**United      States**

**Securities      and Exchange Commission**

**Washington,      D.C. 20549**

**Form      10-Q**

**QUARTERLY      **
**REPORT      PURSUANT TO SECTION **
**13      or 15(d) **
**OF**

**THE      SECURITIES EXCHANGE **
**ACT      OF 1934**

**For      the quarter ended September 30, 2008**

**Commission      File #0 **
**-      **
**13314**

**SMITHTOWN      BANCORP, INC.**

| **New                York**                                                   | **11-2695037**                                   |
|-------------------------------------------------------------------------------|--------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) | (IRS                Employer Identification No.) |
|                                                                          |                                             |
| **100                Motor Parkway, Suite 160, Hauppauge, NY**                | **11788-5138**                                   |
| (Address                of Principal Executive Office)                        | (Zip                Code)                        |

**(631)      360-9300**

----

**SMITHTOWN      BANCORP, INC.**

| Part                I - FINANCIAL INFORMATION |                                                                                                                                                           |
|-----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                          |                                                                                                                                                           |   |
| Item                1.                        | Financial                Statements                                                                                                                            |   |
|                                          |                                                                                                                                                           |   |
|                                          | Unaudited                Consolidated Balance Sheets as of September 30, 2008 and December                31,                2007                              | 3 |
|                                          |                                                                                                                                                           |   |
|                                          | Unaudited                Consolidated Statements of Income for the Three Months Ended September                30,                2008 and 2007                | 4 |
|                                          |                                                                                                                                                           |   |
|                                          | Unaudited                Consolidated Statements of Income for the Nine Months Ended September                30,                2008 and 2007                 | 5 |
|                                          |                                                                                                                                                           |   |
|                                          | Unaudited                Consolidated Statements of Changes in Stockholders’ Equity For the Nine                Months Ended September 30, 2008 and 2007 | 6 |
|                                          |                                                                                                                                                           |   |
|                                          | Unaudited                Consolidated Statements of Cash Flows for the Nine Months Ended September                30, 2008 and 2007                            | 7 |
|                                          |                                                                                                                                                           |   |
| Item                2.                        | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                                      | 16 |
|                                          |                                                                                                                                                           |   |
| Item                3.                        | Quantitative                and Qualitative Disclosures About Market Risk                                                                                      | 24 |
|                                          |                                                                                                                                                           |   |
| Item                4.                        | Controls                and Procedures                                                                                                                         | 25 |
|                                          |                                                                                                                                                           |   |
| Part                II - OTHER INFORMATION    |                                                                                                                                                           |
|                                          |                                                                                                                                                           |   |
| Item                1.                        | Legal                Proceedings – None                                                                                                             |   |
|                                          |                                                                                                                                                           |   |
| Item                1a.                       | Risk                Factors – No change                                                                                                             |   |
|                                          |                                                                                                                                                           |   |
| Item                2.                        | Change                in Securities and Use of Proceeds                                                                                                        |   |

| Issuer                Purchases of Equity Securities |
|------------------------------------------------------|

|                                                                  |   | (a)             |   | (b)                       |   | (c)                        |   | (d)                            |   |
|-----------------------------------------------------------------------|--------|-----------------|--------|---------------------------|--------|----------------------------|--------|--------------------------------|--------|
|                                                                  |   |            |   |                      |   | Total Number of  |   | Maximum                        |   |
|                                                                  |   |            |   |                      |   | Shares(or Units)      |   | Number of                 |   |
|                                                                  |   | Total           |   |                      |   | Purchased as          |   | Shares(or Units)          |   |
|                                                                  |   | Number          |   | Average                   |   | Part of Publicly |   | That May Yet Be |   |
|                                                                  |   | Of Shares  |   | Price                     |   | Announced                  |   | Purchased Under           |   |
|                                                                  |   | (or Units) |   | Paid Per             |   | Plans                      |   | the Plans                 |   |
| Period                                                                |   | Purchased       |   | Share (or Unit) |   | or Programs           |   | or Programs               |   |
| July 1, 2008 – July                31, 2008 |   |            | 0      |                      |   | 0                          |   |                           | 0      |   |   | 852,163 |   |
| August                1, 2008 – August 31, 2008            |   |            | 0      |                      |   | 0                          |   |                           | 0      |   |   | 852,163 |   |
| September                1, 2008 – September 30, 2008      |   |            | 0      |                      |   | 0                          |   |                           | 0      |   |   | 852,163 |   |
| Total                                                                 |   |            | 0      |                      |   | 0                          |   |                           | 0      |   |   | 852,163 | (1)  |

| Item                3. Defaults upon Senior Securities – None                         |   |
|--------------------------------------------------------------------------------------------------|--------|
|                                                                                             |   |
| Item                4. Submission of Matters to a Vote of Security Holders -                None |   |
|                                                                                             |   |
| Item                5. Other Information – None                                       |   |
|                                                                                             |   |
| Item                6. Exhibits and Reports on Form 8-K                                          | 26     |
|                                                                                             |   |
| Signatures                                                                                       | 29     |

----

**SMITHTOWN      BANCORP, INC.**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                                                                                                                                                        |   | As of                   |      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|
|                                                                                                                                                                                                                                                                                        |   | September 30, 2008 |      | December 31, 2007 |   |
| **ASSETS**                                                                                                                                                                                                                                                                                  |   |                         |      |   |   |   |   |
| Cash                and due from banks                                                                                                                                                                                                                                                      |   | $                            | 19,737    |   | $                17,401 |
| Federal                funds sold                                                                                                                                                                                                                                                           |   |                         | 26,393    |   | 54 |
| Total                cash and cash equivalents                                                                                                                                                                                                                                              |   |                         | 46,130    |   | 17,455 |
| Investment                securities:                                                                                                                                                                                                                                                       |   |                         |      |   |   |
| Available                for sale:                                                                                                                                                                                                                                                          |   |                         |      |   |   |
| Obligations                of U.S. government agencies                                                                                                                                                                                                                                      |   |                         | 22,650    |   | 32,394 |
| Mortgage                - backed securities                                                                                                                                                                                                                                                 |   |                         | 25,783    |   | 7,619 |
| Obligations                of state and political subdivisions                                                                                                                                                                                                                              |   |                         | 4,468     |   | 6,312 |
| Other                securities                                                                                                                                                                                                                                                             |   |                         | 10,133    |   | 8,567 |
| Total                securities available for sale                                                                                                                                                                                                                                          |   |                         | 63,034    |   | 54,892 |
| Held                to maturity:                                                                                                                                                                                                                                                            |   |                         |      |   |   |
| Mortgage-backed                securities                                                                                                                                                                                                                                                   |   |                         | -         |   | 8 |
| Obligations                of state and political subdivisions                                                                                                                                                                                                                              |   |                         | 111       |   | 202 |
| Total                securities held to maturity (estimated fair value $112 in 2008 and                $212 in                2007)                                                                                                                                                         |   |                         | 111       |   | 210 |
| Total                investment securities                                                                                                                                                                                                                                                  |   |                         | 63,145    |   | 55,102 |
| Restricted                securities                                                                                                                                                                                                                                                        |   |                         | 16,591    |   | 2,113 |
| Loans                                                                                                                                                                                                                                                                                       |   |                         | 1,493,017 |   | 983,918 |
| Less:                allowance for loan losses                                                                                                                                                                                                                                              |   |                         | 10,158    |   | 8,250 |
| Loans,                net                                                                                                                                                                                                                                                                   |   |                         | 1,482,859 |   | 975,668 |
| Bank                premises and equipment                                                                                                                                                                                                                                                  |   |                         | 28,244    |   | 22,611 |
| Other                assets                                                                                                                                                                                                                                                                 |   |                         |      |   |   |
| Cash                value of company owned life insurance                                                                                                                                                                                                                                   |   |                         | 19,519    |   | 18,961 |
| Goodwill                                                                                                                                                                                                                                                                                    |   |                         | 3,923     |   | 3,923 |
| Intangible                assets                                                                                                                                                                                                                                                            |   |                         | 1,063     |   | 1,383 |
| Other                real estate owned                                                                                                                                                                                                                                                      |   |                         | 6,972     |   | 6,972 |
| Other                                                                                                                                                                                                                                                                                       |   |                         | 22,499    |   | 16,961 |
| Total                other assets                                                                                                                                                                                                                                                           |   |                         | 53,976    |   | 48,200 |
| Total                assets                                                                                                                                                                                                                                                                 |   | $                            | 1,690,945 |   | $                1,121,149 |
|                                                                                                                                                                                                                                                                                        |   |                         |      |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                     |   |                         |      |   |   |
| Liabilities                                                                                                                                                                                                                                                                                 |   |                         |      |   |   |
| Deposits:                                                                                                                                                                                                                                                                                   |   |                         |      |   |   |
| Demand                (noninterest-bearing)                                                                                                                                                                                                                                                 |   | $                            | 107,656   |   | $                111,726 |
| Money                market                                                                                                                                                                                                                                                                 |   |                         | 436,248   |   | 389,891 |
| NOW                                                                                                                                                                                                                                                                                         |   |                         | 30,887    |   | 34,814 |
| Savings                                                                                                                                                                                                                                                                                     |   |                         | 67,431    |   | 54,267 |
| Time                                                                                                                                                                                                                                                                                        |   |                         | 542,081   |   | 400,103 |
| Total                deposits                                                                                                                                                                                                                                                               |   |                         | 1,184,303 |   | 990,801 |
| Dividends                payable                                                                                                                                                                                                                                                            |   |                         | 393       |   | 392 |
| Federal                Home Loan Bank borrowings                                                                                                                                                                                                                                            |   |                         | 340,000   |   | 20,900 |
| Subordinated                debt                                                                                                                                                                                                                                                            |   |                         | 38,836    |   | 18,217 |
| Other                liabilities                                                                                                                                                                                                                                                            |   |                         | 12,456    |   | 10,737 |
| Total                liabilities                                                                                                                                                                                                                                                            |   |                         | 1,575,988 |   | 1,041,047 |
| Stockholders'                equity                                                                                                                                                                                                                                                         |   |                         |      |   |   |
| Common                stock - $.01 par value (20,000,000 shares authorized; 13,851,341                shares                issued, 11,799,477 shares outstanding at Sept. 30, 2008; 11,852,374                shares                issued, 9,800,510 shares outstanding at Dec. 31, 2007) |   |                         | 139       |   | 119 |
| Additional                paid in capital                                                                                                                                                                                                                                                   |   |                         | 51,942    |   | 25,755 |
| Retained                earnings                                                                                                                                                                                                                                                            |   |                         | 75,184    |   | 64,463 |
| Accumulated                other comprehensive loss                                                                                                                                                                                                                                         |   |                         | (2,246    | ) | (173) |
|                                                                                                                                                                                                                                                                                        |   |                         | 125,019   |   | 90,164 |
| Treasury                stock (2,051,864 shares at cost)                                                                                                                                                                                                                                    |   |                         | (10,062   | ) | (10,062) |
| Total                stockholders' equity                                                                                                                                                                                                                                                   |   |                         | 114,957   |   | 80,102 |
| Total                liabilities and stockholders' equity                                                                                                                                                                                                                                   |   | $                            | 1,690,945 |   | $                1,121,149 |

----

| **SMITHTOWN                BANCORP, INC.****CONSOLIDATED                STATEMENTS OF INCOME**(unaudited)(in                thousands, except share and per share                data) |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                  |   | For the Three Months EndedSeptember 30, |      |
|-----------------------------------------------------------------------|--------|------------------------------------------------------------------|-----------|
|                                                                  |   | 2008                                                             |      | 2007 |   |
| Interest income                                                  |   |                                                             |      |   |   |   |   |
| Loans                                                                 |   | $                                                                | 23,353    |   | $ | 18,861 |   |
| Federal                funds sold                                     |   |                                                             | 9         |   |   | 203 |   |
| Investment                securities:                                 |   |                                                             |      |   |   |  |   |
| Taxable:                                                              |   |                                                             |      |   |   |   |   |
| Obligations                of U.S. government agencies                |   |                                                             | 343       |   |   | 711 |   |
| Mortgage                - backed securities                           |   |                                                             | 306       |   |   | 29 |   |
| Other                securities                                       |   |                                                             | 178       |   |   | 110 |   |
| Subtotal                                                              |   |                                                             | 827       |   |   | 850 |   |
| Exempt                from federal income taxes:                      |   |                                                             |      |   |   |   |   |
| Obligations                of state & political subdivisions      |   |                                                             | 49        |   |   | 72 |   |
| Other                                                                 |   |                                                             | 229       |   |   | 55 |   |
| Total                interest income                                  |   |                                                             | 24,467    |   |   | 20,041 |   |
|                                                                  |   |                                                             |      |   |   |   |   |
| Interest                expense                                       |   |                                                             |      |   |   |   |   |
| Money                market accounts (including savings)              |   |                                                             | 2,981     |   |   | 4,005 |   |
| Time                deposits of $100,000 or more                      |   |                                                             | 1,945     |   |   | 2,017 |   |
| Other                time deposits                                    |   |                                                             | 2,809     |   |   | 2,883 |   |
| Federal                Home Loan Bank borrowings                      |   |                                                             | 2,210     |   |   | 297 |   |
| Subordinated                debt                                      |   |                                                             | 610       |   |   | 352 |   |
| Total                interest expense                                 |   |                                                             | 10,555    |   |   | 9,554 |   |
|                                                                  |   |                                                             |      |   |   |   |   |
| Net                interest income                                    |   |                                                             | 13,912    |   |   | 10,487 |   |
| Provision                for loan losses                              |   |                                                             | 500       |   |   | 300 |   |
| Net                interest income after provision for loan losses    |   |                                                             | 13,412    |   |   | 10,187 |   |
|                                                                  |   |                                                             |      |   |   |   |   |
| Noninterest                income                                     |   |                                                             |      |   |   |   |   |
| Trust                and investment services                          |   |                                                             | 189       |   |   | 178 |   |
| Service                charges on deposit accounts                    |   |                                                             | 630       |   |   | 542 |   |
| Revenues                from insurance agency                         |   |                                                             | 824       |   |   | 1,032 |   |
| Net                gain on sales of investment securities             |   |                                                             | 6         |   |   | 34 |   |
| Increase                in cash value of company owned life insurance |   |                                                             | 163       |   |   | 194 |   |
| Other                                                                 |   |                                                             | 536       |   |   | 479 |   |
| Total                noninterest income                               |   |                                                             | 2,348     |   |   | 2,459 |   |
|                                                                  |   |                                                             |      |   |   |   |   |
| Noninterest                expense                                    |   |                                                             |      |   |   |   |   |
| Salaries                                                              |   |                                                             | 3,755     |   |   | 2,925 |   |
| Pension                and other employee benefits                    |   |                                                             | 830       |   |   | 715 |   |
| Net                occupancy expense of bank premises                 |   |                                                             | 1,588     |   |   | 966 |   |
| Furniture                and equipment expense                        |   |                                                             | 698       |   |   | 725 |   |
| Amortization                of intangible assets                      |   |                                                             | 107       |   |   | 119 |   |
| Other                                                                 |   |                                                             | 1,512     |   |   | 1,270 |   |
| Total                noninterest expense                              |   |                                                             | 8,490     |   |   | 6,720 |   |
|                                                                  |   |                                                             |      |   |   |   |   |
| Income                before income taxes                             |   |                                                             | 7,270     |   |   | 5,926 |   |
| Provision                for income taxes                             |   |                                                             | 2,663     |   |   | 2,107 |   |
| Net                income                                             |   | $                                                                | 4,607     |   | $ | 3,819 |   |
|                                                                  |   |                                                             |      |   |   |   |   |
| Basic                earnings per share                               |   | $                                                                | 0.47      |   | $ | 0.39 |   |
| Diluted                earnings per share                             |   | $                                                                | 0.47      |   | $ | 0.39 |   |
| Cash                dividends declared                                |   | $                                                                | 0.04      |   | $ | 0.04 |   |
| Weighted                average common shares outstanding             |   |                                                             | 9,836,255 |   |   | 9,770,828 |   |
| Weighted                average common equivalent shares              |   |                                                             | 9,836,735 |   |   | 9,773,193 |   |
| Comprehensive                income                                   |   | $                                                                | 3,786     |   | $ | 3,945 |   |

----

**SMITHTOWN      BANCORP, INC.**

**CONSOLIDATED      STATEMENTS OF INCOME**

|                                                                  |   | For the Nine Months EndedSeptember 30, |      |
|-----------------------------------------------------------------------|--------|-----------------------------------------------------------------|-----------|
|                                                                  |   | 2008                                                            |      | 2007 |   |
| Interest income                                                  |   |                                                            |      |   |   |   |   |
| Loans                                                                 |   | $                                                               | 63,318    |   | $ | 54,954 |   |
| Federal                funds sold                                     |   |                                                            | 174       |   |   | 712 |   |
| Interest                and dividends on investment securities:       |   |                                                            |      |   |   |   |   |
| Investment                securities:                                 |   |                                                            |      |   |   |  |   |
| Taxable:                                                              |   |                                                            |      |   |   |   |   |
| Obligations                of U.S. government agencies                |   |                                                            | 829       |   |   | 2,314 |   |
| Mortgage                - backed securities                           |   |                                                            | 828       |   |   | 99 |   |
| Other                securities                                       |   |                                                            | 397       |   |   | 246 |   |
| Subtotal                                                              |   |                                                            | 2,054     |   |   | 2,659 |   |
| Exempt                from federal income taxes:                      |   |                                                            |      |   |   |   |   |
| Obligations                of state & political subdivisions      |   |                                                            | 160       |   |   | 222 |   |
| Other                interest income                                  |   |                                                            | 559       |   |   | 167 |   |
| Total                interest income                                  |   |                                                            | 66,265    |   |   | 58,714 |   |
|                                                                  |   |                                                            |      |   |   |   |   |
| Interest                expense                                       |   |                                                            |      |   |   |   |   |
| Money                market accounts (including savings)              |   |                                                            | 9,100     |   |   | 11,463 |   |
| Time                deposits of $100,000 or more                      |   |                                                            | 5,715     |   |   | 5,840 |   |
| Other                time deposits                                    |   |                                                            | 8,234     |   |   | 8,599 |   |
| Other                borrowings                                       |   |                                                            | 4,537     |   |   | 1,090 |   |
| Subordinated                debt                                      |   |                                                            | 1,648     |   |   | 1,040 |   |
| Total                interest expense                                 |   |                                                            | 29,234    |   |   | 28,032 |   |
|                                                                  |   |                                                            |      |   |   |   |   |
| Net                interest income                                    |   |                                                            | 37,031    |   |   | 30,682 |   |
| Provision                for loan losses                              |   |                                                            | 2,000     |   |   | 1,000 |   |
| Net                interest income after provision for loan losses    |   |                                                            | 35,031    |   |   | 29,682 |   |
|                                                                  |   |                                                            |      |   |   |   |   |
| Noninterest                income                                     |   |                                                            |      |   |   |   |   |
| Trust                and investment services                          |   |                                                            | 565       |   |   | 574 |   |
| Service                charges on deposit accounts                    |   |                                                            | 1,662     |   |   | 1,437 |   |
| Revenues                from insurance agency                         |   |                                                            | 2,677     |   |   | 2,819 |   |
| Net                gain on sales of investment securities             |   |                                                            | 6         |   |   | 34 |   |
| Increase                in cash value of company owned life insurance |   |                                                            | 557       |   |   | 613 |   |
| Other                                                                 |   |                                                            | 1,460     |   |   | 1,418 |   |
| Total                noninterest income                               |   |                                                            | 6,927     |   |   | 6,895 |   |
|                                                                  |   |                                                            |      |   |   |   |   |
| Noninterest                expense                                    |   |                                                            |      |   |   |   |   |
| Salaries                                                              |   |                                                            | 10,261    |   |   | 8,894 |   |
| Pension                and other employee benefits                    |   |                                                            | 2,541     |   |   | 2,191 |   |
| Net                occupancy expense of bank premises                 |   |                                                            | 4,032     |   |   | 2,999 |   |
| Furniture                and equipment expense                        |   |                                                            | 2,022     |   |   | 2,042 |   |
| Amortization                of intangible assets                      |   |                                                            | 320       |   |   | 359 |   |
| Other                                                                 |   |                                                            | 4,077     |   |   | 3,497 |   |
| Total                noninterest expense                              |   |                                                            | 23,253    |   |   | 19,982 |   |
|                                                                  |   |                                                            |      |   |   |   |   |
| Income                before income taxes                             |   |                                                            | 18,705    |   |   | 16,595 |   |
| Provision                for income taxes                             |   |                                                            | 6,572     |   |   | 5,721 |   |
| Net                income                                             |   | $                                                               | 12,133    |   | $ | 10,874 |   |
|                                                                  |   |                                                            |      |   |   |   |   |
| Basic                earnings per share                               |   | $                                                               | 1.24      |   | $ | 1.12 |   |
| Diluted                earnings per share                             |   | $                                                               | 1.24      |   | $ | 1.12 |   |
| Cash                dividends declared                                |   | $                                                               | 0.12      |   | $ | 0.12 |   |
| Weighted                average common shares outstanding             |   |                                                            | 9,804,758 |   |   | 9,768,807 |   |
| Weighted                average common equivalent shares              |   |                                                            | 9,805,660 |   |   | 9,771,579 |   |
| Comprehensive                income                                   |   | $                                                               | 10,060    |   | $ | 11,048 |   |

----

**SMITHTOWN      BANCORP, INC.**

**CONSOLIDATED      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**

|                                                                                                                                     |   | Common Stock |            | Additional |   |         |   |     |         | Accumulate Other |   |               |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------------|------------|--------|--------------|--------|----------|--------------|-----------------------|--------|--------------------|--------|
|                                                                                                                                     |   | Shares            |            |       |   | Paid In |   | Retained |         | Treasury              |   | Comprehensive      |   | Total Stockholders’ |   |
|                                                                                                                                     |   | Outstanding       |            | Amount     |   | Capital      |   | Earnings |         | Stock                 |   | Income (Loss) |   | Equity |   |
| Balance at 12/31/2006                                                                                                          |   |              | 9,774,025  |       | $      | 108          |   | $        | 4,046        |                  | $      | 73,046             |   | $ | (10,062 | ) | $ | (331 | ) | $ | 66,807 |   |
| Comprehensive                income:                                                                                                     |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |  |   |   |   |   |   |  |   |
| Net                income                                                                                                                |   |              |            |       |   |         |   |     |         |                  |   | 10,874             |   |   |  |   |   |   |   |   | 10,874 |   |
| Change                in unrealized gain (loss) on securities available for sale, net of                reclassification and tax effects |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |  |   |   | 321 |   |   | 321 |   |
| Adjustment                to apply SFAS 158, net of tax                                                                                  |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |   |   |   | (147 | ) |   | (147 | ) |
| Total                comprehensive income                                                                                                |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |  |   |   |   |   |   | 11,048 |   |
| 10%                stock dividend (1)                                                                                                    |   |              |            |       |   | 11           |   |     | 21,314       |                  |   | (21,325            | )      |   |   |   |   |   |   |   | - |   |
| Cash                dividends declared                                                                                                   |   |              |            |       |   |         |   |     |         |                  |   | (1,141             | )      |   |  |   |   |   |   |   | (1,141 | ) |
| Issuance                of shares for employee stock ownership plan                                                                      |   |              | 9,325           |       |   |         |   |     | 225          |                  |   |               |   |   |   |   |   |   |   |   | 225 |   |
| Stock                awards vested                                                                                                       |   |              |            |       |   |         |   |     | 127          |                  |   |               |   |   |   |   |   |   |   |   | 127 |   |
| Stock                awards granted                                                                                                      |   |              | 17,160          |       |   |         |   |     |         |                  |   |               |   |   |   |   |   |   |   |   | - |   |
|                                                                                                                                     |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |   |   |   |   |   |   |   |   |
| Balance                at 9/30/2007                                                                                                      |   |              | 9,800,510       |       | $      | 119          |   | $        | 25,712       |                  | $      | 61,454             |   | $ | (10,062 | ) | $ | (157 | ) | $ | 77,066 |   |
|                                                                                                                                     |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |  |   |   |  |   |   |  |   |
| Balance                at 12/31/2007                                                                                                     |   |              | 9,800,510       |       | $      | 119          |   | $        | 25,755       |                  | $      | 64,463             |   | $ | (10,062 | ) | $ | (173 | ) | $ | 80,102 |   |
| Comprehensive                income:                                                                                                     |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |  |   |   |  |   |   |  |   |
| Net                income                                                                                                                |   |              |            |       |   |         |   |     |         |                  |   | 12,133             |   |   |  |   |   |  |   |   | 12,133 |   |
| Change                in unrealized gain (loss) on securities available for sale, net of                reclassification and tax effects |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |  |   |   | (2,113 | ) |   | (2,113 | ) |
| Adjustment                to apply SFAS 158, net of of tax                                                                               |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |   |   |   | 40 |   |   | 40 |   |
| Total                comprehensive income                                                                                                |   |              |            |       |   |         |   |     |         |                  |   |               |   |   |  |   |   |  |   |   | 10,060 |   |
| Retained                earnings reduction due to adoption of EITF 06-4                                                                  |   |              |            |       |   |         |   |     |         |                  |   | (233               | )      |   |   |   |   |   |   |   | (233 | ) |
| Cash                dividends declared                                                                                                   |   |              |            |       |   |         |   |     |         |                  |   | (1,179             | )      |   |  |   |   |  |   |   | (1,179 | ) |
| Issuance                of shares                                                                                                        |   |              | 1,965,000       |       |   | 20           |   |     | 25,741       |                  |   |               |   |   |   |   |   |   |   |   | 25,761 |   |
| Issuance                of shares for employee stock ownership plan                                                                      |   |              | 11,967          |       |   |         |   |     | 250          |                  |   |               |   |   |   |   |   |   |   |   | 250 |   |
| Stock                awards vested                                                                                                       |   |              |            |       |   |         |   |     | 196          |                  |   |               |   |   |   |   |   |   |   |   | 196 |   |
| Stock                awards granted                                                                                                      |   |              | 22,000          |       |   |    |   |     |    |                  |   |     |   |   |   |   |   |    |   |   | - |   |
| Balance                at 9/30/2008                                                                                                      |   |              | 11,799,477      |       | $      | 139          |   | $        | 51,942       |                  | $      | 75,184             |   | $ | (10,062 | ) | $ | (2,246 | ) | $ | 114,957 |   |

----

| **SMITHTOWN                BANCORP, INC.**               |   |
|----------------------------------------------------------|--------|
| **CONSOLIDATED                STATEMENTS OF CASH FLOWS** |   |
| (unaudited)                                              |   |
| (in                thousands)                            |   |

|                                                                                                                         |   | For the Nine Months |     |
|------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|----------|
|                                                                                                                         |   | Ended September 30,      |     |
|                                                                                                                         |   | 2008                               |     | 2007 |   |
| **Cash                    flows from operating activities**                                                                  |   |                               |     |   |   |   |   |
| Net                    income                                                                                                |   | $                                  | 12,133   |   | $ | 10,874 |   |
| Adjustments                    to reconcile net income to net cash provided by operating                    activities:      |   |                               |          |   |   |  |   |
| Depreciation                    on premises and equipment                                                                    |   |                               | 2,201    |   |   | 1,936 |   |
| Provision                    for loan losses                                                                                 |   |                               | 2,000    |   |   | 1,000 |   |
| Net                    gain on sale of investment securities                                                                 |   |                               | (6       | ) |   | (34 | ) |
| Net                    increase (decrease) in other liabilities                                                              |   |                               | 1,719    |   |   | (732 | ) |
| Net                    increase in other assets                                                                              |   |                               | (433     | ) |   | (3,063 | ) |
| Net                    increase in deferred taxes                                                                            |   |                               | (3,643   | ) |   | (1,480 | ) |
| Amortization                    of unearned restricted stock awards                                                          |   |                               | 196      |   |   | 128 |   |
| Increase                    in cash surrender value of company owned life insurance                                          |   |                               | (557     | ) |   | (613 | ) |
| Amortization                    of investment security premiums and accretion of discount                                    |   |                               | (34      | ) |   | (13 | ) |
| Amortization                    of intangible assets                                                                         |   |                               | 320      |   |   | 359 |   |
| Cash                    provided                    by operating activities                                                  |   |                               | 13,896   |   |   | 8,362 |   |
|                                                                                                                         |   |                               |          |   |   |  |   |
| **Cash                    flows from investing activities**                                                                  |   |                               |          |   |   |  |   |
| Proceeds                    from calls, repayments, maturities and sales of available-for-sale                    securities |   |                               | 41,467   |   |   | 60,892 |   |
| Proceeds                    from calls, repayments and maturities of held-to-maturity                    securities          |   |                               | 99       |   |   | 198 |   |
| Purchases                    of available-for-sale securities                                                                |   |                               | (53,134  | ) |   | (15,172 | ) |
| Purchases                    of restricted securities                                                                        |   |                               | (21,760  | ) |   | (3,817 | ) |
| Redemptions                    of restricted securities                                                                      |   |                               | 7,282    |   |   | 5,768 |   |
| Loans                    made to customers, net                                                                              |   |                               | (509,099 | ) |   | (99,568 | ) |
| Payment                    for Bank of Smithtown Insurance Agents & Brokers, Inc.                                        |   |                               | -        |   |   | (1,554 | ) |
| Payment                    for acquisition of Payne & Palmieri insurance company                                         |   |                               | -        |   |   | (229 | ) |
| Purchases                    of premises and equipment                                                                       |   |                               | (7,834   | ) |   | (3,064 | ) |
| Cash                    used in investing activities                                                                         |   |                               | (542,979 | ) |   | (56,546 | ) |
|                                                                                                                         |   |                               |          |   |   |  |   |
| **Cash                    flows from financing activities**                                                                  |   |                               |          |   |   |  |   |
| Net                    increase in demand deposits, money market, NOW and savings                                            |   |                               | 51,524   |   |   | 92,304 |   |
| Increase                    (decrease) in time deposits                                                                      |   |                               | 141,978  |   |   | (20,025 | ) |
| Cash                    dividends paid                                                                                       |   |                               | (1,179   | ) |   | (1,104 | ) |
| Federal                    Home Loan Bank term advances                                                                      |   |                               | 520,000  |   |   | - |   |
| Maturities                    of Federal Home Loan Bank term advances                                                        |   |                               | (200,000 | ) |   | (30,000 | ) |
| Net                    decrease in overnight borrowings                                                                      |   |                               | (900     | ) |   | (4,580 | ) |
| Proceeds                    from subordinated debt issuance                                                                  |   |                               | 20,000   |   |   | - |   |
| Proceeds                    from issuance of common shares                                                                   |   |                               | 26,335   |   |   | - |   |
| Cash                    provided by financing activities                                                                     |   |                               | 557,758  |   |   | 36,595 |   |
|                                                                                                                         |   |                               |          |   |   |  |   |
| Net                    increase (decrease) in cash and cash equivalents                                                      |   |                               | 28,675   |   |   | (11,589 | ) |
| Cash                    and cash equivalents, beginning of period                                                            |   |                               | 17,455   |   |   | 27,620 |   |
| Cash                    and cash equivalents, end of period                                                                  |   | $                                  | 46,130   |   | $ | 16,031 |   |
|                                                                                                                         |   |                               |          |   |   |  |   |
| Supplemental                    disclosures of cash flow information                                                         |   |                               |          |   |   |  |   |
| Cash                    paid during the year for:                                                                            |   |                               |          |   |   |  |   |
| Interest                                                                                                                     |   | $                                  | 28,393   |   | $ | 28,230 |   |
| Income                    taxes                                                                                              |   |                               | 7,395    |   |   | 9,123 |   |
|                                                                                                                         |   |                               |     |   |   |   |   |
| Schedule                    of noncash activities                                                                            |   |                               |     |   |   |   |   |
| Issuance                    of common stock to employee stock ownership plan                                                 |   | $                                  | 250      |   | $ | 225 |   |
| Issuance                    of common stock to restricted stock plan                                                         |   |                               | 460      |   |   | 414 |   |

----

----

|                                                                |   | Three Months Ended |      |
|---------------------------------------------------------------------|--------|------------------------------|-----------|
|                                                                |   | September 30,           |      | September 30, |   |
|                                                                |   | 2008                         |      | 2007 |   |
| Computation                of per share income                      |   |                         |      |   |   |   |   |
| (in                thousands, except share and per share data)      |   |                         |      |   |   |   |   |
|                                                                |   |                         |      |   |   |   |   |
| Net                income                                           |   | $                            | 4,607     |   | $ | 3,819 |   |
|                                                                |   |                         |      |   |   |   |   |
| Common                equivalent shares:                            |   |                         |      |   |   |   |   |
|                                                                |   |                         |      |   |   |   |   |
| Weighted                average common shares outstanding           |   |                         | 9,836,255 |   |   | 9,770,828 |   |
| Weighted                average common equivalent shares            |   |                         | 480       |   |   | 2,365 |   |
| Weighted                average common and common equivalent shares |   |                         | 9,836,735 |   |   | 9,773,193 |   |
| Basic                earnings per share                             |   | $                            | 0.47      |   | $ | 0.39 |   |
| Diluted                earnings per share                           |   | $                            | 0.47      |   | $ | 0.39 |   |

|                                                                |   | Nine Months Ended  |      |
|---------------------------------------------------------------------|--------|-----------------------------------|-----------|
|                                                                |   | September 30,                |      | September 30, |   |
|                                                                |   | 2008                              |      | 2007 |   |
| Computation                of per share income                      |   |                              |      |   |   |   |   |
| (in                thousands, except share and per share data)      |   |                              |      |   |   |   |   |
|                                                                |   |                              |      |   |   |   |   |
| Net                income                                           |   | $                                 | 12,133    |   | $ | 10,874 |   |
|                                                                |   |                              |      |   |   |   |   |
| Common                equivalent shares:                            |   |                              |      |   |   |   |   |
|                                                                |   |                              |      |   |   |   |   |
| Weighted                average common shares outstanding           |   |                              | 9,804,758 |   |   | 9,768,807 |   |
| Weighted                average common equivalent shares            |   |                              | 902       |   |   | 2,772 |   |
| Weighted                average common and common equivalent shares |   |                              | 9,805,660 |   |   | 9,771,579 |   |
| Basic                earnings per share                             |   | $                                 | 1.24      |   | $ | 1.12 |   |
| Diluted                earnings per share                           |   | $                                 | 1.24      |   | $ | 1.12 |   |

----

*.*

| For the Three Months Ended September 30, 2008 |   |   |   |                                  |   |
|----------------------------------------------------------------------------------|--------|--------|--------|---------------------------------------|--------|
|                                                                             |   |   |   | Weighted Average                 |   |
|                                                                             |   | Shares |   | Grant Date Share Value |   |
| Nonvested                at beginning of period                                  |   |   | 48,416 |                                  | $      | 21.27 |   |
| Granted                                                                          |   |   | -      |                                  |   | - |   |
| Vested                                                                           |   |   | -      |                                  |   | - |   |
| Nonvested                at end of period                                        |   |   | 48,416 |                                  | $      | 21.27 |   |

|                                                      |   | For the Three Months Ended |   |
|-----------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                      |   | September 30,                             |   |
|                                                      |   | 2008                                           |   | 2007 |   |
| 401(K) Defined Contribution                Plan |   | $                                              | 63     |   | $ | 55 |   |
| Employee                Stock Ownership Plan              |   |                                           | 63     |   |   | 56 |   |

|                                            |   | For the Nine Months Ended |   |
|-------------------------------------------------|--------|-----------------------------------------------|--------|
|                                            |   | September 30,                            |   |
|                                            |   | 2008                                          |   | 2007 |   |
| 401(K)                Defined Contribution Plan |   | $                                             | 188    |   | $ | 165 |   |
| Employee                Stock Ownership Plan    |   |                                          | 188    |   |   | 169 |   |

| For the Three Months Ended |   |               |   |         |   |                  |   |           |   |
|------------------------------------------------|--------|--------------------|--------|--------------|--------|-----------------------|--------|----------------|--------|
|                                           |   |               |   | Amortization |   | Amortization          |   | Total Net |   |
|                                           |   | Interest Cost |   | Cost         |   | of Net Gain |   | Expense        |   |
| September 30,                2008         |   | $                  | 3      |         | $      | 8                     |   | $              | 3      |   | $ | 8 |   |
| September                30, 2007              |   |               | 4      |         |   | 8                     |   |           | 2      |   |   | 10 |   |

| For the Nine Months Ended |   |               |   |         |   |                  |   |           |   |
|-----------------------------------------------|--------|--------------------|--------|--------------|--------|-----------------------|--------|----------------|--------|
|                                          |   |               |   | Amortization |   | Amortization          |   | Total Net |   |
|                                          |   | Interest Cost |   | Cost         |   | of Net Gain |   | Expense        |   |
| September 30,                2008        |   | $                  | 9      |         | $      | 24                    |   | $              | 9      |   | $ | 24 |   |
| September                30, 2007             |   |               | 12     |         |   | 24                    |   |           | 6      |   |   | 30 |   |

| For the Three Months Ended |   | For the Nine Months Ended |   |
|------------------------------------------------|--------|-----------------------------------------------|--------|
| September 30,                             |   | September 30,                            |   |
| 2008                                           |   | 2007                                          |   | 2008 |   | 2007 |   |
| $90                                            |   | $                                             | 77     |   | $ | 270 |   | $ | 223 |   |

----

* *

|  For                the Three Months Ended |   | For                the Nine Months Ended |   |
|-------------------------------------------------|--------|------------------------------------------|--------|
|  September                30               |   | September                30,             |   |
|  2008                                      |   |                                     | 2007   |   |   | 2008 |   |   | 2007 |   |
| $                                               | 116    |                                     | $      | 100 |   | $ | 349 |   | $ | 287 |   |

*.*

----

|                                         |   | Fair Value Measurements at September 30, 2008 Using |   |
|----------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|
|                                         |   | Quoted Prices in                                                             |   | Significant |   | Significant |   |
|                                         |   | Active Markets for                                                           |   | Other |   | Unobservable |   |
|                                         |   | Identical Assets                                                                  |   | Observable Inputs |   | Inputs |   |
|                                         |   | (Level 1)                                                                         |   | (Level 2) |   | (Level 3) |   |
| Available                for sale securities |   |                                                                                   | -      |   | $ | 55,381 |   | $ | 7,653 |   |

|                                              |   | Fair Value Measurements Using Significant |   |
|---------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                              |   | Unobservable Inputs                                      |   |
|                                              |   | (Level 3)                                                |   |
|                                              |   | Securities Available For                            |   |
|                                              |   | Sale                                                          |   |
| Beginning                balance, July 1, 2008    |   | $                                                             | -      |   |
| Transfers                in and/or out of Level 3 |   |                                                          | 7,653  |   |
| Ending                balance, September 30, 2008 |   | $                                                             | 7,653  |   |

|                          |   | Fair Value Measurements at September 30, 2008 Using |   |
|-------------------------------|--------|----------------------------------------------------------------------------------------|--------|
|                          |   |                                                                                   |   |   |   |   |   |
|                          |   | Quoted Prices in                                                             |   | Significant |   | Significant |   |
|                          |   | Active Markets for                                                           |   | Other |   | Unobservable |   |
|                          |   | Identical Assets                                                                  |   | Observable Inputs |   | Inputs |   |
|                          |   | (Level 1)                                                                         |   | (Level 2) |   | (Level 3) |   |
| Impaired                Loans |   |                                                                                   | -      |   |   | - |   | $ | 322 |   |

----

|                                                                                                     |   | September 30, |      | December 31, |   |
|----------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|-------------------|--------|
|                                                                                                     |   | 2008               |      | 2007              |   |
|                                                                                                     |   |               |      |              |   |
| Real                estate loans, construction                                                           |   | $                  | 370,315   |              | $      | 296,397 |   |
| Real                estate loans, other                                                                  |   |               |      |              |   |   |   |
| Commercial                                                                                               |   |               | 646,282   |              |   | 425,983 |   |
| Residential                                                                                              |   |               | 429,915   |              |   | 211,609 |   |
| Agricultural                                                                                             |   |               | -         |              |   | - |   |
| Commercial                and industrial loans                                                           |   |               | 47,735    |              |   | 48,124 |   |
| Loans                to individuals for household, family and other personal                expenditures |   |               | 2,271     |              |   | 3,670 |   |
| All                other loans (including overdrafts)                                                    |   |               | 651       |              |   | 726 |   |
| Total                loans, gross                                                                        |   |               | 1,497,169 |              |   | 986,509 |   |
| Less:                deferred                fees                                                        |   |               | 4,152     |              |   | 2,591 |   |
| allowance                for loan losses                                                                 |   |               | 10,158    |              |   | 8,250 |   |
| Loans,                net                                                                                |   | $                  | 1,482,859 |              | $      | 975,668 |   |

|                                                |   | 2008   |   | 2007   |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|
|                                                |   |   |   |   |   |
| Balance,                January 1                   |   | $      | 8,250  |   | $      | 7,051 |   |
| Add:                                                |   |   |   |   |   |   |   |
| Recoveries                                          |   |   | 53     |   |   | 35 |   |
| Provision                charged to current expense |   |   | 2,000  |   |   | 1,000 |   |
| Total                                               |   |   | 10,303 |   |   | 8,086 |   |
| Less:                charge-offs                    |   |   | 145    |   |   | 119 |   |
| Balance,                September 30                |   | $      | 10,158 |   | $      | 7,967 |   |

|                                                                          |   | 2008   |   | 2007   |   | 2006   |   |
|-------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Gross                interest income which would have been recorded           |   |   |   |   |   |   |   |   |   |   |
| during                the period under original contract                terms |   | $      | 21     |   | $      | 27     |   | $ | 25 |   |
| Gross                interest income recorded during the period               |   |   | 10     |   |   | -      |   |   | - |   |

----

|                                                           |   |   |   | Gross      |   | Gross      |   |
|----------------------------------------------------------------|--------|--------|--------|------------|--------|------------|--------|
|                                                           |   | Fair   |   | Unrealized |   | Unrealized |   |
|                                                           |   | Value  |   | Gains      |   | Losses     |   |
| September                30, 2008                              |   |   |   |       |   |       |   |
| Obligations                of U.S. government agencies         |   | $      | 22,650 |       | $      | 34         |   | $ | (250 | ) |
| Mortgage-backed                securities                      |   |   | 25,783 |       |   | 121        |   |   | (248 | ) |
| Obligations                of state and political subdivisions |   |   | 4,468  |       |   | 7          |   |   | (130 | ) |
| Other                securities                                |   |   | 10,133 |       |   | -          |   |   | (3,143 | ) |
|                                                           |   |   |   |       |   |       |   |   |   |   |
| Total                                                          |   | $      | 63,034 |       | $      | 162        |   | $ | (3,771 | ) |
|                                                           |   |   |   |       |   |       |   |   |   |   |
| December                31, 2007                               |   |   |   |       |   |       |   |   |   |   |
| Obligations                of U.S. government agencies         |   | $      | 32,394 |       | $      | 79         |   | $ | (3 | ) |
| Mortgage-backed                securities                      |   |   | 7,619  |       |   | 7          |   |   | (10 | ) |
| Obligations                of state and political subdivisions |   |   | 6,312  |       |   | 22         |   |   | (13 | ) |
| Other                securities                                |   |   | 8,567  |       |   | -          |   |   | (132 | ) |
|                                                           |   |   |   |       |   |       |   |   |   |   |
| Total                                                          |   | $      | 54,892 |       | $      | 108        |   | $ | (158 | ) |

|                                                           |   |     |   | Gross      |   | Gross      |   |   |   |
|----------------------------------------------------------------|--------|----------|--------|------------|--------|------------|--------|--------|--------|
|                                                           |   | Carrying |   | Unrealized |   | Unrealized |   | Fair   |   |
|                                                           |   | Amount   |   | Gains      |   | Losses     |   | Value  |   |
| September                30, 2008                              |   |     |   |       |   |       |   |   |   |   |   |   |   |
| Mortgage-backed                securities                      |   |     | -      |       |   | -          |   |   | -      |   |   | - |   |
| Obligations                of state and political subdivisions |   | $        | 111    |       | $      | 1          |   | $      | -      |   | $ | 112 |   |
| Total                                                          |   | $        | 111    |       | $      | 1          |   | $      | -      |   | $ | 112 |   |
|                                                           |   |     |   |       |   |       |   |   |   |   |   |   |   |
| December                31, 2007                               |   |     |   |       |   |       |   |   |   |   |   |   |   |
| Mortgage-backed                securities                      |   | $        | 8      |       | $      | -          |   | $      | -      |   | $ | 8 |   |
| Obligations                of state and political subdivisions |   |     | 202    |       |   | 2          |   |   | -      |   |   | 204 |   |
| Total                                                          |   | $        | 210    |       | $      | 2          |   | $      | -      |   | $ | 212 |   |

|                                                                 |   | Available       |   | Held to Maturity |   |
|----------------------------------------------------------------------|--------|-----------------|--------|----------------------------|--------|
|                                                                 |   | for Sale   |   | Carrying                   |   |   |   |
|                                                                 |   | Fair Value |   | Amount                     |   | Fair Value |   |
| Type                and Maturity Grouping                            |   |            |   |                       |   |   |   |   |   |   |
|                                                                 |   |            |   |                       |   |   |   |   |   |   |
| Obligations                of U.S. government agencies               |   |            |   |                       |   |   |   |   |   |   |
| Within                1 year                                         |   | $               | 884    |                       | $      | - |   | $ | - |   |
| After                1 year, but within 5 years                      |   |            | 1,996  |                       |   | - |   |   | - |   |
| After                5 years, but within 10 years                    |   |            | 3,977  |                       |   | - |   |   | - |   |
| After                10 years                                        |   |            | 15,793 |                       |   | - |   |   | - |   |
| Total                obligations of U.S. government agencies         |   | $               | 22,650 |                       | $      | - |   | $ | - |   |
| Mortgage-backed                securities                            |   |            |   |                       |   |   |   |   |   |   |
| After                10 years                                        |   | $               | 25,783 |                       | $      | - |   | $ | - |   |
| Total                mortgage-backed securities                      |   | $               | 25,783 |                       | $      | - |   | $ | - |   |
|                                                                 |   |            |   |                       |   |   |   |   |   |   |
| Obligations                of state and political subdivisions       |   |            |   |                       |   |   |   |   |   |   |
| Within                1 year                                         |   | $               | 533    |                       | $      | 46 |   | $ | 46 |   |
| After                1 year, but within 5 years                      |   |            | 2,271  |                       |   | 65 |   |   | 66 |   |
| After                5 years, but within 10 years                    |   |            | 300    |                       |   | - |   |   | - |   |
| After                10 years                                        |   |            | 1,364  |                       |   | - |   |   | - |   |
| Total                obligations of state and political subdivisions |   | $               | 4,468  |                       | $      | 111 |   | $ | 112 |   |
|                                                                 |   |            |   |                       |   |   |   |   |   |   |
| Other                securities                                      |   |            |   |                       |   |   |   |   |   |   |
| Within                1 year                                         |   | $               | 1,480  |                       | $      | - |   | $ | - |   |
| After                1 year, but within 5 years                      |   |            | 1,940  |                       |   | - |   |   | - |   |
| After                10 years                                        |   |            | 6,713  |                       |   | - |   |   | - |   |
| Total                other securities                                |   | $               | 10,133 |                       | $      | - |   | $ | - |   |

----

|                        |   | As                of September 30, |   |
|-----------------------------|--------|------------------------------------|--------|
|                        |   | 2008                               |   | 2007 |   |
|                        |   |                               |   |   |   |
| Proceeds                    |   | $                                  | 2,004  |   | $ | 5,619 |   |
| Gross                gains  |   |                               | 6      |   |   | 34 |   |
| Gross                losses |   |                               | -      |   |   | - |   |

| As                of September 30, 2008                        |   | Less                than 12 Months |   | 12                Months or More |   | Total  |   |
|----------------------------------------------------------------|--------|------------------------------------|--------|----------------------------------|--------|--------|--------|
|                                                           |   | Fair                               |   | Unrealized                       |   | Fair   |   | Unrealized |   | Fair |   | Unrealized |   |
| Description                of Securities                       |   |  Value                        |   | Loss                             |   | Value  |   | Loss |   | Value |   | Loss |   |
| Securities                available for sale:                  |   |                               |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                of U.S. government agencies         |   | $                                  | 14,738 |                             | $      | (250   | )      | $ | - |   | $ | - |   | $ | 14,738 |   | $ | (250 | ) |
| Mortgage-backed                securities                      |   |                               | 20,425 |                             |   | (248   | )      |   | - |   |   | - |   |   | 20,425 |   |   | (248 | ) |
| Obligations                of state and political subdivisions |   |                               | 1,489  |                             |   | (118   | )      |   | 338 |   |   | (12 | ) |   | 1,827 |   |   | (130 | ) |
| Other                securities                                |   |                               | 5,313  |                             |   | (1,378 | )      |   | 2,340 |   |   | (1,765 | ) |   | 7,653 |   |   | (3,143 | ) |
| Total                temporarily impaired                      |   | $                                  | 41,965 |                             | $      | (1,994 | )      | $ | 2,678 |   | $ | (1,777 | ) | $ | 44,643 |   | $ | (3,771 | ) |

| As                of December 31, 2007                         |   | Less                than 12 Months |   | 12                Months or More |   | Total  |   |
|----------------------------------------------------------------|--------|------------------------------------|--------|----------------------------------|--------|--------|--------|
|                                                           |   | Fair                               |   | Unrealized                       |   | Fair   |   | Unrealized |   | Fair |   | Unrealized |   |
| Description                of Securities                       |   | Value                              |   | Loss                             |   | Value  |   | Loss |   | Value |   | Loss |   |
| Securities                available for sale:                  |   |                               |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                of U.S. government agencies         |   | $                                  | -      |                             | $      | -      |   | $ | 4,072 |   | $ | (3 | ) | $ | 4,072 |   | $ | (3 | ) |
| Mortgage-backed                securities                      |   |                               | 6,766  |                             |   | (10    | )      |   | - |   |   | - |   |   | 6,766 |   |   | (10 | ) |
| Obligations                of state and political subdivisions |   |                               | -      |                             |   | -      |   |   | 2,140 |   |   | (13 | ) |   | 2,140 |   |   | (13 | ) |
| Other                securities                                |   |                               | 6,087  |                             |   | (132   | )      |   | - |   |   | - |   |   | 6,087 |   |   | (132 | ) |
| Total                temporarily impaired                      |   | $                                  | 12,853 |                             | $      | (142   | )      | $ | 6,212 |   | $ | (16 | ) | $ | 19,065 |   | $ | (158 | ) |

----

|                            |   | September                30, 2008 |                | December                31, 2007 |   |
|---------------------------------|--------|-----------------------------------|---------------------|----------------------------------|--------|
|                            |   | Weighted                          |                |                             |   | Weighted |   |   |   |
|                            |   | Average                Rate       |                | Amount                           |   | Average                Rate |   | Amount |   |
| Maturing                in 2008 |   |                              | 4                07 | %                                | $      | 10,000 |   |   | 4.07 | % | $ | 10,900 |   |
| Maturing                in 2009 |   |                              | 4.17                |                             |   | 10,000 |   |   | 4.17 |   |   | 10,000 |   |
| Maturing                in 2010 |   |                              | 2.99                |                             |   | 10,000 |   |   | - |   |   | - |   |
| Maturing                in 2011 |   |                              | 2.58                |                             |   | 3,000 |   |   | - |   |   | - |   |
| Maturing                in 2013 |   |                              | 2.55                |                             |   | 55,000 |   |   | - |   |   | - |   |
| Maturing                in 2018 |   |                              | 2.71                |                             |   | 252,000 |   |   | - |   |   | - |   |
|                            |   |                              | 2.78                | %                                | $      | 340,000 |   |   | 4.12 | % | $ | 20,900 |   |

|   | · | Local,                  regional, national and international economic conditions and the                  impact                  they may have on us and our customers and our assessment of that                  impact. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Changes                  in the level of non-performing assets and                  charge-offs. |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | Changes                  in estimates of future reserve requirements based upon the periodic                  review thereof under relevant regulatory and accounting                  requirements. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                  effects of and changes in trade and monetary and fiscal policies                  and laws,                  including the interest rate policies of the Federal Reserve                  Board. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Inflation,                  interest rate, securities market and monetary                  fluctuations. |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | Political                  instability. |
|--------|--------|-----------------------------------------|

|   | · | Acts                  of war or terrorism. |
|--------|--------|--------------------------------------------|

|   | · | The                  timely development and acceptance of new products and services                  and                  perceived overall value of these products and services by                  users. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Changes                  in consumer spending, borrowings and savings                  habits. |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | Changes                  in the financial performance and/or condition of our                  borrowers. |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | Technological                  changes. |
|--------|--------|-----------------------------------------|

|   | · | Acquisitions                  and integration of acquired                  businesses. |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | The                  ability to increase market share and control                  expenses. |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | Changes                  in the competitive environment among financial holding companies                  and other                  financial service providers. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                  quality and composition of our loan or investment                  portfolio. |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | The                  effect of changes in laws and regulations (including laws and regulations                  concerning taxes, banking, securities and insurance) with which                  we and our                  subsidiaries must comply. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                  effect of changes in accounting policies and practices, as may                  be adopted                  by the regulatory agencies, as well as the Public Company Accounting                  Oversight Board, the Financial Accounting Standards Board and other                  accounting standard setters. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Changes                  in our organization, compensation and benefit                  plans. |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | The                  costs and effects of legal and regulatory developments, including                  the                  resolution of legal proceedings or regulatory or other governmental                  inquiries and the results of regulatory examinations or                  reviews. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Greater                  than expected costs or difficulties related to the opening of new                  branch                  offices or the integration of new products and lines of business,                  or                  both. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our                  success at managing the risk involved in the foregoing                  items. |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | - | Year                over year EPS growth of 10.7% and linked quarter EPS growth of 20.5% |
|--------|---|------------------------------------------------------------------------------------------|

|   | - | Net                loan growth for the quarter of over $139 million or 10.3% |
|--------|---|------------------------------------------------------------------------------|

|   | - | Net                income for the quarter and the year of $4,607 and $12,133 representing                a                20.6% increase over the third quarter of 2007, and an 11.6% increase                over                the nine month period ending September 30,                2007 |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | An                increase of 16.6% in net income from the second to the third quarter                of                2008 |
|--------|---|------------------------------------------------------------------------------------------------------------------------------|

|   | - | “Well                capitalized” regulatory capital ratios with Tier 1 Leverage and Total Risk                Based Capital at September 30 of 9.4% and                12.0% |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | An                increase in deposits of 6.4% for the third quarter as compared to                the                second quarter of 2008 |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------|

|  | - | An                increase in the Company’s capital of $27.5 million attributable to the                gross proceeds of a private issuance of public equity |
|--|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Application      of Critical Accounting Policies**

----

|   | · | Securities                Held to Maturity:** **Bonds                and notes for which the Company 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**:**Bonds,                notes and certain equity securities are carried at estimated fair                value. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                     |   | September                30, 2008 |      | December                31, 2007 |   |
|------------------------------------------|--------|-----------------------------------|-----------|----------------------------------|--------|
| Real                estate loans         |   |                              |           |                             |   |   |   |   |   |   |   |   |   |
| Construction                             |   | $                                 | 370,315   |                             |   | 24.73 | % | $ | 296,397 |   |   | 30.05 | % |
| Residential                              |   |                              | 429,915   |                             |   | 28.72 |   |   | 211,609 |   |   | 21.45 |   |
| Commercial                               |   |                              | 646,282   |                             |   | 43.17 |   |   | 425,983 |   |   | 43.18 |   |
| Commercial                and Industrial |   |                              | 47,735    |                             |   | 3.19 |   |   | 48,124 |   |   | 4.88 |   |
| Consumer                                 |   |                              | 2,271     |                             |   | .15 |   |   | 3,670 |   |   | 0.37 |   |
| Other                loans               |   |                              | 651       |                             |   | .04 |   |   | 726 |   |   | 0.07 |   |
| Total                loans               |   |                              | 1,497,169 |                             |   | 100.00 | % |   | 986,509 |   |   | 100.00 | % |
| Less:                                    |   |                              |      |                             |   |   |   |   |   |   |   |   |   |
| Deferred                fees             |   |                              | 4,152     |                             |   |   |   |   | 2,591 |   |   |   |   |
| Allowance                for loan losses |   |                              | 10,158    |                             |   |   |   |   | 8,250 |   |   |   |   |
| Loans,                net                |   | $                                 | 1,482,859 |                             |   |   |   | $ | 975,668 |   |   |   |   |

----

|                                                           |   | September 30, 2008  |   | December 31, 2007 |   |
|----------------------------------------------------------------|--------|------------------------------------|--------|-----------------------------|--------|
|                                                           |   |                               |   |                        |   |
| Securities                available for sale                   |   |                               |   |                        |   |
| Obligations                of U.S. government agencies         |   | $                                  | 22,650 |                        | $      | 32,394 |   |
| Mortgage-backed                securities                      |   |                               | 25,783 |                        |   | 7,619 |   |
| Obligations                of state and political subdivisions |   |                               | 4,468  |                        |   | 6,312 |   |
| Other                securities                                |   |                               | 10,133 |                        |   | 8,567 |   |
| Total                securities available for sale             |   | $                                  | 63,034 |                        | $      | 54,892 |   |
|                                                           |   |                               |   |                        |   |   |   |
| Securities                held to maturity                     |   |                               |   |                        |   |   |   |
| Mortgage-backed                securities                      |   | $                                  | -      |                        | $      | 8 |   |
| Obligations                of state and political subdivisions |   |                               | 111    |                        |   | 202 |   |
| Total                securities held to maturity               |   | $                                  | 111    |                        | $      | 210 |   |
|                                                           |   |                               |   |                        |   |   |   |
| Total                investment securities                     |   | $                                  | 63,145 |                        | $      | 55,102 |   |

|                                         |   | September 30, 2008 |      | December 31, 2007 |   |
|----------------------------------------------|--------|------------------------------|-----------|-----------------------------|--------|
| Demand                (non interest-bearing) |   | $                            | 107,656   |                        | $      | 111,726 |   |
| Money                market                  |   |                         | 436,248   |                        |   | 389,891 |   |
| NOW                                          |   |                         | 30,887    |                        |   | 34,814 |   |
| Savings                                      |   |                         | 67,431    |                        |   | 54,267 |   |
| Time                                         |   |                         | 542,081   |                        |   | 400,103 |   |
| Total                deposits                |   | $                            | 1,184,303 |                        | $      | 990,801 |   |

----

----

** **

----

|                                                                                          |   | For the Nine Months Ended |      | For the Nine Months Ended |   |
|-----------------------------------------------------------------------------------------------|--------|-----------------------------------------------|-----------|-----------------------------------------------|--------|
|                                                                                          |   | September 30, 2008                  |      | September 30, 2007                  |   |
|                                                                                          |   | Average                                       |      |                                          |   | Average |   | Average |   |   |   | Average |   |
|                                                                                          |   | Balance                                       |      | Interest                                      |   | Rate |   | Balance |   | Interest |   | Rate |   |
| ASSETS                                                                                        |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |
|                                                                                          |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                       |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |
| Investment                securities:                                                         |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                       |   | $                                             | 53,701    |                                          | $      | 2,054 |   |   | 5.10 | % | $ | 72,681 |   | $ | 2,659 |   |   | 4.88 | % |
| Nontaxable                                                                                    |   |                                          | 5,497     |                                          |   | 246 |   |   | 5.97 |   |   | 8,157 |   |   | 341 |   |   | 5.57 |   |
| Total                investment securities                                                    |   |                                          | 59,198    |                                          |   | 2,300 |   |   | 5.18 |   |   | 80,838 |   |   | 3,000 |   |   | 4.95 |   |
|                                                                                          |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                loans                                                                    |   |                                          | 1,244,040 |                                          |   | 63,318 |   |   | 6.79 |   |   | 896,022 |   |   | 54,954 |   |   | 8.18 |   |
| Federal                funds sold                                                             |   |                                          | 11,395    |                                          |   | 174 |   |   | 2.00 |   |   | 18,103 |   |   | 712 |   |   | 5.19 |   |
| Other                interest-earning assets                                                  |   |                                          | 11,445    |                                          |   | 559 |   |   | 6.53 |   |   | 2,975 |   |   | 167 |   |   | 7.51 |   |
| Total                interest-earning assets                                                  |   |                                          | 1,326,078 |                                          |   | 66,351 |   |   | 6.67 |   |   | 997,938 |   |   | 58,833 |   |   | 7.87 |   |
| Noninterest-earning                assets                                                     |   |                                          | 82,747    |                                          |   |   |   |   |   |   |   | 72,916 |   |   |   |   |   |   |   |
|                                                                                          |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                                                   |   | $                                             | 1,408,825 |                                          |   |   |   |   |   |   | $ | 1,070,854 |   |   |   |   |   |   |   |
|                                                                                          |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                           |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                          |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                                   |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                  |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                deposits (including NOW)                                               |   |                                          | 91,720    |                                          |   | 893 |   |   | 1.30 | % | $ | 88,965 |   | $ | 844 |   |   | 1.27 | % |
| Money                market                                                                   |   |                                          | 395,873   |                                          |   | 8,207 |   |   | 2.77 |   |   | 338,207 |   |   | 10,619 |   |   | 4.20 |   |
| Time                deposits                                                                  |   |                                          | 460,229   |                                          |   | 13,949 |   |   | 4.05 |   |   | 405,707 |   |   | 14,439 |   |   | 4.76 |   |
| Total                interest-bearing deposits                                                |   |                                          | 947,822   |                                          |   | 23,049 |   |   | 3.25 |   |   | 832,879 |   |   | 25,902 |   |   | 4.16 |   |
|                                                                                          |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                Home Loan Bank borrowings                                              |   |                                          | 223,289   |                                          |   | 4,537 |   |   | 2.71 |   |   | 35,417 |   |   | 1,090 |   |   | 4.12 |   |
| Subordinated                debt                                                              |   |                                          | 33,972    |                                          |   | 1,648 |   |   | 6.37 |   |   | 18,000 |   |   | 1,040 |   |   | 7.62 |   |
| Total                interest-bearing liabilities                                             |   |                                          | 1,205,083 |                                          |   | 29,234 |   |   | 3.24 |   |   | 886,296 |   |   | 28,032 |   |   | 4.23 |   |
| Noninterest-bearing                liabilities:                                               |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                deposits                                                                |   |                                          | 107,789   |                                          |   |   |   |   |   |   |   | 104,576 |   |   |   |   |   |   |   |
| Other                liabilities                                                              |   |                                          | 8,987     |                                          |   |   |   |   |   |   |   | 8,021 |   |   |   |   |   |   |   |
| Total                liabilities                                                              |   |                                          | 1,321,859 |                                          |   |   |   |   |   |   |   | 998,893 |   |   |   |   |   |   |   |
| Stockholders'                equity                                                           |   |                                          | 86,966    |                                          |   |   |   |   |   |   |   | 71,961 |   |   |   |   |   |   |   |
|                                                                                          |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                liabilites & stockholders equity                                     |   | $                                             | 1,408,825 |                                          |   |   |   |   |   |   | $ | 1,070,854 |   |   |   |   |   |   |   |
|                                                                                          |   |                                          |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income/interest rate spread                                       |   |                                          |      |                                          | $      | 37,117 |   |   | 3.43 | % |   |   |   | $ | 30,801 |   |   | 3.64 | % |
| Net                earning assets/net yield on average interest-earning                assets |   | $                                             | 120,995   |                                          |   |   |   |   | 3.73 | % | $ | 111,642 |   |   |   |   |   | 4.11 | % |

----

**Recent      Regulatory and Accounting Developments**

----

| Change In Interest Rates |   | As of August 31, 2008 |   | As of May 31, 2008 |   |
|-----------------------------------------|--------|-------------------------------------------|--------|----------------------------------------|--------|
| In Basis Points               |   | Potential Change In Net    |   | Potential Change In Net |   |
| (Rate Shock)                       |   | Interest Income                      |   | Interest Income                   |   |
|                                    |   | $ Change                             |   | % Change                          |   | $ Change |   | % Change |   |
| Up                200 basis points      |   |                                      | 1,690  |                                   |   | 2.40 |   |   | 1,848 |   |   | 3.13 |   |
| Up                100 basis points      |   |                                      | 839    |                                   |   | 1.19 |   |   | 2,209 |   |   | 3.74 |   |
| Static                                  |   |                                      | -      |                                   |   | - |   |   | - |   |   | - |   |
| Down                100 basis points    |   |                                      | (802   | )                                      |   | (1.14 | ) |   | 986 |   |   | 1.67 |   |
| Down                200 basis points    |   |                                      | (1,627 | )                                      |   | (2.31 | ) |   | (596 | ) |   | (1.01 | ) |

----

| **Exhibit                No.** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.1                            |   | Articles                of Incorporation, as amended (incorporated herein by reference and                filed                as part of the Registrant’s Registration Statement on Form S-14                Registration Statement under the Securities Act of 1933, Reg #2-91511                filed on June 6, 1984, with amendments filed as part of the Registrant’s                Proxy Statements filed on February 22, 1996, February 19, 1998, February                23, 2001, March 16, 2004, and March 17, 2005, all of which are                incorporated herein by reference)                                                                                                                                                 |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.2                            |   | By-Laws,                  as amended and restated as of October 29, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.1                            |   | Shareholder                  Protection Rights Agreement, dated as of September 23, 1997, between                  the                  Registrant and Mellon Investor Services LLC as Rights Agent, as                  amended                  (filed as Exhibit 1 to the Registrant’s Registration Statement on Form                  8-A, filed on October 8, 1997, with amendments filed as Exhibit                  1 to the                  Registrant’s Registration Statements on Form 8-A/A filed on January 26,                  1998, April 26, 2002, January 22, 2004, February 5, 2004, August                  24, 2004,                  and March 14, 2008, all of which are incorporated herein by                  reference) |

----

| 9      |   | No                voting trust agreements                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1*  |   | Smithtown                Bancorp Supplemental Executive Retirement Agreement (filed as Exhibit                1 to                the Registrant’s Current Report on Form 8-K filed on February 2, 2007 and                incorporated herein by reference)                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.2*  |   | Bank                of Smithtown Bankwide Annual Cash Incentive Plan (filed as Exhibit                2 to                the Registrant’s Current Report on Form 8-K filed on April 25, 2007 and                incorporated herein by reference)                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.3*  |   | Smithtown                Bancorp, Inc. 2007 Stock Compensation Plan (filed as Exhibit 3 to                the                Registrant’s Current Report on Form 8-K filed on April 25, 2007 and                incorporated herein by reference)                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.4*  |   | Amended                and Restated Change in Control Agreement by and between the Registrant,                Bank of Smithtown and Bradley E. Rock (filed as Exhibit 1 to the                Registrant’s Current Report on Form 8-K filed on December 28, 2006 and                incorporated herein by reference)                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.5*  |   | Amended                and Restated Change in Control Agreement by and between the Registrant,                Bank of Smithtown and Anita Florek (filed as Exhibit 2 to the Registrant’s                Current Report on Form 8-K filed on December 28, 2006 and incorporated                herein by reference)                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.6*  |   | Amended                and Restated Change in Control Agreement by and between the Registrant,                Bank of Smithtown and Robert J. Anrig (filed as Exhibit 3 to the                Registrant’s Current Report on Form 8-K filed on December 28, 2006 and                incorporated herein by reference)                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.7*  |   | Amended                and Restated Change in Control Agreement by and between the Registrant,                Bank of Smithtown and Thomas J. Stevens (filed as Exhibit 4 to the                Registrant’s Current Report on Form 8-K filed on December 28, 2006 and                incorporated herein by reference)                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.8*  |   | Amended                and Restated Change in Control Agreement by and between the Registrant,                Bank of Smithtown and John A. Romano (filed as Exhibit 5 to the                Registrant’s Current Report on Form 8-K filed on December 28, 2006 and                incorporated herein by reference)                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.9*  |   | Amendment                to Bank of Smithtown Executive Incentive Retirement Agreement by                and                between the Registrant, Bank of Smithtown and Bradley E. Rock,                as amended (filed as Exhibit 10.9 to the Registrant’s Quarterly                Report on Form 10-Q filed on August 8, 2008 and incorporated herein                by                reference)                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.10* |   | Amendment                to Bank of Smithtown Executive Incentive Retirement Agreement by                and                between the Registrant, Bank of Smithtown and Anita Florek,                as amended (filed as Exhibit 10.10 to the Registrant’s Quarterly                Report on Form 10-Q filed on August 8, 2008 and incorporated herein                by                reference)                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.11* |   | Amendment                to Bank of Smithtown Executive Incentive Retirement Agreement by                and                between the Registrant, Bank of Smithtown and Robert J. Anrig,                as amended (filed as Exhibit 10.11 to the Registrant’s Quarterly                Report on Form 10-Q filed on August 8, 2008 and incorporated herein                by                reference)                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.12* |   | Amendment                to Bank of Smithtown Executive Incentive Retirement Agreement by                and                between the Registrant, Bank of Smithtown and Thomas J.                Stevens,                as amended (filed as Exhibit 10.12 to the Registrant’s Quarterly                Report on Form 10-Q filed on August 8, 2008 and incorporated herein                by                reference) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.13* |   | Amendment                to Bank of Smithtown Executive Incentive Retirement Agreement by                and                between the Registrant, Bank of Smithtown and John A. Romano,                as amended (filed as Exhibit 10.13 to the Registrant’s Quarterly                Report on Form 10-Q filed on August 8, 2008 and incorporated herein                by                reference)                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.14* |   | Smithtown                Bancorp, Inc. Restricted Stock Plan, as amended (filed as Exhibit                10.14                to the Registrant’s Quarterly Report on Form 10-Q filed on August 8,                2008 and incorporated herein by reference)                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.15* |   | Bank                of Smithtown Directors’ Deferred Fee Plan (filed as Exhibit 10.15                to the Registrant’s Quarterly Report on Form 10-Q filed on August 8,                2008 and incorporated herein by reference)                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.16* |   | Bank                of Smithtown Executive Deferred Compensation Plan (filed as Exhibit                10.16                to the Registrant’s Quarterly Report on Form 10-Q filed on August 8,                2008 and incorporated herein by reference)                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.18* |   | Bank                of Smithtown Amended and Restated Employee Stock Ownership Plan (filed                as                Exhibit 10.18 to the Registrant’s Quarterly Report on Form 10-Q filed                on August 8, 2008 and incorporated herein by                reference)                                                                                                                                    |

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| 18     |   | No                change in accounting principles                                                                                                                                                        |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                     |
| 23     |   | Accountant’s                Consent (with respect to Registrant’s Annual Report on Form 10-K filed                March 13, 2008 for the fiscal year ended December 31,                2007) |
|   |   |                                                                                                                                                                                                     |
| 24     |   | Power                of Attorney - None                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                     |
| 31.1   |   | Certification                of Chief Executive Officer pursuant to Rule 13a-14(a) (filed                herewith)                                                                                       |
|   |   |                                                                                                                                                                                                     |
| 31.2   |   | Certification                of Chief Financial Officer pursuant to Rule 13a-14(a) (filed                herewith)                                                                                       |
|   |   |                                                                                                                                                                                                     |
| 32.1   |   | Certification                of Chief Executive Officer pursuant to Rule 13a-14(b) and 18 U.S.C.                Section 1350 (filed herewith)                                                            |
|   |   |                                                                                                                                                                                                     |
| 32.2   |   | Certification                of Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C.                Section 1350 (filed herewith)                                                            |
|   |   |                                                                                                                                                                                                     |
| 99     |   | Independent                Auditor's Report filed as part of Form 10-K for the fiscal year ended                December 31, 2007                                                                        |

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| * | Management contract or compensatory                plan or                arrangement |
|---|---------------------------------------------------------------------------------------|

|   | SMITHTOWN                BANCORP, INC.                       |
|--------|--------------------------------------------------------------|
|   |                                                         |
|   | November                7, 2008                              |
|   |                                                         |
|   |                                                         |
|   | /s/                Bradley E. Rock                           |
|   | Bradley                E. Rock, Chairman, President and      |
|   | Chief                Executive Officer                       |
|   |                                                         |
|   | /s/                Anita M. Florek                           |
|   | Anita                M. Florek, Executive Vice President and |
|   | Chief                Financial Officer                       |

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