FORM 10-K/A

               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, 2001
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 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, 2002
(Common stock, .625 par value)              492,770

               DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual shareholders' report for the year ended
December 31, 2001 are incorporated by reference into Parts I and
II.  Portions of the Proxy Statement for 2001 Annual Meeting of
Security Holders are incorporated by reference in Part III of
this Form 10-K.


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 2001, and has no employees.

          The principal executive office of the Company is

located at 100 Lincoln Way East, McConnellsburg, Fulton County,

Pennsylvania  17233.  The telephone number of the Company is

(717) 485-3144.

          The Company has no employees.


Supervision and Regulation - The Company

          The Company is subject to the provisions of the Bank

Holding Company Act of 1956, as amended (the "Bank Holding

Company Act"), and to supervision by the Federal Reserve Board.

The Bank Holding Company Act requires the Company to secure the

prior approval of the Federal Reserve Board before it owns or

controls, directly or indirectly, more than five percent (5%) of

the voting shares or substantially all of the assets of any

institution, including another bank.  The Bank Holding Company

Act prohibits acquisition by the Company of more than five

percent (5%) of the voting shares of, or interest in, all or

substantially all of the assets of any bank located outside of

Pennsylvania unless such acquisition is specifically authorized

by the laws of the state in which such bank is located.

          A bank holding company is prohibited from engaging in

or acquiring direct or indirect control of more than five percent

(5%) of the voting shares of any company engaged in nonbanking

activities unless the Federal Reserve Board, by order or

regulation, has found such activities to be so closely related to

banking or managing or controlling banks as to be a proper

incident thereto.

          The Company is required to file an annual report with

the Federal Reserve Board and any additional information that the

Federal Reserve Board may require pursuant to the Bank Holding

Company Act.  The Federal Reserve Board may also make

examinations of the Company and any or all of its subsidiaries.

          Federal law prohibits acquisitions of control of a bank

holding company without prior notice to certain federal bank

regulators.  Control is defined for this purpose as the power,

directly or indirectly, to direct the Management or policies of

the bank or bank holding company or to vote 25% or more of any

class of voting securities of the bank holding company.  A person

or group holding revocable proxies to vote 25% or more of the

stock of a bank or its holding company would presumably be deemed

to control the institution for purposes of this federal law.

          Subsidiary banks of a bank holding company are subject

to certain restrictions imposed by the Federal Reserve Act on any

extensions of credit to the bank holding company or any of its

subsidiaries, on investments in the stock or other securities of

the bank holding company and on taking of such stock or

securities as collateral for loans to any borrower.

Permitted Activities

          The Federal Reserve Board permits bank holding

companies to engage in activities so closely related to banking

or managing or controlling banks as to be a proper incident

thereto.  The Company does not at this time engage in any of the

permissible activities described below, nor does the Company have

any current plans to engage in these activities in the

foreseeable future.

          While the types of permissible activities are subject

to a variety of limitations and to change by the Federal Reserve

Board, the principal activities that presently may be conducted

by a bank holding company and may in the future be engaged by the

Company are:  (1) making, acquiring or servicing loans and other

extensions of credit for its own account or for the account of

others, such as would be made by consumer finance, credit card,

mortgage, commercial finance and factoring companies; (2)

operating as an industrial bank or similar entity in the manner

authorized by state law so long as the institution does not both

accept demand deposits and make commercial loans; (3) operating

as a trust company in the manner authorized by federal or state

law so long as the institution does not make certain types of

loans or investments or accept deposits, except as may be

permitted by the Federal Reserve Board; (4) acting as an

investment or financial advisor to investment companies and other

persons; (5) leasing personal and real property or acting as

agent, broker or advisor in leasing property; (6) making equity

and debt investments in corporations or projects designed

primarily to promote community welfare; (7) providing to others

financially oriented data processing or bookkeeping services; (8)

acting as an insurance agent or broker in relation to insurance

for itself and its subsidiaries or for insurance directly related

to extensions of credit; (9) acting as underwriter for credit

life insurance and credit accident and health insurance: (10)

providing courier services of a limited character; (11) providing

management consulting advice to nonaffiliated banks and nonbank

depository institutions; (12) selling money orders, travelers'

checks and United States savings bonds; (13) performing

appraisals of real estate; (14) acting as intermediary for the

financing of commercial or industrial income-producing real

estate by arranging for the transfer of the title, control and

risk of such a real estate project to one or more investors; (15)

providing securities brokerage services, related securities

credit activities and incidental activities such as offering

custodial services, individual retirement accounts and cash

management services, if the securities brokerage services are

restricted to buying and selling securities solely as agent for

the account of customers and do not include securities

underwriting or dealing or investment advice or research

services; (16) underwriting and dealing in obligations of the

United States, general obligations of states and their political

subdivisions such as bankers' acceptances and certificates of

deposit; (17) providing general information, advisory services

and statistical forecasting with respect to foreign exchange

markets; (18) acting as a futures commission merchant in the

execution and clearance on major commodity exchanges of futures

contracts and options on futures contracts for bullion, foreign

exchange, government securities, certificates of deposit and

other money market instruments; (19) performing personal property

appraisals that require expertise regarding all types of personal

and business property, including intangible property such as

corporate securities; (20) providing commodity trading and

futures commission merchant advice; (21) providing consumer

financial counseling to individuals on consumer-oriented

financial management matters, including debt consolidation,

mortgage applications, bankruptcy, budget management, real estate

tax shelters, tax planning, retirement and estate planning,

insurance and general investment management, so long as this

activity does not include the sale of specific products or

investments; (22) providing tax planning and preparation advice

to corporations and individuals; (23) providing check guaranty

services to subscribing merchants; (24) operating a collection

agency and credit bureau; and (25) acquiring and operating thrift

institutions, including savings and loan associations, building

and loan associations and FDIC-insured savings banks.

Certain Provisions of Pennsylvania Banking Law

          Under the Pennsylvania Banking Code of 1965, as

amended, (the "Code"), the Company has been permitted since March

4, 1990 to control an unlimited number of banks.  However, the

Company would be subject to the requirements of the Bank Holding

Company Act as discussed in the "Supervision and Regulation - The

Company" section above.

          Also since March 4, 1990, the Code authorizes

reciprocal interstate banking without any geographic limitation.

Reciprocity between states exists when a foreign state's law

authorizes Pennsylvania bank holding companies to acquire banks

or bank holding companies located in that state on terms and

conditions substantially no more restrictive than those

applicable to such an acquisition by a bank holding company

located in that state.  For a further discussion of interstate

banking and branching, see the section entitled "Legislation and

Regulatory Changes" below.

Legislation and Regulatory Changes

          From time to time, legislation is enacted which has the

effect of increasing the cost of doing business, limiting or

expanding permissible activities or affecting the competitive

balance between banks and other financial institutions.

Proposals to change the laws and regulations governing the

operations and taxation of banks, bank holding companies and

other financial institutions are frequently made in Congress, and

before various bank regulatory agencies.  No prediction can be

made as to the likelihood of any major changes or the impact such

changes might have on the Company and its subsidiary, the Bank.

Certain changes of potential significance to the Company are

discussed below.

          The Riegle-Neal Interstate Banking and Branching

Efficiency Act of 1994 (the "Interstate Banking and Branch Act")

permits interstate banking to occur.  Bank holding companies,

pursuant to an amendment to the Bank Holding Company Act, can

acquire a bank located in any state, as long as the acquisition

does not result in the bank holding company controlling more than

10% of the deposits in the United States, or 30% of the deposits

in the target bank's state.  The legislation permits states to

waive the concentration limits and require that the target

institution be in existence for up to five years before it can be

acquired by an out-of-state bank or bank holding company.

Interstate branching and merging of existing banks is permitted

after 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.

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 offering trust services.  The

Bank's primary service area is located in Fulton County,

Pennsylvania.  Specifically, the main office of the Bank is

located in McConnellsburg, the county seat.  Within the defined

service area of the Bank's main office, the banking business is

highly competitive.  In addition to local community banks, the

Bank competes with regionally-based commercial banks, all of

which have greater assets, capital and lending limits.  The Bank

also competes with savings banks, savings and loan associations,

money market funds, insurance companies, stock brokerage firms,

regulated small loan companies, credit unions and with the

issuers of commercial paper and other securities.

          In order to compete effectively in this market and to

obtain business from individuals, small and medium-sized

businesses and professionals, the Bank offers specialized

services such as extended hours of operation and personal and

business checking accounts at competitive rates in addition to

traditional commercial and consumer banking and trust services.

The Bank accepts time, demand and savings deposits, 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.

          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.

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, 2001, the Bank has forty-seven (47)

full-time equivalent employees.

Supervision and Regulation - The Bank

          The operations of the Bank are subject to federal and

state statutes applicable to banks chartered under the banking

laws of the United States, to members of the Federal Reserve

System and to banks whose deposits are insured by the FDIC.  The

operations of the Bank are also subject to regulations of the

Comptroller, the Federal Reserve Board and the FDIC.  The primary

supervisory authority of the Bank is the Comptroller, which

regulates and examines the Bank.  The Comptroller has authority

to prevent national banks from engaging in unsafe or unsound

practices in conducting their businesses.

          Federal and state banking laws and regulations govern,

among other things, the scope of a bank's business, the

investments a bank may make, the reserves against deposits a bank

must maintain, loans a bank makes and collateral it takes, the

maximum interest rates a bank may pay on deposits, the activities

of a bank with respect to mergers and consolidations and the

establishment of branches.  Under Pennsylvania law, the Bank may

establish or acquire branch offices, subject to certain

limitations, in any county of the state.  National bank branches,

however may be established within the permitted area only after

approval by the Comptroller.

          As a subsidiary bank of a bank holding company, the

Bank is subject to certain restrictions imposed by the Federal

Reserve Act on any extensions of credit to the bank holding

company or its subsidiaries, or investments in the stock or other

securities as collateral for loans.  The Federal Reserve Act and

Federal Reserve Board regulations also place certain limitations

and reporting requirements on extensions of credit by the Bank to

principal shareholders of its parent holding company, among

others, and to related interests of such principal shareholders.

In addition, such legislation and regulations may affect the

terms upon which any person becoming a principal shareholder of a

holding company may obtain credit from banks with which the

subsidiary Bank maintains a correspondent relationship.

FDIC

          Under the Federal Deposit Insurance Act, the

Comptroller possesses the power to prohibit institutions

regulated by it (such as the Bank) from engaging in any activity

that would be an unsafe and unsound banking practice or would

otherwise be in violation of the law.  Moreover, the Financial

Institutions Regulatory and Interest Rate Control Act of 1978

("FIRA") generally expanded the circumstances under which

officers or directors of a bank may be removed by the

institution's federal supervisory agency, restricts lending by a

bank to its executive officers, directors, principal shareholders

or related interests thereof and restricts management personnel

of a bank from serving as directors or in other management

positions with certain depository institutions whose assets

exceed a specified amount or which have an office within a

specified geographic area, and restricts management personnel

from borrowing from another institution that has a correspondent

relationship with their bank.  Additionally, FIRA requires that

no person may acquire control of a bank unless the appropriate

federal supervisory agency has been given sixty (60) days prior

written notice and within that time has not disapproved the

acquisition or otherwise extended the period for disapproval.

Control for purposes of FIRA, means the power, directly or

indirectly, to direct the management or policies or to vote

twenty-five percent (25%) or more of any class of outstanding

stock of a financial institution or its respective holding

company.  A person or group holding revocable proxies to vote

twenty-five percent (25%) or more of the outstanding common stock

of a financial institution or holding company such as the

Company, would presumably be deemed to control the institution

for purposes of FIRA.

Garn-St Germain
          The Garn-St Germain Depository Institutions Act of 1982

("1982 Act") removed certain restrictions on a bank's lending

powers and liberalized its depository capabilities. The 1982 Act

also amended FIRA (see above) by changing the statutory limits on

lending by a bank to its executive officers, directors, principal

shareholders or related interests thereof and by relaxing certain

reporting requirements.  The 1982 Act, however, also tightened

FIRA provisions respecting management interlocks and

correspondent bank relationships involving a bank's management

personnel.

CRA
          Under the Community Reinvestment Act of 1977, as

amended ("CRA"), the Comptroller is required to assess the record

of all financial institutions regulated by it to determine if

these institutions are meeting the credit needs of the community

(including low and moderate income neighborhoods) which they

serve and to take this record into account in its evaluation of

any application made by any of such institutions for, among other

things, approval of a branch or other deposit facility, office

relocation, a merger or an acquisition of bank shares.  The

Financial Institutions Reform, Recovery and Enforcement Act of

1989 amended the CRA to require, among other things, that the

Comptroller make publicly available the evaluation of a bank's

record of meeting the credit needs of its entire community,

including low and moderate income neighborhoods. This evaluation

will include a descriptive rating and a statement describing the

basis for the rating, which is publicly disclosed.

BSA

          Under the Bank Secrecy Act ("BSA"), banks and other

financial institutions are required to report to the Internal

Revenue Service currency transactions of more than $ 10,000 or

multiple transactions of which the Bank is aware in any one day

that aggregate in excess of $ 10,000.  Civil and criminal

penalties are provided under the BSA for failure to file a

required report, for failure to supply information required by

the BSA or for filing a false or fraudulent report.

CEBA

          An omnibus federal banking bill, known as the

Competitive Equality Banking Act ("CEBA"), was signed into law in

August of 1987.  Included in the legislation were measures:  (1)

imposing certain restrictions on transactions between banks and

their affiliates; (2) expanding the powers available to Federal

bank regulators in assisting failed and failing banks; (3)

limiting the amount of time banks may hold certain deposits prior

to making such funds available for withdrawal and any interest

thereon; and (4) requiring that any adjustable rate mortgage loan

secured by a lien on a one-to-four family dwelling include a

limitation on the maximum rate at which interest may accrue on

the principal balance during the term of such loan.

FDICIA

      Capital Categories

          In December of 1991 the Federal Deposit Insurance

Corporation Improvement Act of 1991 ("FDICIA") became law.  Under

FDICIA, institutions must be classified, based on their risk-

based capital ratios into one of five defined categories, as

illustrated below:

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

regulatory rating.

      Based on the above criteria, the Bank is classified

as "well capitalized".

Prompt Corrective Action

          In the event an institution's capital deteriorates to

the undercapitalized category or below, FDICIA prescribes an

increasing amount of regulatory intervention, including: (1) the

institution of a capital restoration plan and a guarantee of the

plan by a parent institution; and (2) the placement of a hold on

increases in assets, number of branches or lines of business.  If

capital has reached the significantly or critically

undercapitalized levels, further material restrictions can be

imposed, including restrictions on interest payable on accounts,

dismissal of management and (in critically undercapitalized

situations) appointment of a receiver.  For well capitalized

institutions, FDICIA provides authority for regulatory

intervention where the institution is deemed to be engaging in

unsafe or unsound practices or receives a less than satisfactory

examination report rating for asset quality, management, earnings

or liquidity.  All but well capitalized institutions are

prohibited from accepting brokered deposits without prior

regulatory approval.

Operational Controls

          Under FDICIA, financial institutions are subject to

increased regulatory scrutiny and must comply with certain

operational, managerial and compensation standards to be

developed by Federal Reserve Board regulations.

          FDICIA also requires the regulators to issue new rules

establishing certain minimum standards to which an institution

must adhere including standards requiring a minimum ratio of

classified assets to capital, minimum earnings necessary to

absorb losses and minimum ratio of market value to book value for

publicly held institutions.  Additional regulations are required

to be developed relating to internal controls, loan

documentation, credit underwriting, interest rate exposure, asset

growth and excessive compensation, fees and benefits.

Examinations and Audits
          Annual full-scope, on site examinations are required

for all FDIC-insured institutions except institutions with assets

under $ 250 million which are well capitalized, well managed and

not subject to a recent change in control, in which case, the

examination period is every eighteen (18) months.  Banks with

total assets of $ 150 million or more are required to submit to

their supervising federal and state banking agencies a publicly

available annual audit report and are subject to additional

accounting and reporting regulations.

Truth-In-Savings
          A separate subtitle within FDICIA, called the "Bank

Enterprise Act of 1991", requires "truth-in-savings" on consumer

deposit accounts so that consumers can make meaningful

comparisons between the competing claims of banks with regard to

deposit accounts and products.  Under this provision, the Bank is

required to provide information to depositors concerning the

terms of their deposit accounts, and in particular, to disclose

the annual percentage yield. There are some operational costs of

complying with the Truth-In-Savings law.

          Federal regulators recently issued regulations to

implement the privacy provisions of the Gramm-Leach-Bliley Act

(Financial Services Modernization Act).  This new law took effect

in 2000 and requires banks to notify consumers about their

privacy policies and to give them an opportunity to "opt-out" or

prevent the bank from sharing "nonpublic personal information"

about them with nonaffiliated third parties.  The Bank has

developed privacy policies and procedures to provide timely

disclosure of such policies and a convenient means for consumers

to opt out of the sharing of their information with unaffiliated

third parties.

          The earnings of the Bank, and therefore the earnings of

the Company are affected by general economic conditions,

management policies, and the legislative and governmental actions

of various regulatory authorities including the FRB, the

Comptroller and the FDIC.

          In addition to banking and securities laws, regulations

and regulatory agencies, the Company also is subject to various

other laws, regulations and regulatory agencies throughout the

United States.  Further more, various proposals, bills and

regulations have been and are being considered in the United

States Congress, and various other governmental regulatory and

legislative bodies, which could result in changes in the

profitability and governance of the Company.  It cannot be

predicted whether new legislation or regulations will be adopted

and, if so, how they would affect the Company.

      References under the caption "Supervision and Regulation"

to applicable statutes, regulations and orders are brief

summaries of portions thereof which do not purport to be complete

and which are qualified in their entirety by reference thereto.

Important Factors relating to Forward Looking Statements

          The Private Securities Litigation Reform Act of 1995

provides a "safe harbor" for forward-looking statements to

encourage companies to provide prospective information about

their companies without fear of litigation so long as those

statements are identified as forward-looking and are accompanied

by meaningful cautionary statements identifying important factors

that could cause actual results to differ materially from those

projected in such statements.  In connection with certain

statements made in this report and those that may be made in the

future by or on behalf of the Company which are identified as

forward-looking statements, the Company notes that the following

important factors, among others, could cause actual results to

differ materially from those set forth in any such forward-

looking statement.  Further, such forward-looking statements

speak only as of the date on which such statement or statements

are made, and the Company undertakes no obligation to update any

forward-looking statement or statements to reflect events or

circumstances after the date on which such statement is made or

to reflect the occurrence of unanticipated events.

          The business and profitability of a financial services

organization such as the Company is influenced by prevailing

economic conditions and governmental policies.  The actions and

policy directives of the FRB determine to a significant degree

the cost and the availability of funds obtained from money market

sources for lending and investing.  FRB polices and regulations

also influence, directly and indirectly, the rates of interest

paid by commercial banks on their interest-bearing deposits and

may also impact the value of financial instruments held by the

Company.  The nature and impact on the Company of future changes

in economic and market conditions and monetary and fiscal

policies, both foreign and domestic, are not predictable and are

beyond the Company's control.  In addition, these conditions and

policies can impact the Company's customers and counterparties

which may increase the risk of default on their obligations to

the Company and its affiliates.  They can also affect the

competitive conditions in the markets and products within which

the Company operates, which can have an adverse impact on the

Company's ability to maintain its revenue streams.

          As part of its ongoing business, the Company assumes

financial exposures to interest rates, currencies, equities and

other financial products.  In doing so, the Company is subject to

unforeseen events which may not have been anticipated or which

may have effects which exceed those assumed within its risk

management processes.  This risk can be accentuated by volatility

and reduction in liquidity and those markets which in turn can

impact the Company's ability to hedge and trade the positions

concerned. In addition, the Company is dependent on its ability

to access  the financial markets for its funding needs.

          As noted in "Supervision and Regulation", the Company

is regulated by and subject to various regulators.  The actions

of these regulators can have an impact on the profitability and

governance of the Corporation.  Increases by regulatory

authorities of minimum capital, reserve, deposit insurance and

other financial viability requirements can also affect the

Company's profitability.

          The Company is subject to operational and control risk

which is the potential for loss caused by a breakdown in

communication, information, processing and settlement systems or

processes or lack of compliance with the procedures on which they

rely either within the Company or within the broader financial

systems infrastructure.

      As with any financial institution, the Company and its

affiliates are also subject to the risk of litigation and to an

unexpected or adverse outcome in such litigation.  Competitive

pressures in the marketplace and unfavorable or adverse publicity

and news coverage can have the effect of lessening customer

demand for the Company's services.  Ultimately, the Company's

businesses and their success are dependent on the Company's

ability to attract and retain high quality employees.

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 Breezwood,

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

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,

2001, the approximate number of shareholders of record was 525.

Market prices at the end of each quarter are based on the latest

sales prices.

<TABLE>
<S>                      <C>         <C>       <C>       <C>
                           Market      Cash     Market     Cash
                           Price     Dividend    Price   Dividend
                                 2001                 2000
First Quarter              $ 31.00    $ .20      $ 51.00    $ .18
Second Quarter               33.00      .20        40.00      .18
Third Quarter                33.00      .25        37.00      .23
Fourth Quarter               33.50      .30       34.125      .27
</TABLE>
          Dividend restrictions are detailed in Note 15 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 2001, 25 shares of treasury stock were reissued, covering

$ 837 in compensation.  In 2000, 45 shares of treasury stock were

reissued, covering compensation of $ 1,800.

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, 2001

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

33 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, 2001

and are incorporated herein by reference.  Additional schedules

required in addition to those included in the annual

shareholders' report are submitted herewith.

          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      		  2001                        2000                         1999
(000 omitted)     Average                       Average             	      Average
                  Balance     Interest Rate     Balance    Interest   Rate    Balance    Interest   Rate
Investment
  securities:
  Taxable interest
    income		$  23,097	$  1,410	6.1%	$  21,209	$  1,282	6.0%	$  20,185	$  1,144	5.7%
Nontaxable interest
  income		    2,817	     135	4.8	    3,997	     200	5.0	    5,903	     292	4.9
    Total investment
      securities	   25,914	   1,545	6.0	   25,206	   1,482	5.9	   26,088	   1,436	5.5
Loans (net of
  unearned
  discounts)	  105,028	   8,585	8.2	   98,052	   8,506	8.7	   87,902	   7,322	8.3
Other short-term
  investments	    1,514	      54	3.6	       73	       4	5.5	       18	       1	5.5
     Total interest
       earning
	 assets	  132,456	$ 10,184	7.7%	  123,331	$  9,992	8.1%	  114,008	$  8,759	7.7%
Allowance for loan
  losses		(     863) 				(     815)				(     695)
Cash and due from
  banks		    3,601				    3,495			          3,201
Bank premises and
  equipment		    3,572				    3,624			 	    3,137
Other assets	    5,618				    4,369				    4,334
     Total assets	$ 144,384				$ 134,004				$ 123,985

	LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing
  demand deposits $  10,992	$    199	1.8%	$  10,204	$    218	2.1%	$  16,951	$    401	2.4%
Savings deposits	   16,891	     363	2.1	   18,618	     482	2.6	   13,834	     351	2.5
Time deposits	   71,974	   3,908	5.4	   62,871	   3,553	5.7	   56,443	   2,990	5.3
Short-term
  borrowings	   16,389	     962	5.9	   15,913	     957	6.0	   11,804	     583	4.9
    Total interest
      bearing
      liabilities	  116,246	$  5,432	4.7%	  107,606	$  5,210	4.8%	   99,032	$  4,325	4.4%
Demand deposits	   12,534				   12,368				   11,362
Other liabilities		921				      866				      666
    Total
      liabilities	  129,701				  120,840				  111,060
Stockholders'
  equity 	         14,683				   13,164				   12,925
    Total
      liabilities
      & stockholders'
	equity	$ 144,384				$ 134,004				$ 123,985

    Net interest
      income/net
      yield on
      average earning
      assets			$  4,752	 3.6%			$  4,782	 3.9%			$  4,434	3.9%
</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 2001, 2000, and 1999.

		    FULTON BANCSHARES CORPORATION AND SUBSIDIARY

		CHANGES IN NET INTEREST INCOME TAX EQUIVALENT YIELDS
<TABLE>
<S>				<C>		<C>		<C>		<C>		<C>		<C>

					2001 Versus 2000				2000 Versus 1999
					Increase (Decrease)			Increase (Decrease)
					Due to Change in				Due to Change in
								   Total  					  Total
				Average 	Average 	 Increase	Average	Average	 Increase
				Volume	  Rate	(Decrease)	Volume	  Rate	(Decrease)
(000 omitted)
Interest Income
  Loans (net of
    unearned
    discounts)		$ 631		($ 552)	$   79	$ 845		$ 339		$ 1,184
  Taxable
    investment
    securities		  104		    24	   128	   65		   73		    138
  Nontaxable
    investment
    securities		(  59)	(    6)	(   65)	(  94)	    2		(    92)
  Other short-
    term
    investments		   79		(   29)	    50	    3		    0		      3
     Total
       interest
       income		  755		(  563)	   192	  819		  414		  1,233

Interest Expense
  Interest
    bearing
    demand			   13		(   32)	(   19)	( 160)	(  23)	(   183)
  Savings
    deposits		(  43)	(   76)	(  119)	  121		   10		    131
  Time deposits		  550		(  195)	   355	  341	        222		    563
  Short-term
    borrowings	         26		(   21)	     5	  203	        171		    374
     Total
       interest
       expense		  546		(  324)	   222	  505	        380		    885

  Net interest
    income							($  30)					$   348
</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.









          FULTON BANCSHARES CORPORATION AND SUBSIDIARY

          The following table shows the maturities of investment
securities at book value as of December 31, 2001, 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     years        years
                                    but       but
                                   within    within
                                  5 years   10 years
  (000 omitted)
Bonds:
  Corporate
    Book value           $   0    $  499    $  498      $   0     $  997
    Yield                    0%     5.62%     4.83%         0%      5.23%

  U. S. Government
    agencies
    Book value               0     7,000     7,000          0     14,000
    Yield                    0%    3.77%     4.13%         0%       3.95%

  State and municipal
    Book value               0       310     1,324        653      2,287
    Yield                    0%    6.06%     7.02%      7.17%       6.99%

  Mortgage-Backed
    Book value               0         0         0      4,035      4,035
    Yield                    0%        0%        0%      4.09%	  4.09%

Total book value         $   0   $ 7,809   $ 8,822    $ 4,688   $ 21,319

    Yield                    0%     3.98%     4.60%      4.52%      4.36%

Other Debt
  Securities:
  FHLMC/FNMA non-
  cumulative
  preferred stock
    Book value                                                  $  9,443
    Yield                                                           7.43%

Equity Securities:
  Total Equity
  Securities                                                    $  1,233
    Yield                                                           4.24%

Total Investment
Securities                                                 	    $ 31,995
    Yield                                                           5.26%
</TABLE>








          FULTON BANCSHARES CORPORATION AND SUBSIDIARY

                         LOAN PORTFOLIO


          The following table presents the loan portfolio at the
end of each of the last five years:
<TABLE>
<S>                 <C>      <C>       <C>       <C>       <C>
     (000 omitted)    2001       2000       1999      1998      1997
Commercial,         $  17,418 $  13,097  $ 12,294  $  11,401 $   7,180
  financial and
  agricultural
Real estate -               0         0         0          0         0
  Construction
Real estate -          78,796    80,020    69,273     58,915    53,624
  Mortgage
Installment and
  other personal        8,287     9,788    10,228     10,478    10,099
  loans (net of
  unearned discount)
Total loans         $ 104,501  $ 102,905 $ 91,795  $  80,794  $ 70,903
</TABLE>

          Presented below are the approximate maturities of the
loan portfolio (excluding real estate mortgages and installments)
at December 31, 2001:
<TABLE>
<S>                            <C>        <C>       <C>      <C>
                               Under One   One to     Over    Total
                                 Year       Five      Five
                                            Years     Years

     (000 omitted)

Commercial, financial and
   agricultural                $ 13,459   $ 2,973   $   986 $ 17,418

Real estate - Construction            0         0         0        0
Total                          $ 13,459   $ 2,973   $   986 $ 17,418
</TABLE>

          The following table presents the approximate amount of
fixed rate loans and variable rate loans due as of December 31,
2001:
<TABLE>
<S                                  <C>           <C>
                                     Fixed Rate    Variable
                                       Loans      Rate Loans
     (000 omitted)

Due within one year                  $  6,774      $ 20,127
Due after one but within five years    15,149         8,521
Due after five years                   22,772        31,158
Total                                $ 44,695      $ 59,806
</TABLE>


          FULTON BANCSHARES CORPORATION AND SUBSIDIARY

                 SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<S>                     <C>       <C>         <C>      <C>        <C>
                                    Years Ended December 31
                           2001     2000      1999     1998      1997
    (000 omitted)

Average total loans
  outstanding (net of
  unearned income)	$ 105,028  $ 98,052  $ 87,902   $ 75,610  $ 68,171

Allowance for loan
  losses, beginning of
  period                $     847  $    800  $    580   $    487  $    444
Additions to provision
  for loan losses charged
  to operations			 15        45       195        185        20
Loans charged off during
  the year
    Commercial                 20         3        14         67         6
    Installment                14        29  	   34         47        40                                                  34
     Total charge-off's        34        32        48        114        46

Recoveries of loans
  previously charged off:
    Commercial                  2        24        63         16        49
    Installment                15        10        10          6        20
	Total recoveries         17        34        73         22        69

Net loans charged off          17  (      2)  (    25)        92  (     23)

Allowance for loan losses,$   845   $   847    $  800    $   580   $   487

Ratio of net loans
  charged off to
  average loans
  outstanding	            .02% (    .01)%     .12%  (    .03)% (   .05)%
</TABLE>


          The provision is based on an evaluation of the adequacy
of the allowance for possible loan losses.  The evaluation
includes, but is not limited to, review of net loan losses for
the year, the present and prospective financial condition of the
borrowers and evaluation of current and projected economic
conditions.











          FULTON BANCSHARES CORPORATION AND SUBSIDIARY

                              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>
                           2001     2000      1999     1998      1997
    (000 omitted)

Nonaccrual loans          $   289  $     0   $     0  $     0   $   413

Accrual loans:
  Restructured            $     0  $     0   $     0  $     0   $     0
  30 through 89 days
    past due                4,121    1,787     1,084    1,458     1,466
  90 days or more past
    due      			922      549       168      442       431
Total accrual loans       $ 5,043  $ 2,336   $ 1,252  $ 1,900   $ 1,897
</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.

          FULTON BANCSHARES CORPORATION AND SUBSIDIARY


          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
                                     2001                  2000
                              Allowance   Percentage Allowance  Percentage
					 Amount      of Loans    Amount    of Loans
                                           to Total              to Total
(000 omitted)
Commercial, financial and
  agricultural        		    $ 141     16.67%    $ 108       12.73%
Real estate - Construction            0       0.0         0        0.00
Real estate - Mortgage              637     75.40       659       77.76
Installment                          67      7.93        80        9.51
Total                             $ 845    100.00%    $ 847      100.00%
</TABLE>

<TABLE>
<S>                           <C>         <C>        <C>        <C>
                                       Years Ended   December 31
                                     1999                  1998
                              Allowance   Percentage Allowance  Percentage
					 Amount      of Loans    Amount    of Loans
                                           to Total              to Total
(000 omitted)
Commercial, financial and
  agricultural			    $ 107     13.37%    $  82       14.11%
Real estate - Construction            0      0.00         0        0.00
Real estate - Mortgage              609     76.13       423       72.92
Installment                          84     10.50        75       12.97
Total                             $ 800    100.00%    $ 580      100.00%
</TABLE>

<TABLE>
<S>                           <C>                 <C>
                                      Years Ended December 31
                                                1997
                                    Allowance         Percentage of
                                    Amount          Loans to Total
                                                         Loans
(000 omitted)
Commercial, financial and
  agricultural				   $  49              10.13%
Real estate - Construction                 0               0.00
Real estate - Mortgage                   368              75.63
Installment                               70              14.24
Total                                  $ 487             100.00%
</TABLE>

          FULTON BANCSHARES CORPORATION AND SUBSIDIARY

                            DEPOSITS


          The average amounts of deposits are summarized below:
<TABLE>
<S>                             <C>       <C>        <C>
                                   Years Ended December 31

                                  2001       2000      1999

      (000 omitted)

Demand deposits                 $  12,534  $  12,368  $ 11,362
Interest bearing demand
  deposits                         10,992     10,204    16,951
Savings deposits                   16,891     18,618    13,834
Time deposits                      71,974     62,871    56,443
     Total deposits             $ 112,391  $ 104,061  $ 98,590
</TABLE>

          The following is a breakdown of maturities of time
deposits of $ 100,000 or more as of December 31, 2001:

<TABLE>
<S>                                       <C>
Maturity                                  (000
                                          omitted)

Certificates of Deposit
  Three months or less                       $  12,688
  Over three months through six months           2,669
  Over six months through twelve months          7,623
  Over twelve months                             2,255
                                              $ 25,235
</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>
                              2000      2000       1999

Assets                      $ 144,384 $ 134,004  $ 123,985
Net income                  $   1,486 $   1,439  $   1,437
Equity                      $  14,683 $  13,164  $  12,925
Cash dividends paid         $     468 $     425  $     426
Return on assets                1.03%     1.07%      1.16%
Return on equity               10.12%    10.94%     11.19%
Dividend payout ratio          31.50%     29.5%      29.7%
Equity to asset ratio          10.17%     9.82%     10.36%
</TABLE>
          FULTON BANCSHARES CORPORATION AND SUBSIDIARY

               CONSOLIDATED SUMMARY OF OPERATIONS

                                        Years Ended December 31
<TABLE>
<S>                         <C>       <C>       <C>       <C>       <C>
                              2001      2000      1999      1998      1997
     (000 omitted)

Interest income              $ 10,185 $  9,992   $ 8,759   $ 8,148   $ 7,875
Interest expense                5,432    5,210     4,325     4,151     4,036
Net interest income             4,753    4,782     4,434     3,997     3,839
Provision for loan losses          15       45       195       185        20

  Net interest income after
    provision for loan losses   4,738    4,737     4,239     3,812     3,819

Other income:
  Trust                            19       18        12        97        63
  Service charges - Deposits      189      177       160       140       146
  Other service charges,
    collection and exchange,
    charges, commission fees      125      124       127       123        93
  Other operating income          306      203       290       362       171
  Total other income              639      522       589       722       473

Income before operating
 expense                        5,377    5,259     4,828     4,534     4,292

Operating expenses:
  Salaries and employees
    benefits		        1,560    1,509     1,314     1,242     1,178
  Occupancy and equipment
    expense		                729      728       647       569       465
  Other operating expenses      1,162    1,133     1,050       934       983
    Total operating expenses    3,451    3,370     3,011     2,745     2,626

Income before income taxes      1,926    1,889     1,817     1,789     1,666
Income tax                        440      449       380       391       376

    Net income applicable to
      common stock	      $ 1,486  $ 1,440   $ 1,437   $ 1,398   $ 1,290

Per share data:
  Earnings per common share   $  3.02  $  2.91   $  2.90   $  2.82   $  2.61
  Cash dividend - Common          .95      .86       .86       .72       .70
  Weighted average number of
    common shares		      492,747  494,054   495,000   495,000   495,000
</TABLE>


            * Based on 495,000 shares issued

Item 9.   Disagreements on Accounting and Financial Disclosures.

          Not applicable.



                            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 2002 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, 2001,

2000, and 1999 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)
					       	         Restricted
Name and                             Other Annual     Stock	   Options/   LTIP    All Other
Principal 		  Salary   Bonus   Compensation   Award(s)     SARS    Payouts Compensation
Position	Year      ($)     ($)       ($)           ($)        ($)	  ($)	      ($)

              Annual Compensation           Long-Term Compensation
Clyde H.
Bookheimer,
President &
CEO		2001	130,008	$ 0	    $ 0	      $ 0	     $ 0	  $ 0	   $ 163,903
		2000	124,708	  0	  	0	  	  0	  	 0	    0	      86,814
  		1999	117,208	  0	  	0	  	  0	  	 0	    0	 	61,990
</TABLE>
     Footnotes:

     (1)  All other compensation includes the following:

  <TABLE>
  <S>        <C>        <C>      	  <C> 	        <C>    	       <C>
  		              Fringe
				 Benefits
				(Personal				  Supplemental
				 Use of				    Executive	   Deferred
				Bank Owned	  Retirement	   Retirement	  Directors
		Directors	 Vehicle)       Plan			Plan		     Fees
  2001       $     0    $ 1,232       $ 13,890           $ 148,781        $     0
  2000             0      1,356         10,641              74,817              0
  1999             0      1,234         12,149              48,607              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, 2001,

the cash surrender value of the policies was $ 1,234,048.









                             PART IV

Item 14.  Exhibits, Financial Statement Schedules and

Reports on Form 8-K.

          (a)  Certain documents filed as part of Form 10-K

               Financial Statement Schedules and Exhibits

             (1)  Financial statements.  See Item 8 of this

			report for the index to financial

			statements.

             (2)  Financial statement schedules.  See Item 8 of this report.

                  Schedule I - Distribution of assets,

                  liabilities and stockholders' equity, interest

                  rates and interest differential tax equivalent

                  yields

                  Schedule II - Changes in net interest income

                  tax equivalent yields

                  Schedule III - Investment portfolio

                  Schedule IV - Loan portfolio

                  Schedule V - Summary of loan loss experience

                  Schedule VI - Nonaccrual and delinquent loans

                  Schedule VII - Allocation of allowance for loan

                  losses

                  Schedule VIII - Schedule of deposits, return on

                  equity and assets

                  Schedule IX - Consolidated summary of

                  operations

             (3)  Exhibits.

      Exhibit Numbers

             (2)    Plan of acquisition, reorganization,

			  arrangement, liquidation or succession.

			  Not applicable.

             (3)    (a) Articles of

                    incorporation.  Incorporated by reference to

                    Exhibit 3A to the Registrant's Registration

                    Statement on Form SB-2, Registration No. 33-

                    85626.

                    (b)    By-laws.  Incorporated by reference to

			  Exhibit 3B to the Registrant's

			  Registration Statement on Form SB-2,

			  Registration No. 33-85626.

             (4)    Instruments defining the rights of

			  security holders including indentures.

			  The rights of the holders of Registrant's

			  common stock are contained in:

                    (i)  Articles of

                         Incorporation of Fulton Bancshares

                         Corporation, filed as Exhibit 3A to

                         Registrant's Registration Statement on Form

                         SB-2 (Registration No. 33-85626).

                   (ii) By-laws of Fulton

                        Bancshares Corporation, filed as Exhibit 3B

                        to the Registrant's Registration Statement

                        on Form SB-2 (Registration No. 33-85626).

             (9)  Voting trust agreement.  Not applicable.

            (10) Material contracts.  None.

            (11) Statement re:  computation of per share

                 earnings.  See Item 5 of this report.

            (12) Statements re:  computation of ratios.  Not

                 applicable.

  	      (13) Annual report to security holders.  Filed herein.

            (16) Letter re:  change in certifying accountant.

                 not applicable.

            (18) Letter re:  change in accounting principles.

                 Not applicable.

            (21) Subsidiaries of the registrant.  Filed

                 herewith as Exhibit 21.

            (22) Published report regarding matters submitted

                 to vote of security holders.  Not applicable.

            (23) Consents of experts and counsel.  Filed

                 herewith.

            (24) Power of attorney.  Not applicable.

            (27) Financial data schedule.  Filed herewith

                 under Item 8.

            (28) Information from reports furnished to state

                 insurance regulatory authorities.  Not

                 applicable.

            (99) Additional exhibits.  Not applicable.

        (b) Reports on Form 8-K.  None.

                           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 &  July 30, 2002
Clyde H. Bookheimer         CEO (Principal Executive
                            Officer)

/S/ David L. Seiders        Director               July 30, 2002
David L. Seiders

/S/ Cecil B. Mellott        Director & Vice        July 30, 2002
Cecil B. Mellott            Chairman

/S/ Robert C. Snyder        Director &             July 30, 2002
Robert C. Snyder            Chairman

/S/ Ellis L. Yingling       Director & Vice        July 30, 2002
Ellis L. Yingling           Chairman

/S/ Clair R. Miller         Director               July 30, 2002
Clair R. Miller




































                          Exhibit Index



Exhibit No.

   13        Annual report to shareholders

   21        Subsidiaries of the Registrant

   23.1      Independent Auditor's Consent

   27        Financial data schedule

























<TABLE>
<S><C>

                                                       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 and 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 and 27
 Management's discussion and analysis of consolidated financial
condition
   and results of operations                           28 - 33
 Stock market analysis and dividends                        33

                  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, 2001 and 2000 and the related
consolidated statements of income, changes in stockholders' equity,
and cash flows for each of the three years ended December 31, 2001.
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, 2001 and 2000, and the
results of their operations and their cash flows for each of the
three years ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.

          As discussed in Note 21 to the financial statements, the
Corporation corrected errors in the accounting of the amortization
and accretion of premiums and discounts on certain investments
purchased from 1997 to 2000, which resulted in restatement of the
prior year financial statements.


                        /S/Smith Elliott Kearns & Company, LLC



Chambersburg, Pennsylvania
February 11, 2002




		FULTON BANCSHARES CORPORATION AND SUBSIDIARIES




			CONSOLIDATED BALANCE SHEETS
			December 31, 2001 and 2000

							2001			2000
									 (As Restated)
ASSETS
  Cash and due from banks		$     5,529,420 	$     4,275,716
  Investment securities available
    for sale				     30,798,647 	     23,390,869
  Federal Reserve, Atlantic Central
    Bankers Bank and Federal Home
    Loan Bank stocks			      1,100,850 	      1,252,150
  Loans, net of reserve for loan
    losses 2001 - $ 845,045;
    2000 - $ 847,121			    103,655,616 	    102,058,473
  Premises and equipment		      3,673,746 	      3,647,287
  Cash surrender value of life
    insurance				      4,430,903 	      4,212,760
  Accrued interest receivable		        902,805 		  965,383
  Real estate owned other than
    premises					   83,341 		   86,610
  Other assets				        679,517 	        591,074
      Total assets			$   150,854,845 	$   140,480,322

LIABILITIES AND STOCKHOLDERS' EQUITY

  Deposits
    Noninterest bearing 		$    13,486,097 	$    13,025,353
    Interest bearing 	                103,552,356 	     92,106,363
						    117,038,453 	    105,131,716

  Other borrowed funds			     17,325,000 	     20,000,000
  Accrued interest payable			  424,743 	        502,398
  Other liabilities			        822,770 	        642,647
      Total liabilities			    135,610,966 	    126,276,761

Stockholders' Equity
  Common stock: par value $.625
    per share; 4,000,000
    shares authorized; 495,000
    shares issued 				  309,375 	        309,375
  Additional paid-in capital		      2,051,106 	      2,051,275
  Retained earnings			     13,035,796 	     12,017,652
  Accumulated other comprehensive
    (loss)					(        62,672)	(        84,009)
  Treasury stock, shares at cost -
    2001- 2,230; 2000 - 2,255		(        89,726)	(        90,732)
      Total stockholders' equity	     15,243,879 	     14,203,561

      Total liabilities and
        stockholders' equity		 $  150,854,845 	 $  140,480,322


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



                FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF INCOME
                 Years Ended December 31, 2001, 2000 and 1999


                            	                2001            2000	    1999
                                                         (As Restated)	 (As Restated)
Interest Income
  Interest and fees on loans	           $  8,584,709    $  8,505,771 	$  7,322,507
  Interest and dividends on investment securities:
     Other U. S. Government agencies	    587,996 	  635,046 	     512,438
     Mortgage-backed securities	          228,320         287,347        326,034
     Obligations of state and political
        subdivisions	                      135,056 	  199,461 	     291,740
     FNMA and FHLMC preferred stock	          463,856         267,674 	     250,349
     Other interest and dividends	          130,407          92,949 	      55,550
  Interest on federal funds sold	           54,335           4,107 	         792
     Total interest income	             10,184,679       9,992,355 	   8,759,410

Interest Expense
  Interest on deposits	                    4,470,576 	4,252,368 	   3,741,753
  Interest on federal funds purchased	      2,632 	    5,760 	       3,557
  Interest on other borrowed money	          959,091         951,684 	     579,538
     Total interest expense	              5,432,299       5,209,812 	   4,324,848

  Net interest income before provision
    for loan losses                         4,752,380       4,782,543 	   4,434,562

Provision for Loan Losses	                 15,000          45,000 	     195,000

  Net interest income after provision
    for loan losses	                    4,737,380       4,737,543 	   4,239,562

Other Income

  Service charges on deposit accounts	   189,186 	        177,226 	     159,652
  Other service charges and fees	         108,567 	        111,181 	     117,567
  Earnings - Cash surrender value of
    life insurance	                     249,418 	        197,110 	     160,185
  Life insurance death benefit income	         0 	              0 	     113,576
  Trust services	                            19,002 	         18,390 	      21,233
  Gain on sale of investment securities       57,329 	          5,905 	       5,918
  Other income	                            15,975 	         12,647 	      10,783
    Total other income	                     639,477 	        522,459 	     588,914

Other Expenses
  Salaries, fees and employee benefits	 1,559,673 	      1,508,929 	   1,314,159
  Net occupancy expense of bank premises and
    furniture and equipment expense	         729,435 	        727,963 	     646,955
  FDIC insurance premiums	                19,754 	         20,811 	      11,258
  Other expenses	                         1,141,725        1,112,743 	   1,038,913
    Total other expenses	             3,450,587        3,370,446 	   3,011,285

    Income before income taxes	       1,926,270        1,889,556 	   1,817,191
  Applicable income tax	                     440,016 	        449,785 	     380,031

     Net income	                       $ 1,486,254 	    $ 1,439,771 	 $ 1,437,160

Earnings per common share	           $      3.02 	    $      2.91 	 $      2.90
                 The Notes to Consolidated Financial Statements are an
                         integral part of these statements.




                    FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OD CHANGES IN STOCKHOLDERS' EQUITY
                    Years Ended December 31, 2001, 2000, 1999
			       Accumulated
			          Other
	      Additional	      Comprehensive	   Total
                             Common      Paid-In          Retained        Income       Treasury	Stockholders'
                              Stock       Capital         Earnings        (Loss)         Stock	   Equity
		          (as restated)  (as restated)

Balance, December 31, 1998  $ 309,375   $ 2,051,275      $  9,991,022    $ 126,925      $     0     $ 12,478,597

Comprehensive income:
  Net income                			                  1,437,160     					 1,437,160

  Change in unrealized
    (loss) on investment
    securities available
    for sale, net of tax
    of $ $ 379,558         					                  (  736,790)                 (    736,790)

Total comprehensive income											               700,370

  Cash dividends ($ .86
    per share)	                 0	       0	  (     425,700)           0            0     (    425,700)

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)	                0	            0	  (     424,601)              0         0      (   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)	                0	            0	  (    468,110)	            0	       0   (    468,110)

Balance, December 31, 2001 $309,375   $ 2,051,106 	  $ 13,035,796 	($     62,672)   ($ 89,726)   $ 15,243,879

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

           FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS
            Years Ended December 31, 2001, 2000 and 1999



                                      2001         2000        1999
                                                   (As         (As
                                                Restated)   Restated)
Cash flows from operating
activities:
  Net income                     $ 1,486,254  $ 1,439,771 $ 1,437,160

  Adjustments to reconcile net
    income to net cash provided
    by operating activities:
      Compensation via treasury
        stock issued		           837        1,800           0
      Depreciation and
        amortization        		 325,065      431,813     381,093
      Provision for loan losses       15,000       45,000     195,000
      Deferred income taxes     (     82,580) (    47,409) (  114,841)
      Life insurance death benefit
	  income				       0            0  (  113,577)
      (Increase) decrease in CSV -
	  life insurance		  (    218,143) (   164,274) (  132,237)
      (Gain) on sale of
        investment securities   (      5,905) (     5,918) (   57,330)
      (Increase) in other assets(     49,780) (    26,521) (   17,375)
      (Increase) decrease in
        interest receivable           62,578  (     2,643) (  234,755)
      Increase (decrease) in interest
	  payable                 (     77,655) (    81,005)     29,153
      Increase in other liabilities  180,119      124,987     180,802
Net cash provided by operating
  activities                       1,616,770    1,622,253   1,832,757

Cash flows from investing
  activities:
  Sales of investment securities
    available for sale             2,750,981    1,155,569   3,906,168
  Maturities of investment
    securities available for sale 16,059,038    1,476,328   3,171,671
  Purchases of investment securities
    available for sale          ( 26,087,480) ( 1,690,544)( 3,193,591)
  Net (increase) in loans       (  1,612,142) (11,108,857)(10,975,268)
  Purchases of property and
    equipment                   (    388,392) (   187,876)( 1,379,978)
  Purchases of FRB, ACBB and
    FHLB stock                  (    270,000) (   382,500)(   292,800)
  Redemptions of FRB, ACBB and
    FHLB stock			       421,300            0           0
  Purchases of officers' life
    insurance 	                         0  ( 1,020,000)          0
  Purchases of other real estate           0            0 (    89,878)
  Insurance benefits received              0            0     383,285
Net cash (used) by investing
  activities			   ( 9,126,695  ( 1,757,880)( 8,470,391)

Cash flows from financing
  activities:
  Net increase in deposits        11,906,739    1,821,115   3,969,449
  Dividends paid                 (   468,110) (   424,601)(   425,700)
  Net (decrease) in federal
    funds purchased                        0            0 ( 2,100,000)
  Proceeds from long-term
    borrowings  				       0    5,000,000   5,000,000
  Net increase (decrease) in
    line-of-credit borrowings      2,675,000    3,525,000   1,475,000

  Purchases of treasury stock              0  (    92,532)          0
Net cash provided by financing
  activities                       8,763,629    9,828,982   7,918,749

  Net increase (decrease) in cash
    and cash equivalents           1,253,704  (   306,645)  1,281,115

     Cash and cash equivalents at
       beginning of year           4,275,716    4,582,361   3,301,246

Cash and cash equivalents at
  of year				   $ 5,529,420  $ 4,275,716 $ 4,582,361

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

            FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
             Years Ended December 31, 2001, 2000 and 1999

                                    2001         2000         1999
                                                 (As           (As
                                              Restated)     Restated)

Supplemental disclosure of cash
  flows information:

  Cash paid during the year for:
    Interest                    $5,509,953    $5,128,808    $4,295,695
    Income taxes                   471,000       505,575       511,000

Supplemental schedule of noncash
investing and financing activities:

  Unrealized holding gain (loss),
    net of tax		        $   21,337    $  525,856   ($  736,790)

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

  Treasury stock issued as
    compensation                $      837    $    1,800    $        0






















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


              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:

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

        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 13 for parent company financial statements.

      Basis of Accounting

      The Corporation uses the accrual basis of accounting.

      Use of estimates

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

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

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

Note 1.   Significant Accounting Policies (Continued)

      Investment Securities

      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 2001 or 2000.

        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, 2001 and 2000.

      Loans and Reserve for Possible Loan Losses

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

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

Note 1.   Significant Accounting Policies (Continued)

      Nonaccrual/Impaired Loans

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

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

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

      Premises and Equipment

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

                Computer software            3 - 5
                Premises                     5 - 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 492,747, 494,054, and 495,000 shares of common
      stock outstanding in 2001, 2000, and 1999, respectively.



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 to be Held to Maturity and Securities Available
          for Sale.  Fair values for investment securities are based
          on quoted market prices.

          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 deposits and IRA's are
          estimated using a discounted cash flow calculation that
          applies interest rates currently being offered to a schedule
          of aggregated expected monthly maturities on time deposits.


Note 1.   Significant Accounting Policies (Continued)


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

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

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

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

      Advertising

      The Corporation expenses advertising costs as incurred.
      Advertising expenses for the years ended December 31, 2001,
      2000 and 1999 were $ 85,169, $ 102,434, and $ 81,904,
      respectively.

      Comprehensive income

      The Corporation has adopted Statement of Financial Accounting
      Standards (SFAS) No. 130 - Reporting Comprehensive Income.
      Under SFAS No. 130, 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:

                                              2001      2000        1999
   Gross unrealized holding
      gains/(losses) arising during the
      year						  $ 89,658  $ 802,657 ($ 1,110,430)
   Reclassification adjustment for
      (gains)/losses realized in net
      income     					 (  57,329)(    5,905)(      5,918)
   Net unrealized holding gains/(losses)
      before taxes    				    32,329    796,752 (  1,116,348)
   Tax effect                              (  10,992)(  270,896)(    379,558)
   Net change                               $ 21,337  $ 525,856 ($   736,790)



Note 2.   Investments

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

                                Amortized      Gross       Gross         Fair
                                   Cost      Unrealized  Unrealized      Value
                                               Gains       Losses
                                                 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

                                                 2000
   Obligations of U. S.
      Government corporations
      and agencies              $ 9,750,245  $  11,290     $ 38,808  $  9,722,727
   Obligations of states and
	political subdivisions      3,659,558     30,780       76,421     3,613,917
   Mortgage-backed securities     4,145,519      4,872       48,751     4,101,640
   Corporate bonds                  499,285     23,485            0       522,770
   FNMA and FHLMC preferred
	stock				    5,331,550    161,609      195,344     5,297,815
   Other stocks                     132,000          0            0       132,000
   	   Totals                 $23,518,157  $ 232,036     $359,324  $ 23,390,869

      The amortized cost and fair value of investment securities
      available for sale at December 31, 2001, 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.

                                             Amortized       Fair
                                                Cost        Value
      Due in one year or less               $         0    $         0
      Due after one year through five years   7,809,419      7,889,051
      Due after five years through ten years  8,821,739      8,868,723
      Due after ten years                       652,617        553,706
      Mortgage-backed securities              4,035,252      7,037,022
      FNMA and FHLMC preferred stock          9,442,578      9,325,445
      Other stocks                              132,000        124,700
                                            $30,893,605    $30,798,647

      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.








Note 2.   Investments

      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.

      Proceeds from sales of securities available for sale during
      1999 were $ 3,906,168.  Gross gains and losses on those sales
      were $ 8,989 and $ 3,071, respectively.  Proceeds from
      maturities of investment securities during 1999 were $
      3,171,671, resulting in no gains or losses.  Included in
      stockholders' equity at December 31, 1999 is $ 609,865 of
      unrealized holding losses on securities available for sale, net
      of $ 352,089 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:

                                                  2001           2000
      Federal Home Loan Bank                 $ 1,020,000  $ 1,171,300
      Atlantic Central Bankers Bank               10,000       10,000
      Federal Reserve Bank 				  70,850       70,850
                                             $ 1,100,850  $ 1,252,150

      Securities with a cost basis of $14,000,000 (fair value of
      $ 14,061,716) and $ 8,750,000 (fair value of $ 8,752,838) at
      December 31, 2001 and 2000, 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):

                                                   2001          2000
      Real estate loans:
        Secured by farmland                     $   15,030   $   16,257
        Secured by 1-4 family residential           43,203       42,075
        Secured by multifamily (5 or more)
	    residential properties                       362          373
        Secured by nonfarm nonresidential           19,650       21,287
      Loans to finance agricultural production:
        Loans to farmers                             5,455        3,814
      Commercial and industrial loans               11,963        8,902
      Loans to individuals for household,
        family and other personal expenditures       8,247        9,765
      Obligations of states and political
        subdivisions in the U. S.                      551          381
      All other loans                                   40           51
                                                   104,501      102,905
      Less:  reserve for loan losses            (      845)  (      847)
                                                 $ 103,656    $ 102,058






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):

                                     90 Days or More               Nonacrual
                             - - - - - Past Due - - - -  - - - - - Status - - - -
                               2001     2000      1999    2001     2000     1999
      Loans secured by real
        estate                $ 567    $ 479     $ 168   $ 269     $   0    $   0
      Personal loans             48       29         0       0         0        0
      Commercial and other
        loans                   307       41         0      20         0        0
      Total                   $ 922    $ 549     $ 168   $ 289     $   0    $   0


      The foregone revenue on nonaccrual loans totaled $ 20,284, $ 0,
      and $ 0 at December 31, 2001, 2000, and 1999, respectively.  In
      January 2002, the Corporation foreclosed on property securing
      one of these nonaccrual loans with a balance of $ 268,595.

      At December 31, 2001, 2000, and 1999, 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:

                                              2001      2000     1999
   Balance at beginning of period          $ 847,121 $ 800,267 $ 580,694
   Recoveries                                 16,830    34,093    72,416
   Current year provision charged to
      income                                  15,000    45,000   195,000
   Total                                     878,951   879,360   848,110
   Losses
                                              33,906    32,239    47,843
   Balance at end of period                $ 845,045 $ 847,121 $ 800,267

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 $ 1,246,000 and $ 1,195,000 at
      December 31, 2001 and 2000, respectively.  During 2001,
      $ 661,000 of new loans were made and repayments totaled
      $ 610,000.  During 2000, $ 508,000 of new loans were made and
      repayments totaled $ 354,000.

      Outstanding loans to employees totaled $ 842,000 and $ 815,000
      at December 31, 2001 and 2000, respectively.




Note 6.   Premises and Equipment

      A summary of premises and equipment is as follows:

                                                     Accumulated   Depreciated
             Description                   Cost      Depreciation      Cost
                                                           2001
   Premises and improvements (including
      land $ 441,101)                    $ 3,445,509  $   714,755   $ 2,730,254
   Equipment, furniture and fixtures       2,507,136    1,890,950       616,186
   Vehicles                                   92,602       35,870        56,732
   Construction in progress                  270,074            0       270,074
                                         $ 6,315,321  $ 2,641,575   $ 3,673,746

                                                           2000
   Premises and improvements (including
      land $ 441,101)                    $ 3,373,575  $   628,335   $ 2,745,240
   Equipment, furniture and fixtures       2,454,542    1,633,959       820,583
   Vehicles                                   92,602       17,349        75,253
   Construction in progress                    6,211            0         6,211
                                         $ 5,926,930  $ 2,279,643   $ 3,647,287


      Included in construction in progress at December 31, 2001 are
      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 $ 365,201 in 2001,
      $ 394,242 in 2000, and $ 336,727 in 1999.

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.

                                                 Contract or Notional
                                                        Amount
                                                      2001         2000
   Financial instruments whose contract amounts
      represent credit risk at December 31:
   Commitments to extend credit               $ 12,909,132  $ 14,847,246
   Standby letters of credit and financial
      guarantees written                           266,000       594,000
      guarantees written








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.

      During 2001, the Corporation entered into a contract to build
      an addition to the Warfordsburg branch. The total contract
      amount is $ 68,403 of which $ 60,213 had been paid at December
      31, 2001.

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 $ 66,000 for 2001, $ 72,000
      for 2000, and $ 60,000 for 1999.

Note 9.   Federal Income Taxes

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

                                              2001       2000      1999
   Current year provision                 $ 503,104   $ 495,186   $ 492,860
   Deferred income taxes (benefits)      (   82,580) (   47,409) (  114,841)
   Income tax effect of securities
      transactions                           19,492       2,008       2,012
   Applicable income taxes                $ 440,016   $ 449,785   $ 380,031

      Federal income taxes were computed after reducing pretax
      accounting income for nontaxable interest and dividend income
      in the amount of $ 464,229, $ 433,970, and $ 516,446 for 2001,
      2000, and 1999, respectively.

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

                                                    2001     2000     1999
   Applicable federal income tax rate              34.0%     34.0%    34.0%
   Reductions resulting from:
   Nontaxable investment income and other
      items, net of nondeductible expenses        (11.2%)   (10.2%)  (13.1%)
   Effective income tax rate                       22.8%     23.8%    20.9%




Note 9.   Federal Income Taxes (Continued)

      Deferred tax liabilities have been provided for taxable
      temporary differences related to accumulated depreciation.
      Deferred tax assets have been provided for deductible temporary
      differences related to the allowance for loan losses, deferred
      compensation, and unrealized losses on available for sale
      securities.  The net deferred tax assets (liabilities) included
      in other assets (other liabilities) in the accompanying
      consolidated balance sheets include the following components:

                                            2001        2000        1999
   Total deferred tax assets             $ 502,166    $ 490,170   $ 684,995
   Total deferred tax liabilities       (  137,646)  (  143,588) (  130,661)
   Net deferred tax asset                $ 364,520      346,582     554,334

      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.

Note 10.  Leases

      The Corporation is party to real estate leases with base
      monthly rental charges of $ 3,323.  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 expired in 2001.  Total rental expense charged to
      operations for the years ended December 31, 2001, 2000, and
      1999 was $ 62,937, $ 58,413, and $ 59,573, respectively.

      Based on the current monthly rent, future minimum rental
      payments for the next five years are as follows:
      2002                             $   62,545
      2003                                 62,545
      2004                                 58,767
      2005                                 39,874
      2006                                 39,874


Note 11.  Other Assets

      Other assets include the following at December 31:

                                       2001              2000
      Net deferred tax asset        $ 364,520          $ 346,582
      Prepaid expenses                214,483            186,874
      Other                           100,514             57,618
                                    $ 679,517          $ 591,074

Note 12.  Deposits

      Included in interest-bearing deposits at December 31 are NOW
      and Money Market Account balances totaling $ 15,800,762 and
      $ 14,765,334 for 2001 and 2000, respectively.

      Time deposits of $ 100,000 and over aggregated $ 25,234,850 and
      $ 13,111,812 at December 31, 2001 and 2000, respectively.
      Interest expense on time deposits of $ 100,000 and over was
      $ 1,064,000, $ 717,000, and $ 624,000 for 2001, 2000, and 1999,
      respectively.

Note 12.   Deposits (Continued)

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

       2002                             $ 62,513,547
       2003                                7,785,200
       2004                                1,835,469
       2005                                  619,151
       2006                                1,568,966
                                        $ 74,322,333

      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
      $ 2,926,759 and $ 3,872,958 at December 31, 2001 and 2000,
      respectively.

      Overdrafts of $ 17,142 and $ 22,506 at December 31, 2001 and
      2000, respectively, were reclassified as loans for financial
      reporting purposes.

Note 13.   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:

                              Balance Sheets
    Assets                                          2001              2000
                                                                 (As restated)
    Cash                                       $      8,788        $     8,172
    Investment in Fulton County National Bank
       & Trust Company                           15,065,732          14,017,147
    Investment in the Fulton County Community
       Development Corporation                       42,177              46,242
    Securities available for sale                   124,700             132,000
    Deferred taxes                                    2,482                   0
    Total assets                               $ 15,243,879       $  14,203,561

    Stockholders' Equity
    Common stock, par value $ .625 per share,
       4,000,000 shares authorized; shares
       issued and outstanding - 2001 -
       492,770; 2000 - 492,745                      309,375             309,375
    Additional paid-in capital                    2,051,106           2,051,275
    Retained earnings                            13,035,796          12,017,652
    Accumulated other comprehensive (loss)    (      62,672)     (       84,009)
    Treasury stock; shares at cost - 2001 -
       2,230; 2000 - 2,255                    (      89,726)     (       90,732)
    Total stockholders' equity                   15,243,879          14,203,561

    Total liabilities and stockholders'
       equity                                  $ 15,243,879       $  14,203,561




Note 13.	Fulton Bancshares Corporation (Parent Company Only) Financial
Information (Continued)


                                                  2001            2000          1999
                                                               (As restated) (As restated)
                                Statements of Income
                                Years Ended December 31

Cash dividends from wholly-owned
   subsidiary                                 $    512,000    $    510,050   $    534,000

Investment income                                    1,200           1,090            840

Equity in undistributed income of
   subsidiaries                                  1,018,365         970,574        942,346

Printing, supplies, amortization and
   other expenses                             (     45,311)  (      41,943) (      40,026)
Net income                                     $ 1,486,254     $ 1,439,771    $ 1,437,160

                               Statements of Cash Flows
                                Years Ended December 31

Cash flows from operating activities:
   Net income                                  $ 1,486,254     $ 1,439,771    $ 1,437,160
   Adjustments to reconcile net
     income to cash provided by
     operating activities:
     Equity in undistributed
       income of subsidiary                    ( 1,018,365)   (    970,574)  (    942,346)
     Compensation - treasury stock issued              837           1,800              0
    Increase (decrease) in accounts payable              0    (         27)            27
Net cash provided by operating activities          468,726         470,970        494,841

Cash flows from investing activities:
   Investment in subsidiary                              0               0   (     15,000)
Net cash (used) by investing activities                  0               0   (     15,000)

Cash flows from financing activities:
   Dividends paid                              (   468,110)    (   424,601)  (    425,700)
   Purchases of treasury stock                           0     (    92,532)             0
Net cash provided (used) by financing
   activities                                  (   468,110)    (   517,133)   (   425,700)

Net change in cash				             616     (    46,163)        54,141
Beginning cash		                             8,172          54,335            194
Ending cash                                  $       8,788   $       8,172     $   54,335

Note 14.	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, 2001 and 2000.

Note 15.	Regulatory Matters

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



Note 15.	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 $ 3,207,341, $ 3,198,758,
and $ 3,150,211 at December 31, 2001, 2000, and 1999, 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:



                                                       - - - - Actual - - - -
                                        Required       2001              2000
Leverage (total capital/total
   assets)                                3.0%         10.6%             10.2%
Tier 1 (Tier 1 core capital/risk
   weighted assets)                       4.0%         14.0%             13.8%
Total capital (total capital plus
   allowance for loan losses/risk
   weighted assets)                       8.0%         14.8%             14.6%

As of December 31, 2001, 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 16.	Liabilities for Borrowed Money

At December 31, 2001 and 2000, the Corporation had an outstanding
$ 15,000,000 ten year 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, 2001 and 2000
and is payable monthly.  The loan matures on July 12, 2010.

The Corporation has established credit at Federal Home Loan Bank (FHLB) of
Pittsburgh to improve liquidity.  The Corporation may borrow up to
approximately $ 41 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
$ 2,325,000 and $ 5,000,000 at December 31, 2001 and 2000, respectively.
The variable interest rate was 2.10% and 6.64% at December 31, 2001 and
2000, respectively, and can change daily based on FHLB's cost of funds.
Collateral for the borrowings consists of certain investments and
mortgages approximating $ 42 million at December 31, 2001.

Note 17.	Real Estate Owned Other Than Premises

Real estate owned other than premises consisted of a rental property in
St. Thomas, PA which was carried at depreciated cost of $ 83,341 and
$ 86,610 at December 31, 2001 and 2000, respectively.  The rental
property was originally purchased for expansion purposes, but the Bank
entered into a sales contract in January 2002 to sell the property.



Note 18.	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,
2001 and 2000:


                                    Carrying Amount              Fair Value
                                                    (000 Omitted)
                                    2001         2000         2001         2000
FINANCIAL ASSETS
Cash and due from banks         $    5,529    $    4,276  $    5,529   $   4,276
Securities available for sale       30,799        23,391      30,799      23,391
Other bank stock                     1,101         1,252       1,101       1,252
Loans receivable (net)             103,656       102,058     103,875     101,361
Accrued interest receivable            903           965         903         965

FINANCIAL LIABILITIES
Time certificates                   74,322        64,747      70,020      65,022
Other deposits                      42,716        40,385      42,716      40,385
Accrued interest payable               425           502         425         502
Other borrowed funds                17,325        20,000      18,250      20,000

Note 19.	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:


                                                2001          2000        1999
Asset
Cash surrender value of life insurance      $ 4,430,903   $ 4,212,760  $ 3,028,486

Liabilities
Supplemental executive retirement plan          501,946       352,031      258,920
Deferred directors fees liability               219,808       171,344      126,055

Income
Earnings on cash surrender value of
   life insurance                               249,418       197,110      160,185
Death benefits received from
   insurance policies                                 0             0      113,576

Note 19.	Deferred Compensation and Other Benefit Programs (Continued)


                                                 2001          2000        1999
Expenses
Life insurance expense                         $ 31,276      $ 32,836    $ 27,948
Supplemental executive retirement expense       149,915        93,111      85,827
Deferred directors fees                          50,148        46,974      43,047
Director emeritus fees                           12,000        12,000      12,003
Death benefits paid to beneficiaries              1,685           857      12,099

Note 20.	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.

Note 21.	Prior Period Adjustments

During the year ended December 31, 2001, changes were made to the
Corporation's retained earnings to correct errors in the accounting of the
amortization and accretion of premiums and discounts on certain investments
purchased from 1997 to 2000.  The changes had no effect on reported
investments, total assets, or total stockholders' equity.  The prior year
financial statements have been restated as follows to reflect the effects of
the amortization on each year:


                                        As originally
		                              reported        Change      As restated
Retained earnings:
   12/31/98	                             $ 10,035,342  ($    44,320) $   9,991,022
   12/31/99	                               11,076,084  (     73,602)    11,002,482
   12/31/00                                12,121,797  (    104,145)    12,017,652
Accumulated other comprehensive
  income (loss)
   12/31/98                                    82,605        44,320        126,925
   12/31/99                             (     683,467)       73,602 (      609,865)
   12/31/00                             (     188,154)      104,145 (       84,009)
Interest and dividends on preferred
  stock:
   1999                                       294,715  (     44,366)       250,349
   2000                                       313,952  (     46,278)       267,674
Income taxes:
   1999                                       395,115  (     15,084)       380,031
   2000                                       465,520  (     15,735)       449,785
Net Income
   1999                                     1,466,442  (     29,282)     1,437,160
   2000                                     1,470,314  (     30,543)     1,439,771



                 FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                     SELECTED FIVE-YEAR FINANCIAL DATA

                                   2001       2000      1999      1998       1997
Income (000 omitted)

Interest income                 $ 10,184  $   9,992  $   8,759  $   8,148  $   7,875
   Interest expense                5,432      5,210      4,325      4,151      4,036
   Provision for loan losses          15         45        195        185         20
   Net interest income after
     provision for loan
     losses                        4,737      4,737      4,239      3,812      3,819
   Securities gains (losses)          57          6          6          4          3
   Other operating income            582        516        583        718        470
Other operating expenses           3,450      3,370      3,011      2,745      2,626
   Income before income taxes      1,926      1,889      1,817      1,789      1,666
Applicable income tax                440        450        380        391        376
   Net income                   $  1,486  $   1,439  $   1,437  $   1,398  $   1,290


Per share amounts are based on following weighted averages:

2001 - 492,747      1999 - 495,000      1997 - 495,000
2000 - 494,054      1998 - 495,000

Income before income taxes       $  3.91  $   3.82   $   3.67   $   3.61   $   3.37
Applicable income taxes              .89       .91        .77        .79        .76
Net income                          3.02      2.91       2.90       2.82       2.61
Cash dividend paid                   .95       .86        .86        .72        .70
Book value                         30.94     28.75      25.76      25.21      23.04

Year-End Balance Sheet Figures (000 omitted)

  Total assets                 $ 150,855 $ 140,480  $ 128,478  $ 119,649  $ 105,770
  Net loans                      103,656   102,058     90,995     80,214     70,416
  Total investment securities     31,899    24,643     24,436     29,183     25,922
  Deposits-noninterest bearing    13,486    13,025     12,354     11,553      8,159
  Deposits-interest bearing      103,552    92,107     90,957     87,788     82,062
  Total deposits                 117,038   105,132    103,311     99,341     90,221
  Liabilities for borrowed
    money                         17,325    20,000     11,475      7,100      3,470
  Total stockholders' equity      15,244    14,204     12,753     12,479     11,407

Ratios (includes net unrealized gain/loss on AFS securities)

Average equity/average assets     10.17%     9.82%     10.36%     10.60%     10.29%
Return on average equity          10.12%    10.94%     11.19%     11.88%     11.84%
Return on average assets           1.03%     1.07%      1.16%      1.26%      1.22%


                FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                CHANGES IN INCOME AND EXPENSE - 2001 AND 2000

	The schedule below reflects comparative changes in income and expense included
in the Consolidated Statements of Income for 2001 and 2000 together with changes in
asset and liability volumes associated with these income and expense items.



                         2001 Compared to 2000           2000 Compared to 1999

                     Average  Volumes  Income/Expense  Average  Volumes  Income/Expense
($ 000 omitted)          $       %       $       %        $        %        $      %
Loans                  6,976     7.1       79      .9    10,150    11.5    1,183   16.1
Investment securities    708     2.8       63     4.3  (    882)  ( 3.4)      47    3.2
Other investments      1,441  1974.0       50  1200.5        55   305.6        3  418.6
   Total               9,125     7.4      192     1.9     9,323     8.2    1,233   14.1

Interest/borrowed
   funds                 476     3.0        4      .4     4,109    34.8      374   64.2
Interest bearing
  demand deposits        788     7.7    (  18) (  8.3)      482     5.0       19    9.4
Savings deposits      (1,727)  ( 9.3)   ( 119) ( 24.7) (  2,445) ( 11.6) (    71) (12.8)
Time deposits          9,103    14.5      355    10.0     6,428    11.4      563   18.8
   Total               8,640     8.9      222     4.1     8,574     8.7      885   20.5

Net interest income                     (  30)  (  .6)                       348    7.8

Provision for loan
   losses                               (  30)    5.4                     (  150) (76.9)
Net interest
   income after
   provision for
   loan losses                              0     0.0                        498   11.7

Security
  transactions                             51   850.0                          0    0.0
Other operating
  income                                   66    12.8                     (   66) (11.4)
Income before
  operating
  expense                                 117     2.2                        432    8.9
Salaries &
  employee
  benefits                                 51     3.4                        195   14.8

Occupancy &
  equipment
  expense                                   1      .1                         81   12.5
FDIC insurance
  premiums                              (   1) (  4.8)                        10   84.9
Other operating
  expenses 						 29     2.6                         74    7.1
   Total operating
     expenses                              80     2.4                        360   11.9

Income before
  income taxes                             37     2.0                         72    4.0
Applicable income
  taxes                                 (  10) (  2.2)                        70   17.8
     Net income		                   47     3.3                          2     .1




                      FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                         SUMMARY OF QUARTERLY FINANCIAL DATA

	The unaudited quarterly results of operations for the years ended
December 31, 2001 and 2000 are as follows:

                                         2001                        2000
($ 000 omitted
except per share)                   Quarter Ended                Quarter Ended
                            Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
Interest income             $ 2,565 $ 2,552 $ 2,565  $ 2,502 $ 2,344 $ 2,457 $ 2,573  $ 2,618
Interest expense              1,385   1,373   1,376    1,298   1,165   1,240   1,377    1,428
   Net interest income        1,180   1,179   1,189    1,204   1,179   1,217   1,196    1,190
Provision for loan losses        15       0       0        0      15      15      15        0
Net interest income after
   provision for loan losses  1,165   1,179   1,189    1,204   1,164   1,202   1,181    1,190
Securities gains (losses)         9      17       0       31       0       5       2 (      1)
Other income                    130     142     136      174     107     119     124      166
Other expenses                  858     854     871      867     850     803     866      851
   Operating income
      before income taxes       446     484     454      542     421     523     441      504
Applicable income taxes         113     108      95      124      96     136     102      116
   Net income               $   333  $  376  $  359  $   418  $  325  $  387  $  339   $  388


Net income applicable to
   common stock
Per share data:
      Net income            $   .68  $  .76 $   .73  $   .85  $  .65  $  .78  $  .69   $  .79








                     FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

                    STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES


($ 000 omitted)                 2001        2000         1999       1998       1997
LOANS
   Lines of credit            $ 3,301     $  3,024     $ 2,921    $ 3,332    $ 3,290
   Tax free                     1,039          785         846      1,281      2,201
   Commercial                  23,363       21,292      18,413     14,203     13,966
   Mortgage                    60,964       54,534      48,070     40,916     35,415
   Consumer                    16,361       18,417      17,652     15,878     13,299
      Total loans             105,028       98,052      87,902     75,610     68,171

INVESTMENT SECURITIES
   (at amortized cost)
   U.S. Government                  0            0           0          0          0
   U.S. Government agencies    10,156       10,210       8,465      5,863      6,931
   State & municipal            2,817        3,997       5,903      5,793      5,090
   Mortgage-backed
      securities                3,751        4,532       5,988      9,324     13,861
   FNMA & FHLMC
      preferred stock           7,309        5,204       4,932      4,701      2,432
   Corporate bonds                814          262           0          0          0
   Other                        1,067        1,001         800        577        392
      Total investment
         securities            25,914       25,206      26,088     26,258     28,706

OTHER SHORT-TERM INVESTMENTS
   Federal funds sold           1,514           73          18        343        255

TOTAL EARNING ASSETS          132,456      123,331     114,008    102,211     97,132

TOTAL ASSETS                $ 144,384    $ 134,004   $ 123,985  $ 111,002  $ 105,864

Percent increase -
   earning assets                7.4%         8.2%       11.5%       5.3%        4.8%

DEPOSITS
   Interest-bearing
      demand (NOW)         $   10,992    $  10,204   $  16,951  $  16,779  $  15,528
   Savings (MMA & sav.)        16,891       18,618      13,834     13,616     13,816
   Time                        71,974       62,871      56,443     54,621     53,738
      Total interest-
         bearing deposits      99,857       91,693      87,228     85,016     83,082

OTHER BORROWINGS
   Federal funds purchased        108          118          70        622        276
   Liabilities for
      borrowed money           16,281       15,795      11,734      3,804      1,838
                               16,389       15,913      11,804      4,426      2,114

TOTAL INTEREST-BEARING
  LIABILITIES                 116,246      107,606      99,032     89,442     85,196









             FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

          STATEMENTS OF AVERAGE BALANCES AND AVERAGE RATES (CONTINUED)


                                          2001       2000       1999      1998      1997
AVERAGE RATES EARNED
                                            %          %          %         %         %
Loans
   Commercial                             7.28       9.21       8.32       9.23     9.11
   Mortgage                               8.19       8.24       8.01       8.61     8.67
   Consumer                               9.07       8.97       8.74       8.77     8.89
   Tax free                               5.54       5.48       5.53       5.82     5.62
   Lines of credit                        7.87       9.55       8.35       8.81     9.19
      Total                               8.17       8.60       8.37       8.72     8.73

Investment Securities
   U.S. Government                        0.00       0.00       0.00       0.00     0.00
   U.S. Government agencies               5.79       6.22       6.05       5.95     6.17
   State & municipal                      4.79       4.99       4.94       4.93     5.00
   Mortgage-backed securities             6.09       6.34       5.44       5.50     6.46
   Corporate bonds                        7.12       7.51       0.00       0.00     0.00
   Other                                  6.38       5.82       5.34       5.31     6.52
      Total                               5.96       5.88       5.50       5.43     6.14

Other Short-Term Investments
   Federal funds sold                     3.54       5.59       4.43       5.49     5.51

Total earning assets                      7.69       8.04       7.68       7.86     8.11

AVERAGE RATES PAID
   Time & savings deposits 		      4.48       4.64       4.29       4.60     4.71
   Federal funds purchased                2.43       4.87       5.05       5.57     5.61
   Liabilities for borrowed money         5.89       6.03       4.91       5.32     5.68

Total interest-bearing liabilities        4.67       4.84       4.37       4.64     4.74
















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 income was $ 1,486,000 for 2001, compared to $ 1,439,000 for 2000,
representing an increase of $ 47,000, or 3.3%.  Net income on an adjusted per
share basis for 2001 was $ 3.02, up $ .11 from the $ 2.91 per share realized
during 2000.

	Interest income for 2001 was $ 10,184,000, up $ 192,000, or 1.9% more than
2000.  The increase was due primarily to higher average balances of loans in 2001,
which typically produce higher yields than investments, compared to 2000.

	Average earning assets increased 7.4% and 8.2% in 2001 and 2000,
respectively.  Average loans, which typically produce higher yields than
investments, increased 7.1% in 2001.  Net loans at December 31, 2001 stood at
$ 103,656,000 compared to $ 102,058,000 as of December 31, 2000, an increase of
1.6%.  Average investment securities increased 2.8% in 2001, with the increase
concentrated in FNMA/FHLMC preferred stock and corporate bonds, while mortgage-
backed securities, obligations of state and political subdivisions, and U.S.
Government Agency securities decreased.

	Total interest expense was $ 5,432,000 for 2001, an increase of $ 222,000,
or 4.3% from the $ 5,210,000 for 2000.  Average time deposits, which pay higher
yields, increased 14.5% in 2001.  Interest-bearing deposits stood at $ 103,552,000
at December 31, 2001 compared with $ 92,107,000 as of December 31, 2000, an
increase of 12.4%.  Average interest-bearing demand deposits increased 7.7%, while
average savings deposits decreased 9.3%.  Average borrowed funds increased 3.0%.

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

	Net interest income for 2001 totaled $ 4,752,000, down 0.6% from 2000.
Management continuously monitors liquidity and interest rate risk through its
Asset-Liability Committee reporting and reprices products to maintain a desired
net interest margin.

	Other income represents service charges on deposit accounts, commissions
on loan insurance, fees for travelers' checks and other services, safe deposit box
rents, 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 $ 117,000 from 2000 to 2001.  The increase in 2001
resulted primarily from a $ 52,000 increase in earnings on cash surrender value of
directors and officers life insurance and a $ 51,000 increase in securities gains
..

	The noninterest expenses are classified into four main categories:
salaries, fees and employee benefits; occupancy expenses 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 3.4% and 14.8% for 2001 and 2000,
respectively, primarily due to the addition of personnel to staff two branch
offices opened in July and November 1999, and merit pay increases.  Occupancy and
furniture and equipment expenses increased 0.1% and 12.5% in 2001 and 2000,
respectively.  The increases in 2000 were due primarily to increased depreciation
and building maintenance costs and expense associated with the addition of two new
full-service banking facilities during 1999.  Other operating expenses increased
2.5% and 7.9%, respectively in 2001 and 2000, respectively, primarily due to
increases in advertising, printing and supplies, shares tax and other overhead
expenses.

	Applicable income taxes changed between 1999, 2000 and 2001 because of
changes in pretax accounting income and taxable income.  The effective income tax
rate for 2001 was 22.8% compared to 23.8% and 20.9% for 2000 and 1999,
respectively.  The decrease in the effective income tax rate for 2001 was due
primarily to increases in the dividends received deduction for FNMA and 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.  The 2000 increase was due primarily to a decrease in tax-
exempt interest on obligations of state and political subdivisions, and the 1999
non-recurring receipt of nontaxable director life insurance benefits.

	FINANCIAL CONDITION

	Total assets at December 31, 2001 were $ 150,855,000, a 7.4% increase over
December 31, 2000. Net loans at December 31, 2001 totaled $ 103,656,000, an
increase of 1.6% over December 31, 2000.

	The provision for loan losses was $ 15,000 in 2001 compared to $ 45,000 in
2000.  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.  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):


                                 90 Days or More
                                     Past Due                Nonaccrual Status
                                 2001        2000            2001         2000

Loans secured by real estate    $ 567       $ 479           $ 269          $ 0
Personal loans                     48          29               0            0
Commercial and other loans        307          41              20            0
     Total                      $ 922       $ 549           $ 289          $ 0


	Total deposits increased to $ 117,038,000 at December 31, 2001 compared
with $ 105,132,000 at December 31, 2000.  Noninterest bearing deposits and
interest-bearing deposits increased 3.5% and 12.4%, respectively.

	Stockholders' equity reached $ 15,244,000 at December 31, 2001 for a 7.3%
increase over the prior year.  Accumulated earnings for 2001 were partially offset
by dividends declared and paid of $ 468,000.  Total stockholders' equity
represented 10.1% of total assets at the end of 2001 and 2000.  Cash dividends of
$ .95 and $ .86 per share were paid in 2001 and 2000, respectively.  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.

	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 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.

                                 Due        Due        Due        Due        Due
                                 0-30      31-90      91-180     181-360    After
                                 Days       Days       Days       Days      1 Year     Total

Rate Sensitive Assets
   Investment securities     $   4,530  $        0  $   4,628  $   2,992  $ 18,744  $   30,894
   Real estate, commercial
     and consumer loans          7,186       9,850     13,471     14,392    59,602     104,501
                             $  11,716  $    9,850  $  18,099  $  17,384  $ 78,346  $  135,395

Rate Sensitive Liabilities
   Short-term borrowings     $   2,325  $        0  $       0  $       0  $       0 $    2,325
   Long-term borrowings              0           0          0      3,750     11,250     15,000
   Certificates of deposit
      over $ 100,000             7,818       4,871      2,669      7,623      2,254     25,235
   Other certificates of
      deposit                    9,880       4,681     10,199     14,773      9,554     49,087
   Money market deposit
      accounts                     392         588        980        980        980      3,920
   Other interest-bearing
      deposits                   1,264       3,797      3,797      3,797     12,655     25,310
                             $  21,679  $   13,937  $  17,645  $  30,923  $  36,693  $ 120,877

Cumulative GAP              ($   9,963)($   14,050)($  13,596)($  27,135) $  14,518


	Loan rates have significantly decreased over the past twelve months.
Based on current economic indicators and predictions, management anticipates that
interest rates will increase slightly over the first half of 2002 and will
continue to 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.



	LIQUIDITY (CONTINUED)

	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 $ 15.2 million at December 31, 2001.  Regulatory authorities have
established capital guidelines in the form of the "leverage" and "risk-based
capital" ratios.  The leverage ratio compares capital to total balance sheet
assets, while the risk-based ratios compare capital to risk-weighted assets and
off-balance-sheet activity in order to make capital levels more sensitive to risk
profiles of individual banks.  A comparison of Fulton Bancshares Corporation's
capital ratios to regulatory minimums at December 31 is as follows:


                              Fulton Bancshares         Regulatory
                                 Corporation             Minimum
                             2001          2000        Requirements

Leverage ratio               10.6%         10.2%            3%

Risk-based capital ratio
Tier I (core capital)        14.0%         13.8%            4%
Combined Tier I and Tier II
  (core capital plus allowance
  for loan losses)           14.8%         14.6%            8%

	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.


                                        2001         2000          1999
Equity capital at December 31
  ($ 000 omitted)                    $ 15,244      $ 14,204      $ 12,753
Equity capital as a percent of assets
  at December 31                       10.10%        10.11%         9.93%
Return on average assets                1.03%         1.07%         1.16%
Return on average equity               10.12%        10.94%        11.19%
Cash dividend payout ratio             31.50%        29.45%        29.62%

	MARKET RISK MANAGEMENT

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

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





	MARKET RISK MANAGEMENT (CONTINUED)

	The following table sets forth the projected maturities and average rates for
all rate sensitive assets and liabilities based on the following assumptions.  All
fixed and variable rate loans were based on original maturities since the bank has
not experienced, and does not expect, a significant rewriting of loans.  Investments
are based on maturity date except certain long-term agencies, which are classified by
call date.  The bank has historically experienced very little deposit runoff and has
generally had net gains in deposits over the years.  Based on this experience, it was
estimated that maximum runoff of noninterest-bearing checking, NOW checking and other
savings would be 10%, and maximum runoff of money market deposits would be 33%. It
was estimated that maximum runoff of time deposits would be 25% and these deposits
are classified by original maturity date.


                       - - - - - - - - - - - - Principal/Notional Amount Maturing In - - - - - - - - - -
(In millions)

Rate sensitive assets  2002   2003   2004   2005   2006   Thereafter   Total   Fair Value

Fixed rate loans     $ 7,051 $ 4,966 $ 4,051 $ 3,393 $ 2,739 $ 22,192 $ 44,392 $ 44,611
Average interest
  rates                8.82%   8.98%   8.99%   8.74%   8.61%    8.41%    8.65%

Variable rate loans   18,521   2,199   2,091   2,164   4,551   30,583   60,109   60,109
Average interest
  rates                5.51%   6.80%   7.03%   7.06%   7.37%    7.25%    6.73%

Fixed rate securities  9,756   5,721     500   3,499   3,300    4,656   27,432   27,336
Average interest
  rates                6.00%   5.26%   5.50%   4.87%   5.39%    5.16%    5.48%

Variable rate
   securities            570     364     250     185     140    3,055    4,564    4,564
Average interest
   rates               5.09%   5.09%    5.09%   5.09%   5.09%   5.14%    5.12%

Rate sensitive
   liabilities

Noninterest-bearing
   checking            1,349   1,214    1,092     983     885   7,963   13,486   13,486
Average interest
   rates                 N/A     N/A      N/A     N/A     N/A     N/A      N/A

Savings and interest-
   bearing checking    3,825   3,145    2,631   2,234   1,920  15,475   29,230   29,230
Average interest
   rates               1.13%   1.13%    1.13%   1.13%   1.13%   1.13%    1.13%

Time deposits         15,629  13,658   10,712   8,187   6,534  19,602   74,322   70,020
Average interest
   rates               4.31%   5.04%    4.72%   5.35%   4.57%   4.57%    4.41%

Variable rate
   borrowings          2,325                                   15,000   17,325  18,250
Average interest
   rates               2.10%                                    5.93%    5.41%


           FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

		Financial Accounting Standards Board (FASB) issued Statement No. 133 as
amended by SFAS No. 138, Accounting For Derivative Instruments and Hedging
Activities, effective for fiscal years beginning after June 15, 2000.  This
Statement establishes accounting and reporting standards for derivative
instruments and hedging activities, including certain derivative instruments
embedded in other contracts, and requires that an entity recognize all
derivatives as assets or liabilities in the balance sheet and measure them at
fair value.  If certain conditions are met, an entity may elect to designate a
derivative as follows: (a) a hedge of the exposure to changes in the fair value
of a recognized asset or liability or an unrecognized firm commitment, (b) a
hedge of exposure to variable cash flows of a forecasted transaction, or (c) a
hedge of the foreign currency exposure of an unrecognized firm commitment, an
available-for-sale security, a foreign currency denominated forecasted
transaction, or a net investment in a foreign operation.  The Statement
generally provides for matching the timing of the recognition of the gain or
loss on derivatives designated as hedging instruments with the recognition of
the changes in fair value of the item being hedged.  Depending on the type of
hedge, such recognition will be either net income or other comprehensive
income.  For a derivative not designated as a hedging instrument, changes in
fair value will be recognized in net income in the period of change.
Management has evaluated the impact of adopting this Statement on the
consolidated financial statements, and does not anticipate that it will have a
material impact.

		In September 2000, the FASB issued Statement No. 140 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities."  This Statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
It replaces previously issued statement No. 125.  Statement No. 140 revises
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but otherwise carries over most of
Statement No. 125's provisions without reconsideration.  Statement No. 140 is
effective for transfers, servicing and extinguishments occurring after March
31, 2001.  Management has evaluated  the impact of this statement, and does not
anticipate that it will have material impact.

	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 is currently evaluating the impact this statement would have on the
consolidated financial statements when adopted, but does not anticipate that it
will have a material impact.

	STOCK MARKET ANALYSIS AND DIVIDENDS

	The Corporation's common stock is traded inactively in the over-the-
counter market.  As of December 31, 2001 the approximate number of shareholders
of record was 525.


                                       Market     Cash     Market        Cash
                                       Price    Dividend   Price       Dividend
                                             2001                 2000
First Quarter                         $ 31.00    $   .20    $ 51.00      $ .18
Second Quarter                          33.00        .20      40.00        .18
Third Quarter                           33.00        .25      37.00        .23
Fourth Quarter                          33.50        .30      34.125       .27


</TABLE>




                                                           EXHIBIT 21

                          SUBSIDIARIES OF THE REGISTRANT



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

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

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


                                                          Exhibit 23.1

                        INDEPENDENT AUDITOR'S CONSENT


Board of Directors and Shareholders
Fulton Bancshares Corporation


	We consent to the incorporation by reference in registration statements (Form
SB-2 No. 33-85626) of Fulton Bancshares Corporation of our report dated
February 11, 2002, appearing in this annual report on Form 10-K of Fulton
Bancshares Corporation for the year ended December 31, 2001.





						/S/SMITH ELLIOTT KEARNS & COMPANY, LLC



Chambersburg, PA
March 20, 2002






EX-27

9


12-MOS
DEC-31, 2001
DEC-31, 2001
5,529
0
0
0
0
30,799
30,799
104,501
845
150,855
117,038
2,325
1,248
15,000
0
0
309
14,935
150,855
8,585
1,546
54
10,185
4,471
5,433
4,752
57
3,451
1,926
1,486


1,486
3.02
3.02
3.59
289
922
0
0
847
34
17
845
845
0
0