- 48 -
                          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, 2002
                          -----------------
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, 2003
------------------------------ -----------------------------
(Common stock, .625 par value)           492,810











                                      - 1 -
<PAGE>
             DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual shareholders' report for the year
ended December 31, 2002 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 21, 2003
are incorporated by reference in Part III of this Form 10-K.











































                                      - 2 -
<PAGE>
                FULTON BANCSHARES CORPORATION

                          FORM 10-K

                            INDEX


Page
Part I

   Item 1.  Business                                         4 - 15
   Item 2.  Properties                                           16
   Item 3.  Legal Proceedings                                    16
   Item 4.  Submission of Matters to a Vote of Security
Holders   16

Part II

   Item 5.  Market for Registrant's Common Equity and
Related
            Stockholder Matters                                  17
   Item 6.  Selected Financial Data                              17
   Item 7.  Management's Discussion and Analysis of
Financial
            Condition and Results of Operations                  17
   Item 8.  Financial Statements and Supplementary Data     17 - 26
   Item 9.  Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure               26

Part III

   Item 10.  Directors and Executive Officers of the
Registrant                                                       27
   Item 11.  Executive Compensation                              27
   Item 12.  Security Ownership of Certain Beneficial Owners
             and Management                                      27
   Item 13.  Certain Relationships and Related Transactions      27
   Item 14.  Controls and Procedures                             28

Part IV

   Item 15.  Exhibits, Financial Statement Schedules, and
             Reports on Form 8-K                            29 - 30

   Signatures                                                    31

   Certification of Chief Executive Officer required by
      Form 10-K                                                  32

   Certification of Chief Financial Officer required by
      Form 10-K                                                  33














                                      - 3 -
<PAGE>
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 2002, 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.
                                      - 4 -
<PAGE>
          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


                                      - 5 -
<PAGE>
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.


                                      - 6 -
<PAGE>
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


                                      - 7 -
<PAGE>
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, including passbook accounts, 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, foreign money exchange, 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 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, (8) home equity
lines of credit, and (9) PHEAA student loans.  Loans of
these types will be considered desirable by the Bank
provided such loans meet the test of sound credit.


                                      - 8 -
<PAGE>
          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.

Loan Loss Reserve

          The provision for loan losses was $ 255,000 in
2002 compared to $ 15,000 in 2001.  The provisions were
based on management's evaluation of the adequacy of the
reserve balance and represent amounts necessary to maintain
the reserve at the appropriate level based on the quality of
the loan portfolio and economic conditions.  The
Corporation's history of net charge-offs has traditionally
been better than peer group performance with an average rate
of less than .10% of average loans outstanding over the past
five years and management is not aware of any problem loans
that are indicative of trends, events, or uncertainties that
would significantly impact operations, liquidity, or
capital.  Though this trend is expected to continue,
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>
<CAPTION
                          90 Days or More  Nonaccrual Status
                              Past Due
                           2002     2001     2002      2001
<S>                        <C>     <C>      <C>        <C>
Loans secured by real        $ 59     $ 567   $ 1,525    $ 269
estate
Personal loans                 11        48         0        0
Commercial and other loans      0       307        71       20
                             ----     -----   -------    -----
     Total loans            $ 70     $ 922   $ 1,596    $ 289
                            ====     =====   =======    =====
</TABLE>


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


                                      - 9 -
<PAGE>
          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


          Business lines of credit and commercial loans with
balances of $250,000 and over are individually reviewed.
Also, loans that are 90 days or more past due or have been
previously classified as substandard are individually
reviewed.  Allocations to the allowance for loan losses are
based upon classifications assigned to those specific loans.



          Loan classifications utilized are based on past
experience and are as follows:

                                       Allowance Factors
                                       -----------------
            Loss                           Charge-off
            Doubtful                          50%
            Substandard                        3%
            Special Mention                    1%


          The remaining portion of the pools are evaluated
as groups with allocations made to the allowance based on
historical loss experience, current and anticipated trends
in delinquencies, trends in volume and terms of loans,
concentrations of credit and general economic conditions
within the Corporation's trading area.

          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, ninety-one percent 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%.

Concentration

          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 20% of
loan portfolio).

Employees

          As of December 31, 2002, the Bank has forty-seven
(47) full-time equivalent employees.


                                      - 10 -
<PAGE>
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.


                                      - 11 -
<PAGE>
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.


                                      - 12 -
<PAGE>
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>
<CAPTION>
                       Total    Tier 1   Tier 1    Under a
                       Risk-    Risk-    Leverag   Capital
                       Based    Based    e Ratio   Order or
                       Ratio    Ratio             Directive
<S>                  <C>       <C>       <C>      <C>
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.


                                      - 13 -
<PAGE>
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


                                      - 14 -
<PAGE>


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.


                                      - 15 -
<PAGE>
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


                                      - 16 -
<PAGE>
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.  As of
December 31, 2002, the approximate number of shareholders of
record was 525.  Market prices at the end of each quarter
are based on the latest sales prices.

          The stock market analysis and dividends for 2002
and 2001 on page 35 of the annual shareholders report for
the year ended December 31, 2002 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 2002, 40 shares of treasury stock were
reissued, covering compensation of $ 1,800.  In 2001, 25
shares of treasury stock were reissued, covering $ 837 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, 2002 is incorporated herein by reference.

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

          Management's discussion and analysis of financial
condition and results of operations included on pages 28
through 35 of the annual shareholders' report is
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 27 of the annual shareholders' report for the year
ended December 31, 2002 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
Distribution of assets, liabilities,
   and stockholders' equity - Interest
   rates and interest differential tax
   equivalent yields                                     18
Changes in net interest income tax equivalent yields     19
Investment portfolio                                     20
Loan portfolio                                           21
Summary of loan loss experience                          22
Nonaccrual and delinquent loans                          23
Allocation of allowances for loan losses                 24
Deposits/return on equity and assets                     25
Consolidated summary of operations                       26

                                      - 17 -
<PAGE>
        FULTON BANCSHARES CORPORATION AND SUBSIDIARY
          For additional information concerning liquidity,
refer to statistical disclosures applicable to the
investment and loan portfolio.
          Closely related to the management of liquidity is
the management of rate sensitivity which focuses on
maintaining stability in the net interest margin.  As
illustrated in the table below the tax equivalent net
interest margin ranged from 3.6% to 3.9% of average earning
assets during the past 3 years.  An asset/liability
committee monitors and coordinates the overall
asset/liability strategy.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
   Interest Rates and Interest Differential Tax Equivalent
                           Yields
                   Years Ended December 31
<TABLE>
<S>                  <C>         <C>       <C>     <C>       <C>       <C>      <C>        <C>         <C>
ASSETS                           2002                          2001                         2000
(000 omitted)         Average    Interest   Rate    Average  Interest    Rate    Average    Interest    Rate
                      Balance                       Balance                      Balance

Investment
securities:
Taxable interest       $  34,783  $  2,102    6.0%  $  23,097  $  1,410     6.1%  $  21,209   $  1,282    6.0%
income
Nontaxable interest        2,240       102     4.6      2,817       135     4.8       3,997        200    5.0
income
                       ---------  --------    ----  ---------  --------    ----   ---------   --------   ----
Total investment          37,023     2,204     6.0     25,914     1,545     6.0      25,206      1,482    5.9
securities
Loans (net of            105,219     7,621     7.2    105,028     8,585     8.2      98,052      8,506    8.7
unearned discounts)
Other short-term             723        12     1.6      1,514        54     3.6          73          4    5.5
investments
                       ---------  --------    ----  ---------  --------    ----   ---------   --------   ----
Total interest           142,965  $  7,837    6.9%    132,456  $ 10,184     7.7%    123,331   $  9,992    8.1%
earning assets
Allowance for loan      (    920)                    (   863)                      (   815)
losses
Cash and due from          3,667                        3,601                         3,495
banks
Bank premises and          3,861                        3,572                         3,624
equipment
Other assets               5,990                        5,618                         4,369
                       ---------  --------    ----  ---------  --------    ----   ---------   --------   ----
Total assets           $ 155,563                    $ 144,384                     $ 134,004
                      =========                    =========                     =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing       $  11,431  $     85      .7% $  10,992  $    199     1.8%  $  10,204   $    218    2.1%
demand deposits
Savings deposits          18,438       237     1.3     16,891       363      2.1     18,618        482     2.6
Time deposits             74,238     2,967     4.0     71,974     3,908      5.4     62,871      3,553     5.7
Short-term borrowings     19,464       982     5.0     16,389       962      5.9     15,913        957     6.0
                       ---------  --------    ----  ---------  --------    ----   ---------   --------   ----
Total interest           123,571  $  4,271     3.5%   116,246  $  5,432     4.7%    107,606   $  5,210    4.8%
bearing liabilities
Demand deposits           15,237                       12,534                        12,368
Other liabilities            905                          921                           866
                       ---------  --------    ----  ---------  --------    ----   ---------   --------   ----
Total liabilities        139,713                      129,701                       120,840
Stockholders' equity      15,850                       14,683                        13,164
                       ---------  --------    ----  ---------  --------    ----   ---------   --------   ----
Total liabilities &    $ 155,563                    $ 144,384                     $ 134,004
stockholders' equity
                       =========                    =========                     =========
Net interest                      $  5,566     3.9%            $  4,752     3.6%              $  4,782    3.9%
income/net yield on
average earning
assets
                                 ========   ====              ========    ====               ========   ====
</TABLE>
          For purposes of calculating loan yields, the
average loan volume includes nonaccrual loans.  For purposes
of calculating yields on nontaxable interest income, the
taxable equivalent adjustment is made to equate nontaxable
interest on the same basis as taxable interest.  The
marginal tax rate was 34% for 2002, 2001, and 2000.

                                      - 18 -
<PAGE>
        FULTON BANCSHARES CORPORATION AND SUBSIDIARY

    CHANGES IN NET INTEREST INCOME TAX EQUIVALENT YIELDS

<TABLE>
<S>                    <C>        <C>        <C>          <C>       <C>       <C>
                                2002 Versus 2001                 2001 Versus 2000
                             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 unearned     $   15  ($ 1,007)    ($   992)     $ 631   ($ 552)     $   79
discounts)
Taxable investment            740  (     20)          720       104        24        128
securities
Nontaxable investment    (    27)  (      6)    (     33)   (   59)   (    6)     (   65)
securities
Other short-term         (    28)  (     14)    (     42)        79   (   29)         50
investments
                          -------  ---------    ---------    ------   -------     ------
Total interest income         700  (  1,047)    (    347)       755   (  563)        192
                          -------  ---------    ---------    ------   -------     ------
Interest Expense
Interest bearing                6  (    121)    (    115)        13   (   32)    (    19)
demand
Savings deposits               24  (    150)    (    126)   (   43)   (   76)    (   119)
Time deposits                 101  (  1,042)    (    941)       550   (  195)        355
Short-term borrowings         187  (    166)           21        26   (   21)          5
                          -------  ---------    ---------    ------   -------     ------
Total interest expense        318  (  1,479)    (  1,161)       546   (  324)        222
                          -------  ---------    ---------    ------   -------     ------
Net interest income                               $   814                        ($   30)
                                                  =======                        =======
</TABLE>

          Changes which are attributed in part to volume and
in part to rate are allocated in proportion to their
relationships to the amounts of changes.

                                      - 19 -
<PAGE>

        FULTON BANCSHARES CORPORATION AND SUBSIDIARY
                    INVESTMENT PORTFOLIO

          The following table shows the maturities of
investment securities at book value as of December 31, 2002,
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>
                    Within   After 1    After 5   After 10    Total
                    1 year   year but    years     years
                             within 5     but
                              years      within
                                        10 years
  (000 omitted)
Bonds:
Corporate
Book value           $   0   $    499    $  498      $   0     $  997
Yield                    0%      5.62%     4.83%        0%       5.22%

U. S. Government
agencies
Book value               0     11,589     2,649          0     14,238
Yield                    0%      2.77%     2.81%        0%       2.78%

State and municipal
Book value               0        310     1,320        456      2,086
Yield                    0%      6.06%     7.01%     7.20%       6.96%

Mortgage-Backed
Book value               0          0         0      4,644      4,644
Yield                    0%         0%        0%     2.67%       2.67%
                    ------   --------   -------    -------   --------
Total book value     $   0   $ 12,398   $ 4,467    $ 5,100   $ 21,965
                    =======  =========  ========  ========   =========
Yield                    0%      2.97%     4.28%     3.08%       3.26%
                    =======  =========  ========  ========   =========
Other Debt
Securities:
FHLMC/FNMA non-
cumulative
preferred stock
Book value                                                   $ 15,390
                                                             =========
Yield                                                            7.71%
                                                             =========
Equity Securities:
Total Equity                                                 $  1,904
Securities
                                                             =========
Yield                                                            2.40%
                                                             =========
Total Investment                                             $ 39,259
Securities
                                                             =========
Yield                                                            4.96%
                                                             =========
</TABLE>

                                      - 20 -
<PAGE>

        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)    2002       2001        2000        1999        1998
Commercial,           $ 15,171    $ 17,418   $  13,097   $ 12,294    $ 11,401
financial and
agricultural
Real estate -                0           0           0          0           0
Construction
Real estate -           82,098      78,796      80,020     69,273      58,915
Mortgage
Installment and         10,998       8,287       9,788     10,228      10,478
other personal
loans (net of
unearned discount)
                    ---------   ---------   ---------   --------    --------
Total loans         $ 108,267   $ 104,501   $ 102,905   $ 91,795    $ 80,794
                    =========   =========   =========   ========    ========
</TABLE>

          Presented below are the approximate maturities of
the loan portfolio (excluding real estate mortgages and
installments) at December 31, 2002:
<TABLE>
<S>                          <C>        <C>       <C>      <C>
                             Under One   One to     Over     Total
                               Year       Five      Five
                                         Years     Years

     (000 omitted)

Commercial, financial and      $ 11,378   $ 3,034    $ 759   $ 15,171
agricultural

Real estate - Construction            0         0        0          0
                               --------   -------    -----   --------
Total                          $ 11,378   $ 3,034    $ 759   $ 15,171
                              ========   =======    =====   ========
</TABLE>
          The following table presents the approximate
amount of fixed rate loans and variable rate loans due as of
December 31, 2002:
<TABLE>
<S                                  <C>          <C>
                                     Fixed Rate   Variable
                                       Loans     Rate Loans
     (000 omitted)

Due within one year                    $  9,281    $ 20,568
Due after one but within five years      11,814       9,644
Due after five years                     19,791      37,169
                                      --------    --------
Total                                 $ 40,886    $ 67,381
                                      ========    ========
</TABLE>

                                      - 21 -
<PAGE>

        FULTON BANCSHARES CORPORATION AND SUBSIDIARY
               SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<S>                           <C>         <C>         <C>          <C>        <C>
                                               Years Ended December 31
                                 2002        2001         2000       1999       1998
    (000 omitted)

Average total loans              $ 105,219  $ 105,028      $ 98,052  $ 87,902   $ 75,610
outstanding (net of unearned
income)
                                =========  =========      ========  ========   ========
Allowance for loan losses,      $     845   $    847      $    800  $    580   $    487
 beginning of period
Additions to provision for             255         15            45       195        185
loan losses charged to
operations
Loans charged off during the
year
Commercial                               3         20             3        14         67
Installment                             73         14            29        34         47
                                  --------    -------       -------  --------    -------
Total charge-off's                      76         34            32        48        114
                                  --------    -------       -------  --------    -------
Recoveries of loans
previously charged off:
Commercial                              1          2            24        63         16
Installment                              6         15            10        10          6
                                  --------    -------       -------  --------    -------
Total recoveries                         7         17            34        73         22
                                  --------    -------       -------  --------    -------
Net loans charged off                   69         17      (     2)   (    25)        92
                                  --------    -------       -------  --------    -------
Allowance for loan losses,        $  1,031    $   845       $   847  $    800    $   580
                                =========  =========      ========  ========   ========
Ratio of net loans charged off        .06%       .02%      (  .01)%      .12%    (  .03)%
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.

                                      - 22 -
<PAGE>
        FULTON BANCSHARES CORPORATION AND SUBSIDIARY
               NONACCRUAL AND DELINQUENT 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>
                                  2002      2001        2000      1999     1998
    (000 omitted)

Nonaccrual loans                 $ 1,596   $   289   $     0   $     0    $     0
                                 =======   =======   =======   =======    =======
Accrual loans:
Restructured                      $     0   $     0   $     0   $     0    $     0
30 through 89 days past due         3,692     4,121     1,787     1,084      1,458
90 days or more past due               70       922       549       168        442
                                 -------   -------   -------   -------    -------
Total accrual loans              $ 3,762   $ 5,043   $ 2,336   $ 1,252    $ 1,900
                                 =======   =======   =======   =======    =======
</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.
          Management has not identified any significant
problem loans in the accrual loan categories shown above.

                                      - 23 -
<PAGE>
        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
                                    2002                  2001
                            Allowance  Percentage Allowance  Percentage
                             Amount     of Loans   Amount     of Loans
                                        to Total              to Total
                                         Loans                 Loans
(000 omitted)
Commercial, financial and       $ 561      54.41%     $ 141      16.67%
agricultural
Real estate - Construction          0       0.00          0        0.0
Real estate - Mortgage            333      32.30        637      75.40
Installment                       137      13.29         67       7.93
                                -----     ------      -----     ------
Total                           1,031     100.00%     $ 845     100.00%
                                =====     ======      =====     ======

                                      Years Ended December 31
                                    2000                  1999
                            Allowance  Percentage Allowance  Percentage
                             Amount     of Loans   Amount     of Loans
                                        to Total              to Total
                                         Loans                 Loans
(000 omitted)
Commercial, financial and       $ 108      12.73%     $ 107      13.37%
agricultural
Real estate - Construction          0       0.00          0       0.00
Real estate - Mortgage            659      77.76        609      76.13
Installment                        80       9.51         84      10.50
                                -----     ------      -----     ------
Total                           1,031     100.00%     $ 845     100.00%
                                =====     ======      =====     ======
</TABLE>

<TABLE>
<S>                         <C>                   <C>
                                      Years Ended December 31
                                               1998
                                  Allowance        Percentage of Loans
                                   Amount            to Total Loans
(000 omitted)
Commercial, financial and             $  82                      14.11%
agricultural
Real estate - Construction                0                        0.00
Real estate - Mortgage                  423                       72.92
Installment                              75                       12.97
                                      -----                     -------
Total                                 $ 580                     100.00%
                                      =====                     =======
</TABLE>

                                      - 24 -
<PAGE>

        FULTON BANCSHARES CORPORATION AND SUBSIDIARY
                          DEPOSITS
          The average amounts of deposits are summarized
below:
<TABLE>
<S>                                <C>       <C>        <C>
                                       Years Ended December 31

                                     2002       2001       2000

      (000 omitted)

Demand deposits                    $  15,237  $  12,534   $  12,368
Interest bearing demand deposits      11,431     10,992      10,204
Savings deposits                      18,438     16,891      18,618
Time deposits                         74,238     71,974      62,871
                                   ---------  ---------   ---------
     Total deposits                $ 119,344  $ 112,391   $ 104,061
                                   =========  =========   =========
</TABLE>
          The following is a breakdown of maturities of time
deposits of $ 100,000 or more as of December 31, 2002:
<TABLE>
<S>                                       <C>
Maturity                                  (000
                                          omitted)

Certificates of Deposit
Three months or less                       $  10,465
Over three months through six months           2,098
Over six months through twelve months          2,940
Over twelve months                             2,834
                                            --------
                                            $ 18,337
                                            ========
</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>
                               2002      2001       2000

Assets                      $ 155,563 $ 144,384  $ 134,004
Net income                  $   1,730 $   1,486  $   1,439
Equity                      $  15,850 $  14,683  $  13,164
Cash dividends paid         $     503 $     468  $     425
Return on assets                1.11%     1.03%      1.07%
Return on equity               10.91%    10.12%     10.94%
Dividend payout ratio          29.06%    31.50%     29.49%
Equity to asset ratio          10.19%    10.17%      9.82%
</TABLE>

                                      - 25 -
<PAGE>
        FULTON BANCSHARES CORPORATION AND SUBSIDIARY
             CONSOLIDATED SUMMARY OF OPERATIONS
                                                Years Ended December 31
<TABLE>
<S>                             <C>          <C>        <C>         <C>         <C>
                                    2002        2001       2000        1999       1998
     (000 omitted)

Interest income                     $  9,837   $ 10,185    $  9,992    $ 8,759   $ 8,148
Interest expense                       4,271      5,432       5,210      4,325     4,151
                                    --------   --------    --------    -------   -------
Net interest income                    5,566      4,753       4,782      4,434     3,997
Provision for loan losses                 255         15          45        195       185
                                    --------   --------    --------    -------   -------
Net interest income after               5,311      4,738       4,737      4,239     3,812
provision for loan losses

Other income:
Trust                                      22         19          18         12        97
Service charges - Deposits                208        189         177        160       140
Other service charges,                    165        125         124        127       123
collection and exchange,
charges, commission fees
Other operating income                    279        306         203        290       362
                                    --------   --------    --------    -------   -------
Total other income                        674        639         522        589       722
                                    --------   --------    --------    -------   -------
Income before operating
 expense                               5,985      5,377       5,259      4,828     4,534

Operating expenses:
Salaries and employees benefits         1,728      1,560       1,509      1,314     1,242
Occupancy and equipment expense           746        729         728        647       569
Other operating expenses                1,304      1,162       1,133      1,050       934
                                    --------   --------    --------    -------   -------
Total operating expenses                3,778      3,451       3,370      3,011     2,745
                                    --------   --------    --------    -------   -------
Income before income taxes              2,207      1,926       1,889      1,817     1,789
Income tax                                477        440         449        380       391
                                    --------   --------    --------    -------   -------
Net income applicable to common      $  1,730   $  1,486     $ 1,440    $ 1,437   $ 1,398
stock
                                    ========   ========     =======    =======   =======
Per share data:
Earnings per common share              $ 3.51     $ 3.02      $ 2.91     $ 2.90    $ 2.82
Cash dividend - Common                   1.02        .95         .86        .86       .72
Weighted average number of            492,772    492,747     494,054    495,000   495,000
common shares
</TABLE>


Item 9.   Disagreements on Accounting and Financial
Disclosures.

          Not applicable.

                                      - 26 -
<PAGE>

PART III

          The information required by Items 10, 12 and 13 is
incorporated by reference from Fulton Bancshares
Corporation's definitive proxy statement for the 2003 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,
2002, 2001, and 2000 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 Annual    Restricted  Options/SA     LTIP      All Other
   Principal               ($)       ($)   Compensation($     Stock         RS      Payouts($)  Compensation
   Position                                      )           Award(s)      (#)                      ($)
                                                               ($)


                           Annual Compensation                          Long-Term Compensation
Clyde H.          2002    140,666      $ 0            $ 0           $ 0        $ 0         $ 0     $ 128,855
Bookheimer,
President & CEO
                  2001    130,008        0              0             0          0           0       163,903
                  2000    124,708        0              0             0          0           0        86,814
</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)

2002     $     0      $ 1,015    $ 16,270     $ 111,570     $     0
2001           0        1,232      13,890       148,781           0
2000           0        1,356      10,641        74,817           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, 2002, the cash surrender value of the
policies was $ 1,301,320.


                                      - 27 -
<PAGE>


Item 14.   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 a date
within 90 days prior to the filing date of this annual
report (the "Evaluation Date").  Based on such evaluation,
such officers have concluded that, as of the Evaluation
Date, 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

          Since the Evaluation Date, there have not been any
significant changes in the Company's internal controls or in
other factors that could significantly affect such controls.




                                      - 28 -
<PAGE>


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, 2002,
                   are incorporated by
                   reference in Item 8:
                   Consolidated balance sheets -
                   December 31, 2002 and 2001
                   Consolidated statements of income -
                   Years ended December 31,
                   2002, 2001, and 2000
                   Consolidated statements of stockholders'
                   equity - Years ended December 31, 2002,
                   2001, and 2000
                   Consolidated statements of cash flows -
                   Years ended December 31, 2002, 2001, and
                   2000
                   Notes to consolidated financial
                   statements - December 31, 2002
             (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 (21)  Subsidiaries of the
                      registrant
                   Exhibit (23)  Consent of independent
                      auditors
                   Exhibit (99.1) Certification pursuant to
                      18 U.S.C. Section 1350 as adopted
                      pursuant to Section 906 of the
                      Sarbanes-Oxley Act of 2002.
                   Exhibit (99.2) Certification pursuant to
                      18 U.S.C. Section 1350 as adopted
                      pursuant to Section 906 of the
                      Sarbanes-Oxley Act of 2002.
                   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

                                      - 29 -
<PAGE>
                      (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 filed herewith.
            (13) Annual report to security holders.  Filed
                 herewith.
            (21) Subsidiaries of the registrant.  Filed
                 herewith.
            (23) Consent of independent auditors.  Filed
                 herewith.
            (99) Additional exhibits.
                 Exhibit (99.1) 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.
                 Exhibit (99.2) 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.













                                      - 30 -
<PAGE>

                            SIGNATURES


          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, 2003
-----------------------      CEO
Clyde H. Bookheimer

/S/ David L. Seiders         Director & Vice
-----------------------      Chairman               March 26, 2003
David L. Seiders

/S/ Cecil B. Mellott         Director & Vice        March 26, 2003
-----------------------      Chairman
Cecil B. Mellott

/S/ Robert C. Snyder         Director               March 26, 2003
-----------------------
Robert C. Snyder

/S/ Ellis L. Yingling        Director &             March 26, 2003
-----------------------      Chairman
Ellis L. Yingling

/S/ Clair R. Miller          Director               March 26, 2003
-----------------------
Clair R. Miller

/s/ Martin R. Brown          Director               March 26, 2003
-----------------------
Martin R. Brown

/s/Robert L. Thomas          Director               March 26, 2003
-----------------------
Robert L. Thomas


                                      - 31 -
<PAGE>

                        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-14 and 15d-14) for the
          registrant and we have:
         (a)  designed such disclosure controls and
              procedures to ensure that material
              information relating to the registrant,
              including its consolidated 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 as of a date within 90 days prior
              to the filing date of this annual report (the
              "Evaluation Date"); and
         (c)  presented in this annual report our
              conclusions about the effectiveness of the
              disclosure controls and procedures based on
              our evaluation as of the Evaluation Date.
     5.  The registrant's other certifying officer and I
          have disclosed, based on our most recent
          evaluation, to the registrant's auditors and the
          audit committee of registrant's board of
          directors:
         (a)  all significant deficiencies in the design or
              operation of the internal controls which
              could adversely affect the registrant's
              ability to record, process, summarize and
              report financial data and have identified for
              the registrant's auditors any material
              weaknesses in internal controls; and
         (b)  any fraud, whether or not material, that
              involves management or other employees who
              have a significant role in the registrant's
              internal controls.
     6.  The registrant's other certifying officer and I
          have indicated in this annual report whether or
          not there were significant  changes in internal
          controls or in other factors that could
          significantly affect the internal controls
          subsequent to the date of our most recent
          evaluation, including any corrective actions with
          regard to significant deficiencies and material
          weaknesses.

                             Date:  March 26, 2003
                                    ----------------------
                             By:    /s/Clyde H. Bookheimer
                                    ----------------------
                                       Clyde H. Bookheimer
                                      President and Chief
                                        Executive Officer,
                                                  Director

                                      - 32 -
<PAGE>

                        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-14 and 15d-14) for the
       registrant and we have:
         (a)  designed such disclosure controls and
            procedures to ensure that material information
            relating to the registrant, including its
            consolidated 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
            as of a date within 90 days prior to the filing
            date of this annual report (the "Evaluation
            Date"); and
         (c)  presented in this annual report our
            conclusions about the effectiveness of the
            disclosure controls and procedures based on our
            evaluation as of the Evaluation Date.
     5.  The registrant's other certifying officer and I
       have disclosed, based on our most recent evaluation,
       to the registrant's auditors and the audit committee
       of registrant's board of directors:
         (a)  all significant deficiencies in the design or
            operation of the internal controls which could
            adversely affect the registrant's ability to
            record, process, summarize and report financial
            data and have identified for the registrant's
            auditors any material weaknesses in internal
            controls; and
         (b)  any fraud, whether or not material, that
            involves management or other employees who have
            a significant role in the registrant's internal
            controls.
     6.  The registrant's other certifying officer and I
       have indicated in this annual report whether or not
       there were significant  changes in internal controls
       or in other factors that could significantly affect
       the internal controls subsequent to the date of our
       most recent evaluation, including any corrective
       actions with regard to significant deficiencies and
       material weaknesses.

                               Date:  March 26, 2003
                                      ---------------------
                               By:    /s/Doriann Hoffman
                                      ---------------------
                                      Doriann Hoffman
                                      Vice President and
                                      Treasurer
                                      (Principal Financial
                                      and
                                      Accounting Officer)

                                      - 33 -
<PAGE>

                        Exhibit Index

Exhibit No.

10.1               Salary Continuation Agreement and Second
                      Amendment - Chief Executive Officer

10.2               First Amendment to Salary Continuation
                      Agreement - Principal Financial and
                      Accounting Officer

10.3               Director Deferred Compensation Plan

10.4               Director Emeritus Retirement Agreement

13                 Annual report to shareholders

21                 Subsidiaries of the Registrant

23.1               Independent Auditor's Consent

99.1               Certification of Chief Executive Officer

99.2               Certification of Chief Financial Officer

<PAGE>

                                                Exhibit 10.1

       THE FULTON COUNTY NATIONAL BANK & TRUST COMPANY
                     MCCONNELLSBURG, PA

                SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this 1st day of September, 1995 by and
between The Fulton County National Bank & Trust Company,
McConnellsburg, Pennsylvania ("Company") and Clyde H. Bookheimer
(the "Executive")

                        INTRODUCTION

To encourage the Executive to remain an employee of the Company,
the Company is willing to provide salary continuation benefits
to the Executive.  The Company will pay the benefits from its
general assets.

                          AGREEMENT

The Executive and the Company agree as follows:

                          Article 1

                         Definitions

1.1Definitions.  Whenever used in this Agreement, the
    following words and phrases shall have the meanings
    specified:

     1.1.1.  "Change of Control" means the transfer of 51% or
             more of the Company's outstanding voting common
             stock followed within twelve (12) months by
             replacement of fifty percent (50%) or more of the
             members of the Company's Board of Directors (for
             reasons other than death or disability).

     1.1.2.  "Code" means the Internal Revenue Code of 1986,
             as amended.  References to a Code Section shall
             be deemed to be to the section as it now exists
             and to any successor provision.

     1.1.3.  "Company" means The Fulton County National Bank
             & Trust Company, and any successor thereto.

     1.1.4.  "Normal Retirement Date" means the Executive
             attaining age 65, or his actual retirement date
             if after age 65.

     1.1.5.  "Termination of Employment" means the
             Executive's ceasing to be
             employed by the Company for any reason
             whatsoever, voluntary or
             involuntary, other than by reason of an
             approved leave of absence.

     1.1.6.  "Plan Year" means each twelve-month period from
             the effective date  of this Agreement.

<PAGE>


                          Article 2

                     Retirement Benefits

2.1.  Normal Retirement Benefit.  If the Executive terminates
      employment on or after the Normal Retirement Date for
      reasons other than death, the Company shall pay to the
      Executive the benefit described in this Section

      2.1.1.  Amount of Benefit.  The benefit under this Section
              2.1 is $ 5,125.  Said amount shall be increased
              each month between the date the Executive reaches
              age 65 and the Executive's Normal Retirement
              Date by .67% per month until retirement.

      2.1.2.  Payment of Benefit.  The Company shall pay the
              benefit to the Executive on the first day of each
              month commencing with the month following the
              Executive's Normal Retirement Date and
              continuing for 179 additional months.

2.2.  Early Retirement Benefit.  If the Executive terminates
      employment before the Normal Retirement Date, and for
      reasons other than death or following
      a Change of Control, the Company shall pay to the
      Executive the benefit
      described in this Section 2.2.

      2.2.1.  Amount of Benefit.  The benefit under this Section
              2.2 is the benefit determined under Schedule A
              based on the date of the Executive's Termination
              of Employment.

      2.2.2.  Payment of Benefit.  The Company shall pay the
              benefit to the Executive on the first day of each
              month commencing with the month following the
              Executive's Normal Retirement Date and
              continuing for 179 additional months.

2.3.  Change of Control Benefit.  If Executive is in active
      service at the time of a Change of Control, the Executive
      shall be entitled to the Normal Retirement Benefit
      described in Section 2.1, whether or not
      Termination of Service occurs prior to Normal Retirement
      Date.


                          Article 3

                      Survivor Benefits

3.1.  Death During Active Service.  If the Executive dies while
      in the active service of the Company, the Company shall
      pay to the Executive's beneficiary the benefit described
      in this Section 3.1.

      3.1.1.  Amount of Benefit.  The benefit under Section 3.1
              is the lifetime benefit that would have been paid
              to the Executive under Section 2.1 calculated as
              if the date of the Executive's death were the
              Normal Retirement Date.

      3.1.2.  Payment of Benefit.  The Company shall pay the
              benefit to the Beneficiary on the first day of
              each month commencing with the month following the
              Executive's death and continuing for 179
              additional months.

<PAGE>

3.2.  Death During Benefit Period.  If the Executive dies after
      benefit payments have commenced under this Agreement but
      before receiving all such payments, the Company shall pay
      the remaining benefits to the Executive's beneficiary at
      the same time and in the same amounts they would have been
      paid to the Executive had the Executive survived.

3.3.  Death Following Active Service Before Benefits Commence.
      If the Executive is entitled to benefit payments under
      this Agreement, but dies prior to receiving said benefit
      payments, the Company shall pay the Executive's
      beneficiary the benefit described in this Section 3.3.

      3.3.1.  Amount of Benefit.  The benefit under Section 3.3
              is the vested benefit that would have been paid to
              the Executive pursuant to Schedule A.

      3.3.2.  Payment of Benefit.  The Company shall pay the
              benefit to the Beneficiary on the first day of
              each month commencing with the month following the
              Executive's death and continuing for 179
              additional months.

3.4.  "Death After Change of Control".  If Executive dies
      following a Change of Control, provided Executive was in
      active service at the time of the Change of Control, the
      Company shall pay the Executive's beneficiary
      the benefit described in this Section 3.4.

      3.4.1.  Amount of Benefit.  The benefit under Section 3.4
              is the lifetime benefit that would have been paid
              to the Executive under Section 2.1 calculated as
              if the date of the Executive's death were the
              Normal Retirement Date.

      3.4.2.  Payment of Benefit.  The Company shall pay the
              benefit to the Beneficiary on the first day of
              each month commencing with the month following the
              Executive's death and continuing for 179
              additional months.

                          Article 4
                        Beneficiaries

4.1.  Beneficiary Designations.  The Executive shall
      designate a beneficiary by filing a written
      designation with the Company.  The Executive may
      revoke or modify the designation at any time by
      filing a new designation.  However, designations will
      only be effective if signed by the Executive and
      accepted by the Company during the Executive's
      lifetime.  The Executive's beneficiary designation
      shall be deemed automatically revoked if the
      beneficiary predeceases the Executive, or
      if the Executive names a spouse as beneficiary and
      the marriage is subsequently dissolved.  If the
      Executive dies without a valid beneficiary
      designation, all payments shall be made to the
      Executive's surviving spouse, if any, and if none, to
      the Executive's surviving children and the
      descendants of any deceased child by right of
      representation, and if no children or descendants
      survive, the Executive's estate.

<PAGE>

4.2.  Facility of Payment.  If a benefit is payable to a
      minor, to a person declared incompetent, or to a
      person incapable of handling the disposition of his
      or her property, the Company may pay such benefit
      to the guardian, legal representative or person
      having the care or custody of such minor, incompetent
      person or incapable person.  The Company may require
      proof of incompetence, minority or guardianship
      as it may deem appropriate prior to distribution of
      the benefit.  Such distribution shall completely
      discharge the Company from all liability with respect
      to such benefit.

                          Article 5
                     General Limitations
Notwithstanding  any  provision of  this  Agreement  to  the
contrary,  the Company shall not pay any benefit under  this
Agreement:

5.1.  Excess Parachute Payment.  To the extent the benefit
      would be an excess parachute payment under Section
      280G of the Code.

5.2.  Termination for Cause.  If the Company terminates the
      Executive's employment for:

      5.2.1.  Gross negligence or gross neglect of duties;

      5.2.2.  Commission of a felony or of a gross
              misdemeanor involving moral turpitude; or

      5.2.3.  Fraud, disloyalty, dishonesty or willful
              violation of any law or significant Company
              policy committed in connection with the
              Executive's employment and resulting in an
              Adverse effect on the Company.

5.3.  Competition After Termination of Employment.  No
      benefits shall be payable, except for benefits paid
      due to a Change of Control, if the Executive, without
      the prior written consent of the Company, engages
      in, becomes interested in, directly or indirectly, as
      a sole proprietor, as a partner in a partnership, or
      as a substantial shareholder in a corporation, or
      becomes associated with, in the capacity of employee,
      director, officer, principal, agent, trustee or
      in any other capacity whatsoever, any enterprise
      conducted in the trading area (a 25 mile radius) of
      the business of the Company which enterprise is, or
      may deemed to be, competitive with any business
      carried on by the Company as of the date of
      termination of the Executive's employment or his
      retirement.

5.4.  Suicide.  No benefits shall be payable if the
      Executive commits suicide within two years after the
      date of this Agreement, or if the Executive
      has made any material misstatement of fact on any
      application for life insurance purchased by the
      Company.

<PAGE>


                          Article 6
                Claims and Review Procedures

6.1.  Claims Procedure.  The Company shall notify the
      Executive's beneficiary in writing, within ninety
      (90) days of his or her written application
      for benefits, of his or her eligibility or
      noneligibility for benefits under the Agreement.  If
      the Company determines that the beneficiary is
      not eligible for benefits or full benefits, the
      notice shall set forth (1) the specific reasons for
      such denial, (2) a specific reference to
      the provisions of the Agreement on which the denial
      is based, (3) a description of any additional
      information or material necessary for the
      claimant to perfect his or her claim, and a
      description of why it is needed, and (4) an
      explanation of the Agreement's claims review
      procedure and other appropriate information as to the
      steps to be taken if the beneficiary wishes to have
      the claim reviewed.  If the Company determines that
      there are special circumstances requiring additional
      time to make a decision, the Company shall notify the
      beneficiary of the special circumstances and the date
      by which a decision is expected to be made, and may
      extend the time for up to an additional ninety-day
      period.

6.2.  Review Procedure.  If the beneficiary is determined
      by the Company not to be eligible for benefits, or if
      the beneficiary believes that he or she is entitled
      to greater or different benefits, beneficiary shall
      have the opportunity to have such claim reviewed by
      the Company by filing a petition for review with the
      Company within sixty (60) days after receipt of the
      notice issued by the Company.  Said petition shall
      state the specific reasons which the beneficiary
      believes entitle him or her to benefits or to greater
      or different benefits.  Within sixty (60) days after
      receipt by the Company of the petition, the Company
      shall afford the beneficiary (and counsel, if any) an
      opportunity to present his or her position to the
      Company orally or in writing, and the beneficiary (or
      counsel) shall have the right to review the
      pertinent documents.  The Company shall notify the
      beneficiary of its decision in writing within the
      sixty-day period, stating specifically
      the basis of its decision, written in a manner
      calculated to be understood by the beneficiary and
      the specific provisions of the Agreement on which the
      decision is based.  If, because of the need for
      a hearing, the sixty-day period is not sufficient,
      the decision may be deferred for up to another sixty-
      day period at the election of the Company, but notice
      of this deferral shall be given to the beneficiary.

                          Article 7

                 Amendments and Termination

This Agreement may be amended or terminated only by a
written agreement signed by the Company and the Executive.

<PAGE>

                          Article 8

                        Miscellaneous

8.1.  Binding Effect.  This Agreement shall bind the
      Executive and the Company, and their beneficiaries,
      survivors, executors, successors, administrators and
      transferees.

8.2.  No Guaranty of Employment.  This Agreement is not an
      employment policy or contract.  It does not give the
      Executive the right to remain an employee of the
      Company, nor does it interfere with the Company's
      right to discharge the Executive.  It also does not
      require the Executive to remain an employee nor
      interfere with the Executive's right to
      terminate employment at any time.

8.3.  Non-Transferability.  Benefits under this Agreement
      cannot be sold, transferred, assigned, pledged,
      attached or encumbered in any manner.

8.4.  Tax Withholding.  The Company shall withhold any
      taxes that are required to be withheld from the
      benefits provided under this Agreement.

8.5.  Applicable Law.  The Agreement and all rights
      hereunder shall be governed by the laws of
      Pennsylvania, except to the extent preempted by
      the laws of the United States of America.

8.6.  Unfunded Arrangement.  The Executive and beneficiary
      are general unsecured creditors of the Company for
      the payment of benefits under this Agreement.  The
      benefits represent the mere promise by the Company
      to pay such benefits.  The rights to benefits are not
      subject in any manner to anticipation, alienation,
      sale, transfer, assignment, pledge, encumbrance,
      attachment, or garnishment by creditors.  Any
      insurance on the Executive's life is a general asset
      of the Company to which the Executive and beneficiary
      have no preferred or secured claim.

8.7.  Recovery of Estate Taxes.  If the Executive's gross
      estate for federal estate tax purposes includes any
      amount determined by reference to and
      on account of this Agreement, and if the beneficiary
      is other than the Executive's estate, then the
      Executive's estate shall be entitled to recover from
      the beneficiary receiving such benefit under the
      terms of the Agreement, an amount by which the total
      estate tax due by Executive's estate, exceeds the
      total estate tax which would have been payable if the
value of such benefit had not been included in the
      Executive's gross estate.  If there is more than one
      person receiving such benefit, the right of recovery
      shall be against each such person.  In the event the
      beneficiary has a liability hereunder, the
      beneficiary may petition the Company for a lump sum
      payment in an amount not to exceed the beneficiary's
      liability hereunder.

<PAGE>


IN WITNESS WHEREOF, The Executive and a duly authorized
Company officer have signed this Agreement.

EXECUTIVE:                          COMPANY:
                                    The Fulton County
                                       National Bank
                                       and Trust Company


/s/Clyde H. Bookheimer       By /s/Gregory Gordon
-----------------------         --------------------------
Clyde H. Bookheimer          Title Senior Vice President
                                   -----------------------
<PAGE>


                     CLYDE H. BOOKHEIMER
                         SCHEDULE  A

<TABLE>
<CAPTION>
  Plan Year       Early           Early
                Retirement      Retirement
                 Monthly      Annual Benefit
                 Benefit
<S>           <C>            <C>
      1             $   780          $  9,364
      2               1,497            17,967
      3               2,156            25,871
      4               2,761            33,133
      5               3,317            39,806
      6               3,828            45,937
      7               4,298            51,570
      8               4,729            56,745
      9               5,125            61,500
</TABLE>

<PAGE>


                      SECOND AMENDMENT
                           TO THE
      THE FULTON COUNTY NATIONAL BANK AND TRUST COMPANY
                SALARY CONTINUATION AGREEMENT

                   DATED SEPTEMBER 1, 1995
                             FOR
                     CLYDE H. BOOKHEIMER

THIS AMENDMENT executed on this 4th day of August, 2000,  by
and  between  THE  FULTON  COUNTY NATIONAL  BANK  AND  TRUST
COMPANY,    a    Pennsylvania   corporation,   located    in
McConnellsburg, Pennsylvania (the "Corporation")  and  CLYDE
H. BOOKHEIMER (the "Executive").

On September 1, 1995, the Company and the Executive executed
THE FULTON COUNTY NATIONAL BANK AND TRUST COMPANY
MCCONNELLSBURG, PA SALARY CONTINUATION AGREEMENT and on
October 15, 1996 the Corporation and the Executive executed
the FIRST AMENDMENT TO THE FULTON COUNTY NATIONAL BANK AND
TRUST COMPANY MCCONNELLSBURG, PA SALARY CONTINUATION
AGREEMENT DATED SEPTEMBER 1, 1995 (the "Agreement").

Pursuant to the power of amendment reserved by Article 7 of
the Agreement, the undersigned hereby amends, in part, said
Agreement to increase the Executive's Normal Retirement
Benefit from $6,083.33 (Six Thousand Eighty-Three Thousand
Dollars and Thirty-Three Cents) per month to $8,000 (Eight
Thousand Dollars) per month for 15 years; and to explain how
the Early Termination Benefit is calculated.  This change
will also increase the accruals in Schedule A attached to
said Agreement.  Therefore, the following revisions shall be
made:

Article 2.1.1 of the Agreement shall be deleted in its
entirety and replaced by Article 2.1.1 below.

2.1.1  Amount of Benefit.  The benefit under this Section
       2.1 is $8,000 (Eight Thousand Dollars).  Said amount
       shall be increased each month between the date the
       Executive reaches age 65 and the Executive's
       Normal Retirement Date by .67% per month until
       retirement.


Article 2.2.1 of the Agreement shall be deleted in its
entirety and replaced by Article 2.2.1 below.

2.2.1  Amount of Benefit.  The annual benefit under Section
       2.2 as set forth under Schedule A is the future value
       of the current year liability amount, in which Early
       Termination occurs, using an 8.5% discount rate
       compounded monthly, and payable as set forth in
       Section 2.2.2 herein.  The annual benefit shall be 0%
       vested prior to age 55.

Schedule A of the Agreement shall be deleted in its
entirety and replaced by the attached Second Amended
Schedule A.

<PAGE>
Article 6.1 of the Agreement shall be deleted in its
entirety and replaced by Article 6.1 below.

6.1  Claims Procedure.  The Company shall notify the
     Executive or the Executive's beneficiary in writing,
     within ninety (90) days of his her written application
     for benefits, of his or her eligibility or
     ineligibility for benefits under the Agreement.  If
     the Company determines that the Executive or the
     Executive's beneficiary is not eligible for benefits
     or full benefits, the notice shall set forth (1)
     the specific reasons for such denial, (2) a specific
     reference to the provisions of the Agreement on which
     the denial is based, (3) a description of any
     additional information or material necessary for the
     claimant to perfect his or her claim, and a
     description of why it is needed, and (4) an
     explanation of the Agreement's claims review
     procedure and other appropriate information as to the
     steps to be taken if the Executive or the Executive's
     beneficiary wishes to have the claims reviewed.  If
     the Company determines that there are special
     circumstances requiring additional time to make a
     decision, the Company shall notify the Executive or
     the Executive's beneficiary of the special
     circumstances and the date by which a decision is
     expected to be made, and may extend the time for up to
     an additional ninety-day period.


Article 6.2 of the Agreement shall be deleted in its
entirety and replaced by Article 6.2 below.

6.2  Review Procedure.  If the Executive or the Executive's
     beneficiary is determined by the Company not to be
     eligible for benefits, or if the Executive or the
     Executive's beneficiary believes that he or she is
     entitled to greater or different benefits, the
     Executive or the Executive's beneficiary shall have
     the opportunity to have such claim reviewed by the
     Company by filing a petition for review with the
     Company within sixty (60) days after receipt of the
     notice issued by the Company.  Said petition shall
     state the specific reasons which the Executive or the
     Executive's beneficiary believes entitle him or her to
     benefits or to greater or different benefits.  Within
     sixty (60) days after receipt by the Company of the
     petition, the Company shall afford the Executive or
     the Executive's beneficiary (and counsel, if any) an
     opportunity to present his or her position to the
     Company orally or in writing, and the Executive or the
     Executive's beneficiary (or counsel) shall have the
     right to review the pertinent documents.  The Company
     shall notify the Executive or the Executive's
     beneficiary of its decision, in writing within the
     sixty-day period, stating specifically
     the basis of its decision, written in a manner
     calculated to be understood by the Executive or the
     Executive's beneficiary and the specific provisions of
     the Agreement on which the decision is based.
     If, because of the need for a hearing, the sixty-day
     period is not sufficient, the decision may be deferred
     for up to another sixty-day period at the election of
     the Company, but notice of this deferral shall
     be given to the Executive or the Executive's
     beneficiary.

<PAGE>


Article 8.8 shall be added in its entirety to the Agreement
as below.

8.8  Entire Agreement.  This Agreement constitutes the
     entire agreement between the Company and the Executive
     as to the subject matter hereof.  No rights are
     granted to the Executive by virtue of this Agreement
     other than those specifically set forth herein.


Article 8.9 shall be added in its entirety to the Agreement
as below.

8.9  Administration.  The Company shall have powers which
     are necessary to administer this Agreement, including
     but not limited to:

     8.9.1  Interpreting the provisions of the Agreement;
     8.9.2  Establishing and revising the method of
            accounting for the Agreement;
     8.9.3  Maintaining a record of benefit payments; and
     8.9.4..Establishing rules and prescribing any forms
            necessary or desirable to administer the
            Agreement.





IN WITNESS OF THE ABOVE, the Executive and the Company have
agreed to this Second Amendment.

Executive:                         Corporation:

                                   THE FULTON COUNTY
                                   NATIONAL BANK AND TRUST
                                   COMPANY

/s/Clyde H. Bookheimer             By /s/Alice G. Clark
-------------------------             ---------------------
Clyde Bookheimer
                                   Title Sr. Vice President
                                         ------------------


<PAGE>
                  FIRST AMENDED SCHEDULE A
                           TO THE
      THE FULTON COUNTY NATIONAL BANK AND TRUST COMPANY
                SALARY CONTINUATION AGREEMENT

                     CLYDE H. BOOKHEIMER

<TABLE>
<CAPTION>
              Early           Early
              Termination     Termination
Plan          Monthly         Annual
Year          Benefit         Benefit
<S>           <C>             <C>
5             $5,057          $60,685
6             $5,889          $70,665
7             $6,653          $79,834
8             $7,355          $88,259
9             $8,000          $96,000
</TABLE>


<PAGE>

                                                Exhibit 10.2


                       FIRST AMENDMENT
                           TO THE
      THE FULTON COUNTY NATIONAL BANK AND TRUST COMPANY
                SALARY CONTINUATION AGREEMENT

                   DATED DECEMBER 23, 1996
                             FOR
                     DORIANN F. HOFFMAN

THIS AMENDMENT executed on this 4th day of August, 2000, by
and between THE FULTON COUNTY NATIONAL BANK AND TRUST
COMPANY, a national banking association, located in
McConnellsburg, Pennsylvania (the "Company") and DORIANN F.
HOFFMAN (the "Executive").

On December 23, 1996, the Company and the Executive executed
THE FULTON COUNTY NATIONAL BANK AND TRUST COMPANY SALARY
CONTINUATION AGREEMENT (the "Agreement").

Pursuant to the power of amendment reserved by Article 7 of
the Agreement, the undersigned hereby amends, in part, said
Agreement to increase the Executive's Normal Retirement
Benefit from $ 24,000 (Twenty Four Thousand Dollars) per
year to $ 44,000 (Forty Four Thousand Dollars) per year for
15 years; and to explain how the Early Termination Benefit
is calculated.  This change will also increase the accruals
in Schedule A attached to said Agreement.  Therefore, the
following revisions shall be made:

Article 2.1.1 of the Agreement shall be deleted in its
entirety and replaced by Article 2.1.1 below.

2.1.1  Amount of Benefit.  The benefit under this Section
       2.1 is $ 44,000 (Forty Four Thousand Dollars).  If
       the Executive works past Normal Retirement Age, this
       amount shall be increased each month by .67%
       From the Executive's Normal Retirement Age to the
       Executive's Normal Retirement Date.


Article 2.2.1 of the Agreement shall be deleted in its
entirety and replaced by Article 2.2.1 below.

2.2.1  Amount of Benefit.  The annual benefit under Section
       2.2 as set forth under Schedule A is the future value
       of the current year liability amount, in which Early
       Termination occurs, using an 8.5% discount rate
       compounded monthly, and payable as set forth in
       Section 2.2.2 herein.  The annual benefit shall be 0%
       vested prior to age 55.

Schedule A of the Agreement shall be deleted in its
entirety and replaced by the attached First Amended
Schedule A.


<PAGE>

Article 4.1 of the Agreement shall be deleted in its
entirety and replaced by Article 4.1 below.

4.1  Beneficiary Designations.  The Executive shall
     designate a beneficiary by filing a written
     designation with the Company.  The Executive may
     revoke or modify the designation at any time by filing
     a new designation.  However, designations will only be
     effective if signed by the Executive and accepted by
     the Company during the Executive's lifetime.  The
     Executive's beneficiary designation shall be deemed
     automatically revoked if the beneficiary predeceases
     the Executive, of if the Executive names a spouse as
     beneficiary and the marriage is subsequently
     dissolved.  If the Executive dies without a valid
     beneficiary designation, all payments shall be made to
     the Executive's surviving spouse, if any, and if none,
     to the Executive's surviving children and the
     descendants of any deceased child by right of
     representation, and if no children or descendants
     survive, to the Executive's estate.





IN WITNESS OF THE ABOVE, the Executive and the Company have
agreed to this Second Amendment.

Executive:                        Corporation:

                                  THE FULTON COUNTY
                                  NATIONAL BANK AND TRUST
                                  COMPANY

/s/DoriAnn Hoffman                By /s/Clyde H. Bookheimer
------------------------             ----------------------
DoriAnn Hoffman
                                  Title President
                                        -------------------

<PAGE>

                  FIRST AMENDED SCHEDULE A
                           TO THE
      THE FULTON COUNTY NATIONAL BANK AND TRUST COMPANY
                SALARY CONTINUATION AGREEMENT

                       DORIANN HOFFMAN

<TABLE>
<CAPTION>
                Early          Early
             Termination    Termination
   Plan        Monthly        Annual
   Year        Benefit        Benefit
<S>         <C>            <C>
    1           $     0        $     0
    2                 0              0
    3                 0              0
    4                 0              0
    5                 0              0
    6                 0              0
    7                 0              0
    8                 0              0
    9                 0              0
    10                0              0
    11                0              0
    12                0              0
    13                0              0
    14                0              0
    15                0              0
    16            3,029         36,344
    17            3,126         37,509
    18            3,215         38,580
    19            3,297         39,564
    20            3,372         40,468
    21            3,442         41,299
    22            3,505         42,062
    23            35,64         42,764
    24            3,617         43,408
    25            3,667         44,000
</TABLE>


<PAGE>
                                                Exhibit 10.3


       THE FULTON COUNTY NATIONAL BANK & TRUST COMPANY
                     MCCONNELLSBURG, PA

                      BOARD RESOLUTION

               ADOPTING DEFERRED FEE AGREEMENT


The Board desires to retain David Seiders ("Director") as a
member of the Company`s Board of Directors.  To encourage such
retention, the Board desires to enter into the Deferred Fee
Agreement attached to these minutes.  Under the Agreement, the
Company promises to pay deferred fees to the Director (or to the
Director's designated beneficiary if the Director dies while
employed) based on elective deferrals of current fees, and on an
interest rate as specified in said Agreement.

THEREFORE, IT IS RESOLVED that the Deferred Fee Agreement is
adopted by the Company effective as of March 25, 1996.

RESOLVED FURTHER, that the Interest Rate for deferrals shall
be 9.0%.

       THE FULTON COUNTY NATIONAL BANK & TRUST COMPANY

                     MCCONNELLSBURG, PA

                   DEFERRED FEE AGREEMENT

THIS AGREEMENT is made this 25th day of March, 1996 by and
between Fulton County National Bank & Trust Company (the
"Company"), and David L. Seiders (the "Director").

                        INTRODUCTION

To encourage the Director to remain a member of the
Company's Board of Directors, the Company is willing to
provide to the Director a deferred fee opportunity.  The
Company will pay the benefits from its general assets.

                          AGREEMENT
The Director and the Company agree as follows:

                          Article 1

                         Definitions

1.1  Definitions.  Whenever used in this Agreement, the
     following words and phrases shall have the meanings
     specified:

     1.1.1  "Code" means the Internal Revenue Code of 1986,
            as amended.  References to a Code section shall
            be deemed to be to that section as it now
            exists and to any successor provision.
     1.1.2  "Election Form" means the Form attached as
            Exhibit 1.
     1.1.3  "Fees" means the total directors fees payable
            to the Director.
     1.1.4  "Normal Termination Date" means the Director
            attaining age 75.

<PAGE>

     1.1.5  "Termination of Service" means the Director's
            ceasing to be a member of the Company's Board
            of Directors for any reason whatsoever.

                          Article 2

                      Deferral Election

2.1  Initial Election.  The Director shall make an initial
     deferral election under this Agreement by filing with
     the Company a signed Election Form within 30 days
     after the date of this Agreement.  The Election Form
     shall set forth the amount of Fees to be deferred.
     The Election Form shall be effective to defer only
     Fees earned after the date the Election Form is
     received by the Company.

2.2  Election Changes

     2.2.1  Generally.  The Director may modify the amount
            of Fees to be deferred by filing a subsequent
            signed Election Form with the Company.  The
            modified deferral shall not be effective until
            the calendar year following the year in which
            the subsequent Election Form is received by the
            Company.

     2.2.2  Hardship.  If an unforeseeable financial
            emergency arising from the death of a family
            member, divorce, disability, sickness,
            injury, catastrophe or similar event outside
            the control of the Director occurs, the
            Director, by written instructions to the
            Company may reduce future deferrals under this
            Agreement.

                          Article 3

                      Deferral Account

3.1  Establishing and Crediting.  The Company shall
     establish a Deferral Account on its books for the
     Director, and shall credit to the Deferral Account the
     following amounts:
     3.1.1  Deferrals.  The Fees deferred by the Director
            as of the time the Fees would have otherwise
            been paid to the Director.
     3.1.2  Interest.  On each anniversary of the date of
            this Agreement and immediately prior to the
            payment of any benefits, interest on
            the account balance since the preceding credit
            under this Section 3.1.2, if any, at an annual
            rate, compounded monthly, equal to 9%.
3.2  Statement of Accounts.  The Company shall provide to
     the Director, within one hundred twenty (120) days
     after each anniversary of this Agreement, a statement
     setting forth the Deferral Account balance.

3.3  Accounting Device Only.  The Deferral Account is
     solely a device for measuring amounts to be paid under
     this Agreement.  The Deferral Account is not a trust
     fund of any kind.  The Director is a general unsecured
     creditor of the Company for the payment of benefits.
     The benefits represent the mere Company promise to pay
     such benefits.  The Director's rights are not subject
     in any manner to anticipation, alienation, sale,
     transfer, assignment, pledge, encumbrance, attachment,
     or garnishment by the Director's creditors.


<PAGE>
                          Article 4

                      Lifetime Benefits

4.1  Normal Termination Benefit.  Upon the Director's
     Termination of Service on or after the Normal
     Termination Date, the Company shall pay to the
     Director the benefit described in this Section 4.1.

     4.1.1  Amount of Benefit.  The benefit under this
            Section 4.1 is the Deferral Account balance at
            the Director's Termination of Service.

     4.1.2  Payment of Benefit.  The Company shall pay the
            benefit to the Director  in 120 equal monthly
            installments including interest at
            9.0%, commencing on the first day of the month
            following the Director's Termination of
            Service.

4.2  Early Termination Benefit.  If the Director terminates
     service as a director before the Normal Termination
     Date, and for reasons other than death or Hardship,
     the Company shall pay to the Director the benefit
     described in this Section 4.2.

     4.2.1  Amount of Benefit.  The benefit under this
            Section 4.2 is the Deferral Account balance at
            the Director's Termination of Service.

     4.2.2  Payment of Benefit.  The Company shall pay the
            benefit to the Director in 120 equal monthly
            installments including interest at 7.0%,
            commencing on the first day of the month
            following the Director's Normal Termination
            Date.

4.3  Hardship Distribution.  Upon the Company's
     determination (following petition by the Director)
     that the Director has suffered an
     unforeseeable financial emergency as described in
     Section 2.2.2, the Company shall distribute to the
     Director all or a portion of the Deferral Account
     balance as determined by the Company, but in no event
     shall the distribution be greater than is necessary to
     relieve the financial hardship.

                          Article 5

                       Death Benefits

5.1  Death During Active Service.  If the Director dies
     while in the active service of the Company, the
     Company shall pay to the Director's beneficiary the
     benefit described in this Section 5.1.

     5.1.1  Amount of Benefit.  The benefit under Section
            5.1 shall be the greater of (A) or (B):

            (A).  $ 144,562
or
            (B).  The Director's Deferral Account balance
                  on the day before the Director's death

     5.1.2  Payment of Benefit.  The Company shall pay the
            benefit to the Beneficiary in 120 equal monthly
            installments including interest at 9.0%,
            commencing on the first day of the month
            following written notification of the
            Director's Death.

5.2  Death During Benefit Period.  If the Director dies
     after benefit payments have commenced under this
     Agreement but before receiving all such payments, the
     Company shall pay the remaining benefits to the
     Director's beneficiary at the same time and in the
     same amounts they would have been paid to the Director
     had the Director survived.

5.3  Death After Early Retirement.  If the Director
     dies after terminating employment for Early
     Termination under Section 4.2 but prior to
     commencement of benefit payments under this Agreement,
     the Company shall pay to the Director's beneficiary
     the benefit described in this Section 5.3.

     5.3.1  Amount of Benefit.  The benefit under Section
            5.3 is the Early Termination Benefit that would
            have been paid to the Director under Section
            4.2, had the Director survived.

     5.3.2  Payment of Benefit.  The Company shall pay the
            benefit to the Beneficiary in 120 equal monthly
            installments including interest at 7.0%,
            commencing on the first day of the month
            following written notification of the
            Director's Death.

5.4  Additional Death Benefit - Burial Expense.  In
     addition to the benefits described herein, upon the
     Director's death, the Director's beneficiary
     shall be entitled to receive a one-time lump sum death
     benefit in the amount of Five Thousand ($5,000)
     Dollars.  This benefit shall be provided specifically
     for the purpose of providing payment for burial
     and/or funeral expenses of the Director.  The lump sum
     payment shall be made within thirty (30) days of
     written notification of the Director's
     death.  This lump sum death benefit shall not be
     payable in the event the Director is terminated for
     cause at any time, as specified in Section 7.1.

<PAGE>

                          Article 6

                        Beneficiaries

6.1  Beneficiary Designations.  The Director shall
     designate a beneficiary by filing a written
     designation with the Company.  The Director may revoke
     or modify the designation at any time by filing a new
     designation.  However, designations will only be
     effective if signed by the Director and accepted by
     the Company during the Director's lifetime.  The
     Director's beneficiary designation shall be deemed
     automatically revoked if the beneficiary predeceases
     the Director, or if the Director names a spouse as
     beneficiary and the marriage is subsequently
     dissolved.  If the Director dies without a valid
     beneficiary designation, all payments shall be made to
     the Director's surviving spouse, if any, and if none,
     to the Director's surviving children and the
     descendants of any deceased child by right of
     representation, and if no children or descendants
     survive, to the Director's estate.

6.2  Facility of Payment.  If a benefit is payable to a
     minor, to a person declared incompetent, or to a
     person incapable of handling the disposition of his or
     her property, the Company may pay such benefit to
     the guardian, legal representative or person having
     the care or custody of such minor, incompetent person
     or incapable person.  The Company may require proof of
     incompetency, minority or guardianship as it may deem
     appropriate prior to distribution of the benefit.
     Such distribution shall completely discharge the
     Company from all liability with respect
     to such benefit.

                          Article 7

                     General Limitations

Notwithstanding any provision of this Agreement to the
contrary, the Company shall not pay any benefit under this
Agreement that is attributable to the interest earned on
such contributions:

7.1  Termination for Cause.  If the Company terminates the
     Director's service as a director for:

     7.1.1  Gross negligence or gross neglect of duties;

     7.1.2  Commission of a felony or of a gross
            misdemeanor involving moral turpitude; or

     7.1.3  Fraud, disloyalty, dishonesty or willful
            violation of any law or significant Company
            policy committed in connection with the
            Director's service and resulting in an adverse
            financial effect on the Company.

7.2  Suicide.  If the Director commits suicide within
               twenty six months after the date of this
               Agreement, or if the Director has made any
               material misstatement of fact on any
               application for life insurance purchased by
               the Company.


<PAGE>

                          Article 8

                Claims and Review Procedures

8.1  Claims Procedure.  The Company shall notify the
     Director's beneficiary in writing, within ninety (90)
     days of his or her written application for benefits,
     of his or her eligibility or noneligibility for
     benefits under the Agreement.  If the Company
     determines that the beneficiary is not eligible for
     benefits or full benefits, the notice shall set forth
     (1) the specific reasons for such denial, (2) a
     specific reference to the provisions of the Agreement
     on which the denial is based, (3) a description of any
     additional information or material necessary for the
     claimant to perfect his or her claim, and a
     description of why it is needed, and (4) an
     explanation of the Agreement's claims review procedure
     and other appropriate information as to the steps to
     be taken if the beneficiary wishes to have the claim
     reviewed.  If the Company determines that there are
     special circumstances requiring additional time to
     make a decision, the Company shall notify the
     beneficiary of the special circumstances and the date
     by which a decision is expected to be made, and may
     extend the time for up to an additional ninety-day
     period.

8.2  Review Procedure.  If the beneficiary is determined by
     the Company not to be eligible for benefits, or if the
     beneficiary believes that he or she is entitled to
     greater or different benefits, the beneficiary shall
     have the opportunity to have such claim reviewed by
     the Company by filing a petition for review with the
     Company within sixty (60) days after receipt of the
     notice issued by the Company.  Said petition shall
     state the specific reasons which the beneficiary
     believes entitle him or her to benefits or to greater
     or different benefits.  Within sixty (60)
     days after receipt by the Company of the petition, the
     Company shall afford the beneficiary (and counsel, if
     any) an opportunity to present his or her position to
     the Company orally or in writing, and the beneficiary
     (or counsel) shall have the right to review the
     pertinent documents.  The Company shall notify the
     beneficiary of its decision in writing within the
     sixty-day period, stating specifically the basis of
     its decision, written in a manner calculated to be
     understood by the beneficiary and the specific
     provisions of the Agreement on which the
     decision is based.  If, because of the need for a
     hearing, the sixty-day period is not sufficient, the
     decision may be deferred for up to another sixty-day
     period at the election of the Company, but notice of
     this deferral shall be given to the beneficiary.

                           Article 9

                 Amendments and Termination

This Agreement may be amended or terminated only by a
written agreement signed by the Company and the Director.

                         Article 10

                        Miscellaneous

10.1  Binding Effect.  This Agreement shall bind the
      Director and the Company, and their beneficiaries,
      survivors, executors, administrators and transferees.

<PAGE>

10.2  No Guaranty of Service.  This Agreement is not a
      contract for services.  It does not give the Director
      the right to remain a director of the Company, nor
      does it interfere with the shareholders' rights to
      replace the Director.  It also does not require the
      Director to remain a director nor interfere with the
      Director's right to terminate services at any time.

10.3  Non-Transferability. Benefits under this Agreement
      cannot be sold, transferred, assigned, pledged,
      attached or encumbered in any manner.

10.4  Tax Withholding.  The Company shall withhold any
      taxes that are required to be withheld from the
      benefits provided under this Agreement.

10.5  Applicable Law.  The Agreement and all rights
      hereunder shall be governed by the laws of the State
      of Pennsylvania, except to the extent preempted
      by the laws of the United States of America.

10.6  Unfunded Arrangement.  The Director and beneficiary
      are general unsecured creditors of the Company for
      the payment of benefits under this Agreement.  The
      benefits represent the mere promise by the Company to
      pay such benefits.  The rights to benefits are not
      subject in any manner to anticipation, alienation,
      sale, transfer, assignment, pledge, encumbrance,
      attachment, or garnishment by creditors.  Any
      insurance on the Director's life is a general asset
      of the Company to which the Director and beneficiary
      have no preferred or secured claim.

IN WITNESS WHEREOF, the Director and a duly authorized
Company officer have signed this Agreement.


DIRECTOR:                           COMPANY:
                                    The Fulton County
National
                                    Bank & Trust Company
/s/David L. Seiders           By  /s/Clyde H. Bookheimer
-------------------------        -------------------------
David L. Seiders              Title  President
                                     ----------------------



<PAGE>

                          EXHIBIT 1
                             TO
                   DEFERRED FEE AGREEMENT

                      Deferral Election

I elect to defer compensation under my Deferred Fee
Agreement with the Company, as follows:

<TABLE>
<CAPTION>
    Amount of Deferral          Frequency of            Durration
                                  Deferral
[Initial and Complete one]      [Initial One]         [Initial One]
<S>      <C>                 <C>  <C>             <C>  <C>
         I elect to defer         Beginning of           This Year only
         ____% of Director        Year
         Fees
                             ---
                                  Each pay
                                  period
  ---                        ---                   ---
  DLS    I elect to defer         Monthly                For ___
         $ 250.00 of                                     [Insert
         Director Fees                                   Number] Years
                             ---
                             DLS  Quarterly
  ---                        ---                   ---
         I elect not to           Semi-Annually    DLS   Until the
         defer Director                                  Normal
         Fees                                            Termination
                                                         Date
                             ---
                                  End of Year
  ---                        ---                   ---
                                                         Until the
                                                         Normal
                                                         Termination
                                                         Date
                                                   ---
</TABLE>

I understand that I may change the amount, frequency and
duration of my deferrals by filing a new election form with
the Company; provided, however, that any subsequent election
will not be effective until the calendar year following the
year in which the new election is received by the Company.

                   Beneficiary Designation

I designate the following as beneficiary of benefits under
the Deferred Fee Agreement payable following my death:

Primary:  /s/David M. Seiders
          ----------------------
Contingent:
             --------------------------

Note:  To name a trust as beneficiary, please provide the
name of the trustee
       and the exact date of the trust agreement.

I understand that I may change these beneficiary
designations by filing a new written designation with the
Company.  I further understand that the designations will be
automatically revoked if the beneficiary predeceases me, or,
if I have named my spouse as beneficiary, in the event of
the dissolution of our marriage.

Signature:  /s/David L. Seiders
            -----------------------
Date:  February 9, 1996
       ----------------------------
Accepted by the Company 9th day of February, 1996.
                        ---       --------------
By:  /s/Clyde H. Bookheimer
     ------------------------------
Title:  President
        ---------------------------
                                                Exhibit 10.4

         BOARD RESOLUTION-DIRECTOR EMERITUS PROGRAM
     OF THE FULTON COUNTY NATIONAL BANK & TRUST COMPANY

BE IT RESOLVED, by the Board of Directors of the Fulton
County National Bank & Trust Company that any directors of
this Bank ceasing to be directors and who have attained the
age of 65 with 10 years of continuous service may be elected
by the Board of Directors as "Director Emeritus" and such
persons who accept such election shall serve for 10 years as
advisors and consultants to the Board of Directors of this
Bank and, when invited, may sit with the Board of Directors
at regular meetings and discuss any question under
consideration provided, however, that such Directors
Emeritus shall cast no vote.

A Director Emeritus, in consideration of his (i)
availability for advice and consultation, (ii) willingness
to act as "Goodwill Ambassador" for the Bank, and (iii)
agreement not to enter into a competitive agreement which in
contrary to the interest of the bank, shall, whether or not
present at such regular meetings, be paid a monthly fee of
$ 333.33.  Should a director who has become eligible for
service as a Director Emeritus die before receiving 10 years
of payments, his beneficiary shall not be entitled to any
remaining payments.  If a retiring director who meets the
eligibility requirements chooses not to become a Director
Emeritus, no living benefits or survivor benefits shall be
paid to such director or his beneficiary.

I, Raleigh V. Barnett, a Director of The Fulton County
National Bank & Trust Company do hereby state that I intend
on participating in the Director Emeritus Program under the
terms and conditions as described in the above resolution
adopted by the Board of Directors on November 13, 1995.

Signed this 15th day of June, 1998.
            ----       -----------

Director:                              Witness:
/s/Raleigh V. Barnett            /s/DoriAnn Hoffman
-----------------------------    --------------------------
[Name of Director]                     [Witness]


                                                  EXHIBIT 13









                       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
 Changes in income and expense                              24
 Summary of quarterly financial data                        25
 Statements of average balances and average rates      26 - 27
 Management's discussion and analysis of consolidated
financial condition
   and results of operations                           28 - 35
 Stock market analysis and dividends                        35

                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, 2002 and 2001
and the related consolidated statements of income, changes
in stockholders' equity, and cash flows for each of the
three years ended December 31, 2002.  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, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years
ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of
America.




/S/Smith Elliott Kearns & Company, LLC



Chambersburg, Pennsylvania
February 20, 2003

<PAGE>

<TABLE>
<CAPTION>
                         FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                                  CONSOLIDATED BALANCE SHEETS
                                   December 31, 2002 and 2001

                                                                  2002                2001
<S>                                                         <C>                 <C>
ASSETS
  Cash and due from banks                                     $     5,213,690    $     5,529,420
  Investment securities available for sale                         37,674,900         30,798,647
  Federal Reserve, Atlantic Central Bankers Bank
      and Federal Home Loan Bank stocks                             1,771,950          1,100,850
  Loans, net of reserve for loan losses
      2002 - $ 1,030,713; 2001 - $ 845,045                        107,236,147        103,655,616
  Premises and equipment                                            3,938,272          3,673,746
  Cash surrender value of life insurance                            4,657,795          4,430,903
  Accrued interest receivable                                         939,089            902,805
  Real estate owned other than premises                                     0             83,341
  Other assets                                                        850,560            679,517
                                                              ---------------    ---------------
       Total assets                                            $  162,282,403     $  150,854,845
                                                              ===============    ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

  Deposits
       Noninterest bearing                                    $    16,155,636    $    13,486,097
       Interest bearing                                            96,869,814        103,552,356
                                                             ----------------   ----------------
                                                                  113,025,450        117,038,453

  Other borrowed funds                                             31,250,000         17,325,000
  Accrued interest payable                                            313,724            424,743
  Other liabilities                                                 1,033,949            822,770
                                                             ----------------   ----------------
     Total liabilities                                            145,623,123        135,610,966
                                                             ----------------   ----------------
Stockholders' Equity
  Common stock: par value $.625 per share; 4,000,000
       shares authorized; shares issued and outstanding -
       2002 - 492,810; 2001 - 492,770                                 309,375            309,375
  Additional paid-in capital                                        2,051,294          2,051,106
  Retained earnings                                                14,262,722         13,035,796
  Accumulated other comprehensive income (loss)                       124,003    (        62,672)
  Treasury stock, shares at cost -
       2002 - 2,190; 2001 - 2,230                            (        88,114)    (        89,726)
                                                             ----------------   ----------------
     Total stockholders' equity                                    16,659,280         15,243,879
                                                             ----------------   ----------------
       Total liabilities and stockholders' equity              $  162,282,403     $  150,854,845
                                                              ===============    ===============
</TABLE>
       The Notes to Consolidated Financial Statements
         are an integral part of these statements.

                              -3-

<PAGE>

<TABLE>
<CAPTION>
                              FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF INCOME
                               Years Ended December 31, 2002, 2001 and 2000
                                                                         2002         2001         2000
<S>                                                                  <C>           <C>          <C>
  Interest Income
    Interest and fees on loans                                         $ 7,593,348 $ 8,584,709  $ 8,505,771
    Interest and dividends on investment securities:
         Other U. S. Government agencies                                   708,802     587,996      635,046
         Mortgage-backed securities                                        197,870     228,320      287,347
         Obligations of state and political subdivisions                   102,247     135,056      199,461
         FNMA and FHLMC preferred stock                                  1,102,811     463,856      267,674
         Other interest and dividends                                      119,954     130,407       92,949
    Interest on federal funds sold                                          11,976      54,335        4,107
                                                                       ----------- -----------  -----------
     Total interest income                                               9,837,008  10,184,679    9,992,355
                                                                       ----------- -----------  -----------
  Interest Expense
    Interest on deposits                                                 3,289,201   4,470,576    4,252,368
    Interest on federal funds purchased                                     31,380       2,632        5,760
    Interest on other borrowed money                                       950,426     959,091      951,684
                                                                       ----------- -----------  -----------
     Total interest expense                                              4,271,007   5,432,299    5,209,812
                                                                       ----------- -----------  -----------
     Net interest income before provision for loan losses                5,566,001   4,752,380    4,782,543
                                                                       ----------- -----------  -----------
  Provision for Loan Losses                                                255,000      15,000       45,000
                                                                       ----------- -----------  -----------
     Net interest income after provision for loan losses                 5,311,001   4,737,380    4,737,543
                                                                       ----------- -----------  -----------
  Other Income
    Service charges on deposit accounts                                    208,084     189,186      177,226
    Other service charges and fees                                         165,311     108,567      111,181
    Earnings - Cash surrender value of life insurance                      258,203     249,418      197,110
    Trust services                                                          22,277      19,002       18,390
    Gain on sale of investment securities                                      705      57,329        5,905
    Gain on sale of OREO property                                            8,516           0            0
    Other income                                                            10,544      15,975       12,647
                                                                       ----------- -----------  -----------
     Total other income                                                    673,640                  522,459
                                                                                   639,477
                                                                       ----------- -----------  -----------
  Other Expenses
    Salaries, fees and employee benefits                                 1,727,652   1,559,673    1,508,929
    Net occupancy expense of bank premises and
      furniture and equipment expense                                      746,394     729,435      727,963
    FDIC insurance premiums                                                 20,386      19,754       20,811
    Other expenses                                                       1,283,779   1,141,725    1,112,743
                                                                       ----------- -----------  -----------
     Total other expenses                                                3,778,211   3,450,587    3,370,446
                                                                       ----------- -----------  -----------
     Income before income taxes                                          2,206,430   1,926,270    1,889,556
  Applicable income tax                                                    476,878     440,016      449,785
                                                                       ----------- -----------  -----------
     Net income                                                        $ 1,729,552 $ 1,486,254  $ 1,439,771
                                                                       =========== ===========  ===========
  Earnings per common share                                            $      3.51 $      3.02  $      2.91
                                                                       =========== ===========  ===========
</TABLE>

       The Notes to Consolidated Financial Statements
         are an integral part of these statements.

                              -3-


<TABLE>
<CAPTION>
                                        FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                         Years Ended December 31, 2002, 2001 and 2000
<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, 1999                      $ 309,375   $ 2,051,275  $ 11,002,482   ($  609,865)  $        0   $ 12,753,267

Comprehensive income:
     Net income                                                             1,439,771                                 1,439,771

     Change in unrealized gain on
       investment securities available
       for sale, net of tax of $ $ 270,896                                                   525,856                    525,856
                                                                                                                  -------------
Total comprehensive income                                                                                            1,965,627

     Purchases of treasury stock
       (2,300 shares)                                                                                 (  92,532)     (  92,532)

     Issuance of treasury stock
        (45 shares)                                                                                        1,800          1,800

     Cash dividends ($ .86 per share)                                    (   424,601)                              (   424,601)
                                               ----------  ------------  ------------  -------------  ----------  -------------
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 $ 10,992                                                       21,337                     21,337
                                                                                                                  -------------
Total comprehensive income                                                                                            1,507,591

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

     Cash dividends ($ .95 per share)                                    (   468,110)                             (    468,110)
                                               ----------  ------------  ------------  -------------  ----------  -------------
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 $ 96,166                                                      186,675                    186,675
                                                                                                                  -------------
Total comprehensive income                                                                                            1,916,227

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

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

       The Notes to Consolidated Financial Statements
         are an integral part of these statements.

                              -4-

<PAGE>

<TABLE>
<CAPTION>
                           FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                            Years Ended December 31, 2002, 2001 and 2000
                                                       2002              2001             2000
<S>                                              <C>               <C>              <C>
Cash flows from operating activities:
  Net income                                          $ 1,729,552       $ 1,486,254     $  1,439,771
  Adjustments to reconcile net income to net
    cash provided by operating activities:
       Compensation via treasury stock issued               1,800               837            1,800
     Depreciation and amortization                        333,070           365,722          394,762
     Investment amortization (accretion)            (    362,634)     (     40,657)           37,051
     Provision for loan losses                            255,000            15,000           45,000
     Deferred income taxes                          (     78,685)     (     82,580)    (     47,409)
     (Increase) decrease in CSV - life              (    226,892)     (    218,143)    (    164,274)
insurance
     (Gain) on sale of investment securities        (        705)     (     57,330)    (      5,905)
     (Gain) on sale of OREO property                (      8,516)                 0                0
     (Increase) in other assets                     (    188,524)     (     17,375)    (     49,780)
     (Increase) decrease in interest receivable     (     36,284)            62,578    (    234,755)
     Increase (decrease) in interest payable        (    111,019)     (     77,655)           81,005
     Increase in other liabilities                        211,180           180,119          124,987

Net cash provided by operating activities               1,517,343         1,616,770        1,622,253

Cash flows from investing activities:
  Sales of investment securities available                825,158         2,750,981        1,155,569
      for sale
  Maturities of investment securities available        20,021,820        16,059,038        1,476,328
      for sale
                                                    ( 27,077,051)     ( 26,087,480)    (  1,690,544)

  Net (increase) in loans                           (  4,077,176)     (  1,612,142)    ( 11,108,857)
  Purchases of property and equipment               (    596,779)     (    388,392)    (    187,876)
  Purchases of FRB, ACBB and FHLB stock             (  1,123,600)     (    270,000)    (    382,500)
  Redemptions of FRB, ACBB and FHLB stock                 452,500           421,300                0
  Purchases of officers' life insurance                         0                 0    (  1,020,000)
  Proceeds from the sale of OREO property                 332,684                 0                0
                                                     ------------      ------------     ------------
Net cash (used) by investing activities             ( 11,242,444)     (  9,126,695)    ( 11,757,880)
                                                     ------------      ------------     ------------
Cash flows from financing activities:
  Net increase (decrease) in deposits               (  4,013,003)        11,906,739        1,821,115
  Dividends paid                                    (    502,626)     (    468,110)    (    424,601)
  Proceeds from long-term borrowings                            0                 0        5,000,000
  Net increase (decrease) in line-of-credit            13,925,000        2,675,000)        3,525,000
      borrowings
  Purchases of treasury stock                                   0                 0          92,532)
                                                     ------------      ------------     ------------
Net cash provided by financing activities               9,409,371         8,763,629        9,828,982
                                                     ------------      ------------     ------------
Net increase (decrease) in cash and cash            (    315,730)         1,253,704    (    306,645)
    equivalents

Cash and cash equivalents at beginning of year          5,529,420         4,275,716        4,582,361
                                                     ------------      ------------     ------------
Cash and cash equivalents at end of year             $  5,213,690      $  5,529,420     $  4,275,716
                                                     ============      ============     ============
</TABLE>
       The Notes to Consolidated Financial Statements
         are an integral part of these statements.

                              -5-

<PAGE>

<TABLE>
<CAPTION>
                           FULTON BANCSHARES CORPORATION AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                            Years Ended December 31, 2002, 2001 and 2000
                                                       2002              2001             2000
<S>                                              <C>               <C>              <C>
Supplemental disclosure of cash flows
   information:

   Cash paid during the year for:
      Interest                                     $    4,382,026    $    5,509,953    $   5,128,808
      Income taxes                                        645,000           471,000          505,575

Supplemental schedule of noncash investing and
   financing activities:

  Unrealized holding gain, net of tax              $      186,675    $       21,337    $     525,856

  Other real estate owned transferred to
      premises and equipment                       $            0    $            0    $     140,000

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

  Other real estate acquired in settlement of      $      241,645    $            0    $           0
      loans
</TABLE>
       The Notes to Consolidated Financial Statements
         are an integral part of these statements.

                              -6-

<PAGE>


         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,
        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.  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.

                                        -7-

<PAGE>

Note 1.   Significant Accounting Policies (Continued)

      Investment Securities

      Under SFAS 115, 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.  The Corporation had
        no trading securities in 2002 or 2001.

      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,
      2002 and 2001, 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.

                                        -8-

<PAGE>

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 492,772, 492,747, and 494,054
      shares of common stock outstanding in 2002, 2001, and
      2000, respectively.

                                        -9-

<PAGE>


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".  As permitted by Statement of
      Financial Accounting Standards No. 104, 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

      Statement of Financial Accounting Standards No. 107,
      Disclosures About Fair Value of Financial
      Instruments, requires 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.
      Statement No. 107 excludes certain financial
      instruments and all nonfinancial instruments from its
      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.

                                        -10-

<PAGE>

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, 2002, 2001, and 2000 were $ 93,217,
      $ 85,169, and $ 102,434, 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>
      <CAPTION>
                                  2002         2001        2000
   <S>                         <C>          <C>         <C>
   Gross unrealized holding      $ 283,546   $   89,658   $ 802,657
      gains arising during
      the year
   Reclassification             (      705) (   57,329) (    5,905)
      adjustment for gains
      realized in net income
                                 ---------    ---------   ---------
   Net unrealized holding          282,841       32,329     796,752
      gains before taxes

   Tax effect                   (   96,166) (   10,992) (  270,896)
                                 ---------    ---------   ---------
   Net change                    $ 186,675    $  21,337   $ 525,856
                                 =========    =========   =========
      </TABLE>

      Reclassifications

      Certain reclassifications have been made to the 2001
      financial statements in order to conform to the 2002
      presentation.

                                        -11-

<PAGE>

Note 2.    Investments

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

<TABLE>
<CAPTION>
                                    Amortized Cost   Gross Unrealized Gross Unrealized     Fair Value
                                                          Gains            Losses

                                                                   2002
<S>                                <C>               <C>              <C>               <C>
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
                                    ===============    ==============  ===============   ===============
                                                                   2001
Obligations of U. S. Government
   corporations and agencies        $    14,000,000    $      104,122  $        42,406   $    14,061,716
Obligations of states and
political
   subdivisions                           2,286,825            20,854          104,915         2,202,764
Mortgage-backed securities                4,035,252            20,413           18,643         4,037,022
Corporate bonds                             996,950            50,050                0         1,047,000
FNMA and FHLMC preferred stock            9,442,578             9,298          126,431         9,325,445
Other stocks                                132,000             3,700           11,000           124,700
                                    ---------------    --------------  ---------------   ---------------
       Totals                       $    30,893,605    $      208,437  $       303,395   $    30,798,647
                                    ===============    ==============  ===============   ===============
</TABLE>


      The amortized cost and fair value of investment
      securities available for sale at December 31, 2002, 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>
<CAPTION>
                                        Amortized Cost     Fair Value
<S>                                     <C>              <C>
Due in one year or less                   $           0  $            0
Due after one year through five years        12,398,053      12,568,602
Due after five years through ten years        4,467,361       4,617,466
Due after ten years                             456,336         427,151
Mortgage-backed securities                    4,643,691       4,698,130
FNMA and FHLMC preferred stock               15,389,576      15,243,351
Other stocks                                    132,000         120,200
                                         --------------  --------------
                                          $  37,487,017  $   37,674,900
                                         ==============  ==============
</TABLE>

      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.

                                        -12-

<PAGE>

Note 2.    Investments

      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.

      Proceeds from sales of securities available for sale
      during 2000 were $ 1,155,569.  Gross gains and losses
      on those sales were $ 10,400 and $ 4,495,
      respectively.  Proceeds from maturities of investment
      securities during 2000 were $ 1,476,328, resulting in
      no gains or losses.  Included in stockholders' equity
      at December 31, 2000 is $ 84,009 of unrealized
      holding losses on securities available for sale, net
      of $ 43,277 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:

                                                 2002         2001

      Federal Home Loan Bank               $ 1,691,100  $ 1,020,000
      Atlantic Central Bankers Bank             10,000       10,000
      Federal Reserve Bank
                                                70,850       70,850
                                           -----------  -----------
                                           $ 1,771,950  $ 1,100,850
                                           ===========  ===========

      Securities with a cost basis of $ 14,237,861 (fair
      value of $ 14,382,444) and $ 14,000,000 (fair value
      of $ 14,061,716) at December 31, 2002 and 2001,
      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>
<CAPTION>
                                                      2002            2001
<S>                                              <C>             <C>
Real estate loans:
    Secured by farmland                             $     15,179   $     15,030
    Secured by 1-4 family residential                     52,444         43,203
    Secured by multifamily (5 or more)                       314            362
       residential properties
    Secured by nonfarm nonresidential                     13,705         19,650
Loans to finance agricultural production:
    Loans to farmers                                       6,104          5,455
Commercial and industrial loans                            9,067         11,963
Loans to individuals for household, family and
   other personal expenditures                            10,959          8,247
Obligations of states and political                          456            551
   subdivisions in the U.S.
All other loans
                                                              39             40
                                                         108,267        104,501
Less:  reserve for loan losses                    (       1,031) (         845)
                                                   ------------- --------------
                                                     $   107,236    $   103,656
                                                   ============= ==============
</TABLE>

                                        -13-

<PAGE>

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>
<CAPTION>
                                    90 Days or More           Nonaccrual
                                 - - - Past Due - - -     - - - Status - - -
                                  2002    2001   2000     2002    2001   2000
<S>                              <C>     <C>     <C>    <C>      <C>     <C>
Loans secured by real estate      $  59   $  567 $ 479   $ 1,525  $ 269  $   0
Personal loans                       11       48    29         0      0      0
Commercial and other loans            0      307    41        71     20      0
                                  -----   ------ -----   -------  -----  -----
    Total                         $  70   $  922 $ 549   $ 1,596  $ 289  $   0
                                  =====   ====== =====   =======  =====  =====
</TABLE>

      The foregone revenue on nonaccrual loans totaled
      $ 6,503, $ 20,284, and $ 0 at December 31, 2002,
      2001, and 2000, respectively.  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.

      At December 31, 2002, 2001, and 2000, the total
      recorded investment in impaired loans was $ 0.

Note 4.Reserve for Loan Losses

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

      <TABLE>
      <CAPTION>
                                                        2002        2001        2000
   <S>                                          <C>             <C>         <C>
   Balance at beginning of period                 $    845,045    $ 847,121   $ 800,267
   Recoveries                                            7,441       16,830      34,093
   Current year provision charged to income            255,000       15,000      45,000
                                                  ------------    ---------   ---------
   Total                                             1,107,486      878,951     879,360
   Losses                                               76,773       33,906      32,239
                                                  ------------    ---------   ---------
   Balance at end of period                        $ 1,030,713    $ 845,045   $ 847,121
                                                  ============    =========   =========
      </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 $ 1,231,000 and $ 1,246,000
      at December 31, 2002 and 2001, respectively.  During
      2002, $ 1,258,000 of new loans were made and
      repayments totaled $ 1,273,000.  During 2001,
      $ 661,000 of new loans were made and repayments
      totaled $ 610,000.

      Outstanding loans to employees totaled $ 781,000 and
      $ 842,000 at December 31, 2002 and 2001, res
      pectively.

                                       -14-

<PAGE>

Note 6.   Premises and Equipment

      A summary of premises and equipment is as follows:

<TABLE>
<CAPTION>
           Description                   Cost           Accumulated     Depreciated Cost
                                                       Depreciation
                                                           2002
<S>                                <C>               <C>                <C>
Premises and improvements          $      3,770,477   $        788,538  $      2,981,939
(including land $ 482,257)
Equipment, furniture and fixtures                            2,127,273
                                          3,007,411                              880,138
Vehicles
                                            111,505             35,310            76,195
                                   ----------------   ----------------  ----------------
                                   $      6,889,393   $      2,951,121  $      3,938,272
                                   ================   ================  ================
                                                           2001
Premises and improvements          $      3,445,509   $        714,755  $      2,730,254
(including land $ 441,101)
Equipment, furniture and fixtures                            1,890,950
                                          2,507,136                              616,186
Vehicles
                                             92,602             35,870            56,732
Construction in progress
                                            270,074                  0           270,074
                                   ----------------   ----------------  ----------------
                                   $      6,315,321   $      2,641,575  $      3,673,246
                                   ================   ================  ================
</TABLE>
      Included in construction in progress at December 31,
      2001 were costs associated with the purchase of a
      branch office in Breezewood, PA.  The branch began
      operations on February 11, 2002.

      Depreciation and amortization expense on property and
      equipment and other real estate owned amounted to
      $ 332,253 in 2002, $ 365,201 in 2001, and $ 394,242
      in 2000.

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>
      <CAPTION>
                                     Contract or Notional Amount
                                         2001            2001
   <S>                              <C>             <C>
   Financial instruments whose
      contract amounts represent
      credit risk at December 31:
      Commitments to extend credit    $ 15,502,585    $ 12,909,132
      Standby letters of credit            106,000         266,000
      and financial guarantees
      written
      </TABLE>

                                        -15-

<PAGE>

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 $ 104,206 for 2002, $ 66,000 for 2001, and
      $ 72,000 for 2000.

Note 9.Federal Income Taxes

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

      <TABLE>
      <CAPTION>
                                             2002          2001          2000
   <S>                                 <C>          <C>          <C>
   Current year provision                 $ 555,323    $ 503,104    $ 495,186
   Deferred income taxes (benefits)      (  78,685)   (  82,580)   (  47,409)
   Income tax effect of securities                        19,492
      transactions                              240                     2,008
                                          ---------    ---------    ---------
   Applicable income taxes                $ 476,878    $ 440,016    $ 449,785
                                          =========    =========    =========
      </TABLE>

      Federal income taxes were computed after reducing
      pretax accounting income for nontaxable interest and
      dividend income in the amount of $ 593,555,
      $ 464,229, and $ 433,970, for 2002, 2001, and 2000,
      respectively.

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

      <TABLE>
      <CAPTION>
   <S>                                    <C>        <C>         <C>

   Applicable federal income tax rate        34.0%       34.0%    34.0%
   Reductions resulting from:
   Nontaxable investment income and        ( 12.4%)   ( 11.2%)    (10.2%)
      other items, net of nondeductible
      expenses
                                           -------      -------    ------
   Effective income tax rate                 21.6%        22.8%     23.8%
                                           =======      =======    ======
      </TABLE>

                                        -16-

<PAGE>

Note 9.Federal Income Taxes (Continued)

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

      <TABLE>
      <CAPTION>
                                             2002           2001
   <S>                                   <C>           <C>
   Total deferred tax assets                $ 601,482       $ 502,166
   Total deferred tax liabilities        (   254,443)    (   137,646)
                                           ----------     -----------
   Net deferred tax asset                   $ 347,039       $ 364,520
                                           ==========     ===========
      </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>
<CAPTION>
                                                2002           2001
<S>                                         <C>           <C>
Net unrealized losses (gains) on             ($   63,880)    $    32,286
securities available for sale
Deferred compensation                             312,571        242,589
Allowance for loan losses                         286,700        220,394
Depreciation                                 (   190,563)   (   137,646)
Foregone interest on non-accrual loans              2,211          6,897
                                              -----------    -----------
    Net deferred tax asset                    $   347,039    $   364,520
                                              ===========    ===========
</TABLE>

Note 10.  Leases

      The Corporation is party to real estate leases with
      base monthly rental charges of $ 3,370.  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, 2002,
      2001, and 2000 was $ 64,195, $ 62,937, and $ 58,413,
      respectively.

      Based on the current monthly rent, future minimum
      rental payments for the next five years are as
      follows:
      2003                           $ 63,110
      2004                             59,331
      2005                             40,439
      2006                             38,939
      2007                             38,939

Note 11.  Deposits

      Included in interest-bearing deposits at December 31
      are NOW and Money Market Account balances totaling
      $ 19,099,495 and $ 15,800,762 for 2002 and 2001,
      respectively.

      Time deposits of $ 100,000 and over aggregated
      $ 18,337,176 and $ 25,234,850 at December 31, 2002
      and 2001, respectively.  Interest expense on time
      deposits of $ 100,000 and over was $ 1,009,000,
      $ 1,064,000, and $ 717,000 for 2002, 2001, and  2000,
      respectively.

                                        -17-

<PAGE>

Note 11.   Deposits (Continued)

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

       2003                      $ 49,456,004
       2004                         3,378,485
       2005                         1,344,080
       2006                         1,312,979
       2007                         8,501,084
                                 ------------
                                 $ 63,992,632
                                 ============

      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
      $ 3,648,369 and $ 2,926,759 at December 31, 2002 and
      2001, respectively.

      Overdrafts of $ 34,679 and $ 17,142 at December 31,
      2002 and 2001, 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 periods ended
      December 31:

<TABLE>
<CAPTION>
Assets                                                                   2002             2001
<S>                                                                 <C>              <C>
Cash                                                                  $      14,364   $       8,788
Investment in Fulton County National Bank & Trust Company                16,483,857      15,065,732
Investment in the Fulton County Community Development Corporation            36,859          42,177
Securities available for sale                                               120,200         124,700
Deferred taxes                                                                4,012           2,482
                                                                      -------------   -------------
  Total assets                                                        $  16,659,292   $  15,243,879
                                                                      =============   =============
Liabilities

Accounts payable                                                      $          12   $           0
                                                                      -------------   -------------
Stockholders' Equity

Common stock, par value $ .625 per share,                                   309,375         309,375
  4,000,000 shares authorized; shares issued and
  outstanding - 2002 - 492,810; 2001 - 492,770
Additional paid-in capital                                                2,051,294       2,051,106
Retained earnings                                                        14,262,722      13,035,796
Accumulated other comprehensive income (loss)                               124,003   (     62,672)
Treasury stock; shares at cost - 2002 - 2,190; 2001 - 2,230           (     88,114)   (     89,726)
                                                                      -------------   -------------
Total stockholders' equity                                               16,659,280      15,243,879
                                                                      -------------   -------------
Total liabilities and stockholders' equity                             $ 16,659,292   $  15,243,879
                                                                       ============   =============
</TABLE>

                                        -18-

<PAGE>

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

<TABLE>
<CAPTION>
                                                            2002           2001           2000

                 Statements of Income
               Years Ended December 31
<S>                                                    <C>             <C>           <C>
Cash dividends from wholly-owned subsidiary              $    555,000   $   512,000    $    510,050

Investment income                                               1,360         1,200           1,090

Equity in undistributed income of subsidiaries              1,223,162     1,018,365         970,574

Printing, supplies, amortization and other expenses     (     49,970)  (    45,311)   (     41,943)
                                                         ------------   -----------    ------------
Net income                                               $  1,729,552   $ 1,486,254    $  1,439,771
                                                         ============   ===========    ============
               Statements of Cash Flows
               Years Ended December 31

Cash flows from operating activities:
    Net income                                           $  1,729,552  $  1,486,254    $  1,439,771
    Adjustments to reconcile net income to cash
      provided by operating activities:
       Equity in undistributed income of subsidiary     (  1,223,162)  ( 1,018,365)   (    970,574)
       Compensation - treasury stock issued                     1,800           837           1,800
       Increase (decrease) in accounts payable                     12             0   (         27)
                                                         ------------   -----------    ------------
Net cash provided by operating activities                     508,202       468,726         470,970
                                                         ------------   -----------    ------------
Cash flows from financing activities:
    Dividends paid                                      (    502,626)  (   468,110)   (    424,601)
    Purchases of treasury stock                                     0             0   (     92,532)
                                                         ------------   -----------   -------------
Net cash provided (used) by financing activities        (    502,626)  (   468,110)   (    517,133)
                                                         ------------  ------------   -------------
Net change in cash                                              5,576           616   (     46,163)
Beginning cash                                                  8,788         8,172          54,335
                                                         ------------  ------------    ------------
Ending cash                                              $     14,364   $     8,788    $      8,172
                                                         ============   ===========    ============
</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, 2002 and
      2001.

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.

                                        -19-

<PAGE>

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 $ 3,455,122, $ 3,207,341, and
      $ 3,198,758 at December 31, 2002, 2001, and 2000,
      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>
      <CAPTION>
                                         - - - - Actual - -
                                                - -
                               Required   2002       2001
   <S>                         <C>      <C>        <C>
   Leverage (total adjusted     3.0%      10.4%     10.6%
      capital/total average
      assets)
   Tier 1 (Tier 1 core          4.0%      14.5%     14.0%
      capital/risk weighted
      assets)
   Total capital (total         8.0%      15.4%     14.8%
      capital plus allowance
      for loan losses/risk
      weighted assets)
   </TABLE>

      As of December 31, 2002, 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, 2002 and 2001, 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, 2002 and 2001 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 $ 57 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 $ 16,250,000 and
      $ 2,325,000 at December 31, 2002 and 2001,
      respectively.  The variable interest rate was 1.31%
      and 2.10% at December 31, 2002 and 2001,
      respectively, and can change daily based on FHLB's
      cost of funds.  Collateral for the borrowings
      consists of certain investments and mortgages
      approximating $ 60 million at December 31, 2002.

Note 16.   Real Estate Owned Other Than Premises

      At December 31, 2001, real estate owned other than
      premises consisted of a rental property in St.
      Thomas, PA which was carried at depreciated cost of
      $ 83,341.  The rental property was originally
      purchased for expansion purposes, but the Bank sold
      the property during 2002.  Net proceeds from the sale
      were $ 91,040, which resulted in a gain of $ 8,516.

                                        -20-

<PAGE>

Note 17.Fair Value of Financial Instruments

      The estimated fair values of the Corporation's
      financial instruments under Statement on Financial
      Accounting Standards (SFAS) No. 107, Disclosure About
      Fair Value of Financial Instruments were as follows
      at December 31, 2002 and 2001:

       <TABLE>
       <CAPTION>
                                       - - - - - 2002 - - - - - -     - - - - 2001- - - - - -
                                         Carrying         Fair        Carrying        Fair
                                          Amount          Value        Amount        Value
                                                            (000 Omitted)
       <S>                            <C>             <C>           <C>          <C>
       FINANCIAL ASSETS
       Cash and due from banks            $   5,214     $   5,214   $    5,529     $    5,529
       Securities available for sale         37,675        37,675       30,799         30,799
    Federal Reserve, Atlantic                 1,772         1,772        1,101          1,101
       Central Bankers Bank, and
       Federal Home Loan Bank stocks
       Loans receivable (net)               107,236       108,245      103,656        103,875
       Accrued interest receivable              939           939          903            903

       FINANCIAL LIABILITIES
       Time certificates                     63,993        65,429       74,322         70,020
       Other deposits                        49,032        49,032       42,716         42,716
       Accrued interest payable                 314           314          425            425
       Other borrowed funds                  31,250        33,452       17,325         18,250
  </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 of
         generally double their current salary level, and
         is also funded by single premium life insurance.

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

      <TABLE>
      <CAPTION>
                                                         2002         2001           2000
   <S>                                            <C>            <C>          <C>
   Asset
   Cash surrender value of life insurance           $ 4,657,795  $ 4,430,903    $ 4,212,760

   Liabilities
   Supplemental executive retirement plan               653,785      501,946        352,031
   Deferred directors fees liability                    272,818      219,808        171,344


   Income
   Earnings on cash surrender value of life             258,203      249,418        197,110
      insurance
      </TABLE>

                                        -21-

<PAGE>

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

      <TABLE>
      <CAPTION>
                                                         2002         2001          2000
      <S>                                         <C>          <C>          <C>
      Expenses
      Life insurance expense                        $   31,311   $   31,276   $   32,836
      Supplemental executive retirement expense        151,839      149,915       93,111
      Deferred directors fees                           54,695       50,148       46,974
      Director emeritus fees                            12,000       12,000       12,000
      Payments made to retired director                  1,685        1,685          857
      </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 (approximately 20% of loan portfolio).

      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.

                                        -22-

<PAGE>

       FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

              SELECTED FIVE-YEAR FINANCIAL DATA


<TABLE>
<CAPTION>
                                           2002         2001         2000        1999        1998
<S>                                     <C>          <C>          <C>         <C>         <C>
Income (000 omitted)
Interest income                           $   9,837     $ 10,184    $   9,992   $   8,759   $   8,148
Interest expense                                4,271        5,432        5,210       4,325       4,151
Provision for loan losses                         255           15           45         195         185
                                           ----------  -----------    ---------  ----------  ----------
Net interest income after provision for         5,311        4,737        4,737       4,239       3,812
loan losses
Securities gains (losses)                           1           57            6           6           4
Other operating income                            673          582          516         583         718
Other operating expenses                        3,778        3,450        3,370       3,011       2,745
                                           ----------  -----------    ---------  ----------  ----------
Income before income taxes                    2,207        1,926        1,889       1,817       1,789
Applicable income tax                           477          440          450         380         391
                                           ----------  -----------    ---------  ----------  ----------
Net income                               $    1,730    $   1,486    $   1,439   $   1,437   $   1,398
                                         ==========  ===========    =========  ==========  ==========
</TABLE>

Per share amounts are based on following weighted averages:

2002 - 492,772   2000 - 494,054    1998 - 495,000
2001 - 492,747   1999 - 495,000

<TABLE>
<S>                             <C>          <C>          <C>         <C>         <C>
Income before income taxes         $   4.48     $   3.91     $   3.82   $   3.67     $   3.61
Applicable income taxes                 .97          .89          .91        .77          .79
Net income                             3.51         3.02         2.91       2.90         2.82
Cash dividend paid                     1.02          .95          .86        .86          .72
Book value                            33.81        30.94        28.75      25.76        25.21
</TABLE>

Year-End Balance Sheet Figures (000 omitted)
<TABLE>
<S>                               <C>          <C>        <C>          <C>        <C>
Total assets                        $ 162,282  $ 150,855    $ 140,480  $ 128,478   $ 119,649
Net loans                             107,236    103,656      102,058     90,995      80,214
Total investment securities            39,447     31,899       24,643     24,436      29,183
Deposits-noninterest bearing           16,155     13,486       13,025     12,354      11,553
Deposits-interest bearing              96,870    103,552       92,107     90,957      87,788
Total deposits                        113,025    117,038      105,132    103,311      99,341
Liabilities for borrowed money         31,250     17,325       20,000     11,475       7,100
Total stockholders' equity             16,659     15,244       14,204     12,753      12,479
</TABLE>

Ratios (includes net unrealized gain/loss on AFS
securities)
<TABLE>
<S>                                    <C>      <C>      <C>      <C>      <C>
Average equity/average assets       10.21%   10.17%    9.82%   10.36%   10.60%
Return on average equity            10.64%   10.12%   10.94%   11.19%   11.88%
Return on average assets             1.09%    1.03%    1.07%    1.16%    1.26%
</TABLE>

                                        -23-

<PAGE>

       FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

        CHANGES IN INCOME AND EXPENSE - 2002 and 2001

      The schedule below reflects comparative changes in
income and expense included in the Consolidated Statements
of Income for 2002 and 2001 together with changes in asset
and liability volumes associated with these income and
expense items.


<TABLE>
<CAPTION>
                                                  2002 Compared to 2001                         2001 Compared to 2000
                                       Average      Volumes       Income/Expense       Average     Volumes      Income/Expense
($ 000 omitted)                               $             %          $           %           $           %        $           %
<S>                                  <C>          <C>         <C>         <C>        <C>          <C>        <C>       <C>
Loans                                        191           .2    (   992)  (   11.6)       6,976         7.1       79          .9
Investment securities                     11,109         42.9        687        44.4         708         2.8       63         4.3
Other investments                       (    791)   (   52.2)   (    42)   (   77.8)       1,441      1974.0       50      1200.5
                                        --------                 --------              ---------              -------
Total                                     10,509          7.9    (   347)  (    3.4)       9,125         7.4      192         1.9
                                        --------                 --------              ---------              -------
Interest/borrowed funds                    3,075         18.8         21         2.5         476         3.0        4          .4
Interest bearing demand deposits             439          4.0    (   115)  (   57.5)         788         7.7  (    18)  (    8.3)
Savings deposits                           1,547          9.2    (   126)  (   34.7)   (   1,727)   (   9.3)        (   (   24.7)
                                                                                                               119)
Time deposits                              2,264          3.1    (   941)  (   24.1)       9,103        14.5      355        10.0
                                        --------                 --------              ---------              -------
Total                                      7,325          6.3    ( 1,161)  (   21.4)       8,640         8.9      222         4.1
                                        --------                 --------              ---------              -------
Net interest income                                                  814        17.1                          (    30)  (     .6)
Provision for loan losses                                            240      1600.0                          (    30)        5.4
                                                                 -------                                      -------
Net interest income after provision                                  574        12.1                                          0.0
for loan losses                                                                                                   0
                                                                 -------                                      -------
Security transactions                                            (    56)  (   98.2)                               51       850.0
Other operating income                                                91        15.6                               66        12.8
                                                                 -------                                      -------
Income before operating expense                                      609        11.3                              117         2.2
                                                                 -------                                      -------
Salaries & employee benefits                                         168        10.8                               51         3.4
Occupancy & equipment expense                                         17         2.3                                1          .1
FDIC insurance premiums                                                1         3.2                                 (  (    4.8)
                                                                                                                  1)
Other operating expenses                                             142        12.4                               29         2.6
                                                                 -------                                      -------
Total operating expenses                                             328         9.5                               80         2.4
                                                                 -------                                      -------
Income before income taxes                                           281        14.6                               37         2.0
Applicable income taxes                                               37         8.4                          (    10)  (    2.2)
                                                                 -------                                      -------
Net income                                                           244        16.4                               47         3.3
                                                                 =======                                      =======
</TABLE>


                                        -24-

<PAGE>
       FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

             SUMMARY OF QUARTERLY FINANCIAL DATA

      The unaudited quarterly results of operations for the
years ended December 31, 2002 and 2001 are as follows:


<TABLE>
<CAPTION>
                                               2002                                2001
($ 000 omitted except per                  Quarter Ended                       Quarter Ended
share)
                                Mar. 31 June 30  Sept. 30  Dec. 31  Mar. 31  June 30 Sept. 30   Dec. 31
<S>                             <C>     <C>      <C>       <C>      <C>      <C>     <C>        <C>
Interest income                 $ 2,443 $ 2,575    $ 2,500  $ 2,319 $ 2,565  $ 2,552   $ 2,565  $ 2,502
Interest expense                  1,064   1,132      1,118      957   1,385    1,373     1,376    1,298
                                ------- -------    -------  ------- -------  -------   -------  -------
Net interest income               1,379   1,443      1,382    1,362   1,180    1,179     1,189    1,204
Provision for loan losses            15     110        115       15      15        0         0        0
                                ------- -------    -------  ------- -------  -------   -------  -------
Net interest income after          1,364   1,333      1,267    1,347   1,165    1,179     1,189    1,204
provision for loan losses
Securities gains (losses)             1       0          0        0       9       17         0       31
Other income                        156     161        157      199     130      142       136      174
Other expenses                      936     933        965      944     858      854       871      867
                                ------- -------    -------  ------- -------  -------   -------  -------
Operating income before income       585     561        459      602     446      484       454      542
taxes
Applicable income taxes             151     122         78      126     113      108        95      124
                                ------- -------    -------  ------- -------  -------   -------  -------
Net income                      $   434 $   439    $   381  $   418 $   333  $   376   $   359  $   418
                                ======= =======    =======  ======= =======  =======   =======  =======


Net income applicable to common
stock
Per share data:
Net income                      $   .88 $   .89    $   .77  $   .97 $   .68  $   .76   $   .73  $   .85
</TABLE>
















                                        -25-

<PAGE>

       FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

      STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES


<TABLE>
<CAPTION>
           ($ 000 omitted)               2002           2001         2000        1999        1998
<S>                                   <C>         <C>          <C>         <C>         <C>
LOANS
Lines of credit                        $    3,549     $ 3,301    $  3,024  $    2,921  $    3,332
Tax free                                      690       1,039         785         846       1,281
Commercial                                 23,950      23,363      21,292      18,413      14,203
Mortgage                                   64,784      60,964      54,534      48,070      40,916
Consumer                                   12,246      16,361      18,417      17,652      15,878
                                       ----------   ---------   ---------  ----------  ----------
Total loans                               105,219     105,028      98,052      87,902      75,610
                                       ----------   ---------   ---------  ----------  ----------
INVESTMENT SECURITIES
  (at amortized cost)
U.S. Government                                 0           0           0           0           0
U.S. Government agencies                   14,960      10,156      10,210       8,465       5,863
State & municipal                           2,240       2,817       3,997       5,903       5,793
Mortgage-backed securities                  4,697       3,751       4,532       5,988       9,324
FNMA & FHLMC preferred stock               13,023       7,309       5,204       4,932       4,701
Corporate bonds                               997         814         262           0           0
Other                                       1,106       1,067       1,001         800         577
                                       ----------   ---------   ---------  ----------  ----------
Total investment securities                37,023      25,914      25,206      26,088      26,258
                                       ----------   ---------   ---------  ----------  ----------
OTHER SHORT-TERM INVESTMENTS
Federal funds sold                            723       1,514          73          18         343
                                       ----------   ---------   ---------  ----------  ----------
TOTAL EARNING ASSETS                      142,965     132,456     123,331     114,008     102,211
                                       ----------   ---------   ---------  ----------  ----------
TOTAL ASSETS                            $ 155,563   $ 144,384   $ 134,004   $ 123,985   $ 111,002
                                       ==========   =========   =========  ==========  ==========
Percent increase - earning assets            7.9%        7.4%        8.2%       11.5%        5.3%

DEPOSITS
Interest-bearing demand (NOW)          $   11,431  $   10,992  $   10,204  $   16,951  $   16,779
Savings (MMA & sav.)                       18,438      16,891      18,618      13,834      13,616
Time                                       74,238      71,974      62,871      56,443      54,621
                                       ----------   ---------   ---------  ----------  ----------
Total interest-bearing deposits           104,107      99,857      91,693      87,228      85,016
                                       ----------   ---------   ---------  ----------  ----------
OTHER BORROWINGS
Federal funds purchased                       239         108         118          70         622
Liabilities for borrowed money             19,225      16,281      15,795      11,734       3,804
                                       ----------   ---------   ---------  ----------  ----------
                                           19,464      16,389      15,913      11,804       4,426

TOTAL INTEREST-BEARING
  LIABILITIES                             123,571     116,246     107,606      99,032      89,442
                                       ----------   ---------   ---------  ----------  ----------
</TABLE>




                                        -26-

<PAGE>
       FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES (CONTINUED)

<TABLE>
<CAPTION>
                                    2002   2001    2000    1999    1998
<S>                                <C>    <C>     <C>     <C>     <C>
AVERAGE RATES EARNED
                                     %       %      %       %       %
Loans
Commercial                         5.61      7.28   9.21    8.32    9.23
Mortgage                           7.41      8.19   8.24    8.01    8.61
Consumer                           8.75      9.07   8.97    8.74    8.77
Tax free                           5.08      5.54   5.48    5.53    5.82
Lines of credit                    6.61      7.87   9.55    8.35    8.81
                                   ----      ----   ----    ----    ----
Total                              7.22      8.17   8.60    8.37    8.72
                                   ----      ----   ----    ----    ----
Investment Securities
U.S. Government                    0.00      0.00   0.00    0.00    0.00
U.S. Government agencies           4.74      5.79   6.22    6.05    5.95
State & municipal                  4.56      4.79   4.99    4.94    4.93
Mortgage-backed securities         4.21      6.09   6.34    5.44    5.50
Corporate bonds                    7.02      7.12   7.51    0.00    0.00
Other                              8.66      6.38   5.82    5.34    5.31
                                   ----      ----   ----    ----    ----
Total                              6.03      5.96   5.88    5.50    5.43
                                   ----      ----   ----    ----    ----
Other Short-Term Investments
Federal funds sold                 1.63      3.54   5.59    4.43    5.49
                                   ----      ----   ----    ----    ----
Total earning assets               6.89      7.69   8.04    7.68    7.86
                                   ====      ====   ====    ====    ====
AVERAGE RATES PAID
Time & savings deposits            3.16      4.48   4.64    4.29    4.60
Federal funds purchased            1.72      2.43   4.87    5.05    5.57
Liabilities for borrowed money     4.94      5.89   6.03    4.91    5.32
                                   ----      ----   ----    ----    ----
Total interest-bearing             3.46      4.67   4.84    4.37    4.64
liabilities
                                   ====      ====   ====    ====    ====
</TABLE>









                                        -27-

<PAGE>
    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 selected supplementary
financial information presented in this report.


OPERATING RESULTS

          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.

          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 increased 7.9% and 7.4% in
2002 and 2001, respectively.  Average investments increased
42.9% in 2002, with the increase concentrated in U. S.
Government Agency securities and FNMA/FHLMC preferred
stocks.  Average loans, which typically produce higher
yields than investments, increased 0.2% in 2002.  Net loans
at December 31, 2002 stood at $ 107,236,000 compared to
$ 103,656,000 as of December 31, 2001, an increase of 3.5%.

          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 decrease was due solely to a significant decrease
in interest rates paid on deposits and short-term
borrowings.

          Average interest-bearing liabilities increased
6.3% and 8.0% in 2002 and 2001, respectively.  Average
borrowings increased 18.8% and average time deposits, which
typically pay higher yields, increased 3.1% in 2002.
Average interest-bearing demand deposits and savings
deposits increased 4.0% and 9.2%, respectively.  Interest-
bearing deposits stood at $ 96,870,000 at December 31, 2002
compared to $ 103,552,000 as of December 31, 2001, a
decrease of 6.5%.

          Net interest income is the difference between
total interest income and total interest expense. Interest
income is generated through earning assets, which includes
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 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 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 $ 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.

                                        -28-

<PAGE>
OPERATING RESULTS (Continued)


          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 increased 10.8% and 3.4%
for 2002 and 2001, respectively, primarily due to the
addition of personnel to staff a branch office opened in
early February, 2002, and merit pay increases.  Occupancy
and furniture and equipment expenses increased 2.3% and 0.1%
for 2002 and 2001, respectively, primarily due to increased
equipment and building maintenance costs and depreciation
associated with the opening of a new branch office in
February, 2002, offset by reduced depreciation expense on
assets that became fully depreciated at the end of 2001.
Other operating expenses increased 12.4% and 2.4% for 2002
and 2001, respectively, primarily due to increases in
advertising costs, OCC assessments, PA shares tax, printing
and supplies, telephone and other overhead expenses.

          Applicable income taxes changed between 2002,
2001, and 2000 because of changes in pretax accounting
income and taxable income.  The effective tax rate for 2002
was 21.6% compared to 22.8% and 23.8% for 2001 and 2000,
respectively.  The decrease in the effective income tax rate
for 2002 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.  The 2001
decrease was due primarily to increases in the dividends
received deduction for FNMA/FHLMC preferred stock and
nontaxable income related to the increase in the cash
surrender value of directors and officers life insurance
benefit 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, 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.

          The provision for loan losses was $ 255,000 in
2002 compared to $15,000 in 2001.  The provisions were based
on management's evaluation of the adequacy of the reserve
balance and represent amounts necessary to maintain the
reserve at the appropriate level based on the quality of the
loan portfolio and economic conditions.  The Corporation's
history of net charge-offs has traditionally been better
than peer group performance with an average rate of less
than .10% of average loans outstanding over the past five
years and management is not aware of any problem loans that
are indicative of trends, events, or uncertainties that
would significantly impact operations, liquidity or capital.
Though this trend is expected to continue, management
intends to maintain the reserve at appropriate levels based
on an ongoing evaluation of the loan portfolio.

                                        -29-

<PAGE>

FINANCIAL CONDITION (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>
<CAPTION>
                                   90 Days or More   Nonaccrual Status
                                      Past Due
<S>                              <C>       <C>       <C>       <C>
                                   2002      2001      2002      2001
Loans secured by real estate        $ 59      $ 567   $ 1,525    $ 269
Personal loans                        11         48          0        0
Commercial and other loans             0        307         71       20
                                    ----      -----    -------    -----
     Total loans                    $ 70      $ 922    $ 1,596    $ 289
                                    ====      =====    =======    =====
</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
          Pool #6  Off-Balance Sheet Commitments

          Business lines of credit and commercial loans with
balances of $250,000 and over are individually reviewed.
Also, loans that are 90 days or more past due or have been
previously classified as substandard are individually
reviewed.  Allocations to the allowance for loan losses are
based upon classifications assigned to those specific loans.

          Loan classifications utilized are based on past
experience and are as follows:

                                   Allowance Factors
                                   ------------------
          Loss                        Charge-off
          Doubtful                       50%
          Substandard                     3%
          Special Mention                 1%

          The remaining portion of the pools are evaluated
as groups with allocations made to the allowance based on
historical loss experience, current and anticipated trends
in delinquencies, trends in volume and terms of loans,
concentrations of credit and general economic conditions
within the Corporation's trading area.

          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, ninety-one percent 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 86.3% of the classified loans.

                                        -30-

<PAGE>

FINANCIAL CONDITION (Continued)


          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 reached $ 16,659,000 at
December 31, 2002 for a 9.3% increase over the prior year.
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 10.3% and 10.1% of total
assets at the end of 2002 and 2001, respectively.  Cash
dividends of $ 1.02 and $ .95 per share were paid in 2002
and 2001, 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 September 30,
2002, the company had repurchased 2,190 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.

          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

                                        -31-

<PAGE>
LIQUIDITY (Continued)


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>
<CAPTION>
                               Due          Due          Due         Due         Due         Total
                           0 - 30 Days    31 - 90      91 - 180   181 - 360     After
                                           Days         Days         Days       1 Year
<S>                        <C>          <C>          <C>         <C>          <C>         <C>
Rate Sensitive Assets
Investment securities         $   9,058    $   8,108    $   4,043    $   4,894   $ 11,384    $   37,487
Real estate, commercial and      18,846        4,293       14,052       11,955     59,121       108,267
consumer loans
                             ---------    ---------    ---------    ---------  ---------    ----------
                              $ 27,904     $ 12,401     $ 18,095     $ 16,849   $ 70,505     $ 145,754
                             =========    =========    =========    =========  =========    ==========
Rate Sensitive
Liabilities
Short-term borrowings          $ 16,250   $        0   $        0   $        0          $    $   16,250
                                                                                       0
Long-term borrowings                  0            0            0            0     15,000        15,000
Certificates of deposit           4,757        5,708        2,098        2,940      2,834        18,337
over $ 100,000
Other certificates of            11,462        5,081        6,966       10,441     11,706        45,656
deposit
Money market deposit                  0            0        1,996        3,992      1,996         7,984
accounts
Other interest-bearing                                      2,489        9,957     12,447        24,893
deposits                             0            0
                             ----------   ----------   ----------   ----------  ---------   -----------
                               $ 32,469     $ 10,789     $ 13,549     $ 27,330   $ 43,983     $ 128,120
                             ==========   ==========   ==========   ==========  =========   ===========
Cumulative GAP               ($   4,565) ($   2,953)    $   1,593  ($   8,888)   $ 17,634    $   17,634
                             ==========   ==========   ==========   ==========  =========   ===========
</TABLE>

          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 2003 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
$ 16.6 million at December 31, 2002.  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
                                        -32-

<PAGE>

CAPITAL FUNDS (Continued)


risk profiles of individual banks.  A comparison of Fulton
Bancshares Corporation's capital ratios to regulatory
minimums at December 31 is as follows:

<TABLE>
<CAPTION>
                                   Fulton        Regulatory
                                 Bancshares       Minimum
                                 Corporation    Requirement
                                                     s
                                2002    2001
<S>                            <C>     <C>      <C>
Leverage ratio                  10.4%   10.6%          3%

Risk-based capital ratio
Tier I (core capital)           14.5%   14.0%          4%
Combined Tier I and Tier II
  (core capital plus
allowance
  for loan losses)              15.4%   14.8%          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>
<CAPTION>
                                      2002      2001      2000
<S>                                 <C>       <C>       <C>
Equity capital at December 31       $ 16,659  $ 15,244   $ 14,204
  ($ 000 omitted)
Equity capital as a percent of        10.27%    10.10%     10.11%
assets
  at December 31
Return on average assets               1.11%     1.03%      1.07%
Return on average equity              10.91%    10.12%     10.94%
Cash dividend payout ratio            29.06%    31.50%     29.45%
</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.

      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

                                        -33-

<PAGE>
MARKET RISK MANAGEMENT (Continued)


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>
<CAPTION>
                       - - - - - - - - - - Principal/Notional Amount Maturing In - - - - - - - - - -
<S>                    <C>      <C>      <C>      <C>      <C>      <C>         <C>         <C>
(In millions)
Rate sensitive assets    2003    2004     2005      2006    2007    Thereafter    Total       Fair
                                                                                              Value

Fixed rate loans        $ 9,281 $ 3,689  $ 3,262   $ 2,571 $ 2,291     $ 19,792   $ 40,886   $ 41,895
Average interest          7.42%   9.08%    8.72%     8.40%   8.07%        7.91%      8.01%
rates

Variable rate loans      18,059   2,452    2,548     2,434   2,211       39,677     67,381     67,381
Average interest          5.13%   6.31%    6.34%     6.43%   6.41%        6.42%      6.07%
rates

Fixed rate securities    26,778       0      499     2,800   1,000        1,456     32,533     32,721
Average interest          4.39%       0    7.53%     5.55%   5.38%        5.50%      4.62%
rates

Variable rate             3,215     844      533       379     290        1,465      6,726      6,726
securities
Average interest          3.27%   4.00%    4.01%     4.02%   4.03%        4.08%      3.68%
rates


Rate sensitive
liabilities

Noninterest-bearing        1,616   1,454    1,309     1,178   1,060        9,538     16,155     16,155
checking
Average interest            N/A     N/A      N/A       N/A     N/A          N/A        N/A
rates

Savings and interest-     3,288   2,959    2,663     2,397   2,157       19,413     32,877     32,877
bearing checking
Average interest          0.82%   0.82%    0.82%     0.82%   0.82%        0.82%      0.82%
rates

Time deposits            12,364  10,118    7,924     6,272   6,829       20,486     63,993     65,429
Average interest          3.38%   3.70%    4.09%     4.39%   4.19%        4.19%      3.54%
rates

Variable rate            16,250       0        0         0       0       15,000     31,250     33,452
borrowings
Average interest          1.31%       0        0         0       0        5.93%      3.53%
rates
</TABLE>
                                        -34-

<PAGE>

FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

          Financial Accounting Standards Board (FASB)
Standard 142, which is effective for years beginning after
December 15, 2001, addresses the financial accounting
reporting for acquired goodwill and other intangible assets.
It does not address intangibles acquired as part of business
combinations which is addressed by FASB 141.  This statement
also addresses how goodwill and intangibles are accounted
for after they have been initially recognized.  Management
has evaluated the impact of this statement on the
consolidated financial statements and has determined it is
not material.

          Financial Accounting Standards Board (FASB)
Standard 148, Accounting for Stock-Based Compensation-
Transition and Disclosure, an amendment of FASB 123, amends
FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition
for an entity that voluntarily changes to the fair value
based method of accounting for stock-based employee
compensation.  It also amends the disclosure provisions of
Statement 123 to require prominent disclosure about the
effects on reported net income of an entity's accounting
policy decisions with respect to stock-based employee
compensation.  Finally, this Statement amends APB Opinion
No. 28, Interim Financial Reporting, to require disclosure
about those effects in interim financial information.  The
Corporation does not have any stock option plan, therefore,
SAFS No. 148 will have no affect.


STOCK MARKET ANALYSIS AND DIVIDENDS

          The Corporation's common stock is traded
inactively in the over-the-counter market.  As of
December 31, 2002 the approximate number of shareholders of
record was 513.

<TABLE>
<CAPTION>
                               Market      Cash     Market     Cash
                               Price     Dividen    Price     Dividen
                                            d                    d
                                     2002                2001
<S>                          <C>         <C>      <C>         <C>
First Quarter                 $ 35.25      .22     $ 31.00      .20
Second Quarter                  35.25      .22       33.00      .20
Third Quarter                   37.50      .26       33.00      .25
Fourth Quarter                  45.00      .32       33.50      .30
</TABLE>

                                        -35-

<PAGE>

                                                  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.




<PAGE>


                                                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 20,
2003, appearing in the 2002 annual report on shareholders
incorporated by reference in this Form 10-K of Fulton
Bancshares Corporation for the year ended December 31, 2002.




                         /S/SMITH ELLIOTT KEARNS & COMPANY, LLC



Chambersburg, PA
March 20, 2003

<PAGE>

                                                EXHIBIT 99.1





                  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, 2002 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, 2003
<PAGE>

                                                EXHIBIT 99.2


                  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, 2002 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
                                (Principal Financial and
                                Accounting Officer)

Dated:  March 26, 2003