashiers checks,
treasury securities, U.S. Savings Bonds, individual retirement accounts, and
utility and municipal payments.  The Bank also offers its customers access to
discount brokerage services, mutual funds, and other alternative investment
products through its affiliation with Sentry Trust Company.  The Bank also
offers telephone and internet banking to its customers. The Bank expects to
experience a modest increase in growth.

Lending Activities

          It is the Bank's general policy to grant all of its loans in its
primary trade area.  This trade area includes all of Fulton County, southern
Huntington County, western Franklin County, eastern Bedford County, and the
Hancock, Maryland area.  The Bank's lending objectives are as follows:  (1) to
establish a diversified loan portfolio composed of a predetermined mix of
mortgage loans, commercial loans, consumer loans and all other loan types; (2)
to provide a satisfactory rate of return to its shareholders by properly pricing
loans to include the cost of funds, administrative costs, bad debts, local
economic conditions, competition, customer relationships, the term of the loan,
credit risk, and collateral quality; and, (3) to provide protection for its
depositors by maintaining a predetermined level of loans to deposits to ensure
liquidity.  The Bank recognizes that the lending of money is a community
responsibility which involves a degree of credit risk and is willing to
undertake such risks by utilizing standard banking procedures and making prudent
judgments when extending credit.

          The Bank makes loans to both individual consumers and commercial
entities.  The types of loans offered include: (1) loans for businesses and
individuals on a short term or seasonal basis; (2) mortgage and construction
loans, (3) loans to individuals for consumer purchases such as appliances,
furniture, vacations, etc.: (4) loans secured by marketable stock and bonds
providing adequate margins for market fluctuations; (5) short term working
capital loans secured by the assignment of accounts receivable and inventory;
(6) automobile loans, (7) second liens on commercial and residential real
estate, and (8) home equity lines of credit.  Loans of these types will be
considered desirable by the Bank provided such loans meet the test of sound
credit.

          The Bank has adopted the following loan-to-value ratios, in accordance
with standards adopted by its bank supervisory agencies:

<TABLE>
<S>      <C>                                    <C>
                    Loan Category              Loan-to-Value
                                                   Limit
         Raw land                                   65%
         Land development                           75%
         Construction:
           Commercial, multifamily, and             80%
            other nonresidential
           1 to 4-family residential                85%
         Improved property                          85%
         Owner-occupied 1 to 4 family and           90%
           home equity
</TABLE>

The Bank does not assume undue risk on any loan within the loan portfolio, and
takes appropriate steps to secure all loans as necessary.

Allowance for Loan Losses and Related Provision

          The provision for loan losses was $ 1,265,000 in 2003 compared to
$ 255,000 in 2002 and $ 15,000 in 2001.  The provisions were based on
management's evaluation of the adequacy of the reserve balance and represent
amounts deemed necessary to maintain the reserve at the appropriate level based
on the quality of the loan portfolio and economic conditions.  Actual charge-
offs (net of recoveries) were $ 396,000 in 2003 and $ 70,000 in 2002.  These

were significantly higher than in previous years, and were directly related to
agri-business loans.  Management intends to maintain the reserve at appropriate
levels based on an ongoing evaluation of the loan portfolio.

          Loans 90 days or more past due (still accruing interest) and those on
nonaccrual status were as follows at December 31 (in thousands):

<TABLE>
<S>                  <C>      <C>            <C>       <C>
                        90 Days or More       Nonaccrual Status
                            Past Due
                        2003        2002        2003     2002
Loans secured by       $       0    $    59   $ 3,314    $ 1,525
real estate
Personal loans                 0         11        74          0
Commercial and other           0          0       771         71
loans
                       ---------    -------   -------    -------
Total loans            $       0    $    70   $ 4,159    $ 1,596
                       =========    =======   =======    =======
</TABLE>

          There were no restructured loans for any of the time periods set forth
above.

          The Corporation 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

          Commercial borrowers with lending relationships over $ 500,000 and
agribusiness borrowers with lending relationships over $ 250,000 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            35 - 50%
Substandard          3 - 5%
Special Mention      1 - 3%


          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
Corporation's trading area.

          The reasons for the significant increase in the provision for loan
losses for 2003 compared to 2002 are significant increases in nonaccrual and
classified loans.  No loans were past-due 90 days or more still accruing
interest at December 31, 2003.  Nonaccrual loans have increased more than 160%
over the past four quarters and represent 4.0% of totals loans compared with
1.5% of total loans at December 31, 2002.  At December 31, 2003, 80% of loans on
nonaccrual status were fully-secured by real estate.  Classified loans on
December 31, 2003 were $ 4,728,000 compared to $ 4,264,000 on December 31, 2002,
an increase of 11%.  The Corporation has identified agribusiness lending as a
concentration of credit.  At December 31, 2003, agribusiness loans comprised
$ 2,484,000, or 60%, of the classified loans.  In addition, the allowance and
loans placed on nonaccrual status were adjusted in the third quarter 2003 based
on preliminary results of an OCC examination conducted in July and August for
which an official report has not yet been received.  As a result of the
increased delinquencies and classified loans, the examiners have suggested
increasing the allowance to a level more in line with the bank's peer group (as
a percentage of total loans) as a way to provide for the perceived increase in
the overall risk associated with the bank's loan portfolio.  They have also
classified as "nonaccrual" several loans with current payment status (amounting
to $ 1,956,000) due to perceived weaknesses in the collateral or borrower's
financial condition.

          The reasons for the increase in the provision for loan losses for 2002
compared to 2001 are significant increases in nonaccrual and classified loans.
Nonaccrual loans have increased more than 450% over the past four quarters and
represent 1.5% of total loans.  At December 31, 2002, 91% of loans on nonaccrual
status were fully-secured farm loans.  Classified loans on December 31, 2002
were $ 4,264,000 compared to $ 2,040,000 on December 31, 2001, an increase of
109%.  The Corporation has identified farm loans as a concentration of credit.
At December 31, 2002, classified farm loans comprised $ 3,680,000, or 86% of the
classified loans.

Concentrations

          The Bank is neither dependent upon deposits from nor exposed to loan
concentrations to a single customer, the loss of which would have a material
adverse effect on the financial condition of the Bank.  Although the Bank has a
diversified loan portfolio, a significant portion of its customers' ability to
honor their contracts is dependent upon the agribusiness economic sector
(approximately 22% of loan portfolio and 136% of stockholders' equity).

          The Company also has a significant concentration in FNMA and FHLMC
preferred stocks, representing 37% of total investments and 72% of stockholders'
equity at December 31, 2003.

Employees

          As of December 31, 2003, the Bank has forty-eight (48) full-time
equivalent employees.

Supervision and Regulation - The Bank

          The operations of the Bank are subject to federal and state statutes
applicable to banks chartered under the banking laws of the United States, to
members of the Federal Reserve System and to banks whose deposits are insured by
the FDIC.  The operations of the Bank are also subject to regulations of the
Comptroller, the Federal Reserve Board, and the FDIC.  The primary supervisory
authority of the Bank is the Comptroller, which regulates and examines the Bank.
The Comptroller has authority to prevent national banks from engaging in unsafe
or unsound practices in conducting their businesses.

          Federal and state banking laws and regulations govern, among other
things, the scope of a bank's business, the investments a bank may make, the
reserves against deposits a bank must maintain, loans a bank makes and
collateral it takes, the maximum interest rates a bank may pay on deposits, the
activities of a bank with respect to mergers and consolidations and the
establishment of branches.  Under Pennsylvania law, the Bank may establish or

acquire branch offices, subject to certain limitations, in any county of the
state.  National bank branches, however, may be established within the permitted
area only after approval by the Comptroller.

          As a subsidiary bank of a bank holding company, the Bank is subject to
certain restrictions imposed by the Federal Reserve Act on any extensions of
credit to the bank holding company or its subsidiaries, or investments in the
stock or other securities as collateral for loans.  The Federal Reserve Act and
Federal Reserve Board regulations also place certain limitations and reporting
requirements on extensions of credit by the Bank to principal shareholders of
its parent holding company, among others, and to related interests of such
principal shareholders.  In addition, such legislation and regulations may
affect the terms upon which any person becoming a principal shareholder of a
holding company may obtain credit from banks with which the subsidiary Bank
maintains a correspondent relationship.

FDIC

          Under the Federal Deposit Insurance Act, the Comptroller possesses the
power to prohibit institutions regulated by it (such as the Bank) from engaging
in any activity that would be an unsafe and unsound banking practice or would
otherwise be in violation of the law.  Moreover, the Financial Institutions
Regulatory and Interest Rate Control Act of 1978 ("FIRA") generally expanded the
circumstances under which officers or directors of a bank may be removed by the
institution's federal supervisory agency, restricts lending by a bank to its
executive officers, directors, principal shareholders or related interests
thereof and restricts management personnel of a bank from serving as directors
or in other management positions with certain depository institutions whose
assets exceed a specified amount or which have an office within a specified
geographic area, and restricts management personnel from borrowing from another
institution that has a correspondent relationship with their bank.
Additionally, FIRA requires that no person may acquire control of a bank unless
the appropriate federal supervisory agency has been given sixty (60) days prior
written notice and within that time has not disapproved the acquisition or
otherwise extended the period for disapproval.  Control for purposes of FIRA,
means the power, directly or indirectly, to direct the management or policies or
to vote twenty-five percent (25%) or more of any class of outstanding stock of a
financial institution or its respective holding company.  A person or group
holding revocable proxies to vote twenty-five percent (25%) or more of the
outstanding common stock of a financial institution or holding company such as
the Company, would presumably be deemed to control the institution for purposes
of FIRA.

Garn-St Germain

          The Garn-St Germain Depository Institutions Act of 1982 ("1982 Act")
removed certain restrictions on a bank's lending powers and liberalized its
depository capabilities.  The 1982 Act also amended FIRA (see above) by changing
the statutory limits on lending by a bank to its executive officers, directors,
principal shareholders, or related interests thereof and by relaxing certain
reporting requirements.  The 1982 Act, however, also tightened FIRA provisions
respecting management interlocks and correspondent bank relationships involving
a bank's management personnel.

CRA

          Under the Community Reinvestment Act of 1977, as amended ("CRA"), the
Comptroller is required to assess the record of all financial institutions
regulated by it to determine if these institutions are meeting the credit needs
of the community (including low and moderate income neighborhoods) which they
serve and to take this record into account in its evaluation of any application

made by any of such institutions for, among other things, approval of a branch
or other deposit facility, office relocation, a merger or an acquisition of bank
shares.  The Financial Institutions Reform, Recovery and Enforcement Act of 1989
amended the CRA to require, among other things, that the Comptroller make
publicly available the evaluation of a bank's record of meeting the credit needs
of its entire community, including low and moderate income neighborhoods.  This
evaluation will include a descriptive rating and a statement describing the
basis for the rating, which is publicly disclosed.

BSA

          Under the Bank Secrecy Act ("BSA"), banks and other financial
institutions are required to report to the Internal Revenue Service currency
transactions of more than $ 10,000 or multiple transactions of which the Bank is
aware in any one day that aggregate in excess of $ 10,000.  Civil and criminal
penalties are provided under the BSA for failure to file a required report, for
failure to supply information required by the BSA or for filing a false or
fraudulent report.

CEBA

          An omnibus federal banking bill, known as the Competitive Equality
Banking Act ("CEBA"), was signed into law in August of 1987.  Included in the
legislation were measures:  (1) imposing certain restrictions on transactions
between banks and their affiliates; (2) expanding the powers available to
Federal bank regulators in assisting failed and failing banks; (3) limiting the
amount of time banks may hold certain deposits prior to making such funds
available for withdrawal and any interest thereon; and (4) requiring that any
adjustable rate mortgage loan secured by a lien on a one-to-four family dwelling
include a limitation on the maximum rate at which interest may accrue on the
principal balance during the term of such loan.

FDICIA

     Capital Categories

          In December of 1991 the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") became law.  Under FDICIA, institutions must
be classified, based on their risk-based capital ratios into one of five defined
categories, as illustrated below:

<TABLE>
<S>                   <C>          <C>          <C>         <C>
                      Total Risk-    Tier 1       Tier 1      Under a
                      Based Ratio  Risk-Based    Leverage     Capital
                                      Ratio       Ratio      Order or
                                                             Directive
CAPITAL CATEGORY
Well capitalized           10.0            6.0       5.0        No
Adequately
 capitalized                8.0            4.0       4.0*
Undercapitalized          < 8.0          < 4.0     < 4.0*
Significantly
 Undercapitalized         < 6.0          < 3.0     < 3.0
Critically
 undercapitalized                        < 2.0
</TABLE>
*  3.0 for those banks having the highest available regulatory rating.

          Based on the above criteria, the Bank is classified as "well
capitalized".

Prompt Corrective Action

          In the event an institution's capital deteriorates to the
undercapitalized category or below, FDICIA prescribes an increasing amount of
regulatory intervention, including: (1) the institution of a capital restoration
plan and a guarantee of the plan by a parent institution; and (2) the placement
of a hold on increases in assets, number of branches or lines of business.  If
capital has reached the significantly or critically undercapitalized levels,
further material restrictions can be imposed, including restrictions on interest
payable on accounts, dismissal of management and (in critically undercapitalized
situations) appointment of a receiver.  For well capitalized institutions,
FDICIA provides authority for regulatory intervention where the institution is
deemed to be engaging in unsafe or unsound practices or receives a less than
satisfactory examination report rating for asset quality, management, earnings,
or liquidity.  All but well capitalized institutions are prohibited from
accepting brokered deposits without prior regulatory approval.

Operational Controls

          Under FDICIA, financial institutions are subject to increased
regulatory scrutiny and must comply with certain operational, managerial and
compensation standards to be developed by Federal Reserve Board regulations.

          FDICIA also requires the regulators to issue new rules establishing
certain minimum standards to which an institution must adhere including
standards requiring a minimum ratio of classified assets to capital, minimum
earnings necessary to absorb losses and minimum ratio of market value to book
value for publicly held institutions.  Additional regulations are required to be
developed relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth and excessive compensation,
fees and benefits.

Examinations and Audits

          Annual full-scope, on site examinations are required for all FDIC-
insured institutions except institutions with assets under $ 250 million which
are well capitalized, well managed and not subject to a recent change in
control, in which case, the examination period is every eighteen (18) months.
Banks with total assets of $ 150 million or more are required to submit to their
supervising federal and state banking agencies a publicly available annual audit
report and are subject to additional accounting and reporting regulations.

Truth-In-Savings

          A separate subtitle within FDICIA, called the "Bank Enterprise Act of
1991", requires "truth-in-savings" on consumer deposit accounts so that
consumers can make meaningful comparisons between the competing claims of banks
with regard to deposit accounts and products.  Under this provision, the Bank is
required to provide information to depositors concerning the terms of their
deposit accounts, and in particular, to disclose the annual percentage yield.
There are some operational costs of complying with the Truth-In-Savings law.

          Federal regulators recently issued regulations to implement the
privacy provisions of the Gramm-Leach-Bliley Act (Financial Services
Modernization Act).  This new law took effect in 2000 and requires banks to
notify consumers about their privacy policies and to give them an opportunity to
"opt-out" or prevent the bank from sharing "nonpublic personal information"
about them with nonaffiliated third parties.  The Bank has developed privacy
policies and procedures to provide timely disclosure of such policies and a
convenient means for consumers to opt out of the sharing of their information
with unaffiliated third parties.

The earnings of the Bank, and therefore the earnings of the Company
are affected by general economic conditions, management policies, and the
legislative and governmental actions of various regulatory authorities including
the FRB, the Comptroller, and the FDIC.

          In addition to banking and securities laws, regulations and regulatory
agencies, the Company also is subject to various other laws, regulations, and
regulatory agencies throughout the United States.  Furthermore, various
proposals, bills, and regulations have been and are being considered in the
United States Congress, and various other governmental regulatory and
legislative bodies, which could result in changes in the profitability and
governance of the Company.  It cannot be predicted whether new legislation or
regulations will be adopted and, if so, how they would affect the Company.

          References under the caption "Supervision and Regulation" to
applicable statutes, regulations and orders are brief summaries of portions
thereof which do not purport to be complete and which are qualified in their
entirety by reference thereto.

Important Factors relating to Forward Looking Statements

          The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies without fear of litigation so long
as those statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in such statements.  In
connection with certain statements made in this report and those that may be
made in the future by or on behalf of the Company which are identified as
forward-looking statements, the Company notes that the following important
factors, among others, could cause actual results to differ materially from
those set forth in any such forward-looking statement.  Further, such forward-
looking statements speak only as of the date on which such statement or
statements are made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events.

          The business and profitability of a financial services organization
such as the Company is influenced by prevailing economic conditions and
governmental policies.  The actions and policy directives of the FRB determine
to a significant degree the cost and the availability of funds obtained from
money market sources for lending and investing.  FRB polices and regulations
also influence, directly and indirectly, the rates of interest paid by
commercial banks on their interest-bearing deposits and may also impact the
value of financial instruments held by the Company.  The nature and impact on
the Company of future changes in economic and market conditions and monetary and
fiscal policies, both foreign and domestic, are not predictable and are beyond
the Company's control.  In addition, these conditions and policies can impact
the Company's customers and counterparties which may increase the risk of
default on their obligations to the Company and its affiliates.  They can also
affect the competitive conditions in the markets and products within which the
Company operates, which can have an adverse impact on the Company's ability to
maintain its revenue streams.

          As part of its ongoing business, the Company assumes financial
exposures to interest rates, currencies, equities and other financial products.
In doing so, the Company is subject to unforeseen events which may not have been
anticipated or which may have effects which exceed those assumed within its risk
management processes.  This risk can be accentuated by volatility and reduction
in liquidity and those markets which in turn can impact the Company's

ability to hedge and trade the positions concerned.  In addition, the Company is
dependent on its ability to access the financial markets for its funding needs.

          As noted in "Supervision and Regulation", the Company is regulated by
and subject to various regulators.  The actions of these regulators can have an
impact on the profitability and governance of the Corporation.  Increases by
regulatory authorities of minimum capital, reserve, deposit insurance and other
financial viability requirements can also affect the Company's profitability.

          The Company is subject to operational and control risk which is the
potential for loss caused by a breakdown in communication, information,
processing and settlement systems or processes or lack of compliance with the
procedures on which they rely either within the Company or within the broader
financial systems infrastructure.

          As with any financial institution, the Company and its affiliates are
also subject to the risk of litigation and to an unexpected or adverse outcome
in such litigation.  Competitive pressures in the marketplace and unfavorable or
adverse publicity and news coverage can have the effect of lessening customer
demand for the Company's services.  Ultimately, the Company's businesses and
their success are dependent on the Company's ability to attract and retain high
quality employees.

          The Company files periodic reports with the Securities and Exchange
Commission (SEC) in the form of 10-Q's - quarterly reports; 10-K - annual
report; annual proxy statements and Form 8-K for any significant events that may
arise during the year.  Copies of the Company's filings may be obtained through
the SEC's internet site at www.sec.gov.  The Company has not yet made
arrangements to have these filings available on its website at www.fnbctc.com,
but will provide paper copies of its filings free of charge upon request.  This
can be done by contacting Doriann Hoffman in writing at Fulton Bancshares
Corporation, 100 Lincoln Way East, McConnellsburg, Pennsylvania  17233.

Item 2.   Properties

          The main administrative office of the Bank, which also includes a
drive-up facility, is located in McConnellsburg, Pennsylvania.  The Bank
currently has seven branch offices one of which is located at Penn's Village on
Route 16 at the east end of McConnellsburg, Pennsylvania.  This branch office
opened on May 11, 1981.  In addition, the Bank installed an ATM at the Penn's
Village Shopping Center in March, 1989.  The Bank also serves the communities
surrounding the Pennsylvania/Maryland border through its branch office located
in Warfordsburg, Pennsylvania.  This branch opened for business on April 4,
1983.  On the same day, a third branch office was opened in Hustontown,
Pennsylvania, which services northern Fulton County.  Finally, to service the
southern end of Huntington County, the Bank acquired a branch in Shade Gap,
Pennsylvania, on September 26, 1988.  On July 15, 1999, the Bank opened a
branch, including an ATM, at the Sandy Ridge Mall in Orbisonia, PA.  To service
the western portion of Franklin County, the Bank opened a branch, including an
ATM, on Route 30 in St. Thomas, PA on November 15, 1999.  On February 11, 2002,
the Bank opened a branch in Breezewood, Pennsylvania, including an ATM, to
service eastern Bedford County.  On January 7, 1997 ATM's were opened at the
Warfordsburg and Hustontown branches.  In June, 1998 the Bank opened an ATM at
the Shade Gap branch and added an ATM to its main office drive-up facility.  The
main office, Warfordsburg, Hustontown, Orbisonia and Breezewood branches are
owned by the Bank.  The Penn's Village branch is rented.

          The Bank closed its Shade Gap branch (except for the ATM facility) on
June 30, 2000.

Item 3.   Legal Proceedings.

          Fulton Bancshares Corporation is an occasional party to legal actions
arising in the ordinary course of its business.  In the opinion of the Company's
management, Fulton Bancshares Corporation has adequate legal defenses and/or
insurance coverage respecting any and each of these actions and does not believe
that they will materially affect the Company's operations or financial position.

Item 4.   Submission of Matters to Vote of Security Holders.

          None

PART II

Item 5.   Market for Registrant's Common Stock and Related Security
             Holder Matters.

          The corporation's common stock is traded on a limited basis in the
local over-the-counter market under the symbol FULB.  As of December 31, 2003,
the approximate number of shareholders of record was 500.  Market prices at the
end of each quarter are based on the latest sales prices.

          The stock market analysis and dividends for 2003 and 2002 on page 34
of the annual shareholders report for the year ended December 31, 2003 is
incorporated herein by reference.

          Dividend restrictions are detailed in Note 14 of the annual
shareholders report and are incorporated herein by reference.

          The Company occasionally reissues shares of stock held in Treasury as
compensation for services rendered to employees.  In 2003, 5 shares of treasury
stock were reissued, covering compensation of $ 245.  In 2002, 40 shares of
treasury stock were reissued, covering $ 1,800 in compensation.

Item 6.   Selected Financial Data.

          The selected five-year financial data on page 23 of the annual
shareholders' report for the year ended December 31, 2003 is incorporated herein
by reference.

Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.

          Contractual obligations of the Company as of December 31, 2003 are as
follows:

<TABLE>
<S>                         <C>        <C>          <C>        <C>         <C>
                                             Payments due by period
                                 - - - - - - - - - - - - - - - - - - - - - - -
      (In thousands)           Total       Less       1 - 3      3 - 5       More
  Contractual obligations                 than 1      years      years      than 5
                                           year                              years
   - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Long-term obligations          $ 15,000    $     0    $     0     $     0   $ 15,000
Operating lease obligations         339         58        121         120         40
                               --------    -------    -------     -------   --------
Total                          $ 15,339     $   58    $   121     $   120   $ 15,040
                               ========    =======    =======     =======   ========
</TABLE>

          All other information required by Item 7 is included in "Management's
Discussion and Analysis of Financial Condition and Results of Operation", on
pages 27 through 34 of the annual shareholders' report which are incorporated
herein by reference.

Item 8.   Financial Statements and Supplementary Data.

          The financial statements and supplementary data, some of which is
required under Guide 3 (statistical disclosures by bank holding companies) are
shown on pages 2 through 26 of the annual shareholders' report for the year
ended December 31, 2003 and are incorporated herein by reference.  Additional

schedules required in addition to those included in the annual shareholders'
report are submitted herewith as follows:

                     Description of Statistical Information

                                                                        Page
Investment portfolio                                                     20
Loan portfolio                                                           21
Summary of loan loss experience                                          22
Nonaccrual, delinquent loans, and impaired                               23
Allocation of allowances for loan losses                                 24
Deposits/return on equity and assets                                     25
Consolidated summary of operations                                       26


                  FULTON BANCSHARES CORPORATION AND SUBSIDIARY
                              INVESTMENT PORTFOLIO

          The following table shows the maturities of investment securities at
book value as of December 31, 2003, and weighted average yields of such
securities.  Yields are shown on a tax equivalent basis, assuming a 34% federal
income tax rate.
<TABLE>
<S>                 <C>        <C>         <C>         <C>          <C>
                                 After 1     After 5
                                year but    years but
                    Within 1    within 5    within 10    After 10
                      year        years       years       years       Total
  (000 omitted)
Bonds:

U. S. Government
agencies
Book value             $   0      $ 9,238     $     0      $     0    $ 9,238
Yield                      0%        2.45%          0%           0%      2.45%

State and municipal
Book value                 0            0       2,369        3,026      5,395
Yield                      0%           0%       5.88%        5.79%      5.82%

Mortgage-Backed
Book value                 0            0           0        3,128      3,128
Yield                      0%           0%          0%        2.29%      2.29%
                       -----      -------     -------      -------   --------
Total book value       $   0      $ 9,238     $ 2,369      $ 6,154   $ 17,761
                       =====      =======     =======      =======   ========
Yield                      0%        2.45%       5.88%        4.01%      3.45%
                       =====      =======     =======      =======   ========
Other Debt
Securities:
FHLMC/FNMA non-
cumulative
preferred stock
Book value                                                           $ 12,652
                                                                     ========
Yield                                                                    6.44%
                                                                     ========
Equity Securities:
Total Equity                                                         $  1,533
Securities
                                                                     ========
Yield                                                                    2.10%
                                                                     ========
Total Investment                                                     $ 31,946
Securities
                                                                     ========
Yield                                                                    4.57%
                                                                     ========
</TABLE>
                  FULTON BANCSHARES CORPORATION AND SUBSIDIARY

                                 LOAN PORTFOLIO

          The following table presents the loan portfolio at the end of each of
the last five years:
<TABLE>
<S>                      <C>         <C>        <C>         <C>        <C>
     (000 omitted)          2003       2002        2001       2000       1999
Commercial,                 $ 18,623   $ 15,171    $ 17,418  $  13,097   $ 12,294
   financial and
   agricultural
Real estate -                      0          0           0          0          0
   Construction
Real estate -                 80,398     82,098      78,796     80,020     69,273
   Mortgage
Installment and                4,268     10,998       8,287      9,788     10,228
   other personal
   loans (net of
   unearned discount)
                          ---------  ---------   ---------  ---------   --------
Total loans               $ 103,289  $ 108,267   $ 104,501  $ 102,905   $ 91,795
                          =========  =========   =========  =========   ========
</TABLE>
          Presented below are the approximate maturities of the loan portfolio
(excluding real estate mortgages and installments) at December 31, 2003:
<TABLE>
<S>                          <C>          <C>        <C>        <C>
                                            One to      Over
                              Under One      Five       Five
                                Year        Years      Years      Total

     (000 omitted)

Commercial, financial and        $ 12,105     $ 4,656   $ 1,862   $ 18,623
agricultural

Real estate - Construction              0           0         0          0
                                 --------     -------   -------   --------
Total                            $ 12,105     $ 4,656   $ 1,862   $ 18,623
                                 ========     =======   =======   ========
</TABLE>

          The following table presents the approximate amount of fixed rate
loans and variable rate loans due as of December 31, 2003:
<TABLE>
<S                                    <C>            <C>
                                       Fixed Rate    Variable Rate
                                          Loans          Loans
     (000 omitted)

Due within one year                       $  7,779       $ 24,790
Due after one but within five years         10,052         10,552
Due after five years                        18,827         31,289
                                          --------       --------
Total                                     $ 36,658       $ 66,631
                                          ========       ========
</TABLE>

                  FULTON BANCSHARES CORPORATION AND SUBSIDIARY
                         SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<S>                         <C>       <C>       <C>       <C>       <C>
                                        Years Ended December 31
                              2003      2002      2001      2000     1999
    (000 omitted)

Average total loans
outstanding (net of
unearned income)            $107,140  $105,219  $105,028   $98,052  $87,902
                            ========  ========  =========  =======  =======

Allowance for loan
  losses,
 beginning of period        $ 1.031   $   845   $  847     $  800   $  580
Additions to provision        1,265       255         15       45      195
for loan losses charged
to operations
Loans charged off during
the year
Real estate                      25         0          0        0        0
Commercial and                  363         3         20        3       14
agricultural
Installment                      23        73         14       29       34
                           --------  --------  ---------  -------  -------
Total charge-off's              411        76         34       32       48
                           --------  --------  ---------  -------  -------
Recoveries of loans
previously charged off:
Real estate                       6         0          0        0        0
Commercial and                    0         1          2       24       63
agricultural
Installment                       9         6         15       10       10
                           --------  --------  ---------  -------  -------
Total recoveries                 15         7         17       34       73
                           --------  --------  ---------  -------  -------
Net loans charged off           396        69         17  (     2) (    25)
                           --------  --------  ---------  -------  -------
Allowance for loan         $  1,900  $  1,031  $     845  $   847  $   800
                           ========  ========  =========  =======  =======
Ratio of net loans             .37%      .06%       .02%  (  .01)%    .12%
charged off to average
loans outstanding
                          ========  ========  =========  ======== =======
</TABLE>

          The provision is based on an evaluation of the adequacy of the
allowance for possible loan losses.  The evaluation includes, but is not limited
to, review of net loan losses for the year, the present and prospective
financial condition of the borrowers and evaluation of current and projected
economic conditions.
                  FULTON BANCSHARES CORPORATION AND SUBSIDIARY
                   NONACCRUAL, DELINQUENT, AND IMPAIRED LOANS
          The following table sets forth the outstanding balances of those loans
on a nonaccrual status and those on accrual status which are contractually past
due as to principal or interest payments for 30 days or more at December 31.
<TABLE>
<S>                      <C>       <C>       <C>      <C>      <C>
                            2003      2002     2001       2000     1999
    (000 omitted)

Nonaccrual loans          $ 4,159   $ 1,596  $   289   $     0  $     0
                          =======   =======  =======   =======  =======
Accrual loans:
Restructured               $     0   $     0  $     0   $     0  $     0
30 through 89 days past      3,362     3,692    4,121     1,787    1,084
due
90 days or more past due         0        70      922       549      168
                           -------   -------  -------   -------  -------
Total accrual loans        $ 3,326   $ 3,762  $ 5,043   $ 2,336  $ 1,252
                           =======   =======  =======   =======  =======
</TABLE>

          See Note 3 of the notes to consolidated financial statements for
details of income recognized and foregone revenue on nonaccrual loans for the
past three years, as well as loan impairment details for 2001 through 2003.
                  FULTON BANCSHARES CORPORATION AND SUBSIDIARY
                     ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

          The following is an allocation by loan categories of the allowance for
loan losses at December 31 for the last five years.  In retrospect the specific
allocation in any particular category may prove excessive or inadequate and
consequently may be reallocated in the future to reflect the then current
conditions.  Accordingly, the entire allowance is available to absorb losses in
any category:
 (000 omitted)
<TABLE>
<S>                        <C>       <C>       <C>       <C>
                                   Years Ended December 31
                                  2003                2002
                           Allowanc  Percentag Allowanc  Percentag
                           e Amount    e of    e Amount    e of
                                     Loans to            Loans to
                                       Total               Total
                                       Loans               Loans
(000 omitted)
Commercial, financial and   $ 1,507     79.34%    $ 561     54.41%
agricultural
Real estate - Construction        0      0.00         0      0.00
Real estate - Mortgage          351     18.46       333     32.30
Installment                      42      2.20       137     13.29
                            -------    -------    -----    -------
Total                         1,900    100.00%    1,031    100.00%
                            =======    =======    =====    =======
</TABLE>
<TABLE>
<S>                        <C>       <C>       <C>       <C>
                                   Years Ended December 31
                                  2001                2000
                           Allowanc  Percentag Allowanc  Percentag
                           e Amount    e of    e Amount    e of
                                     Loans to            Loans to
                                       Total               Total
                                       Loans               Loans
(000 omitted)
Commercial, financial and     $ 141     16.67%    $ 108     12.73%
agricultural
Real estate - Construction        0       0.0         0      0.00
Real estate - Mortgage          637     75.40       659     77.76
Installment                      67      7.93        80      9.51
                              -----    -------    -----    -------
Total                         $ 845    100.00%    $ 847    100.00%
                              =====    =======    =====    =======
</TABLE>
<TABLE>
<S>                        <C>                 <C>
                                   Years Ended December 31
                                            1999
                                Allowance         Percentage of
                                 Amount          Loans to Total
                                                      Loans
(000 omitted)
Commercial, financial and         $ 107               13.37%
agricultural
Real estate - Construction            0                0.00
Real estate - Mortgage              609               76.13
Installment                          84               10.50
                                  -----              -------
Total                             $ 800              100.00%
                                  =====              =======
</TABLE>
                  FULTON BANCSHARES CORPORATION AND SUBSIDIARY
                                    DEPOSITS
          The average amounts of deposits are summarized below:
<TABLE>
<S>                             <C>       <C>        <C>
                                   Years Ended December 31

                                  2003       2002      2001

      (000 omitted)

Demand deposits                  $ 14,966  $  15,237         $
                                                        12,534
Interest bearing demand            11,925     11,431    10,992
deposits
Savings deposits                   22,579     18,438    16,891
Time deposits                      61,069     74,238
                                                        71,974
                                ---------  ---------  --------
     Total deposits             $ 110,539  $ 119,344  $112,391
                                =========  =========  ========
</TABLE>
          The following is a breakdown of maturities of time deposits of
$ 100,000 or more as of December 31, 2003:
<TABLE>
<S>                                       <C>
Maturity                                  (000
                                          omitted)

Certificates of Deposit
Three months or less                        $  5,849
Over three months through six months           2,245
Over six months through twelve months          1,708
Over twelve months                             6,724
                                            --------
                                            $ 16,526
                                            ========
     </TABLE>
          RETURN ON EQUITY AND ASSETS (APPLYING DAILY AVERAGE BALANCES)
          The following table presents a summary of significant earnings and
capital ratios:
<TABLE>
<S>                        <C>        <C>        <C>
                               2003      2002       2001

Assets                      $ 153,621 $ 155,563  $ 144,384
Net income                  $     830 $   1,730  $   1,486
Equity                      $  16,971 $  15,850  $  14,683
Cash dividends paid         $     517 $     503  $     468
Return on assets                0.54%     1.11%      1.03%
Return on equity                4.89%    10.91%     10.12%
Dividend payout ratio          62.33%    29.06%     31.50%
Equity to asset ratio          11.02%    10.19%     10.17%
   </TABLE>
                  FULTON BANCSHARES CORPORATION AND SUBSIDIARY
                       CONSOLIDATED SUMMARY OF OPERATIONS
                                        Years Ended December 31
<TABLE>
<S>                         <C>         <C>       <C>       <C>       <C>
                              2003        2002      2001      2000      1999
     (000 omitted)

Interest income              $  8,469  $ 9,837  $ 10,185  $  9,992   $ 8,759
Interest expense                3,175    4,271     5,432     5,210     4,325
                             --------  -------  --------  --------   -------
Net interest income             5,294    5,566     4,753     4,782     4,434
Provision for loan losses       1,265      255        15        45       195
                             --------  -------  --------  --------   -------
Net interest income after       4,029    5,311     4,738     4,737     4,239
provision for loan losses

Other income:
Trust                              19       22        19        18        12
Service charges - Deposits        224      208       189       177       160
Other service charges,            182      165       125       124       127
collection and exchange,
charges, commission fees
Other operating income            378      279       306       203       290
                             --------  -------  --------  --------   -------

Total other income                803      674       639       522       589
                             --------  -------  --------  --------   -------
Income before operating
 expense                        4,932    5,985     5,377     5,259     4,828

Operating expenses:
Salaries and employees          1,708    1,728     1,560     1,509     1,314
  benefits
Occupancy and equipment           833      746       729       728       647
  expense
Other operating expenses        1,471    1,304      1,162     1,133     1,050
                             --------  -------  --------  --------   -------
Total operating expenses        4,012   3,778      3,451     3,370     3,011
                              -------  -------  --------  --------   -------
Income before income taxes        820    2,207     1,926     1,889     1,817
Income tax expense          (      10)     477       440       449       380
(benefit)
                              --------  -------  --------  --------   -------
Net income applicable to      $   830  $1,730   $  1,486   $ 1,440   $ 1,437
common stock
                             ========  =======  ========   =======   =======
Per share data:
Earnings per common share        1.68   $ 3.51    $ 3.02    $ 2.91    $ 2.90
Cash dividend - Common           1.05     1.02       .95       .86       .86
Weighted average number of    492,810  492,772   492,747   494,054   495,000
  common shares
</TABLE>
Item 9.   Disagreements on Accounting and Financial Disclosures.

          Not applicable.

Item 9a.  Controls and Procedures

          The Company's Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the Company's disclosure controls and procedures
(as such term is defined in Rules 13a-14(c) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) as of December 31, 2003. Based on such
evaluation, such officers have concluded that, as of December 31, 2003, the
Company's disclosure controls and procedures are effective in alerting them on a
timely basis to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's periodic
filings under the Exchange Act.

Changes in Internal Controls

          There have not been any significant changes in the Company's internal
control or in other factors that could significantly affect such control during
the fourth quarter of 2003.

PART III

Item 10.  Directors and Executive Officers of the Registrant

          The Company has adopted a code of ethics that applies to all senior
financial officers (including its chief executive officer, chief financial
officer, and any person performing similar functions).  The Company has filed a
copy of this Code of Ethics as Exhibit 14 to this Form 10-K.  The Company has
also made the Code of Ethics available on its website at http://www.fcnbtc.com.

          All other information required by Item 10 is incorporated by reference
from Fulton County Bancshares Corporation's definitive proxy statement for the
2004 Annual Meeting of Shareholders filed pursuant to Regulation 14A.

Item 11.   Executive Compensation

          Shown below is information concerning the annual compensation for
services in all capacities to the Company, the Bank, and FCCDC for the fiscal
years ended December 31, 2003, 2002, and 2001 of the Chief Executive Officer.
There were no other officers of the Company, the Bank, or FCCDC whose total
annual salary and bonus during that time frame exceeded $ 100,000.

                           Summary Compensation Table
<TABLE>
<S>          <C>    <C>       <C>    <C>           <C>         <C>      <C>      <C>
    (a)       (b)     (c)      (d)        (e)         (f)        (g)      (h)        (i)
 Name and     Year   Salary   Bonus      Other     Restricted  Options   LTIP     All Other
 Principal            ($)      ($)      Annual       Stock      /SARS   Payouts  Compensatio
 Position                            Compensation   Award(s)     (#)      ($)         n
                                          ($)         ($)s)                         ($)
                      Annual Compensation                   Long-Term Compensation
Clyde H.       2003  140,858     $ 0           $ 0        $ 0       $ 0     $ 0    $  81,711
Bookheimer,
President &
CEO
               2002  140,666       0             0          0         0       0      128,855
               2001  130,008       0             0          0         0       0      163,903
</TABLE>
Footnotes:
(1)  All other compensation includes the following:
  <TABLE>
      <S>        <C>          <C>       <C>         <C>           <C>
                 Directors    Fringe    Retirement  Supplemental  Deferred
                              Benefits    Plan      Executive     Directors
                             (Personal              Retirement    Fees
                              Use of                 Plan
                               Bank
                               Owned
                               Vehicle)

2003              $     0    $   937   $ 18,864     $ 61,910      $     0
2002                    0      1,015     16,270      111,570            0
2001                    0      1,232     13,890      148,781            0
</TABLE>
          The supplemental executive retirement plan was funded by single
premium life insurance policies on the CEO, with the Bank named as beneficiary.
Actual payments to the CEO amounting to $ 96,000 annually will not begin until
2005.  At December 31, 2003, the cash surrender value of the policies was
$ 1,363,905.

          All other information required by Item 11 is incorporated by reference
from Fulton County Bancshares Corporation's definitive proxy statement for the
2004 Annual Meeting of Shareholders filed pursuant to Regulation 17A.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

          The information required by Item 12 is incorporated by reference from
Fulton Bancshares Corporation's definitive proxy statement for the 2004 Annual
Meeting of Shareholders filed pursuant to Regulation 14A.

Item 13.  Certain Relationships and Related Transactions

          The information required by Item 13 is incorporated by reference from
Fulton Bancshares Corporation's definitive proxy statement for the 2004 Annual
Meeting of Shareholders filed pursuant to Regulation 14A.

Item 14.  Principal Accountant Fees and Services

          The information required by Item 14 is incorporated by reference from
Fulton Bancshares Corporation's definitive proxy statement for the 2004 Annual
Meeting of Shareholders filed pursuant to Regulation 14A.
PART IV

Item 15.  Exhibits, Financial Statement Schedules, and Reports of Form 8-K.

         (a) (1) - List of Financial Statements
                   The following consolidated financial statements of Fulton
                   Bancshares Corporation and its subsidiaries, included in
                   the annual report of the registrant to its shareholders
                   for the year ended December 31, 2003, are incorporated by
                   reference in Item 8:
                   Consolidated balance sheets - December 31, 2003 and 2002
                   Consolidated statements of income - Years ended December 31,
                   2003, 2002, and 2001
                   Consolidated statements of stockholders' equity - Years
                   ended December 31, 2003, 2002, and 2001
                   Consolidated statements of cash flows - Years ended
                   December 31, 2003, 2002, and 2001
                   Notes to consolidated financial statements - December 31,
                   2003
             (2)   List of Financial Statement Schedules
                   All financial statement schedules for which provision is
                   made in the applicable accounting regulations of the
                   Securities and Exchange Commission are not required under
                   the related instructions or are inapplicable and therefore
                   have been omitted.
             (3)   Listing of Exhibits
                   Exhibit (3) (i) Articles of incorporation
                   Exhibit (3) (ii) Bylaws
                   Exhibit (4) Instruments defining the rights of security
                      holders including indentures
                   Exhibit (10) Material contracts
                   Exhibit (13)  Annual report to security holders
                   Exhibit (14)  Code of Ethics
                   Exhibit (21)  Subsidiaries of the registrant
                   Exhibit (23)  Consent of independent auditors
                   Exhibit (31)  Rule 13a-14(a)/15d-14(a) Certifications
                   Exhitit (32)  Section 1350 Certifications
                   All other exhibits for which provision is made in the
                      applicable accounting regulations of the Securities and
                      Exchange Commission are not required under the related
                      instructions or are inapplicable and therefore have been
                      omitted.
         (b) Reports on Form 8-K filed
             None.

         (c) Exhibits
             (3) (i)  Articles of incorporation.  Incorporated by reference
                      to Exhibit 3A to the Registrant's Registration Statement
                      on Form SB-2, Registration No. 33-85626.
                (ii)  By-laws.  Incorporated by reference to Exhibit 3B to the
                      Registrant's Registration Statement on Form SB-2,
                      Registration No. 33-85626.
             (4) Instruments defining the rights of security holders including
                 indentures.  The rights of the holders of Registrant's common
                 stock are contained in:
                 (i)  Articles of Incorporation of Fulton Bancshares
                      Corporation, filed as Exhibit 3A to Registrant's
                      Registration Statement on Form SB-2
                      (Registration No. 33-85626).
                (ii) By-laws of Fulton Bancshares Corporation, filed as
                     Exhibit 3B to the Registrant's Registration Statement
                     on Form SB-2 (Registration No. 33-85626).
            (10) Material contracts.  Copies of the Salary Continuation
                 Agreements for the Chief Executive Officer and Principal
                 Financial and Accounting Officer, as well as the Director
                 Deferred Compensation Plan Agreement and Director Emeritus
                 Retirement Agreement are incorporated by reference to the
                 registrant's Form 10-K for the year ended December 31, 2002.
            (13) Annual report to security holders.  Filed herewith.
            (14) Code of Ethics
            (21) Subsidiaries of the registrant.  Filed herewith.
            (23) Consent of independent auditors.  Filed herewith.
            (31.1) Certification of Chief Executive Officer pursuant
                 to Section 302 of the Sarbanes-Oxley Act of 2002 - filed
                 herewith
            (31.2) Certification of Chief Financial Officer pursuant
                 to Section 302 of the Sarbanes-Oxley Act of 2002 - filed
                 herewith
            (32.1) Certification of Chief Executive Officer pursuant to
                 18 U.S.C. Section 1350 as adopted pursuant to Section 906
                 of the Sarbanes-Oxley Act of 2002 - filed herewith.
            (32.2) Certification of Chief Financial Officer pursuant to
                 18 U.S.C. Section 1350 as adopted pursuant to Section 906
                 of the Sarbanes-Oxley Act of 2002 - filed herewith.

         (d)  Financial statement schedules.  None.


                                   SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) 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 BANCSHARES CORPORATION
                                       --------------------------------------
                                       (Registrant)

                                   By  /s/ Clyde H. Bookheimer
                                       --------------------------------------
                                       Clyde H. Bookheimer, President
Dated:  March 26, 2004                 (Duly authorized officer)

                                   By  /s/ Doriann Hoffman
                                       --------------------------------------
                                       Doriann Hoffman, Chief Financial Officer
                                       (Principal Accounting Officer)


          In accordance with the requirements of Section 13 or 15(d) of the
Securities Act of 1934, this report was signed by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.

      Signature                    Title                Date

/S/ Clyde H. Bookheimer     Director, President &  March 26, 2004
Clyde H. Bookheimer         CEO

/S/ David L. Seiders        Director & Vice ChairmanMarch 26, 2004
David L. Seiders

/S/ Cecil B. Mellott        Director & Vice        March 26, 2004
Cecil B. Mellott            Chairman

/S/ Robert C. Snyder        Director               March 26, 2004
Robert C. Snyder

/S/ Ellis L. Yingling       Director &             March 26, 2004
Ellis L. Yingling           Chairman

/S/ Clair R. Miller         Director               March 26, 2004
Clair R. Miller

/s/ Martin R. Brown         Director               March 26, 2004
Martin R. Brown

/s/Robert L. Thomas         Director               March 26, 2004
Robert L. Thomas
                                                                      EXHIBIT 13



                          FULTON BANCSHARES CORPORATION

                          2003 Annual Financial Report


                                 C O N T E N T S


                                                          Page

INDEPENDENT AUDITOR'S REPORT                                 1

CONSOLIDATED FINANCIAL STATEMENTS

  Balance sheets                                             2
  Statements of income                                       3
  Statements of changes in stockholders' equity              4
  Statements of cash flows                               5 - 6
  Notes to consolidated financial statements            7 - 22

ACCOMPANYING FINANCIAL INFORMATION

 Selected five year financial data                          23
 Summary of quarterly financial data                        24
 Distribution of assets, liabilities and stockholders' equity,
   interest rates and interest differential                 25
 Changes in net interest income                             26
 Management's discussion and analysis of consolidated financial condition
   and results of operations                           27 - 34
 Stock market analysis and dividends                        34

                          INDEPENDENT AUDITOR'S REPORT



Board of Directors
Fulton Bancshares Corporation
McConnellsburg, Pennsylvania


          We have audited the accompanying consolidated balance sheets of the
Fulton Bancshares Corporation and its wholly-owned subsidiaries as of
December 31, 2003 and 2002 and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for each of the three years
ended December 31, 2003.  These consolidated financial statements are the
responsibility of the corporation's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

          We conducted our audits in accordance with auditing standards
generally accepted in the United States of America.  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

          In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of the
Fulton Bancshares Corporation and its wholly-owned subsidiaries as of
December 31, 2003 and 2002, and the results of their operations and their cash
flows for each of the three years ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America.


                                          /S/Smith Elliott Kearns & Company, LLC
                  --------------------------------------------------------------
                                             SMITH ELLIOTT KEARNS & COMPANY, LLC




Chambersburg, Pennsylvania
February 17, 2004

                   FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                             CONSOLIDATED BALANCE SHEETS
                             December 31, 2003 and 2002

<TABLE>
<S>                                                <C>               <C>
                                                         2003              2002

ASSETS
  Cash and due from banks                             $    3,852,702    $   5,213,690
  Investment securities available for sale                29,680,370       37,674,900
  Federal Reserve, Atlantic Central Bankers Bank
     and Federal Home Loan Bank stocks                     1,400,850        1,771,950
  Loans, net of reserve for loan losses
     2003 - $ 1,899,643; 2002 - $ 1,030,713              101,388,847      107,236,147
  Premises and equipment                                   3,759,508        3,938,272
  Cash surrender value of life insurance                   5,229,926        4,657,795
  Accrued interest receivable                                656,642          939,089
  Real estate owned other than premises                      206,199                0
  Other assets                                             1,568,336          956,134
                                                      --------------    -------------
      Total assets                                    $  147,743,380    $ 162,387,977
                                                      ==============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY

  Deposits
       Noninterest bearing                            $   13,924,892    $  16,155,636
       Interest bearing                                   97,200,011       96,869,814
                                                         111,124,903      113,025,450

  Other borrowed funds                                    18,825,000       31,250,000
  Accrued interest payable                                   254,599          313,724
  Other liabilities                                        1,261,143        1,139,523
                                                     ---------------   --------------
    Total liabilities                                    131,465,645      145,728,697
                                                     ---------------   --------------
Stockholders' Equity
  Common stock: par value $.625 per share;
4,000,000
       shares authorized; 495,000 shares issued              309,375          309,375
  Additional paid-in capital                               2,051,337        2,051,294
  Retained earnings                                       14,575,473       14,262,722
  Accumulated other comprehensive income (loss)      (      570,538)          124,003
  Treasury stock, shares at cost -
       2003 - 2,185 ; 2002 - 2,190                   (       87,912)   (      88,114)
                                                     ---------------   --------------
    Total stockholders' equity                            16,277,735       16,659,280
                                                     ---------------   --------------
      Total liabilities and stockholders' equity      $  147,743,380    $ 162,387,977
                                                     ===============   ==============
</TABLE>

                              FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                                    CONSOLIDATED STATEMENTS OF INCOME
                               Years Ended December 31, 2003, 2002 and 2001
<TABLE>
<S>                                                           <C>            <C>            <C>
                                                                   2003           2002           2001

Interest Income
Interest and fees on loans                                       $ 6,954,044    $ 7,593,348   $  8,584,709
Interest and dividends on investment securities:
     Other U. S. Government agencies                                 352,657        708,802        587,996
     Mortgage-backed securities                                      126,030        197,870        228,320
     Obligations of state and political subdivisions - tax            75,232        102,247        135,056
exempt
     FNMA and FHLMC preferred stock                                  883,931      1,102,811        463,856
     Other interest and dividends                                     77,027        119,954        130,407
Interest on federal funds sold                                             0         11,976         54,335
                                                                 -----------    -----------  -------------
Total interest income                                              8,468,921      9,837,008     10,184,679
                                                                 -----------    -----------  -------------
Interest Expense
Interest on deposits                                               2,132,148      3,289,201      4,470,576
Interest on federal funds purchased                                      726          4,111          2,632
Interest on other borrowed money                                   1,042,110        977,695        959,091
                                                                 -----------    -----------  -------------
Total interest expense                                             3,174,984      4,271,007      5,432,299
                                                                 -----------    -----------  -------------
Net interest income before provision for loan losses               5,293,937      5,566,001      4,752,380

Provision for Loan Losses                                          1,265,000        255,000         15,000
                                                                 -----------    -----------  -------------
Net interest income after provision for loan losses                4,028,937      5,311,001      4,737,380
                                                                 -----------    -----------  -------------
Other Income
Service charges on deposit accounts                                  224,257        208,084        189,186
Other service charges and fees                                       181,804        165,311        108,567
Earnings - Cash surrender value of life insurance                    258,209        258,203        249,418
Trust services                                                        19,133         22,277         19,002
Gain on sale of investment securities                                 86,472            705         57,329
Gain on sale of OREO property                                              0          8,516              0
Gain on sale of loans                                                 24,012              0              0
Other income                                                           9,515         10,544         15,975
                                                                 -----------    -----------  -------------
Total other income                                                   803,402        673,640        639,477
                                                                 -----------    -----------  -------------
Other Expenses
Salaries, fees and employee benefits                               1,707,844      1,727,652      1,559,673
Net occupancy expense of bank premises and
  furniture and equipment expense                                    833,377        746,394        729,435
FDIC insurance premiums                                               17,515         20,386         19,754
Other expenses                                                     1,453,379      1,283,779      1,141,725
                                                                 -----------    -----------  -------------
Total other expenses                                               4,012,115      3,778,211      3,450,587
                                                                 -----------    -----------  -------------
Income before income taxes                                           820,224      2,206,430      1,926,270
Applicable income tax (benefit)                                  (    9,977)        476,878        440,016
                                                                 -----------    -----------  -------------
Net income                                                        $  830,201     $1,729,552   $  1,486,254
                                                                 ===========    ===========  =============
Earnings per common share                                         $     1.68     $     3.51   $       3.02
                                                                 ===========    ===========  =============
</TABLE>


                       FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        Years Ended December 31, 2003, 2002 and 2001
<TABLE>
<S>                                  <C>            <C>             <C>            <C>              <C>            <C>
                                                                                     Accumulated
                                                                                        Other
                                                      Additional                    Comprehensive                      Total
                                        Common         Paid-In         Retained         Income        Treasury     Stockholders'
                                         Stock         Capital         Earnings         (Loss)          Stock          Equity

Balance, December 31, 2000               $ 309,375     $ 2,051,275    $ 12,017,652    ($    84,009)   ($  90,732)    $ 14,203,561

Comprehensive income:
     Net income                                                          1,486,254                                      1,486,254

     Change in unrealized gain on
       investment securities
available
       for sale, net of tax of $ $                                                           21,337                        21,337
10,992
                                                                                                                    -------------
Total comprehensive income                                                                                              1,507,591

     Issuance of treasury stock
        (25 shares)                                   (       169)                                          1,006             837

     Cash dividends ($ .95 per                                        (   468,110)                                  (    468,110)
share)
                                        ----------     -----------    ------------    -------------   -----------   -------------
Balance, December 31, 2001                 309,375       2,051,106      13,035,796    (     62,672)   (   89,726)      15,243,879

Comprehensive income:
     Net income                                                          1,729,552                                      1,729,552

     Change in unrealized gain on
       investment securities
available
       for sale, net of tax of $                                                            186,675                       186,675
96,166
                                                                                                                    -------------
Total comprehensive income                                                                                              1,916,227

     Issuance of treasury stock
        (40 shares)                                            188                                          1,612           1,800

     Cash dividends ($ 1.02 per                                       (   502,626)                                  (    502,626)
share)
                                        ----------     -----------    ------------    -------------   -----------   -------------
Balance, December 31, 2002                 309,375       2,051,294      14,262,722          124,003   (   88,114)      16,659,280

Comprehensive income:
     Net income                                                            830,201                                        830,201

     Change in unrealized (loss) on
       investment securities
available
       for sale, net of tax of $                                                      (    694,541)                 (    694,541)
357,794
                                                                                                                    -------------
Total comprehensive income                                                                                                135,660

     Issuance of treasury stock
        (5 shares)                                              43                                            202             245

     Cash dividends ($ 1.05 per                                       (   517,450)                                  (    517,450)
share)
                                        ----------     -----------    ------------    -------------   -----------   -------------
Balance, December 31, 2003               $ 309,375     $ 2,051,337     $14,575,473    ($   570,538)   ($  87,912)    $ 16,277,735
                                        ==========     ===========    ============    =============   ===========   =============
</TABLE>

                       FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                        Years Ended December 31, 2003, 2002 and 2001
<TABLE>
<S>                                               <C>            <C>           <C>

                                                       2003          2002           2001

Supplemental disclosure of cash flows
information:

   Cash paid during the year for:
         Interest                                    $ 3,234,108   $4,382,026     $ 5,509,953
         Income taxes                                    424,500      645,000         471,000

Supplemental schedule of noncash investing and
   financing activities:

  Unrealized holding gain (loss), net of tax        ($  694,541)   $  186,675     $    21,337

  Treasury stock issued as compensation              $       245   $    1,800     $       837

  Other real estate acquired in settlement of        $   206,199   $  241,645     $         0
loans

</TABLE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.   Significant Accounting Policies

      Nature of Operations

      Fulton Bancshares Corporation's primary activity consists of owning and
      supervising its subsidiaries:

      The Fulton County National Bank and Trust Company ("Bank"), which is
      engaged in providing banking and bank related services, principally in
      Fulton, southern Huntingdon, Bedford, and western Franklin Counties.
      Its seven branches are located in McConnellsburg (2), Warfordsburg,
      Hustontown, Orbisonia, St. Thomas and Breezewood.

      Fulton County Community Development Corporation was formed on June 7,
        1996 to support efforts of the local downtown business revitalization
        project by making low interest loans to eligible small businesses for
        the purpose of facade improvement.  Future projects are expected to
        include small business marketing, new business creation, small business
        education, and housing for low-to-moderate income individuals.

      Principles of Consolidation

      The consolidated financial statements include the accounts of the
      Corporation and its wholly-owned subsidiaries, The Fulton County
      National Bank and Trust Company and the Fulton County Community
      Development Corporation (collectively referred to as the "Corporation").
      All significant intercompany transactions and accounts have been
      eliminated.

      See Note 12 for parent company financial statements.

      Basis of Accounting

      The Corporation uses the accrual basis of accounting.

      Use of estimates

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities
      and disclosure of contingent assets and liabilities at the date of the
      financial statements, and the reported amounts of revenues and expenses
      during the reporting period.  Actual results could differ from those
      estimates.

      Material estimates that are particularly susceptible to significant
      change relate to the determination of the allowance for losses on loans
      and the valuation of real estate acquired in connection with foreclosures
      or in satisfaction of loans.  In connection with the determination of the
      allowances for losses on loans and foreclosed real estate, management
      obtains independent appraisals for significant properties.

      While management uses available information to recognize losses on loans
      and foreclosed real estate, future additions to the allowances may be
      necessary based on changes in local economic conditions.  In addition,
      regulatory agencies, as an integral part of their examination process,
      periodically review the Corporation's allowances for losses on loans and
      foreclosed real estate.  Such agencies may require the Corporation to
      recognize additions to the allowances based on their judgments about
      information available to them at the time of their examination.  Because
      of these factors, management's estimate of credit losses inherent in the
      loan portfolio and the related allowance may change in the near term.

Note 1.   Significant Accounting Policies (Continued)

      Investment Securities

      The Corporation's investments in securities are classified in three
      categories and accounted for as follows:

      Trading Securities.  Securities held principally for resale in the near
        term are classified as trading securities and recorded at their fair
        values.  Unrealized gains and losses on trading securities are included
        in other income.

      Securities to be Held to Maturity.  Bonds and notes for which the
        Corporation has the positive intent and ability to hold to maturity are
        reported at cost, adjusted for amortization of premiums and accretion
        of discounts, which are recognized in interest income using the
        interest method over the period to maturity.

      Securities Available for Sale.  Securities available for sale consist of
        equity securities, bonds and notes not classified as trading securities
        nor as securities to be held to maturity, and FNMA and FHLMC preferred
        stock.  These are securities that management intends to use as a part
        of its asset and liability management strategy and may be sold in
        response to changes in interest rates, resultant prepayment risk and
        other related factors.

      Purchase premiums and discounts are amortized to earnings by the interest
      method from purchase date to maturity date.  Unrealized holding gains and
      losses, net of tax, on securities available for sale are reported as a
      net amount in other comprehensive income.  Gains and losses on the sale
      of securities available for sale are determined using the specific-
      identification method.  Fair values for investment securities are based
      on quoted market prices.

      The Corporation has classified all of its investment securities as
      "available for sale" at December 31, 2003 and 2002, and during the years
      then ended.

      Loans and Reserve for Possible Loan Losses

      Loans are stated at the amount of unpaid principal, reduced by a reserve
      for loan losses and increased or decreased by net deferred loan
      origination fees and costs.  Interest on loans is calculated by using
      the simple interest method on daily balances of the principal amount
      outstanding.  The reserve for loan losses is established through a
      provision for loan losses charged to expense.  Loans are charged against
      the reserve for loan losses when management believes that the
      collectibility of the principal is unlikely.  Subsequent recoveries,
      if any, are credited to the reserve.  The reserve is an amount that
      management believes will be adequate to absorb possible losses
      on existing loans that may become uncollectible, based on evaluations
      of the collectibility of loans and prior loan loss experience.
      The evaluations are performed regularly and take into consideration
      such factors as changes in the nature and volume of the loan portfolio,
      overall portfolio quality, review of specific problem loans, and
      current economic conditions that may affect the borrowers' ability
      to pay.  This evaluation is inherently subjective as it requires
      estimates that are susceptible to significant revision as more
      information becomes available.

      The reserve consists of specific, general and unallocated loss components.
      The specific loss component relates to loans that are classified as either
      doubtful, substandard or special mention.  For such loans that are also
      classified as impaired, an allowance is established when the discounted
      cash flows (or collateral value or observable market price) of the
      impaired loan is lower than the carrying value of that loan.  The
      general component covers non-classified loans and is based on historical
      loss experience adjusted for qualitative factors.  An unallocated
      component is maintained to cover uncertainties that could affect
      management's estimate of probable losses.  The unallocated component
      of the allowance reflects the margin of imprecision
      inherent in the underlying assumptions used in the methodologies for
      estimating specific and general losses in the portfolio.


Note 1.   Significant Accounting Policies (Continued)

      Nonaccrual/Impaired Loans

      The accrual of interest income on loans, including impaired loans, ceases
      when principal or interest is past due 90 days or more and collateral is
      inadequate to cover principal and interest or immediately if, in the
      opinion of management, full collection is unlikely.  Interest accrued but
      not collected as of the date of placement on nonaccrual status is
      reversed and charged against current income unless fully collateralized.
      Subsequent payments received either are applied to the outstanding
      principal balance or recorded as interest income, depending on
      management's assessment of the ultimate collectibility of principal.

      A loan is considered impaired when, based on current information and
      events, it is probable that the Corporation will be unable to collect the
      scheduled payments of principal or interest when due according to the
      contractual terms of the loan agreement.  Impairment is measured on a
      loan by loan basis by either the present value of expected future cash
      flows discounted at the loan's effective interest rate, the loan's
      obtainable market price, or the fair value of the collateral if the loan
      is collateral dependent.

      Consumer loans, comprised of smaller balance homogeneous loans, are
      collectively evaluated for impairment.

      Premises and Equipment

      Premises and equipment are carried at cost less accumulated depreciation.
      Depreciation is calculated on primarily the straight-line method over the
      estimated useful lives of the various assets as follows:

                                              Years

                Computer software            3 - 5
                Premises                    15 - 50
                Equipment and vehicles       3 - 25

      Repairs and maintenance are charged to operations as incurred.

      Real Estate Owned Other Than Premises

      Other real estate owned includes foreclosed properties for which the
      institution has taken physical possession in connection with loan
      foreclosure proceedings.  Assets received in foreclosure are recorded at
      the lower of the outstanding principal balance of the related loans or
      the estimated fair value of collateral held, less estimated costs to
      sell.  Any adjustment required to write down the property to net
      realizable value is charged to the allowance for loan losses.  Costs of
      holding and maintaining the property and subsequent adjustments to the
      carrying amount of the property are charged to expense when incurred.

      Earnings per Share

      Earnings per common share were computed based on weighted averages of
      shares of common stock outstanding as follows:

           Year          Shares

           2003         492,810
           2002         492,772
           2001         492,747
Note 1.   Significant Accounting Policies (Continued)

      Federal Income Taxes

      As a result of certain timing differences between financial statement and
      federal income tax reporting, including depreciation, loan losses, and
      deferred compensation, deferred income taxes are provided in the
      financial statements.  Deferred tax assets and liabilities are included
      in the financial statements at currently enacted income tax rates
      applicable to the period in which the deferred tax assets and liabilities
      are expected to be realized or settled.  As changes in tax laws or rates
      are enacted, deferred tax assets and liabilities are adjusted through the
      provision for income taxes.  See Note 9 for further details.

      Statements of Cash Flows

      For purposes of the Statements of Cash Flows, cash and cash equivalents
      include those amounts in the balance sheet captions "cash and due from
      banks" and "federal funds sold".  The Corporation has elected to present
      the net change in interest bearing deposits with banks, deposits, and
      loans in the Statements of Cash Flows.

      Fair values of financial instruments

      The Corporation meets the requirements for disclosure of fair value
      information about financial instruments, whether or not recognized in the
      balance sheet.  In cases where quoted market prices are not available,
      fair values are based on estimates using present value or other valuation
      techniques.  Those techniques are significantly affected by the
      assumptions used, including the discount rate and estimates of future
      cash flows.  In that regard, the derived fair value estimates cannot be
      substantiated by comparison to independent markets and, in many cases,
      could not be realized in immediate settlement of the instruments.
      Certain financial instruments and all nonfinancial instruments are
      excluded from the disclosure requirements.  Accordingly, the aggregate
      fair value amounts presented do not represent the underlying value of the
      Corporation.

      The following methods and assumptions were used by the Corporation in
      estimating fair values of financial instruments as disclosed herein:

          Cash and Cash Equivalents.  The carrying amounts of cash and short-
          term instruments approximate their fair value.

          Securities Available for Sale.  Fair values for investment securities
          are based on quoted market prices.

          Federal Reserve, Atlantic Central Banker's Bank, and Federal Home Loan
          Bank Stocks.  The carrying amount for these stocks approximates their
          fair value since they are not actively traded and have no readily
          determinable market value.

          Loans Receivable.  For variable-rate loans that reprice frequently and
          have no significant change in credit risk, fair values are based on
          carrying values.  Fair values for fixed rate loans are estimated using
          discounted cash flow analyses, using interest rates currently being
          offered for loans with similar terms to borrowers of similar credit
          quality.  Fair values for impaired loans are estimated using
          discounted cash flow analyses or underlying collateral values, where
          applicable.

          Deposit Liabilities.  The fair values disclosed for demand deposits
          are, by definition, equal to the amount payable on demand at the
          reporting date (that is, their carrying amounts).  The carrying
          amounts of variable-rate, fixed-term money market accounts and
          certificates of deposit approximate their fair values at the reporting
          date.  Fair values for fixed-rate certificates of deposit and IRA's
          are estimated using a discounted cash flow calculation that applies
          interest rates currently being offered to a schedule of aggregated
          expected monthly maturities on time deposits.

Note 1.   Significant Accounting Policies (Continued)

          Short-Term Borrowings.  The carrying amounts of federal funds
          purchased and other short-term borrowings maturing within 90 days
          approximate their fair values.  Fair values of other short-term
          borrowings are estimated using discounted cash flow analyses based on
          the Corporation's current incremental borrowing rates for similar
          types of borrowing arrangements.

          Long-Term Borrowings.  The fair values of the Corporation's long-term
          borrowings are estimated using discounted cash flow analyses based on
          the Corporation's current incremental borrowing rates for similar
          types of borrowing arrangements.

          Accrued Interest.  The carrying amounts of accrued interest
          approximate their fair values.

          Off-Balance-Sheet Instruments.  The Corporation generally does not
          charge commitment fees. Fees for standby letters of credit and their
          off-balance-sheet instruments are not significant.

      Advertising

      The Corporation expenses advertising costs as incurred.  Advertising
      expenses for the years ended December 31, 2003, 2002, and 2001, were
      $ 93,876, $ 93,217, and $ 85,169, respectively.

      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 stockholders and
      distributions to stockholders. Comprehensive income includes net income
      and certain elements of "other comprehensive income" such as foreign
      currency transactions; accounting for futures contracts; employers
      accounting for pensions; and accounting for certain investments in debt
      and equity securities.

      The Corporation has elected to report its comprehensive income in the
      statement of stockholders' equity.  The only element of "other
      comprehensive income" that the Corporation has is the unrealized gain or
      loss on available for sale securities.

      The components of the change in net unrealized gains (losses) on
      securities were as follows:

      <TABLE>
      <S>                                <C>            <C>         <C>
                                               2003        2002            2001
   Gross unrealized holding gains        ($    965,863)  $ 283,546   $   89,658
      (losses)
      arising during the year
   Reclassification adjustment for gains (      86,472) (     705)   (   57,329)
      realized in net income
                                          -------------  ---------  -----------
   Net unrealized holding gains (losses) (   1,052,335)    282,841       32,329
      before taxes
   Tax effect                                  357,794   (  96,166)  (   10,992)
                                          -------------  ---------  -----------
   Net change                            ($    694,541)  $ 186,675   $   21,337
                                          =============  =========  ===========
      </TABLE>

Note 2.    Investments

      The amortized cost and fair value of investment securities available for
      sale at December 31 were:

      <TABLE>
       <S>                                  <C>               <C>             <C>               <C>
                                               Amortized           Gross           Gross           Fair Value
                                                  Cost          Unrealized       Unrealized
                                                                   Gains           Losses
                                                                            2003
       Obligations of U. S. Government
         corporations and agencies             $   9,237,758     $     50,640    $      14,654      $   9,273,744
       Obligations of states and political
         subdivisions                              5,395,500           77,886           10,444          5,462,942
       Mortgage-backed securities                  3,127,194            4,536            7,571          3,124,159
       FNMA and FHLMC preferred stock             12,652,370           18,000          983,245         11,687,125
       Other stocks                                  132,000            5,400            5,000            132,400
         Totals                                $  30,544,822     $    156,462    $   1,020,914      $  29,680,370

                                                                            2002
       Obligations of U. S. Government
         corporations and agencies             $  14,237,861     $    144,583    $           0      $  14,382,444
       Obligations of states and political
         subdivisions                              2,086,473           61,497           29,185          2,118,785
       Mortgage-backed securities                  4,643,691           55,270              831          4,698,130
       Corporate bonds                               997,416          114,574                0          1,111,990
       FNMA and FHLMC preferred stock             15,389,576          160,500          306,725         15,243,351
       Other stocks                                  132,000            2,300           14,100            120,200
         Totals                                $  37,487,017     $    538,724    $     350,841      $  37,674,900

      </TABLE>



      The amortized cost and fair value of investment securities available for
      sale at December 31, 2003, by contractual maturity, are shown below.
      Contractual maturities will differ from expected maturities because
      borrowers may have the right to call or prepay obligations with or
      without call or prepayment penalties.

       <TABLE>
       <S>                              <C>             <C>
                                        Amortized Cost   Fair Value
       Due in one year or less            $          0   $         0
       Due after one year through five       9,237,758     9,273,743
       years
       Due after five years through          2,369,024     2,433,878
       ten years
       Due after ten years                   3,026,476     3,029,065
       Mortgage-backed securities            3,127,194     3,124,159
       FNMA and FHLMC preferred stock       12,652,370    11,687,125
       Other stocks                            132,000       132,400
                                          $ 30,544,822   $29,680,370
       </TABLE>

      Proceeds from sales of securities available for sale during 2003 were
      $ 6,299,942.  Gross gains and losses on those sales were $ 151,028 and
      $ 64,556, respectively.  Proceeds from maturities of investment
      securities during 2003 were $ 20,568,343, resulting in no gains or
      losses.  Included in stockholders' equity at December 31, 2003 is
      $ 570,538 of unrealized holding losses on securities available for sale,
      net of $ 293,914 in deferred taxes.
Note 2.    Investments

      Proceeds from sales of securities available for sale during 2002 were
      $ 825,158.  Gross gains and losses on those sales were $ 705 and $ 0,
      respectively.  Proceeds from maturities of investment securities during
      2002 were $ 20,021,820, resulting in no gains or losses.  Included in
      stockholders' equity at December 31, 2002 is $ 124,003 of unrealized
      holding gains on securities available for sale, net of $ 63,880 in
      deferred taxes.

      Proceeds from sales of securities available for sale during 2001 were
      $ 2,750,981.  Gross gains and losses on those sales were $ 57,329 and
      $ 0, respectively.  Proceeds from maturities of investment securities
      during 2001 were $ 16,059,038, resulting in no gains or losses.  Included
      in stockholders' equity at December 31, 2001 is $ 62,672 of unrealized
      holding losses on securities available for sale, net of $ 32,286 in
      deferred taxes.

      The Corporation is required to maintain minimum investments in certain
      stocks, which are recorded at cost since they are not actively traded and
      therefore, have no readily determinable market value. Consequently, the
      Corporation owns the following equity securities at December 31:

      <TABLE>
      <S>                                  <C>           <C>
                                                  2003            2002

      Federal Home Loan Bank                 $ 1,320,000   $ 1,691,100
      Atlantic Central Bankers Bank               10,000        10,000
      Federal Reserve Bank                        70,850        70,850
                                             -----------   -----------
                                             $ 1,400,850   $ 1,771,950
                                             ===========   ===========
          </TABLE>

      Securities with a cost basis of $ 9,237,758 (fair value of $ 9,273,744)
      and $ 14,237,861 (fair value of $ 14,382,444) at December 31, 2003 and
      2002, respectively, were pledged to secure public funds and for other
      purposes as required or permitted by law.

Note 3.    Loans

      Loans consist of the following at December 31 (in thousands):

       <TABLE>
       <S>                                                     <C>        <C>
                                                                  2003       2002
       Real estate loans:
         Secured by farmland                                   $   13,359  $   15,179
         Secured by 1-4 family residential                         48,063      52,444
         Secured by multifamily (5 or more) residential               351         314
       properties
         Secured by nonfarm nonresidential                         18,625      13,705
       Loans to finance agricultural production:
         Loans to farmers                                           8,850       6,104
       Commercial and industrial loans                              9,773       9,067
       Loans to individuals for household, family and
         other personal expenditures                                3,784      10,959
       Obligations of states and political subdivisions in the U.S.   475         456
       All other loans                                                  9          39
                                                                  103,289     108,267
                                                                ---------   ---------
       Less:  reserve for loan losses                           (   1,900)  (   1,031)
                                                                ---------   ---------
                                                               $  101,389  $  107,236
                                                                =========  ==========
      </TABLE>


Note 3.    Loans (Continued)

      Loans 90 days or more past due (still accruing interest) and those on
      nonaccrual status were as follows at December 31 (in thousands):

<TABLE>
<S>                            <C>       <C>       <C>       <C>        <C>       <C>
                                      90 Days or More                  Nonaccrual
                               - - - - - - - Past Due - - -  - - - - - - - Status - - - - -
                                           - - -                         - - -
                                 2003      2002      2001      2003       2002      2001
Loans secured by real estate    $      0  $     59  $    567  $  3,314   $  1,525  $    269
Personal loans                         0        11        48        74          0         0
Commercial and other loans             0         0       307       771         71        20
                                --------  --------  --------  --------   --------  --------
   Total                        $      0  $     70  $    922  $  4,159   $  1,596  $    289
                                ========  ========  ========  ========   ========  ========
</TABLE>

      Foregone revenue on nonaccrual loans was as follows:

<TABLE>
<S>                                 <C>        <C>       <C>
                                       2003      2002      2001

Interest income that would have been   $ 147,128   $ 6,503  $ 20,284
   accrued at original loan rates
Amount recognized as interest income       3,198         0         0
                                       ---------   -------  --------
Foregone revenue                       $ 143,930   $ 6,503  $ 20,284
                                       =========   =======  ========
</TABLE>

      At December 31, 2003, the total recorded investment in impaired loans,
      all of which had allowances determined in accordance with SFAS No. 114,
      amounted to approximately $ 740,000.  The average recorded investment in
      impaired loans amounted to approximately $ 1,064,000 for the year ended
      December 31, 2003.  The allowance for loan losses related to impaired
      loans amounted to approximately $ 250,000 at December 31, 2003.  Interest
      income on impaired loans of $ 1,043 was recognized for cash payments
      received in 2003.  The Bank has no commitments to loan additional funds
      to borrowers whose loans have been modified.  There was no recorded
      investment in impaired loans at December 31, 2002 and 2001.

      During 2003, the Corporation sold a majority of its student loan
      portfolio.  Proceeds from the sale of these loans were $ 1,683,784, which
      resulted in a gain of $ 24,012 for the year ended December 31, 2003.

      During 2003, the Corporation sold certain mortgage loans to Federal Home
      Loan Bank (FHLB), but the Corporation continues to service these loans
      for FHLB.  The outstanding balance of these loans was $ 2,228,413 at
      December 31, 2003.

Note 4.Reserve for Loan Losses

      Activity in the reserve for loan losses is summarized as follows:

      <TABLE>
      <S>                                <C>           <C>          <C>
                                                2003           2002        2001

   Balance at beginning of period         $ 1,030,713  $    845,045   $ 847,121
   Recoveries                                  15,036         7,441      16,830
   Current year provision charged to        1,265,000       255,000      15,000
      income
                                          -----------  ------------   ---------
   Total                                    2,310,749     1,107,486     878,951
   Losses                                     411,106        76,773      33,906
                                          -----------   -----------   ---------
   Balance at end of period               $ 1,899,643   $ 1,030,713   $ 845,045
                                          ===========   ===========   =========
      </TABLE>

Note 5.  Loans to Related Parties

      The Corporation has granted loans to its officers and directors and to
      their associates.  Related party loans are made on substantially the same
      terms, including interest rates and collateral, as those prevailing at
      the time for comparable transactions with unrelated persons and do not
      involve more than normal risk of collectibility.  The aggregate dollar
      amount of these loans was $ 3,639,000 and $ 3,375,000 at December 31,
      2003 and 2002, respectively.  During 2003, $ 1,050,000 of new loans were
      made and repayments totaled $ 786,000.  During 2002, $ 1,258,000 of new
      loans were made and repayments totaled $ 1,273,000.

      Outstanding loans to employees totaled $ 1,148,000 and $ 781,000 at
      December 31, 2003 and 2002, respectively.

Note 6.   Premises and Equipment

      A summary of premises and equipment is as follows:

<TABLE>
<S>                                                 <C>             <C>            <C>
                    Description                          Cost        Accumulated     Depreciated
                                                                     Depreciation       Cost
                                                                         2003
Premises and improvements (including land             $  3,810,227    $    864,541    $  2,945,686
  $500,207)
Equipment, furniture and fixtures                        3,165,230       2,415,284         749,946
Vehicles                                                    98,296          34,420          63,876
                                                      $  7,073,753    $  3,314,245    $  3,759,508

                                                                         2002
Premises and improvements (including land             $  3,770,477    $    788,538    $  2,981,939
  $482,257)
Equipment, furniture and fixtures                        3,007,411       2,127,273         880,138
Vehicles                                                   111,505          35,310          76,195
                                                      $  6,889,393    $  2,951,121    $  3,938,272
</TABLE>

      Depreciation and amortization expense on property and equipment and other
      real estate owned amounted to $ 385,655 in 2003,  $ 332,253 in 2002, and
      $ 365,201 in 2001.

Note 7.  Financial Instruments With Off-Balance-Sheet Risk/Commitments

      The Corporation is a party to financial instruments with off-balance-
      sheet risk in the normal course of business to meet the financial needs
      of its customers and to reduce its own exposure to fluctuations in
      interest rates.  These financial instruments include commitments to
      extend credit and standby letters of credit.  Those instruments involve,
      to varying degrees, elements of credit and interest rate risk in excess
      of the amount recognized in the balance sheets.  The contract amounts of
      those instruments reflect the extent of involvement the corporation has
      in particular classes of financial instruments.

      The Corporation's exposure to credit loss in the event of nonperformance
      by the other party to the financial instrument for commitments to extend
      credit and standby letters of credit and financial guarantees written is
      represented by the contractual amounts of those instruments.  The
      Corporation uses the same credit policies in making commitments and
      conditional obligations as it does for on-balance-sheet instruments.

      <TABLE>
      <S>                                                                 <C>         <C>
                                                                           Contract or Notional
                                                                                  Amount
                                                                             2003        2002
      Financial instruments whose contract amounts represent credit
        risk at December 31:
      Commitments to extend credit                                        $12,388,552  $15,502,585
      Standby letters of credit and financial guarantees written               91,000      106,000
      </TABLE>

Note 7.  Financial Instruments With Off-Balance-Sheet Risk/Commitments
(Continued)

      Commitments to extend credit are agreements to lend to a customer as long
      as there is no violation of any condition established in the contract.
      Commitments generally have fixed expiration dates or other termination
      clauses and may require payment of a fee.  Since many of the commitments
      are expected to expire without being drawn upon, the total commitment
      amounts do not necessarily represent future cash requirements.  The
      Corporation evaluates each customer's credit worthiness on a case-by-case
      basis.  The amount of collateral obtained if deemed necessary by the
      Corporation upon extension of credit is based on management's credit
      evaluation of the customer.  Collateral held varies but may include
      accounts receivable, inventory, real estate, equipment, and income-
      producing commercial properties.

      Standby letters of credit and financial guarantees written are
      conditional commitments issued by the Corporation to guarantee the
      performance of a customer to a third party.  Those guarantees are
      primarily issued to support public and private borrowing arrangements.
      The credit risk involved in issuing letters of credit is essentially the
      same as that involved in extending loans to customers.  The corporation
      holds collateral supporting those commitments when deemed necessary by
      management.

Note 8.Retirement Plan

      The Corporation maintains a 401-K profit-sharing plan covering
      substantially all full-time employees. The plan allows contributions of
      up to 15% of eligible compensation by employees.  Additional
      contributions can be made at the discretion of the board of directors.
      The Corporation contributions made to the plan were $ 110,100 for 2003,
      $ 104,206 for 2002, and $ 66,000 for 2001.

Note 9.Federal Income Taxes

      The components of federal income tax expense are summarized as follows:

      <TABLE>
      <S>                                         <C>        <C>        <C>
                                                      2003       2002        2001
   Current year provision                          $ 338,653  $ 555,323   $ 503,104
   Deferred income taxes (benefits)               ( 378,030)  (  78,685)  (  82,580)
   Income tax effect of securities transactions       29,400        240      19,492
                                                  ----------  ---------   ---------
   Applicable income taxes (credits)              ($  9,977)  $ 476,878   $ 440,016
                                                  ==========  =========   =========
      </TABLE>
      Federal income taxes were computed after reducing pretax accounting
      income for nontaxable interest and dividend income in the amount of
      $ 670, 932, $ 593,555, and $ 464,229, for 2003, 2002, and 2001,
      respectively.

      A reconciliation of the effective income tax rate to the federal
      statutory rate is as follows:

      <TABLE>
      <S>                                 <C>        <C>        <C>
                                             2003       2002      2001
   Applicable federal income tax rate        34.0%      34.0%     34.0%
   Reductions resulting from:
   Nontaxable investment income and other     35.2%   ( 12.4%)  ( 11.2%)
      items, net of nondeductible expenses
   Effective income tax rate                 ( 1.2%)    21.6%     22.8%
   </TABLE>

<TABLE>
<S>                                                 <C>             <C>            <C>
                    Description                          Cost        Accumulated     Depreciated
                                                                     Depreciation       Cost
                                                                         2003
Premises and improvements (including land $           $  3,810,227    $    864,541    $  2,945,686
500,207)
Equipment, furniture and fixtures                        3,165,230       2,415,284         749,946
Vehicles                                                    98,296          34,420          63,876
                                                      $  7,073,753    $  3,314,245    $  3,759,508

                                                                         2002
Premises and improvements (including land $           $  3,770,477    $    788,538    $  2,981,939
482,257)
Equipment, furniture and fixtures                        3,007,411       2,127,273         880,138
Vehicles                                                   111,505          35,310          76,195
                                                      $  6,889,393    $  2,951,121    $  3,938,272
</TABLE>


Note 9.Federal Income Taxes (Continued)

      Net deferred tax assets are included in other assets on the balance sheet
      as follows:

      <TABLE>
      <S>                                 <C>          <C>
                                              2003         2002

   Total deferred tax assets              $ 1,308,605     $ 601,482
   Total deferred tax liabilities                   (     ( 254,443)
                                             225,743)
   Net deferred tax asset                 $ 1,082,862     $ 347,039
      </TABLE>

      The Corporation has not recorded a valuation allowance for the deferred
      tax assets as management believes that it is more likely than not that
      they will be ultimately realized.

      The tax effects of each type of significant item that give rise to
      deferred taxes are:

<TABLE>
<S>                                                       <C>         <C>
                                                            2003         2002

Net unrealized losses (gains) on securities available     $  293,914  ($  63,880)
for sale
Deferred compensation                                        383,357      312,571
Allowance for loan losses                                    582,398      286,700
Depreciation                                             (  225,743)  (  190,563)
Foregone interest on non-accrual loans                        48,936        2,211
                                                          ----------   ----------
   Net deferred tax asset                                 $1,082,862   $  347,039
                                                          ==========   ==========
</TABLE>

Note 10.  Leases

      The Corporation is party to real estate leases with base monthly rental
      charges of $ 3,453.  These charges are to be adjusted on specified dates
      and by agreed upon amounts or by the net change in the consumer price
      index.  The leases expire on January 7, 2011 (as extended) and
      December 31, 2005, respectively.  Each lease contains a provision for
      renewal under various terms at the Corporation's option. In addition, the
      Corporation leases certain equipment on a 54 month lease which expires on
      October 30, 2004.  Total rental expense charged to operations for the
      years ended December 31, 2003, 2002, and 2001 was $ 68,131, $ 64,195, and
      $ 62,937, respectively.

      Based on the current monthly rent, future minimum rental payments for the
      next five years are as follows:
      2004                               $ 58,440
      2005                                 41,436
      2006                                 39,936
      2007                                 39,936
      2008                                 39,936

Note 11.  Deposits

      Included in interest-bearing deposits at December 31 are NOW and Money
      Market Account balances totaling $ 20,476,269 and $ 19,099,495 for 2003
      and 2002, respectively.

      Time deposits of $ 100,000 and over aggregated $ 16,526,248 and
      $ 18,337,176 at December 31, 2003 and 2002, respectively.  Interest
      expense on time deposits of $ 100,000 and over was $ 504,000,
      $ 1,009,000, and $ 1,064,000 for the years ended 2003, 2002, and 2001,
      respectively.
Note 11.   Deposits (Continued)

      The amount of time deposits maturing over the next 5 years is as follows:

       2004                             $ 36,852,037
       2005                                2,345,491
       2006                                2,003,677
       2007                                8,389,899
       2008                               10,037,191
                                        ------------
                                        $ 59,628,295
                                        ============

      The Corporation accepts deposits of the officers and directors of the
      Corporation and its subsidiaries on the same terms, including interest
      rates, as those prevailing at the time for comparable transactions with
      unrelated persons.  The aggregate dollar amount of deposits of officers
      and directors totaled $ 3,137,434 and $ 3,648,369 at December 31, 2003
      and 2002, respectively.

      Overdrafts of $ 5,843 and $ 34,679 at December 31, 2003 and 2002,
      respectively, were reclassified as loans for financial reporting
      purposes.

Note 12.   Fulton Bancshares Corporation (Parent Company Only) Financial
Information

      The following are the condensed balance sheets, income statements and
      statements of cash flows for the parent company as of and for the years
      ended December 31:

<TABLE>
<S>                                                               <C>           <C>
                           Balance Sheets
Assets                                                                2003          2002

Cash                                                              $     23,049  $     14,364
Investment in Fulton County National Bank & Trust Company           16,091,245    16,483,857
Investment in the Fulton County Community Development Corporation       31,196        36,859
Securities available for sale                                          132,400       120,200
Deferred taxes                                                               0         4,012
                                                                  ------------  ------------
  Total assets                                                    $ 16,277,890  $ 16,659,292
                                                                  ============  ============
Liabilities

Accounts payable                                                  $         19  $         12
Deferred taxes                                                             136             0
                                                                  ------------  ------------
  Total liabilities                                                        155            12
                                                                  ------------  ------------
Stockholders' Equity

Common stock, par value $ .625 per share,                              309,375       309,375
  4,000,000 shares authorized; 495,000 shares issued
Additional paid-in capital                                           2,051,337     2,051,294
Retained earnings                                                   14,575,473    14,262,722
Accumulated other comprehensive income (loss)                      (   570,538)      124,003
Treasury stock; shares at cost - 2003 - 2,185; 2002 -              (    87,912  (     88,114)
                                                                  ------------  ------------
Total stockholders' equity                                          16,277,735    16,659,280
                                                                  ------------  ------------
Total liabilities and stockholders' equity                        $ 16,277,890  $ 16,659,292
                                                                  ============  ============
</TABLE>

Note 12.   Fulton Bancshares Corporation (Parent Company Only) Financial
Information (Continued)

<TABLE>
<S>                                                     <C>          <C>
                                                            2002         2001

                 Statements of Income
               Years Ended December 31

Cash dividends from wholly-owned subsidiary             $    555,000 $    512,000
Investment income                                              1,360        1,200
Equity in undistributed income of subsidiaries             1,223,162    1,018,365
Printing, supplies, amortization and other expenses     (     49,970) (    45,311)
                                                        ------------ ------------
Net income                                              $  1,729,552 $  1,486,254
                                                        ============ ============

               Statements of Cash Flows
               Years Ended December 31

Cash flows from operating activities:
   Net income                                           $  1,729,552 $  1,486,254
   Adjustments to reconcile net income to cash
    provided by operating activities:
      Equity in undistributed income of subsidiary      (  1,223,162)(  1,018,365)
      Compensation - treasury stock issued                     1,800          837
      Increase (decrease) in accounts payable                     12            0
Net cash provided by operating activities                    508,202      468,726

Cash flows from financing activities:
   Dividends paid                                       (    502,626)(    468,110)
                                                        ------------ ------------
Net cash provided (used) by financing activities        (    502,626)(    468,110)
                                                        ------------ ------------
Net change in cash                                             5,576          616
Beginning cash                                                 8,788        8,172
                                                        ------------ ------------
Ending cash                                             $     14,364 $      8,788
                                                        ============ ============
</TABLE>

Note 13.   Compensating Balances

      The Corporation is required to maintain certain compensating balances
      with its correspondent banks to cover processing costs and service
      charges.  The balances with these correspondent banks may exceed
      federally insured limits, which management considers to be a normal
      business risk.  Required compensating balances were $ 125,000 at
      December 31, 2003 and 2002.

Note 14.   Regulatory Matters

      Dividends paid by Fulton Bancshares Corporation are generally provided
      from the Fulton County National Bank and Trust Company's dividends to it.
      The Federal Reserve Board, which regulates bank holding companies,
      establishes guidelines which indicate that cash dividends should be
      covered by current year earnings and the debt to equity ratio of the
      holding company must be below thirty percent.

Note 14.   Regulatory Matters (Continued)

      Fulton County National Bank and Trust Company, as a National Bank, is
      subject to the dividend restrictions set forth by the Comptroller of the
      Currency.  Retained earnings available for the payment of dividends
      without approval of the Comptroller amounted to $ 3,613,413, $ 3,455,122,
      and $ 3,207,341 at December 31, 2003, 2002, and 2001, respectively.  The
      Corporation is also subject to various regulatory capital requirements
      administered by federal banking agencies.  Failure to meet minimum
      capital requirements can initiate certain mandatory, and possibly
      additional discretionary actions by regulators that, if undertaken, could
      have a direct material effect on the Corporation's financial statements.
      Under capital adequacy guidelines, the Corporation is required to
      maintain minimum capital ratios.  The "leverage ratio", which compares
      capital to adjusted total balance sheet assets is required to be at least
      3%.  "Tier I" and "Tier II" capital ratios compare capital to risk-
      weighted assets and off-balance sheet activity.  The Tier I ratio is
      required to be at least 4%.  The combined Tier I and Tier II ratio is
      required to be at least 8%.

      At December 31 the Corporation's actual ratios and required levels were
      as follows:

      <TABLE>
      <S>                            <C>       <C>        <C>
                                               - - - - Actual - - -
                                     Required    2003       2002
   Leverage (total adjusted            3.0%      11.3%      10.4%
      capital/total average
      assets)
   Tier 1 (Tier 1 core                 4.0%      15.7%      14.5%
      capital/risk
      weighted assets)
   Total capital (total capital        8.0%      16.9%      15.4%
      plus
      allowance for loan
      losses/risk
      weighted assets)
      </TABLE>

      As of December 31, 2003, the most recent notification from the
      Comptroller of the Currency categorized the Bank as well capitalized
      under the regulatory framework for prompt corrective action. There are no
      conditions or events since that notification that management believes
      have changed the Bank's category.

Note 15.   Liabilities for Borrowed Money

      At December 31, 2003 and 2002, the Corporation had an outstanding ten
      year, $ 15,000,000 loan with Federal Home Loan Bank of Pittsburgh.  The
      interest rate can increase quarterly depending on market rates based on
      the 3 month LIBOR plus .1%, but any change is at the discretion of the
      FHLB.  The rate is currently fixed at 5.93% at December 31, 2003 and 2002
      and is payable monthly.  The loan matures on July 12, 2010.  There are
      significant penalties for prepayment.

      The Corporation has established credit at Federal Home Loan Bank (FHLB)
      of Pittsburgh to improve liquidity.  The Corporation may borrow up to
      approximately $ 53 million from FHLB under the terms of certain
      commitment agreements, less any borrowings outstanding.  The rates and
      terms of the commitments are flexible and are not fixed until the funds
      are withdrawn, but funds may not be borrowed for more than one year.
      Borrowings were $ 3,825,000 and $ 16,250,000 at December 31, 2003 and
      2002, respectively.  The variable interest rate was 1.03% and 1.31% at
      December 31, 2003 and 2002, respectively, and can change daily based on
      FHLB's cost of funds.  Collateral for the borrowings consists of certain
      investments and mortgages approximating $ 62 million at December 31,
      2003.

Note 16.   Real Estate Owned Other Than Premises

      At December 31, 2003, real estate owned other than premises consisted of
      four properties that the Corporation foreclosed on in 2003, which are
      carried at the cost of $ 206,199.

      During 2002, the Corporation foreclosed on property with a cost of
      $ 241,645, which was sold in 2002 for $ 154,471.  Proceeds of $ 87,173
      were also received from an insurance company to satisfy the balance due
      from the foreclosure.

Note 16.   Real Estate Owned Other Than Premises (Continued)

      The Corporation also sold a rental property in 2002.  Net proceeds from
      the sale were $ 91,040, which resulted in a gain of $ 8,516.

Note 17.Fair Value of Financial Instruments

      The estimated fair values of the Corporation's financial instruments were
      as follows at December 31, 2003 and 2002:

       <TABLE>
       <S>                       <C>           <C>          <C>          <C>
                                  - - - - - - 2003 - - - -  - - - - - - 2002- - - -
                                           - - -                      - -
                                   Carrying        Fair      Carrying       Fair
                                    Amount        Value       Amount        Value
                                                    (000 Omitted)
       FINANCIAL ASSETS
       Cash and due from banks     $   3,853    $   3,853    $   5,214     $   5,214
       Securities available for       29,680       29,680       37,675        37,675
       sale
       Federal Reserve, Atlantic       1,401        1,401        1,772         1,772
       Central Bankers Bank,
       and
       Federal Home Loan Bank
       stocks
       Loans receivable (net)        101,389      101,529      107,236       108,245
       Accrued interest                  657          657          939           939
       receivable

       FINANCIAL LIABILITIES
       Time certificates              59,628       60,791       63,993        65,429
       Other deposits                 51,497       51,497       49,032        49,032
       Accrued interest payable          255          255          314           314
       Other borrowed funds           18,825       20,258       31,250        33,452

      </TABLE>
Note 18. Deferred Compensation and Other Benefit Programs

      The Bank has adopted several benefit programs, some of which result in
      the deferral of payments for services rendered:

      (1) The Supplemental Executive Retirement Plan - This Plan is funded by
         single premium life insurance on the CEO and certain other Corporation
         executives, with the Corporation as beneficiary.  Actual payments to
         the executives will not begin until their retirement.

      (2) The Director Emeritus Program - This plan, funded by life insurance,
         will allow the Corporation to reward its directors for longevity of
         service to the Board.  Directors who qualify would be eligible at age
         75 to receive $ 4,000 annually for up to 10 years under this program.

      (3) The Director Deferred Compensation Plan - This plan, also funded by
         life insurance, will allow directors to defer up to 100% of directors
         fees annually.  The amounts deferred will be paid out over a period of
         up to 10 years beginning when the director reaches the age of 75.

      (4) The Officer Supplemental Life Insurance Plan provides for officer
         life insurance coverage to named third parties of generally double
         their current salary level, and is also funded by single premium life
         insurance.


Note 18. Deferred Compensation and Other Benefit Programs (Continued)

      As a result of these plans, the following items are recognized in the
      financial statements:

      <TABLE>
      <S>                                      <C>        <C>        <C>
                                                  2003        2002        2001
   Asset
   Cash surrender value of life insurance     $5,229,926  $4,657,795 $4,430,903

   Liabilities
   Supplemental executive retirement plan        798,930     653,785    501,946
   Deferred directors fees liability             328,592     272,818    219,808


   Income
   Earnings on cash surrender value of life      258,209     258,203    249,418
      insurance

   Expenses
   Life insurance expense                         39,078      31,311     31,276
   Supplemental executive retirement             145,145     151,839    149,915
      expense
   Deferred directors fees                        63,711      54,695     50,148
   Director emeritus fees                         12,000      12,000     12,000
   Payments made to retired director               1,685       1,685      1,685
      </TABLE>

Note 19. Concentrations of Credit Risk

      The Corporation grants agribusiness, commercial and residential loans to
      customers primarily in Fulton County, Pennsylvania and adjoining counties
      in Pennsylvania and Maryland.  Although the Corporation has a diversified
      loan portfolio, a significant portion of its customers' ability to honor
      their contracts is dependent upon the agribusiness economic sector at
      December 31, 2003 (approximately 22% of loan portfolio and 136% of
      stockholders' equity).

      Management evaluates each customer's creditworthiness on a case-by-case
      basis.  The amount of collateral obtained, if deemed necessary upon the
      extension of credit, is based on management's credit evaluation of the
      customer.  Collateral held varies but generally includes equipment and
      real estate.

      The corporation maintains deposit balances at correspondent banks, which
      provide check collection and item processing services to the corporation.
      At times, the balances with these correspondent banks may exceed
      federally insured limits, which management considers to be a normal
      business risk.

      The Corporation also has a significant concentration in FNMA and FHLMC
      preferred stocks, representing 37% of total investments and 72% of
      stockholders' equity at December 31, 2003.
                 FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                        SELECTED FIVE-YEAR FINANCIAL DATA


<TABLE>
<S>                         <C>          <C>         <C>        <C>        <C>
                               2003         2002        2001      2000       1999
Income (000 omitted)

Interest income               $   8,469   $   9,837    $ 10,184 $   9,992  $   8,759
Interest expense                  3,175       4,271       5,432     5,210      4,325
Provision for loan losses         1,265         255          15        45        195
                              ---------   ---------   --------- ---------  ---------
Net interest income after         4,029       5,311       4,737     4,737      4,239
   provision for loan losses
Securities gains (losses)            86           1          57         6          6
Other operating income              717         673         582       516        583
Other operating expenses          4,012       3,778       3,450     3,370      3,011
                              ---------   ---------   --------- ---------  ---------
Income before income taxes          820       2,207       1,926     1,889      1,817
Applicable income tax         (      10)        477         440       450        380
(benefit)
                              ---------   ---------   --------- ---------  ---------
Net income                    $     830   $   1,730   $   1,486 $   1,439  $   1,437
                              =========   =========   ========= =========  =========
</TABLE>

Per share amounts are based on following weighted averages:

2003 - 492,810   2001 - 492,747    1999 - 495,000
2002 - 492,772   2000 - 494,054

<TABLE>
<S>                             <C>        <C>         <C>       <C>       <C>
Income before income taxes        $   1.66   $   4.48  $   3.91   $   3.82  $   3.67
Applicable income taxes           (    .02)       .97       .89        .91       .77
Net income                            1.68       3.51      3.02       2.91      2.90
Cash dividend paid                    1.05       1.02       .95        .86       .86
Book value                           33.03      33.81     30.94      28.75     25.76
  </TABLE>

Year-End Balance Sheet Figures (000 omitted)
<TABLE>
<S>                             <C>        <C>        <C>        <C>         <C>
Total assets                    $ 147,743  $ 162,282  $ 150,855   $ 140,480  $ 128,478
Net loans                         101,389    107,236    103,656     102,058     90,995
Total investment securities        31,081     39,447     31,899      24,643     24,436
Deposits-noninterest bearing       13,925     16,155     13,486      13,025     12,354
Deposits-interest bearing          97,200     96,870    103,552      92,107     90,957
Total deposits                    111,125    113,025    117,038     105,132    103,311
Liabilities for borrowed money     18,825     31,250     17,325      20,000     11,475
Total stockholders' equity         16,278     16,659     15,244      14,204     12,753
  </TABLE>
Ratios (includes net unrealized gain/loss on AFS securities)
<TABLE>
<S>                             <C>     <C>       <C>     <C>      <C>
Average equity/average assets    11.05%   10.19%   10.17%   9.82%   10.36%
Return on average equity          4.89%   10.91%   10.12%  10.94%   11.19%
Return on average assets          0.54%    1.11%    1.03%   1.07%    1.16%
</TABLE>

                 FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                       SUMMARY OF QUARTERLY FINANCIAL DATA

      The unaudited quarterly results of operations for the years ended
December 31, 2003 and 2002 are as follows:


<TABLE>
<S>                                <C>       <C>       <C>       <C>       <C>      <C>       <C>      <C>
                                                    2003                                   2002
($ 000 omitted except per share)    - - - - - - - - Quarter Ended - - - -  - - - - - - - - - Quarter Ended - -
                                    Mar. 31  June 30   Sept. 30  Dec. 31   Mar. 31   June 30   Sept.   Dec. 31
                                                                                                 30

Interest income                      $ 2,305  $ 2,035   $ 2,115  $ 2,014    $ 2,443   $ 2,575  $ 2,500  $ 2,319
Interest expense                         849      807       776      743      1,064    1,132     1,118      957
                                     -------  -------   -------  -------    -------   -------  -------  -------
Net interest income                    1,456    1,228     1,339    1,271      1,379     1,443    1,382    1,362
Provision for loan losses                 30      205     1,030        0         15       110      115       15
                                      -------  -------   -------  -------    -------   -------  -------  -------
Net interest income after               1,426    1,023       309   1,271      1,364     1,333    1,267    1,347
   provision for loan losses
Securities gains (losses)                  0      150         0  (    64)        1         0        0        0
Other income                             194      199       183      141        156       161      157      199
Other expenses                           969      970     1,002    1,071        936       933      965      944
                                      -------  -------   -------  -------    -------   -------  -------  -------
Operating income before income            651      402   (  510)     277        585       561      459      602
Applicable income taxes                  144      120    (  280)       6        151       122       78      126
                                     -------  -------   -------  -------    -------   -------  -------  -------
Net income                           $   507  $   282  ($   230) $   271    $   434   $   439  $   381  $   418
                                     =======  =======   =======  =======    =======   =======  =======  =======


Net income applicable to common
stock
Per share data:
Net income                            $ 1.03  $   .57   ($  .47) $   .55    $   .88   $   .89  $   .77  $   .97
</TABLE>


                 FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

          DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
                    INTEREST RATES AND INTEREST DIFFERENTIAL
                             YEARS ENDED DECEMBER 31


<TABLE>
<S>                 <C>          <C>         <C>      <C>          <C>        <C>        <C>       <C>      <C>
                                  2003                              2002                             2001
(000 omitted)         Average     Interest    Rate      Average     Interest    Rate     Average   Interest    Rate
                      Balance                           Balance                          Balance
      ASSETS

Investment
securities:
Taxable interest        $  32,341   $   1,440    4.4%    $   34,783    $ 2,102      6.0%   $23,097  $   1,410     6.1%
Nontaxable                  1,657          75    4.5          2,240        102      4.6      2,817        135     4.8
  interest income       ---------   ---------    ---      ---------  ---------      ---   --------  ---------     ---
Total investment           33,998       1,515    4.5         37,023      2,204      6.0     25,914      1,545     6.0
  securities
Loans (net of             107,140       6,954    6.5        105,219      7,621      7.2    105,028      8,585     8.2
  unearned
  discounts)
Other short-term                0           0    0.0            723         12      1.6      1,514         54     3.6
  investments           ---------   ---------    ---      ---------  ---------      ---   --------  ---------     ---
Total interest            141,138   $   8,469    6.0%       142,965    $ 7,837      6.9%   132,456   $ 10,184     7.7%
  earning
  assets
                                    ---------                         --------                       --------
Allowance for loan     (   1,159)                        (     920)                       (   863)
  losses
Cash and due from           3,748                             3,667                          3,601
banks
Bank premises and           3,869                             3,861                          3,572
  equipment
Other assets                6,025                             5,990                          5,618
                        ---------                         ---------                       --------
                                                                                                -
Total assets            $ 153,621                         $ 155,563                              $
                                                                                           144,384
                        =========                         =========                       ========
                                                                                                =
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing       $   11,925  $       76     0.6%    $  11,431  $      85        .7%        $  $     199     1.8%
  demand deposits                                                                           10,992
Savings deposits           22,579         198     0.9        18,438        237       1.3    16,891        363      2.1
Time deposits              61,069       1,858     3.0        74,238      2,967       4.0    71,974      3,908      5.4
Borrowings                 25,290       1,043     4.1        19,464        982       5.0                           5.9
                                                                                           16,389        962
                        ---------   ---------    ---      ---------  ---------      ---   --------  ---------     ---
                                                                                                -
Total interest            120,863     $ 3,175     2.6%      123,571    $ 4,271       3.5%  116,246   $  5,432     4.7%
  bearing
  liabilities
                                    ---------                        ---------                       --------
Demand deposits            14,966                            15,237                         12,534
Other liabilities             821                               905
                                                                                              921
                       ----------                         ---------                       --------
                                                                                                -
Total liabilities         136,650                           139,713                        129,701
Stockholders' equity       16,971                            15,850
                                                                                           14,683
                        ---------                         ---------                       --------
                                                                                                -
Total liabilities       $ 153,621                         $ 155,563                              $
  & stockholders'                                                                          144,384
  equity
                        =========                         =========                       ========
                                                                                                =
Net interest                         $  5,294     3.8%                $  5,566       3.9%            $  4,752     3.6%
  income/net
  yield on
  average
  earning
  assets
                                     ========   ======                ========      =====            ========    =====
</TABLE>
                  FULTON BANCSHARES CORPORATION AND SUBSIDIARY

                         CHANGES IN NET INTEREST INCOME

<TABLE>
<S>                     <C>        <C>         <C>         <C>        <C>        <C>
                        - - - - - - 2003 Versus 2002 - - - - - - - - - 2002 Versus 2001 - -
                                     - - -                             - - - -
                              Increase (Decrease)                Increase (Decrease)
                                Due to Change in                  Due to Change in
                         Average     Average      Total     Average    Average      Total
                         Volume      Rate      Increase     Volume      Rate     Increase
                                              (Decrease)                        (Decrease)
(000 omitted)
Interest Income
Loans (net of               $ 121   ($    760)  ($    639)     $   15  ($ 1,007)    ($   992)
  unearned discounts)
Taxable investment        (   190)  (     500)  (     690)        740  (     20)         720
  securities
Nontaxable investment     (    26)  (       1)  (      27)    (    27) (      6)    (     33)
  securities
Other short-term          (    12)          0   (      12)   (    28)  (     14)    (     42)
  investments
                          --------   ---------   ---------    -------  ---------    ---------
Total interest            (   107)  (   1,261)  (   1,368)        700  (  1,047)    (    347)
  income
                          --------   ---------   ---------    -------  ---------    ---------
Interest Expense
Interest bearing          (     2)  (       7)  (       9)          6  (    121)    (    115)
  demand
Savings deposits               57   (      96)  (      39)         24  (    150)    (    126)
Time deposits             (   524)  (     585)  (   1,109)        101  (  1,042)    (    941)
Short-term                    283   (     222)         61         187  (    166)          21
  borrowings
                          --------   ---------   ---------    -------  ---------    ---------
Total interest            (   186)  (     910)  (   1,096)        318  (  1,479)    (  1,161)
  expense
                          --------   ---------   ---------    -------  ---------    ---------
Net interest income                             ($    272)                           $   814
                                                 ========                           ========
</TABLE>

              MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          The following discussion and analysis should be read in conjunction
with the financial tables/statistics, financial statements and notes to the
financial statements presented elsewhere in this report.


OPERATING RESULTS

Overview

          Net after tax income was $ 830,000 for 2003 compared to $ 1,730,000
for 2002, representing a decrease of $ 900,000, or 52.0%.  Net income on an
adjusted per share basis for 2003 was $ 1.68, a decrease of $ 1.83 from the
$ 3.51 per share realized during 2002.

          Net after tax income was $ 1,730,000 for 2002 compared to $ 1,486,000
for 2001, representing an increase of $ 244,000, or 16.4%.  Net income on an
adjusted per share basis for 2002 was $ 3.51, an increase of $ .49 from the
$ 3.02 per share realized during 2001.

Net Interest Income

          Total interest income for 2003 was $ 8,469,000 compared with
$ 9,837,000 earned during 2002, for a decrease of $ 1,368,000, or 13.9%.  While
there was a decrease in average investments in 2003, the decrease in interest
income is due primarily to a significant decrease in interest rates earned on
loans and investments in 2003 compared with the same period in 2002.

          Total interest income for 2002 was $ 9,837,000 compared with
$ 10,184,000 earned during 2001, for a decrease of $ 347,000, or 3.4%.  The
decrease was due primarily to a significant decrease in interest rates earned on
loans and investments and a higher average balance of investments, which
typically produce lower yields than loans, in 2002 compared with the same period
in 2001.

          Average earning assets decreased 1.3% in 2003 and increased 7.9% in
2002.  Average investments decreased 8.2% in 2003, with the decrease
concentrated in U. S. Government Agency securities and FNMA/FHLMC preferred
stocks.  The 2002 increase was concentrated in U. S. Government Agencies and
FNMA/FHLMC preferred stocks.  Average loans, which typically produce higher
yields than investments, increased 1.8% in 2003 and 0.2% in 2002.  Net loans at
December 31, 2003 stood at $ 101,389,000 compared to $ 107,236,000 as of
December 31, 2002, a decrease of 5.5%.  Net loans at December 31, 2002 were up
3.5% over those at December 31, 2001.

          Total interest expense was $ 3,175,000 for 2003, a decrease of
$ 1,096,000, or 25.7%, from the $ 4,271,000 for 2002.  Total interest expense
was $ 4,271,000 for 2002, a decrease of $ 1,161,000, or 21.4%, from the
$ 5,432,000 for 2001.  The decreases were due primarily to a significant
decrease in interest rates paid on deposits and short-term borrowings.

          Average interest-bearing liabilities decreased 2.2% in 2003 and
increased 6.3% in 2002.  Average borrowings increased 31.0% while average time
deposits, which typically pay higher yields, decreased 21.5% in 2003 after
increasing 3.1% in 2002.  Average interest-bearing demand deposits and savings
deposits increased 4.3% and 22.5%, respectively, in 2003, and increased 4.0% and
9.2%, respectively, in 2002.  Interest bearing deposits stood at $ 97,200,000 at
December 31, 2003 compared to $ 96,870,000 as of December 31, 2002, an increase
of 0.3%.  Interest-bearing deposits at December 31, 2002 were 6.5% lower than at
December 31, 2001.
OPERATING RESULTS (Continued)

          Net interest income is the difference between total interest income
and total interest expense.  Interest income is generated through earning
assets, which include loans, deposits with other banks, and investments.
Interest income is dependent on many factors including the volume of earning
assets; level of interest rates; changes in interest rates; and volumes of
nonperforming loans.  The cost of funds varies with the volume of funds
necessary to support earning assets; rates paid to maintain deposits; rates paid
on borrowed funds; and level of interest-free deposits.

          Net interest income for 2003 totaled $ 5,294,000, down $ 272,000, or
4.9% from 2002.  Net interest income for 2002 totaled $ 5,566,000, up $ 814,000,
or 17.1% from 2001.  Liquidity and interest rate risk are continuously monitored
through Asset-Liability Committee reports.  Management plans to protect its net
interest margin by competitively pricing loans and deposits and by structuring
interest-earning assets and liabilities to maintain a desired net interest
margin.

Other Income and expenses

          Other income represents service charges on deposit accounts,
commissions on loan insurance, fees for official checks and other services, safe
deposit box rentals, fees for trust services, securities gains(losses),
gains(losses) on sales of other real estate owned, and earnings on cash
surrender value of directors and officers life insurance.

          Other income increased $ 130,000, or 19.3%, from 2002 to 2003.  The
increase in 2003 resulted primarily from $ 24,000 of income generated on the
sale of PHEAA loans and $ 81,000 from gains on the sale of investments.  Other
income increased $ 35,000, or 5.5%, from 2001 to 2002.  The increase in 2002
resulted primarily from $ 25,000 earned as a result of instituting ATM
surcharges and a $ 19,000 increase in service charges on deposit accounts.

          Noninterest expenses are classified into four main categories:
salaries, fees and employee benefits; occupancy and furniture and equipment
expenses that include depreciation, maintenance, utilities, taxes, insurance and
rents; FDIC insurance premiums; and other operating expenses that include all
other expenses incurred in daily operations.

          Employee-related expenses decreased 1.1% for 2003, primarily due to
merit pay increases which were offset by turnover of staff that was replaced
with lower payscale employees, versus a 10.8% increase in 2002.  The 2002
increase resulted primarily from staffing a new branch office opened in February
2002.  Occupancy and furniture and equipment expenses increased 11.7% and 2.3%
for 2003 and 2002, respectively, primarily due to increased equipment and
building maintenance costs, utilities and depreciation.  Other operating
expenses increased 13.2% and 12.4% for 2003 and 2002, respectively, primarily
due to increases in advertising costs, OCC assessments, PA shares tax, printing
and supplies, telephone and other overhead expenses.

Income Taxes

          Applicable income taxes changed between 2003, 2002, and 2001 because
of changes in pretax accounting income and taxable income.  The effective tax
rate for 2003 was (1.2%) compared to 21.6% and 22.8% for 2002 and 2001,
respectively.  The decrease in the effective income tax rate for 2003 was due
primarily to an increase in deferred tax assets that was a result of the
$1,265,000 increase in the Reserve for Loan Losses balance.  This effectively
lowered the pre-tax book income to a level in which tax exempt interest, the
dividends received deduction, and the non-taxable increase in cash surrender
value of life
insurance fully eliminated all taxes.  The 2002 decrease was due primarily to
increases in the dividends received deduction for FNMA/FHLMC preferred stock
which was partially offset by a decrease in tax-exempt interest on obligations
of state and political subdivisions.
FINANCIAL CONDITION

          Total assets at December 31, 2003 were $ 147,743,000, a 9.0% decrease
over December 31, 2002.  Net loans at December 31, 2003 totaled $ 101,389,000, a
decrease of 5.5% over December 31, 2002.  These reductions were the result of a
decision to start reducing the Bank's concentration in agri-business loans,
which make up 60% of classified loans at December 31, 2003.  In addition,
investments maturing during 2003 were utilized to pay down $ 12.4 million in
FHLB borrowings.

          Total assets at December 31, 2002 were $ 162,282,000, a 7.6% increase
over December 31, 2001.  Net loans at December 31, 2002 totaled $ 107,236,000,
an increase of 3.5% over December 31, 2001.

Allowance for Loan Losses and Related Provision

          The provision for loan losses was $ 1,265,000 in 2003 compared to
$ 255,000 in 2002 and $ 15,000 in 2001.  The provisions were based on
management's evaluation of the adequacy of the reserve balance and represent
amounts deemed necessary to maintain the reserve at the appropriate level based
on the quality of the loan portfolio and economic conditions.  Actual charge-
offs (net of recoveries) were $ 396,000 in 2003 and $ 70,000 in 2002.  These
were significantly higher than in previous years, and were directly related to
agri-business loans.  Management intends to maintain the reserve at appropriate
levels based on an ongoing evaluation of the loan portfolio.

          Loans 90 days or more past due (still accruing interest) and those on
nonaccrual status were as follows at December 31 (in thousands):

<TABLE>
<S>                           <C>         <C>          <C>         <C>
                                  90 Days or More        Nonaccrual Status
                                     Past Due
                                 2003        2002           2003      2002
Loans secured by real estate    $       0     $    59     $ 3,314     $ 1,525
Personal loans                          0          11          74           0
Commercial and other loans              0           0         771          71
                                ---------     -------     -------     -------
Total loans                     $       0     $    70     $ 4,159     $ 1,596
                                =========     =======     =======     =======
</TABLE>
          There were no restructured loans for any of the time periods set forth
above.

          The Corporation 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

          Commercial borrowers with lending relationships over $ 500,000 and
agribusiness borrowers with lending relationships over $ 250,000 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                35 - 50%
Substandard              3 - 5%
Special Mention          1 - 3%

FINANCIAL CONDITION (Continued)

          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
Corporation's trading area.

          The reasons for the significant increase in the provision for loan
losses for 2003 compared to 2002 are significant increases in nonaccrual and
classified loans.  No loans were past-due 90 days or more still accruing
interest at December 31, 2003.  Nonaccrual loans have increased more than 160%
over the past four quarters and represent 4.0% of totals loans compared with
1.5% of total loans at December 31, 2002.  At December 31, 2003, 80% of loans on
nonaccrual status were fully-secured by real estate.  Classified loans on
December 31, 2003 were $ 4,728,000 compared to $ 4,264,000 on December 31, 2002,
an increase of 11%.  The Corporation has identified agribusiness lending as a
concentration of credit.  At December 31, 2003, agribusiness loans comprised
$ 2,484,000, or 60%, of the classified loans.  In addition, the allowance and
loans placed on nonaccrual status were adjusted in the third quarter 2003 based
on preliminary results of an OCC examination conducted in July and August for
which an official report has not yet been received.  As a result of the
increased delinquencies and classified loans, the examiners have suggested
increasing the allowance to a level more in line with the bank's peer group (as
a percentage of total loans) as a way to provide for the perceived increase in
the overall risk associated with the bank's loan portfolio.  They have also
classified as "nonaccrual" several loans with current payment status (amounting
to $ 1,956,000) due to perceived weaknesses in the collateral or borrower's
financial condition.

          The reasons for the increase in the provision for loan losses for 2002
compared to 2001 are significant increases in nonaccrual and classified loans.
Nonaccrual loans have increased more than 450% over the past four quarters and
represent 1.5% of total loans.  At December 31, 2002, 91% of loans on nonaccrual
status were fully-secured farm loans.  Classified loans on December 31, 2002
were $ 4,264,000 compared to $ 2,040,000 on December 31, 2001, an increase of
109%.  The Corporation has identified farm loans as a concentration of credit.
At December 31, 2002, classified farm loans comprised $ 3,680,000, or 86% of the
classified loans.

          Total deposits decreased 1.7% to $ 111,125,000 at December 31, 2003
compared with $ 113,025,000 at December 31, 2002.  Non-interest-bearing demand
deposits decreased 13.8% while interest-bearing deposits increased 0.3%.  Total
deposits decreased 3.4% to $ 113,025,000 at December 31, 2002 compared with
$ 117,038,000 at December 31, 2001.  Non-interest-bearing demand deposits
increased 19.8%, while interest-bearing deposits decreased 6.5%.

          Stockholders' equity was $ 16,278,000 at December 31, 2003 compared
with $16,659,000 at December 31, 2002, which was up 9.3% over the balance at
December 31, 2001.  Accumulated earnings for 2003 were offset by dividends
declared and paid of $ 517,000 and a $ 695,000 increase in net unrealized losses
(net of tax effect).  Accumulated earnings for 2002 and a $ 187,000 decrease in
net unrealized losses (net of tax effect) were partially offset by dividends
declared and paid of $ 503,000.  Total stockholders' equity represented 11.0%
and 10.3% of total assets at the end of 2003 and 2002, respectively.  Cash
dividends of $ 1.05 and $ 1.02 per share were paid in 2003 and 2002,
respectively.  On July 20, 2000, the Board of Directors announced the approval
of a plan to purchase, in open and privately negotiated transactions, up to 2%
of its shares of outstanding common stock.  As of December 31, 2003, the company
had repurchased 2,185 shares, representing 0.44% of its shares of 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.

CRITICAL ACCOUNTING POLICIES

          Bank policy related to the allowance for loan losses is considered to
be a critical accounting policy because the allowance for loan losses represents
a particularly sensitive accounting estimate.  The amount of the allowance is
based on management's evaluation of the collectibility of the loan portfolio,
including the nature of the loan portfolio, credit concentrations, trends in
historical loss experience, specific impaired loans, and economic conditions.

          The allowance for loan losses is established through a provision for
loan losses charged to expense.  Loans are charged against the allowance for
loan losses when management believes the collectibility of the principal is
unlikely.  The allowance is an amount management believes will be adequate to
absorb possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience.  The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the borrowers'
ability to pay.

LIQUIDITY

          Liquidity and interest rate sensitivity are related to, but distinctly
different from, one another.

          Liquidity involves the bank's ability to meet cash withdrawal needs of
customers and their credit needs in the form of loans.  Liquidity is provided by
cash on hand and transaction balances held at correspondent banks.  Adequate
liquidity to meet credit demands and/or adverse deposit flows is also made
available from sales or maturities of short-term assets.  Additional sources of
funds to meet credit needs is provided by access to the marketplace to obtain
interest-bearing deposits and other borrowings, including special programs
available through Federal Home Loan Bank.  At December 31, 2003 and 2002, the
Bank had borrowings of $ 18,825,000 and $ 31,250,000, respectively.  At December
31, 2003, the Bank had additional borrowing capacity available of $ 53,000,000.

          Interest rate sensitivity is the matching or mismatching of the
maturity and rate structure of the interest-bearing assets and liabilities.  It
is the objective of management to control the difference in the timing of the
rate changes for these assets and liabilities to preserve a satisfactory net
interest margin.  The following table approximately reflects the matching of
assets and liabilities maturing within one year and thereafter, which management
feels is adequate to meet customer cash and credit needs while maintaining a
desired interest rate spread.

<TABLE>
<S>                           <C>         <C>        <C>         <C>        <C>        <C>
                                 Due         Due        Due         Due        Due       Total
                                0 - 30     31 - 90    91 - 180   181 - 360    After
                                 Days        Days       Days       Days       1 Year
Rate Sensitive Assets
Investment securities            $ 10,574    $  2,350   $  3,527   $  7,634    $  6,996 $  31,081
Real estate, commercial            23,289       5,059      7,126      8,898      58,917   103,289
  and consumer loans
                                --------    --------   --------   --------    -------- ---------
                                $ 33,863    $  7,409   $ 10,653   $ 16,532    $ 65,913 $ 134,370
                                ========    ========   ========   ========    ======== =========
Rate Sensitive Liabilities
Short-term borrowings            $  3,825    $      0   $      0   $      0    $      0 $   3,825
Long-term borrowings                    0           0          0          0      15,000    15,000
Certificates of deposit             3,915       1,934      2,245      1,708       6,724    16,526
  over $ 100,000
Other certificates of deposit      10,990       3,908      5,661      6,492      16,051    43,102
Money market deposit accounts           0           0      1,866      3,734       1,866     7,466
Other interest-bearing                  0           0      3,010     12,042      15,054    30,106
  deposits
                                 --------   ---------   --------   --------    -------- ---------
                                   18,730       5,842     12,782     23,976      54,695   116,025
                                 --------   ---------   --------   --------    -------- ---------
Cumulative GAP - 12/31/03        $ 15,133   $  16,700   $ 14,571   $  7,127    $ 18,345 $  18,345
                                 ========   =========   ========   ========    ======== =========
Cumulative GAP - 12/31/02       ($  4,565) ($  2,953)   $  1,593  ($  8,888)   $ 17,634 $  17,634
                                 ========= ==========   ========   =========   ======== =========
</TABLE>
LIQUIDITY (Continued)

          Loan rates have significantly decreased over the past twelve months.
Based on current economic indicators and predictions, management anticipates
that interest rates will remain stagnant over the first half of 2004 and will
slowly increase over the remainder of the year.  As a result, management has
assessed probabilities to each time period and proportionately included
variable rate loans in rate sensitive assets of one year or less.

          In monitoring and evaluating liquidity, management generally does not
consider regular savings or interest-bearing checking accounts to be
particularly rate sensitive since it is highly improbable that 100% of these
deposits will be withdrawn within the next 360 days.  Therefore, management has
assessed probabilities to each time period and proportionately included these
funds in rate sensitive liabilities of one year or less.

CAPITAL FUNDS

          Internal capital generation has been the primary method utilized by
Fulton Bancshares Corporation to increase its capital stock.  Stockholders'
equity exceeded $ 16.2 million at December 31, 2003.  Regulatory authorities
have established capital guidelines in the form of the "leverage" and "risk-
based capital" ratios.  The leverage ratio compares capital to total balance
sheet assets, while the risk-based ratios compare capital to risk-weighted
assets and off-balance-sheet activity in order to make capital levels more
sensitive to risk profiles of individual banks.  A comparison of Fulton
Bancshares Corporation's capital ratios to regulatory minimums at December 31
is as follows:

<TABLE>
<S>                                    <C>      <C>     <C>
                                            Fulton      Regulator
                                          Bancshares    y Minimum
                                         Corporation    Requireme
                                                           nts
                                        2003     2002

Leverage ratio                          11.3%    10.4%       3%

Risk-based capital ratio
Tier I (core capital)                   15.7%    14.5%       4%
Combined Tier I and Tier II
  (core capital plus allowance
  for loan losses)                      16.9%    15.4%       8%
</TABLE>

          Fulton Bancshares Corporation has traditionally been well above
required levels and expects equity capital to continue to exceed regulatory
guidelines and industry averages.  Certain ratios are useful in measuring the
ability of a company to generate capital internally.

          The following chart indicates the growth in equity capital for the
past three years.

<TABLE>
<S>                                     <C>         <C>         <C>
                                           2003        2002        2001
Equity capital at December 31
  ($ 000 omitted)
                                           $ 16,278    $ 16,659   $ 15,244
Equity capital as a percent of assets
  at December 31
                                             11.02%      10.27%     10.10%
Return on average assets                      0.54%       1.11%      1.03%
Return on average equity                      4.89%      10.91%     10.12%
Cash dividend payout ratio                   62.33%      29.06%     31.50%
</TABLE>

MARKET RISK MANAGEMENT

          The Bank has risk management policies to monitor and limit exposure to
market risk, and works diligently to take advantage of profit opportunities
available in interest rate movements.

          Management continuously monitors liquidity and interest rate risk
through its Asset-Liability Committee reporting, and reprices products in order
to maintain desired net interest margins.  Management expects to continue to
direct its marketing efforts toward attracting more low cost retail deposits
while competitively pricing its time deposits in order to maintain favorable
interest spreads, while minimizing structural interest rate risk.



MARKET RISK MANAGEMENT (Continued)

          The following table sets forth the projected maturities and average
rates for all rate sensitive assets and liabilities based on the following
assumptions.  All fixed and variable rate loans were based on original
maturities since the bank has not experienced, and does not expect, a
significant rewriting of loans.  Investments are based on maturity date except
certain long-term agencies, which are classified by call date.  The bank has
historically experienced very little deposit runoff and has generally had net
gains in deposits over the years.  Based on this experience, it was estimated
that maximum runoff of noninterest-bearing checking, NOW checking and other
savings would be 10%, and maximum runoff of money market deposits would be 33%.
It was estimated that maximum runoff of time deposits would be 25% and these
deposits are classified by original maturity date.
<TABLE>
<S>                     <C>      <C>       <C>      <C>      <C>       <C>         <C>         <C>
                         - - - - - - - - - - - Principal/Notional Amount Maturing In - - - - - - - - - -
(In millions)
Rate sensitive assets     2004     2005     2006     2007      2008    Thereafter    Total       Fair
                                                                                                 Value

Fixed rate loans         $ 7,779  $ 3,083  $ 2,576  $ 2,305   $ 2,088     $ 18,827   $ 36,658   $ 36,798
Average interest rates     6.88%    8.63%    8.30%    7.97%     7.78%        7.31%      7.46%

Variable rate loans       24,790    2,728    2,790    2,548     2,486       31,289     66,631     66,631
Average interest rates     4.94%    5.90%    5.77%    5.88%     5.91%        6.02%      5.63%

Fixed rate securities     19,688        0    1,300        0     4,315        1,733     27,107     26,282
Average interest rates     4.22%       0%    5.13%       0%     3.90%        4.14%      4.21%

Variable rate              2,701      782      625      469       262            0      4,839      4,799
securities
Average interest rates     2.48%    3.07%    3.07%    3.07%     3.07%           0%      2.74%


Rate sensitive
liabilities

Noninterest-bearing         1,393    1,253    1,128    1,015       914        8,222     13,925     13,925
  checking
Average interest rates       N/A      N/A      N/A      N/A       N/A          N/A        N/A

Savings and interest-      6,322    5,048    4,062    3,295     2,696       16,149     37,572     37,572
  bearing checking
Average interest rates     0.73%    0.73%    0.73%    0.73%     0.73%        0.73%      0.73%

Time deposits              9,213    7,496    6,123    6,690     7,527       22,579     59,628     60,791
Average interest rates     2.40%    3.32%    3.45%    4.16%     3.34%        3.34%      2.89%

Variable rate              3,825        0        0        0         0       15,000     18,825     20,258
borrowings
Average interest rates     1.03%        0        0        0         0        5.93%      4.93%

</TABLE>
FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

          Financial Accounting Standards Board Statement 150 - Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity, was issued May of 2003 and is effective for financial instruments
entered into or modified after May 31, 2003.  This statement establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity.  It requires
that an issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances).  Many of those instruments were
previously classified as equity.  Provisions of this statement are consistent
with the Board's proposal to revise the definition of liabilities to encompass
certain obligations that a reporting entity can or must settle by issuing its
own equity shares, depending on the nature of the relationship established
between the holder and the issuer.  Management does not expect there to be a
significant impact from this statement since the Corporation currently does not
have any obligations requiring settlement by the issuance of its own shares of
stock.

          In December 2003, the Financial Accounting Standards Board released
Financial Interpretation No. 46, Consolidation of Variable Interest Entities.
This Interpretation of Accounting Research Bulletin No. 51, Consolidated
Financial Statements, addresses consolidation by business enterprises of
variable interest entities, which have one or more of the following
characteristics:

          1.The equity investment at risk is not sufficient to permit the
            entity to finance its activities without additional subordinated
            financial support provided by any parties, including the equity
            holders.
          2.The equity investors lack one or more of the following essential
            characteristics of a controlling financial interest:
            a.The direct or indirect ability to make decisions about the
              entity's activities through voting rights or similar rights;
            b.The obligation to absorb the expected losses of the entity;
            c.The right to receive the expected residual returns of the entity.
          3.The equity investors have voting rights that are not proportionate
            to their economic interests, and the activities of the entity
            involve or are conducted on behalf of an investor with a
            disproportionately small voting interest.

          Management does not expect this interpretation to have a significant
impact since the Corporation does not have any investment in any entity with the
aforementioned characteristics.

STOCK MARKET ANALYSIS AND DIVIDENDS

          The Corporation's common stock is traded inactively in the over-the-
counter market.  As of December 31, 2003 the number of shareholders of record
was about or around 500.

<TABLE>
<S>                           <C>        <C>        <C>        <C>
                               Market       Cash      Market      Cash
                                Price     Dividend    Price     Dividend
                                      2003                  2002

First Quarter                 $ 44.15      $ .23     $ 35.25     $ .22
Second Quarter                  49.00        .23       35.25       .22
Third Quarter                   55.05        .27       37.50       .26
Fourth Quarter                  49.20        .32       45.00       .32
</TABLE>
                                                                      Exhibit 14


                          FULTON BANCSHARES CORPORATION
                                 CODE OF ETHICS

     The Directors, officers and employees of Fulton Bancshares Corporation (the
"Company"), and any and all subsidiaries, hold an important and elevated role in
corporate governance.  They are vested with both the responsibility and
authority to protect and preserve the interests of all of the Company's
constituents, including shareholders, customers and citizens of the communities
in which we conduct business.  The maintenance of extremely high standards of
honest, ethical and impartial conduct is essential to assure the proper
performance of the Company's business and the maintenance of the public's trust.
This Code of Ethics prescribes the policies and procedures to be employed and
enforced in the Company's operations.  This Code augments The Fulton County
National Bank & Trust Company Employee Handbook.

    *     It is your responsibility to comply with the law and behave in an
          ethical manner.  This responsibility cannot be delegated or assumed
          by the Company.

    *     This Code cannot anticipate every possible situation or cover every
          topic in detail.  Most of the topics covered in this Code are
          explained in greater detail in The Fulton County National Bank &
          Trust Company Employee Handbook.  From time-to-time the Company may
          establish compliance programs to address specific subjects.
          If you are unclear about a situation, seek guidance before taking
          action.

    *     The standards in this Code do not necessarily take into account all
          legal requirements.  Where more restrictive local laws or
          requirements exist, those take precedence.

    *     Comply with all applicable governmental rules and regulations.
          Failure to obey laws and regulations violates this Code and may
          expose both you and the Company to criminal or civil prosecution.
          Any violation of this Code or other compliance programs may result
          in corrective action, up to and including termination.  The
          Company may also seek civil remedies from you and even refer
          criminal misconduct to law enforcement agencies.

    *     You are responsible for reporting suspected violations of this Code.

    *     If you have a question about a topic covered in this Code, please
          review The Fulton County National Bank & Trust Company Employee
          Handbook.  If you still have a concern regarding any unethical
          or illegal conduct, please contact DoriAnn Hoffman, our Corporate
          Compliance Officer, or follow the guidelines in the Whistleblower
          Policy.

Conflicts of Interest

A "conflict of interest" exists any time one faces a choice between what is in
his/her personal interest (financial or otherwise) and the interest of the
Company.  These situations are not always easy to avoid.  When a conflict of
interest arises, it is important that officers act with great care to avoid even
the appearance that their actions were not in the best interest of the Company.
If you find yourself in a position where your objectivity may be questioned
because of individual interest or family or personal relationships, notify
DoriAnn Hoffman, our Corporate Compliance Officer, immediately.

Ownership Interests

Board of Directors approval is required for the Company to do business with a
company in which a member of the Board of Directors, an officer, an employee or
a family member of a director, officer or employee owns - directly or indirectly
- an interest.  If you or a family member own or acquire an interest that is
greater than 5% in any company, Board approval is needed:

     *    If that company has more than $1,000 in deposits, loans or does more
          than $1,000 in annual sales of goods or services to the Company or
          its affiliates; or

     *    If you help make that company's purchasing or lending decisions
          or have a part in payment for the goods and services.

If your ownership interest does not meet any of the above criteria, Board
approval is not needed, but you remain obligated to keep the Company's interests
first in mind.

Gifts, Meals, Services and Entertainment

One should not request or accept anything that might be used as a means to
influence, or even appear to influence, you against the Company's best
interests.  Personal gifts should not be accepted other than those considered
common business courtesies and for which one would reasonably expect to give
something similar in return in the normal course of business.

Safeguarding Company Assets/Accuracy of Books and Records

The Company maintains internal controls to provide direction on protecting
Company assets and financial accountability.  The controls are based upon the
following principles.
Do not:

   *  Make personal use of Company assets that creates any additional costs
      for theCompany, interferes with work duties or violates any Company
      policies;

   *  Allow Company property to be used to help carry out illegal acts;

   *  Manipulate financial accounts, records or reports for personal gain;

   *  Maintain off-the-book accounts to facilitate questionable or illegal
      payments; or

   *  Violate any law or regulation.

Do:

   *  Ensure effective internal controls and procedures are designed and
      implemented;

   *  Prepare project budget proposals with accurate information;

   *  Maintain books, accounts and records according to generally accepted
      accounting principles, using enough detail to reflect accurately and
      fairly Company transactions;

   *  Record transactions in a timely manner, so that no misleading financial
      information is created.  (These transactions include, but are not
      limited to, income, expense, indebtedness, obligation, reserves and
      acquisition or disposition of assets, etc.); and

   *  Give full, fair, accurate, timely, and understandable disclosure in
      any and all periodic reports filed with the Securities Exchange
      Commission.

Insider Trading

Insider trading is a crime that can carry severe penalties.  If you know
material, confidential information about the Company or any company with whom we
have a business relationship and you trade Company securities, such as stocks or
bonds, while in possession of that information or tell others about it before it
is made public, you may have violated the insider trading laws.

Material information is the type of news that would affect a reasonable
investor's decision on whether or not to invest in the Company's stock.
Examples include plans to issue securities, sharp changes in earnings patterns,
changes in dividend rates, changes in key management personnel, mergers,
acquisitions, and important regulatory actions affecting the Company.  This
policy forbids you from trading not only in Company stock, but also in stock of
our suppliers, customers or other companies with whom we have a business
relationship while in possession of material inside information learned in the
course of your employment at our Company.

We encourage all members of the Board of Directors and officers to invest in our
stock.  However, if you have access to any information not readily available to
the public, you must be very careful when trading stock to be sure you have not
traded while in possession of material non-public information.  When you have
such information:

     *    Do not tell anyone not authorized to have the information.  A casual
          remark to a friend may find its way to a broker and eventually to
          the entire financial community thereby requiring the Company to make
          a premature or unplanned public announcement.  This "tipping" may
          be illegal and damaging to the Company.

     *    In compliance with the Sarbanes-Oxley Act of 2002, do not trade and
          trading is prohibited in the Company's stock (or that of an
          applicable outside company) until the news has been made public for
          a least two full business days.
          Circumstances suggesting the possibility of insider trading may
          result in an investigation by governmental authorities of the
          Company and stockbroker records of stock trading transactions.
          This investigation could damage our Company's reputation and result
          in liability or penalties, including criminal charges and
          fines against the individual.

     *    This policy against insider trading also covers transfers into and
          out of the Company stock or savings plans and changes in patterns
          involving purchases of our stock within the plans.  However,
          generally, regular scheduled monthly purchases of the Company stock
          within plans are not prohibited.

If you are planning to effect a transaction in our securities, you must contact
DoriAnn Hoffman, our Corporate Compliance Officer, in advance.

Bribery, Kickbacks and Other Improper Payments

The Company, our Board of Directors, officers and employees must maintain high
ethical and professional standards in all dealings.

     *    Do not directly or indirectly promise, offer or make payment in money
          or anything of value to anyone, including a government official,
          agent or employee of a government, political party, labor
          organization or business entity or a candidate of a political party,
          with the intent to induce favorable business treatment or to
          improperly affect business or governmental decisions.
     *    Our Code does not take into account all local legal requirements.
          Where more restrictive local laws exist, those take precedence.
          In general, the Company does not consider ordinary and reasonable
          business entertainment or gifts of insubstantial value that are
          customary and legal in the local market to be improper.

     *    Document any entertainment of and gifts to customers and potential
          customers.

     *    Loans are not made by the Company to its Board members, officers or
          employees. Loans may be made by our banking subsidiaries and will
          comply with all federal and state laws, statutes and regulations.


                                 ACKNOWLEDGMENT

I, the undersigned, hereby acknowledge that I have received a copy of the FULTON
BANCSHARES CORPORATION Code of Ethics.  I further certify that I have reviewed
the Code of Ethics, and that I understand its provisions and what they require
of me.  I understand that a violation of this Code of Ethics may result in the
termination of my employment and/or a request to resign.




------------------------------      ------------------------------
Date                          Signature




                                    ------------------------------
                                   PRINT NAME




                                                                      EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT


1.  Fulton County National Bank and Trust, Pennsylvania; a national bank
    organized February 24, 1887 under the Pennsylvania Banking Code.

    It converted to a national banking association on September 5, 1933.

2.  Fulton County Community Development Corporation, which was formed on June 7,
    1996 under the Pennsylvania Business Corporation Law of 1988, as amended.
                                                                    EXHIBIT 23.1

                          INDEPENDENT AUDITOR'S CONSENT


Board of Directors and Shareholders
Fulton Bancshares Corporation


          We consent to the incorporation by reference in registration
statements (Form SB-2 No. 33-85626) of Fulton Bancshares Corporation of our
report dated February 17, 2004, appearing in the 2003 annual report on
shareholders incorporated by reference in this Form 10-K of Fulton Bancshares
Corporation for the year ended December 31, 2003.




                                        /S/SMITH ELLIOTT KEARNS & COMPANY, LLC



Chambersburg, PA
March 20, 2004


                                                                    EXHIBIT 31.1


                                  CERTIFICATION

I, Clyde H. Bookheimer, certify that:

     1.  I have reviewed this annual report on Form 10-K of Fulton Bancshares
       Corporation;
     2.  Based on my knowledge, the annual 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 annual report.
     3.  Based on my knowledge, the financial statements, and other financial
       information included in this annual 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 annual 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-15(e) and 15d-15(e)) for the
       registrant and we have:
         (a)  designed such disclosure controls and procedures or caused such
            disclosure controls and procedures to be designed under our
            supervision to ensure that material information relating to the
            registrant, including its consolidated subsidiary, is made known to
            us by others within those entities, particularly during the period
            in which this annual report is being prepared;
         (b)  evaluated the effectiveness of the registrant's disclosure
            controls and procedures and presented in this annual report our
            conclusions about the effectiveness of the disclosure controls and
            procedures as of the end of the period covered by this annual report
            based on such evaluation; and
         (c)  disclosed in this annual report any change in the registrant's
            internal control over financial reporting that occurred during the
            registrant's most recent fiscal quarter that has materially affected
            or is reasonably likely to materially affect the registrant's
            internal control over financial reporting.
     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:
         (a)  all significant deficiencies and material weaknesses in the design
            or operation of the internal control over financial reporting which
            are reasonably likely to adversely affect the registrant's ability
            to record, process, summarize and report financial information; and
         (b)  any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

                                           Date:  March 26, 2004
                                                  -----------------------------
                                           By:    /s/Clyde H. Bookheimer
                                                  -----------------------------
                                                  Clyde H. Bookheimer
                                                  President and Chief
                                                  Executive Officer,
                                                  Director

                                                                    EXHIBIT 31.2

                                  CERTIFICATION

I, Doriann Hoffman, certify, that:

     1.  I have reviewed this annual report on Form 10-K of Fulton Bancshares
       Corporation;
     2.  Based on my knowledge, the annual 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 annual report.
     3.  Based on my knowledge, the financial statements, and other financial
       information included in this annual 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 annual 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-15(e) and 15d-15(e)) for the
       registrant and we have:
         (a)  designed such disclosure controls and procedures or caused such
            disclosure controls and procedures to be designed under our
            supervision to ensure that material information relating to the
            registrant, including its consolidated subsidiary, is made known to
            us by others within those entities, particularly during the period
            in which this annual report is being prepared;
         (b)  evaluated the effectiveness of the registrant's disclosure
            controls and procedures and presented in this annual report our
            conclusions about the effectiveness of the disclosure controls and
            procedures as of the end of the period covered by this annual report
            based on such evaluation; and
         (c)  disclosed in this annual report any change in the registrant's
            internal control over financial reporting that occurred during the
            registrant's most recent fiscal quarter that has materially affected
            or is reasonably likely to materially affect the registrant's
            internal control over financial reporting.
     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:
         (a)  all significant deficiencies and material weaknesses in the design
            or operation of the internal control over financial reporting which
            are reasonably likely to adversely affect the registrant's ability
            to record, process, summarize and report financial information; and
         (b)  any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

                                           Date:  March 26, 2004
                                                  -----------------------------
                                           By:    /s/Doriann Hoffman
                                                  -----------------------------
                                                  Doriann Hoffman
                                                  Vice President and Treasurer
                                                  (Chief Financial Officer)
                                                                    EXHIBIT 32.1





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OR THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of FULTON BANCSHARES CORPORATION (the
"Company") on Form 10-K for the period ending December 31, 2003 as filed with
the Securities and Exchange Commission on the date therein specified (the
"Report"), I, Clyde H. Bookheimer, President and 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 financial condition and results of operations of the Company
    as of and for the period covered by the Report.


                                           By:    /s/Clyde H. Bookheimer
                                                  ----------------------
                                                  Clyde H. Bookheimer
                                                  President and Chief
                                                  Executive Officer,
                                                  Director
Dated:  March 26, 2004
        --------------
                                                                    EXHIBIT 32.2


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OR THE SARBANES-OXLEY ACT OF 2002




In connection with the Annual Report of FULTON BANCSHARES CORPORATION (the
"Company") on Form 10-K for the period ending December 31, 2003 as filed with
the Securities and Exchange Commission on the date therein specified (the
"Report"), I, DoriAnne Hoffman, Vice President and Treasurer, and 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 financial condition and results of operations of the Company
    as of and for the period covered by the Report.


                                           By:    /s/DoriAnn Hoffman
                                                  ------------------------
                                                  DoriAnn Hoffman
                                                  Vice President and Treasurer
                                                  (Chief Financial Officer)

Dated:  March 26, 2004
        ---------------