SecProbe.io

Washington, D.C. 20549 Fulton Bancshares Corporation Our File No.: 634-95

Re: SEC Comment Letter dated June 15, 2005

Dear Mr. Farhat:

This letter is being provided to you in response to your letter dated June 15, 2005 regarding review of and comments to Fulton Bancshares Corporation Form 10-K for the year ended December 31, 2004, your file number 33-85626.

Note 1 – Significant Accounting Policies – Prior Period Adjustments page 7

1. Please refer to prior comment 6 and revise the Selected Five-Year Financial Data and the Summary of Quarterly Financial Data to include the required pro-forma disclosures as required by paragraph 39 of APB 20. Please ensure that all related disclosure and column headings are marked “restated”.

Please see the highlighted sections of the Selected Five-Year Financial Data and Summary of Quarterly Financial Data, on pages 26 and 27 of the amended Form 10-K which reads as follows:

FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

SELECTED FIVE-YEAR FINANCIAL DATA

(As Restated)

(As Restated)

(As Restated)

(As Restated)

Income Statement (000 omitted)

Interest income

$

7,555

$

8,365

$

9,449

$

10,142

$

9,946

Interest expense

2,891

3,175

4,271

5,432

5,210

Provision for loan losses

1,265

Net interest income after provision for loan losses

4,403

3,925

4,923

4,695

4,691

Securities gains (losses)

(1,265

)

Other operating income

Other operating expense

4,219

4,005

3,774

3,450

3,370

Income (loss) before income taxes (benefit)

(472

)

1,790

1,884

1,843

Applicable income tax (benefit)

(7

)

(10

)

Net income (loss)

$

(465

)

$

$

1,455

$

1,456

$

1,409

Per share amounts based on weighted averages shares outstanding

492,799

492,810

492,772

492,747

494,054

Income (loss) before income taxes (benefit)

$

(0.95

)

$

1.54

$

3.63

$

3.82

$

3.73

Income taxes (benefit)

(0.01

)

(0.02

)

0.68

0.87

0.88

Net Income (loss)

(0.94

)

1.56

2.95

2.95

2.85

Cash dividend paid

1.05

1.05

1.02

0.95

0.86

Book value

31.49

32.68

33.80

30.88

28.75

Year-End Balance Sheet (000 omitted)

Total assets

$

141,757

$

147,569

$

162,492

$

150,828

$

140,480

Loans

94,470

103,288

108,267

104,501

102,905

Reserve for loan losses

(1,821

)

(1,899

)

(1,031

)

(845

)

(847

)

Net loans

92,649

101,389

107,236

103,656

102,058

Total investment securities

20,192

31,081

39,447

31,899

24,643

Deposits-noninterest bearing

16,524

13,927

16,156

13,486

13,025

Deposits-interest bearing

93,097

97,200

96,870

103,552

92,107

Total deposits

109,621

111,127

113,025

117,038

105,132

Liabilities for borrowed money

15,000

18,825

31,250

17,325

20,000

Total stockholders’ equity

15,518

16,104

16,658

15,217

14,204

Ratios

Average equity/average assets

11.23

%

11.05

%

10.19

%

10.17

%

9.82

%

Return on average equity

(2.85

)%

4.52

%

9.18

%

9.92

%

10.71

%

Return on average assets

(0.32

)%

0.50

%

0.94

%

1.01

%

1.05

%

The 2000-2003 amounts have been restated to correct the accounting on certain investment discounts – See Note 1, Prior Period Adjustments.

Net Income

As originally reported

N/A

$

$

1,730

$

1,486

$

1,439

As restated

N/A

1,455

1,456

1,409

Change

N/A

$

(63

)

$

(275

)

$

(30

)

$

(30

)

Net Income per Share

As originally reported

N/A

$

1.68

$

3.51

$

3.02

$

2.91

As restated

N/A

1.56

2.95

2.95

2.85

Change

N/A

$

(.12

)

$

(.56

)

$

(.07

)

$

(.06

)

FULTON BANCSHARES CORPORATION AND SUBSIDIARIES

SUMMARY OF QUARTERLY FINANCIAL DATA

The unaudited quarterly results of operations for the years ended December 31, 2004 and 2003 are as follows:

(As restated)

($ 000 omitted except per

Quarter Ended

Quarter Ended

share)

Mar. 31

June 30

Sept. 30

Dec. 31

Mar. 31

June 30

Sept. 30

Dec. 31

Interest income (1)

$

1,915

$

1,877

$

1,879

$

1,884

$

2,245

$

2,035

$

2,114

$

1,971

Interest expense

Net interest income

1,181

1,147

1,162

1,174

1,396

1,228

1,338

1,228

Provision for loan losses

(2)

1,235

(3)

Net interest income after Provision for loan losses

1,181

1,162

1,174

1,366

(7

)

1,338

1,228

Securities gains (losses)

(1,275

)(4)

(64

)

Other income

Other expenses

1,014

1,089

1,004

1,112

1,002

1,064

Operating income before income taxes

(34

)

(1,060

)

(628

)

Applicable income taxes

(7

)

(13

)

(35

)

(230

)

Net income (restated – 2003)

$

$

(27

)

$

$

(1,025

)

$

$

(398

)

$

$

Net income – originally reported

(230

)

Change

$

(40

)

$

(680

)

$

$

(22

)

Net income applicable to common stock

Per share data:

Net income (restated – 2003)

$

0.57

$

(0.05

)

$

0.62

$

(2.08

)

$

.95

$

(0.81

)

$

0.91

$

0.51

Originally reported

1.03

.57

(.47

)

.55

Change

$

(.08

)

$

(1.38

)

$

1.38

$

(.04

)

(1) Restated for correct accounting on certain investment discounts – See Note 1 Prior Period Adjustment.

(2) The amount and timing of the provision for loan loss was the result of regulatory examination commenced August 10, 2004. See Allowance for Loan Losses and Related Provisions discussed in Management’s Discussion and Analysis.

(3) The amount and timing of the provision for loan loss was the result of regulatory examination commenced July 14, 2003. See Allowance for Loan Loss and Related Provisions discussion on Management’s Discussion and Analysis.

(4) Loss on sale of Preferred Stocks – See Note 2. Investments and Management’s Discussion and Analysis – Other Income and Expense.

Note14 – Dividends/Regulatory Matters/Contingencies, page 21

2. Please refer to prior comment 3 and revise here and in your MD&A to specifically disclose the nature of the OCC’s concerns and findings in the final reports referenced in your disclosure and their effect on your results of operations and financial condition. Also address any actions you intend to undertake to remediate these weaknesses.

Please see the additional highlighted paragraphs in Note 14, page 22 and page 42 of the MD&A, of the amended Form 10-K which reads as follows:

The Order includes 24 articles that commence by requiring the Bank to form a Compliance Committee and develop an action plan (“Plan”) to comply with the remaining articles. The Plan requires the development of a strategic plan, the appointment of certain management and officers and the commission of a management and board supervision study. The Plan also requires the development of a three-year profit plan and capital plan, the requirement to maintain certain capital ratios, improvement in interest rate risk management, a consultant study of compliance with Truth-In-Lending and RESPA, and a review of the methodology of determining ALLL. The Plan further requires the Bank to engage and retain a qualified third-party loan review, to develop a criticized assets improvement program, to implement a loan portfolio management improvement program and to implement improved reporting and information systems for the loan portfolio. Further articles of the Plan require a qualified, independent consultant to assess compliance with the Bank Secrecy Act (“BSA”), Money Laundering Control Act, suspicious activities, and the rules and regulations of the Office of Foreign Assets and Control, the development of a BSA compliance program, a study of the audit function with emphasis on BSA compliance, and a written program on Suspicious Activity Reports. Other articles of the Plan require the development of a customer information security program, a disaster recovery plan, and a liquidity contingency plan. Finally, an article requires the Board to take all necessary steps to ensure that the Bank corrects each violation of law, rule or regulation cited in Reports of Examination. The remaining articles are administrative in nature.

Because compliance with the Order will require reallocation and increases in internal resources and the engagement of various vendors and consultants, the cost of compliance and the effect on results of operations is expected to be material; however the cost of compliance with the Order cannot be reasonably estimated at this time.

The Bank intends to take actions required by the Order to remediate the identified weaknesses by forming a Board Compliance Committee that will direct and monitor the completion of the specific requirements of Order by use of internal resources and the retention of qualified vendors and consultants.

In response to your comments Fulton Bancshares Corporation acknowledges the following:

• Fulton Bancshares Corporation is responsible for the adequacy and accuracy of the disclosure in the filing;

• staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

• Fulton Bancshares Corporation may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Sincerely
/s/ David Cathell