**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, 2007**

**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**

**9,800,633**

----

**SMITHTOWN      BANCORP, INC.**

| Part                  I - FINANCIAL INFORMATION                                                                                                                    |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                               |   |   |
| Item                  1. Financial Statements                                                                                                                      |   |   |
|                                                                                                                                                               |   |   |
| Unaudited                  Consolidated Balance Sheets as of September 30, 2007 and December                  31,                  2006                            |   | 4      |
|                                                                                                                                                               |   |   |
| Unaudited                  Consolidated Statements of Income for the Three Months Ended September                  30,                  2007 and 2006              |   | 5      |
|                                                                                                                                                               |   |   |
| Unaudited                  Consolidated Statements of Income for the Nine Months Ended September                  30,                  2007 and 2006               |   | 6      |
|                                                                                                                                                               |   |   |
| Unaudited                  Consolidated Statements of Changes in Stockholders’ Equity For the Nine                  Months Ended September 30, 2007 and 2006 |   | 7      |
|                                                                                                                                                               |   |   |
| Unaudited                  Consolidated Statements of Cash Flows for the Nine Months Ended                  September                  30, 2007 and 2006           |   | 8      |
|                                                                                                                                                               |   |   |
| Item                  2. Management’s Discussion and Analysis of Financial Condition and Results                  of Operations                              |   | 13     |
|                                                                                                                                                               |   |   |
| Item                  3. Quantitative and Qualitative Disclosures About Market                  Risk                                                               |   | 20     |
|                                                                                                                                                               |   |   |
| Item                  4. Controls and Procedures                                                                                                                   |   | 20     |
|                                                                                                                                                               |   |   |
| Part                  II - OTHER INFORMATION                                                                                                                       |   |   |
|                                                                                                                                                               |   |   |
| Item                  1. Legal Proceedings - None                                                                                                                  |   |   |
|                                                                                                                                                               |   |   |
| Risk                  Factors - No change in factors as reported in Registrant’s Annual Report                  on Form 10-K                                 |   |   |
|                                                                                                                                                               |   |   |
| Item                  2. Change in Securities and Use of Proceeds                                                                                                  |   |   |

| Issuer                  Purchases of Equity Securities  |   |                                                                                          |   |                                                                                 |   |                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                |   |
|---------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                    |   |                                                                                          |   |                                                                                 |   |                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                |   |
|                                                    |   | (a)                                                                                           |   | (b)                                                                                  |   | (c)                                                                                                                                                                                                                                             |   | (d)                                                                                                                                                                                                                                                                                                                                                                 |   |
| Period                                                  |   | TotalNumberof                            Shares(or                            Units)Purchased |   | AveragePricePaid                          PerShare(or                          Unit) |   | Total                                Number ofShares(or                                Units)Purchased                                asPart                                of PubliclyAnnouncedPlansor                                Programs |   | MaximumNumber(or                                    ApproximateDollar                                    Value) ofShares(or                                    Units)That                                    May Yet BePurchased                                    Underthe                                    Plansor                                    Programs |   |
| July                  1, 2007 - July 31, 2007           |   |                                                                                          | 0      |                                                                                 |   | 0                                                                                                                                                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                | 0      |   |   | 874,163 |   |
| August                  1, 2007 - August 31, 2007       |   |                                                                                          | 0      |                                                                                 |   | 0                                                                                                                                                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                | 0      |   |   | 874,163 |   |
| September                  1, 2007 - September 30, 2007 |   |                                                                                          | 0      |                                                                                 |   | 0                                                                                                                                                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                | 0      |   |   | 874,163 |   |
|                                                    |   |                                                                                          |   |                                                                                 |   |                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |
| Total                                                   |   |                                                                                          | 0      |                                                                                 |   | 0                                                                                                                                                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                | 0      |   |   | 874,163 |   |

| 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                                            |   |   |

----

| Exhibit                Number Referred to in Item 601                of Regulation S-K |   | Description                of Exhibit                                                                                                       |
|----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                   |   |                                                                                                                                        |
| 31.1                                                                                   |   | Certification                of Chief Executive Officer pursuant to Rule 13a-14(a)                                                          |
|                                                                                   |   |                                                                                                                                        |
| 31.2                                                                                   |   | Certification                of Chief Financial Officer pursuant to Rule 13a-14(a)                                                          |
|                                                                                   |   |                                                                                                                                        |
| 32.1                                                                                   |   | Certification                of Chief Executive Officer pursuant                to Rule 13a-14(b) and 18 U.S.C. Section                1350 |
|                                                                                   |   |                                                                                                                                        |
| 32.2                                                                                   |   | Certification                of Chief Financial Officer pursuant                to Rule 13a-14(b) and 18 U.S.C. Section                1350 |

|  | (2) | Reports                    on Form 8-K |
|--|-----|----------------------------------------|

----

**SMITHTOWN      BANCORP, INC.**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                                                                                                                                                                                                           |   | As                of         |                      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------------------------|
|                                                                                                                                                                                                                                                                                                                                           |   | September                30, 2007 |                      | December                31, 2006 |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                     |   |                              |                      |   |   |
| Cash                and due from banks                                                                                                                                                                                                                                                                                                         |   | $                                 | 15,529                    |   | $ | 27,384 |   |
| Federal                funds sold                                                                                                                                                                                                                                                                                                              |   |                              | 502                       |   |   | 236 |   |
| Total                cash and cash equivalents                                                                                                                                                                                                                                                                                                 |   |                              | 16,031                    |   |   | 27,620 |   |
| Investment                securities:                                                                                                                                                                                                                                                                                                          |   |                              |                      |   |   |   |   |
| Available                for sale:                                                                                                                                                                                                                                                                                                             |   |                              |                      |   |   |   |   |
| Obligations                of U.S. government agencies                                                                                                                                                                                                                                                                                         |   |                              | 44,706                    |   |   | 84,713 |   |
| Mortgage                - backed securities                                                                                                                                                                                                                                                                                                    |   |                              | 1,781                     |   |   | 2,972 |   |
| Obligations                of state and political subdivisions                                                                                                                                                                                                                                                                                 |   |                              | 6,650                     |   |   | 8,943 |   |
| Other                securities                                                                                                                                                                                                                                                                                                                |   |                              | 11,553                    |   |   | 3,968 |   |
| Total                securities available for sale                                                                                                                                                                                                                                                                                             |   |                              | 64,690                    |   |   | 100,596 |   |
| Held                to maturity:                                                                                                                                                                                                                                                                                                               |   |                              |                      |   |   |   |   |
| Mortgage-backed                securities                                                                                                                                                                                                                                                                                                      |   |                              | 15                        |   |   | 41 |   |
| Obligations                of state and political subdivisions                                                                                                                                                                                                                                                                                 |   |                              | 202                       |   |   | 374 |   |
| Total                securities held to maturity (estimated fair value                                                                                                                                                                                                                                                                         |   |                              |                      |   |   |   |   |
| $204                in 2007 and $418 in 2006)                                                                                                                                                                                                                                                                                                  |   |                              | 217                       |   |   | 415 |   |
| Total                investment securities                                                                                                                                                                                                                                                                                                     |   |                              | 64,907                    |   |   | 101,011 |   |
| Restricted                securities                                                                                                                                                                                                                                                                                                           |   |                              | 2,298                     |   |   | 4,249 |   |
| Loans                                                                                                                                                                                                                                                                                                                                          |   |                              | 948,826                   |   |   | 849,258 |   |
| Less:                allowance for loan losses                                                                                                                                                                                                                                                                                                 |   |                              | 7,967                     |   |   | 7,051 |   |
| Loans,                net                                                                                                                                                                                                                                                                                                                      |   |                              | 940,859                   |   |   | 842,207 |   |
| Bank                premises and equipment                                                                                                                                                                                                                                                                                                     |   |                              | 21,726                    |   |   | 20,598 |   |
| Other                assets                                                                                                                                                                                                                                                                                                                    |   |                              |                      |   |   |   |   |
| Cash                value of bank-owned life insurance                                                                                                                                                                                                                                                                                         |   |                              | 18,768                    |   |   | 18,195 |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                       |   |                              | 3,860                     |   |   | 2,077 |   |
| Intangible                assets                                                                                                                                                                                                                                                                                                               |   |                              | 1,533                     |   |   | 1,591 |   |
| Other                real estate owned                                                                                                                                                                                                                                                                                                         |   |                              | 6,972                     |   |   | 6,972 |   |
| Due                from broker                                                                                                                                                                                                                                                                                                                 |   |                              | -                         |   |   | 9,225 |   |
| Other                                                                                                                                                                                                                                                                                                                                          |   |                              | 18,534                    |   |   | 14,479 |   |
| Total                other assets                                                                                                                                                                                                                                                                                                              |   |                              | 49,667                    |   |   | 52,539 |   |
| Total                assets                                                                                                                                                                                                                                                                                                                    |   | $                                 | 1,095,488                 |   | $ | 1,048,224 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                              |                      |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                                                        |   |                              |                      |   |   |   |   |
| Liabilities                                                                                                                                                                                                                                                                                                                                    |   |                              |                      |   |   |   |   |
| Deposits:                                                                                                                                                                                                                                                                                                                                      |   |                              |                      |   |   |   |   |
| Demand                (non-interest bearing)                                                                                                                                                                                                                                                                                                   |   | $                                 | 107,492                   |   | $ | 102,608 |   |
| Money                market                                                                                                                                                                                                                                                                                                                    |   |                              | 358,405                   |   |   | 264,876 |   |
| NOW                                                                                                                                                                                                                                                                                                                                            |   |                              | 31,971                    |   |   | 42,003 |   |
| Savings                                                                                                                                                                                                                                                                                                                                        |   |                              | 54,113                    |   |   | 50,190 |   |
| Time                                                                                                                                                                                                                                                                                                                                           |   |                              | 412,615                   |   |   | 432,640 |   |
| Total                deposits                                                                                                                                                                                                                                                                                                                  |   |                              | 964,596                   |   |   | 892,317 |   |
| Dividends                payable                                                                                                                                                                                                                                                                                                               |   |                              | 392                       |   |   | 355 |   |
| Other                borrowings                                                                                                                                                                                                                                                                                                                |   |                              | 25,000                    |   |   | 59,580 |   |
| Subordinated                debt                                                                                                                                                                                                                                                                                                               |   |                              | 18,217                    |   |   | 18,217 |   |
| Other                liabilities                                                                                                                                                                                                                                                                                                               |   |                              | 10,217                    |   |   | 10,948 |   |
| Total                liabilities                                                                                                                                                                                                                                                                                                               |   |                              | 1,018,422                 |   |   | 981,417 |   |
| Stockholders'                equity                                                                                                                                                                                                                                                                                                            |   |                              |                      |   |   |   |   |
| Common                stock - $.01 par value (20,000,000 shares authorized at September                30, 2007                and December 31, 2006; 11,852,497 shares issued, 9,800,633 shares                outstanding at September 30, 2007; 11,826,012 shares issued, 9,774,148                shares outstanding at December 31, 2006) |   |                              | 119                       |   |   | 108 |   |
| Additional                paid in capital                                                                                                                                                                                                                                                                                                      |   |                              | 4,387                     |   |   | 4,046 |   |
| Retained                earnings                                                                                                                                                                                                                                                                                                               |   |                              | 82,779                    |   |   | 73,046 |   |
| Accumulated                other comprehensive loss                                                                                                                                                                                                                                                                                            |   |                              | (157                      | ) |   | (331 | ) |
|                                                                                                                                                                                                                                                                                                                                           |   |                              | 87,128                    |   |   | 76,869 |   |
| Treasury                stock (2,051,864 shares at cost)                                                                                                                                                                                                                                                                                       |   |                              | (10,062                   | ) |   | (10,062 | ) |
| Total                stockholders' equity                                                                                                                                                                                                                                                                                                      |   |                              | 77,066                    |   |   | 66,807 |   |
| Total                liabilities and stockholders' equity                                                                                                                                                                                                                                                                                      |   | $                                 | 1                ,095,488 |   | $ | 1,048,224 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                              |                      |   |   |   |   |
| See                notes to consolidated financial statements.                                                                                                                                                                                                                                                                                 |   |                              |                      |   |   |   |   |

----

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

|                                                               |   | For                the Three Months EndedSeptember                30, |      |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------------|-----------|
|                                                               |   | 2007                                                                  |      | 2006 |   |
| Interest                income                                     |   |                                                                  |      |   |   |
| Loans                                                              |   | $                                                                     | 18,861    |   | $ | 15,757 |   |
| Federal                funds sold                                  |   |                                                                  | 203       |   |   | 127 |   |
| Investment                securities:                              |   |                                                                  |      |   |   |  |   |
| Taxable:                                                           |   |                                                                  |      |   |   |   |   |
| Obligations                of U.S. treasury                        |   |                                                                  | -         |   |   | 45 |   |
| Obligations                of U.S. government agencies             |   |                                                                  | 711       |   |   | 1,119 |   |
| Mortgage                - backed securities                        |   |                                                                  | 29        |   |   | 43 |   |
| Other                securities                                    |   |                                                                  | 110       |   |   | 27 |   |
| Subtotal                                                           |   |                                                                  | 850       |   |   | 1,234 |   |
| Exempt                from federal income taxes:                   |   |                                                                  |      |   |   |   |   |
| Obligations                of state & political subdivisions   |   |                                                                  | 72        |   |   | 105 |   |
| Other                                                              |   |                                                                  | 55        |   |   | 75 |   |
| Total                interest income                               |   |                                                                  | 20,041    |   |   | 17,298 |   |
|                                                               |   |                                                                  |      |   |   |   |   |
| Interest                expense                                    |   |                                                                  |      |   |   |   |   |
| Money                market accounts (including savings)           |   |                                                                  | 4,005     |   |   | 2,278 |   |
| Time                deposits of $100,000 or more                   |   |                                                                  | 2,017     |   |   | 1,659 |   |
| Other                time deposits                                 |   |                                                                  | 2,883     |   |   | 2,861 |   |
| Other                borrowings                                    |   |                                                                  | 297       |   |   | 572 |   |
| Subordinated                debt                                   |   |                                                                  | 352       |   |   | 355 |   |
| Total                interest expense                              |   |                                                                  | 9,554     |   |   | 7,725 |   |
|                                                               |   |                                                                  |      |   |   |   |   |
| Net                interest income                                 |   |                                                                  | 10,487    |   |   | 9,573 |   |
| Provision                for loan losses                           |   |                                                                  | 300       |   |   | 300 |   |
| Net                interest income after provision for loan losses |   |                                                                  | 10,187    |   |   | 9,273 |   |
|                                                               |   |                                                                  |      |   |   |   |   |
| Noninterest                income                                  |   |                                                                  |      |   |   |   |   |
| Trust                and investment services                       |   |                                                                  | 178       |   |   | 121 |   |
| Service                charges on deposit accounts                 |   |                                                                  | 542       |   |   | 448 |   |
| Revenues                from insurance agency                      |   |                                                                  | 1,032     |   |   | 984 |   |
| Net                gain on sales of investment securities          |   |                                                                  | 34        |   |   | 205 |   |
| Increase                in cash value of bank owned life insurance |   |                                                                  | 194       |   |   | 164 |   |
| Other                                                              |   |                                                                  | 479       |   |   | 588 |   |
| Total                noninterest income                            |   |                                                                  | 2,459     |   |   | 2,510 |   |
|                                                               |   |                                                                  |      |   |   |   |   |
| Noninterest                expense                                 |   |                                                                  |      |   |   |   |   |
| Salaries                                                           |   |                                                                  | 2,925     |   |   | 2,823 |   |
| Pension                and other employee benefits                 |   |                                                                  | 715       |   |   | 587 |   |
| Net                occupancy expense of bank premises              |   |                                                                  | 966       |   |   | 907 |   |
| Furniture                and equipment expense                     |   |                                                                  | 725       |   |   | 560 |   |
| Amortization                of intangible assets                   |   |                                                                  | 119       |   |   | 229 |   |
| Other                                                              |   |                                                                  | 1,270     |   |   | 1,051 |   |
| Total                noninterest expense                           |   |                                                                  | 6,720     |   |   | 6,157 |   |
|                                                               |   |                                                                  |      |   |   |   |   |
| Income                before income taxes                          |   |                                                                  | 5,926     |   |   | 5,626 |   |
| Provision                for income taxes                          |   |                                                                  | 2,107     |   |   | 1,977 |   |
| Net                income                                          |   | $                                                                     | 3,819     |   | $ | 3,649 |   |
|                                                               |   |                                                                  |      |   |   |   |   |
| Basic                earnings per share                            |   | $                                                                     | 0.39      |   | $ | 0.37 |   |
| Diluted                earnings per share                          |   | $                                                                     | 0.39      |   | $ | 0.37 |   |
|                                                               |   |                                                                  |      |   |   |   |   |
| Cash                dividends declared                             |   | $                                                                     | 0.04      |   | $ | 0.04 |   |
| Weighted                average common shares outstanding          |   |                                                                  | 9,770,828 |   |   | 9,754,764 |   |
| Weighted                average common equivalent shares           |   |                                                                  | 9,773,193 |   |   | 9,758,014 |   |
| Comprehensive                income                                |   | $                                                                     | 3,945     |   | $ | 4,231 |   |
|                                                               |   |                                                                  |      |   |   |   |   |
| See                notes to consolidated financial statements.     |   |                                                                  |      |   |   |   |   |

----

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

|                                                               |   | For                the Nine Months EndedSeptember                30, |      |
|--------------------------------------------------------------------|--------|----------------------------------------------------------------------|-----------|
|                                                               |   | 2007                                                                 |      | 2006 |   |
| Interest                income                                     |   |                                                                 |      |   |   |
| Loans                                                              |   | $                                                                    | 54,954    |   | $ | 44,680 |   |
| Federal                funds sold                                  |   |                                                                 | 712       |   |   | 349 |   |
| Investment                securities:                              |   |                                                                 |      |   |   |  |   |
| Taxable:                                                           |   |                                                                 |      |   |   |   |   |
| Obligations                of U.S. treasury                        |   |                                                                 | -         |   |   | 168 |   |
| Obligations                of U.S. government agencies             |   |                                                                 | 2,314     |   |   | 3,054 |   |
| Mortgage                - backed securities                        |   |                                                                 | 99        |   |   | 146 |   |
| Other                securities                                    |   |                                                                 | 246       |   |   | 71 |   |
| Subtotal                                                           |   |                                                                 | 2,659     |   |   | 3,439 |   |
| Exempt                from federal income taxes:                   |   |                                                                 |      |   |   |   |   |
| Obligations                of state & political subdivisions   |   |                                                                 | 222       |   |   | 348 |   |
| Other                                                              |   |                                                                 | 167       |   |   | 180 |   |
| Total                interest income                               |   |                                                                 | 58,714    |   |   | 48,996 |   |
|                                                               |   |                                                                 |      |   |   |   |   |
| Interest                expense                                    |   |                                                                 |      |   |   |   |   |
| Money                market accounts (including savings)           |   |                                                                 | 11,463    |   |   | 6,323 |   |
| Time                deposits of $100,000 or more                   |   |                                                                 | 5,840     |   |   | 4,075 |   |
| Other                time deposits                                 |   |                                                                 | 8,599     |   |   | 7,652 |   |
| Other                borrowings                                    |   |                                                                 | 1,090     |   |   | 1,965 |   |
| Subordinated                debt                                   |   |                                                                 | 1,040     |   |   | 903 |   |
| Total                interest expense                              |   |                                                                 | 28,032    |   |   | 20,918 |   |
|                                                               |   |                                                                 |      |   |   |   |   |
| Net                interest income                                 |   |                                                                 | 30,682    |   |   | 28,078 |   |
| Provision                for loan losses                           |   |                                                                 | 1,000     |   |   | 1,400 |   |
| Net                interest income after provision for loan losses |   |                                                                 | 29,682    |   |   | 26,678 |   |
|                                                               |   |                                                                 |      |   |   |   |   |
| Noninterest                income                                  |   |                                                                 |      |   |   |   |   |
| Trust                and investment services                       |   |                                                                 | 574       |   |   | 364 |   |
| Service                charges on deposit accounts                 |   |                                                                 | 1,437     |   |   | 1,423 |   |
| Revenues                from insurance agency                      |   |                                                                 | 2,819     |   |   | 2,948 |   |
| Net                gain on sales of investment securities          |   |                                                                 | 34        |   |   | 194 |   |
| Increase                in cash value of bank owned life insurance |   |                                                                 | 613       |   |   | 482 |   |
| Other                                                              |   |                                                                 | 1,418     |   |   | 1,794 |   |
| Total                noninterest income                            |   |                                                                 | 6,895     |   |   | 7,205 |   |
|                                                               |   |                                                                 |      |   |   |   |   |
| Noninterest                expense                                 |   |                                                                 |      |   |   |   |   |
| Salaries                                                           |   |                                                                 | 8,894     |   |   | 8,270 |   |
| Pension                and other employee benefits                 |   |                                                                 | 2,191     |   |   | 1,826 |   |
| Net                occupancy expense of bank premises              |   |                                                                 | 2,999     |   |   | 2,638 |   |
| Furniture                and equipment expense                     |   |                                                                 | 2,042     |   |   | 1,593 |   |
| Amortization                of intangible assets                   |   |                                                                 | 359       |   |   | 612 |   |
| Other                                                              |   |                                                                 | 3,497     |   |   | 3,243 |   |
| Total                noninterest expense                           |   |                                                                 | 19,982    |   |   | 18,182 |   |
|                                                               |   |                                                                 |      |   |   |   |   |
| Income                before income taxes                          |   |                                                                 | 16,595    |   |   | 15,701 |   |
| Provision                for income taxes                          |   |                                                                 | 5,721     |   |   | 5,429 |   |
| Net                income                                          |   | $                                                                    | 10,874    |   | $ | 10,272 |   |
|                                                               |   |                                                                 |      |   |   |   |   |
| Basic                earnings per share                            |   | $                                                                    | 1.12      |   | $ | 1.05 |   |
| Diluted                earnings per share                          |   | $                                                                    | 1.12      |   | $ | 1.05 |   |
| Cash                dividends declared                             |   | $                                                                    | 0.12      |   | $ | 0.12 |   |
| Weighted                average common shares outstanding          |   |                                                                 | 9,768,807 |   |   | 9,753,585 |   |
| Weighted                average common equivalent shares           |   |                                                                 | 9,771,579 |   |   | 9,755,931 |   |
| Comprehensive                income                                |   | $                                                                    | 11,048    |   | $ | 10,455 |   |
|                                                               |   |                                                                 |      |   |   |   |   |
| See                notes to consolidated financial statements.     |   |                                                                 |      |   |   |   |   |

----

**SMITHTOWN          BANCORP, INC.**

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

|                                                                          |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   | Other                            |   |   |         |   |   |                |   |
|-------------------------------------------------------------------------------|--------|--------|---------------------------------|--------|--------|--------------|--------|--------|----------------------------------|--------|--------|--------------|--------|--------|-------------|--------|--------|----------------------------------|--------|--------|--------------|--------|--------|---------------------|--------|
|                                                                          |   |   | Common                    Stock |   |   | Additional   |   |   |                             |   |   |         |   |   | Accumulated |   |   | Unearned                         |   |   | Total        |   |
|                                                                          |   |   | Shares                     |   |   |         |   |   | Paid                    In  |   |   | Retained     |   |   | Treasury    |   |   | Comprehensive                    |   |   | Stock        |   |   | Stockholders’ |   |
|                                                                          |   |   | Outstanding                     |   |   | Amount       |   |   | Capital                     |   |   | Earnings     |   |   | Stock       |   |   | Income                    (Loss) |   |   | Awards       |   |   | Equity              |   |
| Balance                    at 12/31/2005                                      |   |   | 9,774,148                       |   | $      | 108          |   | $      | 4,372                            |   | $      | 62,124       |   | $      | (10,062     | )      | $      | (601                             | )      | $      | (91          | )      | $      | 55,850              |   |
| Comprehensive                    income:                                      |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   |                             |   |   |         |   |   |                |   |
| Net                    income                                                 |   |   |                            |   |   |         |   |   |                             |   |   | 10,272       |   |   |        |   |   |                             |   |   |         |   |   | 10,272              |   |
| Other                    comprehensive income                    , net of tax |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   | 183                              |   |   |         |   |   | 183                 |   |
| Total                    comprehensive income                                 |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   |                             |   |   |         |   |   | 10,455              |   |
|                                                                          |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   |                             |   |   |         |   |   |                |   |
| Cash                    dividends declared                                    |   |   |                            |   |   |         |   |   |                             |   |   | (1,066       | )      |   |        |   |   |                             |   |   |         |   |   | (1,066              | )      |
| Transfer                    due to the                                        |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   |                             |   |   |         |   |   |                |   |
| adoption                    of SFAS 123R                                      |   |   |                            |   |   |         |   |   | (91                              | )      |   |         |   |   |        |   |   |                             |   |   | 91           |   |   | -                   |   |
| Stock                    awards vested                                        |   |   |                            |   |   |         |   |   | 62                               |   |   |         |   |   |        |   |   |                             |   |   |         |   |   | 62                  |   |
| Stock                    awards granted                                       |   |   | 16,088                          |   |   |         |   |   | (323                             | )      |   |         |   |   | 323         |   |   |                             |   |   |         |   |   | -                   |   |
| Treasury                    stock purchases                                   |   |   | (16,088                         | )      |   |         |   |   |                             |   |   |         |   |   | (323        | )      |   |                             |   |   |         |   |   | (323                | )      |
| Balance                    at 9/30/2006                                       |   |   | 9,774,148                       |   | $      | 108          |   | $      | 4,020                            |   | $      | 71,330       |   | $      | (10,062     | )      | $      | (418                             | )      | $      | -            |   | $      | 64,978              |   |
|                                                                          |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   |                             |   |   |         |   |   |                |   |
| Balance                    at 12/31/2006                                      |   |   | 9,774,148                       |   | $      | 108          |   | $      | 4,046                            |   | $      | 73,046       |   | $      | (10,062     | )      | $      | (331                             | )      | $      | -            |   | $      | 66,807              |   |
| Comprehensive                    income:                                      |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   |                             |   |   |         |   |   |                |   |
| Net                    income                                                 |   |   |                            |   |   |         |   |   |                             |   |   | 10,874       |   |   |        |   |   |                             |   |   |         |   |   | 10,874              |   |
| Other                    comprehensive income,                    net of tax  |        |   |                                 |   |   |         |   |   |                             |   |   |              |   |   |        |   |   | 174                              |   |   |         |   |   | 174                 |   |
| Total                    comprehensive income                                 |   |   |                            |   |   |         |   |   |                             |   |   |         |   |   |        |   |   |                             |   |   |         |   |   | 11,048              |   |
| Adjust                    capital stock for shares outstanding                |   |   |                            |   |   | 11           |   |   | (11                              | )      |   |         |   |   |        |   |   |                             |   |   |         |   |   | -                   |   |
| 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                                       |   |   | 9,800,633                       |   | $      | 119          |   | $      | 4,387                            |   | $      | 82,779       |   | $      | (10,062     | )      | $      | (157                             | )      | $      | -            |   | $      | 77,066              |   |

----

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

|                                                                                                            |   | For                the Nine Months       |    |
|-----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                                                            |   |  Ended                September 30, |    |
|                                                                                                            |   | 2007                                     |    | 2006 |   |
| **Cash                flows from operating activities**                                                         |   |                                     |    |   |   |
| Net                income                                                                                       |   | $                                        | 10,874  |   | $ | 10,272 |   |
| Adjustments                to reconcile net income to net cash provided by operating                activities: |   |                                     |         |   |   |  |   |
| Depreciation                on premises and equipment                                                           |   |                                     | 1,936   |   |   | 1,438 |   |
| Provision                for loan losses                                                                        |   |                                     | 1,000   |   |   | 1,400 |   |
| Net                gain on sale of investment securities                                                        |   |                                     | (34     | ) |   | (194 | ) |
| Net                increase (decrease) in other liabilities                                                     |   |                                     | (732    | ) |   | 1,505 |   |
| Net                increase in other assets                                                                     |   |                                     | (3,063  | ) |   | (2,514 | ) |
| Net                increase in deferred taxes                                                                   |   |                                     | (1,480  | ) |   | (140 | ) |
| Amortization                of unearned restricted stock awards                                                 |   |                                     | 128     |   |   | 62 |   |
| Increase                in cash surrender value of officers’ life insurance                policies       |   |                                     | (613    | ) |   | (482 | ) |
| Amortization                of investment security premiums and accretion of discounts,                net      |   |                                     | (13     | ) |   | (63 | ) |
| Amortization                of intangible assets                                                                |   |                                     | 359     |   |   | 612 |   |
|                                                                                                            |   |                                     |    |   |   |   |   |
|  Cash                provided                by operating activities                                       |   |                                     | 8,362   |   |   | 11,896 |   |
|                                                                                                            |   |                                     |         |   |   |  |   |
| **Cash                flows from investing activities**                                                         |   |                                     |         |   |   |  |   |
| Mortgage-backed                securities:                                                                      |   |                                     |         |   |   |  |   |
| Proceeds                from calls, repayments, maturities and sales of available for                sale       |   |                                     | 1,198   |   |   | 4,676 |   |
| Proceeds                from calls, repayments and maturities of held to maturity                               |   |                                     | -       |   |   | 38 |   |
| Other                securities:                                                                                |   |                                     |         |   |   |  |   |
| Proceeds                from calls, repayments, maturities and sales of available for                sale       |   |                                     | 59,694  |   |   | 24,802 |   |
| Proceeds                from calls, repayments and maturities of held to maturity                               |   |                                     | 198     |   |   | 703 |   |
| Purchases                of investment securities:                                                              |   |                                     |         |   |   |  |   |
| Available                for sale                                                                               |   |                                     | (15,172 | ) |   | (29,977 | ) |
| Purchases                of restricted securities                                                               |   |                                     | (3,817  | ) |   | (2,419 | ) |
| Redemptions                of restricted securities                                                             |   |                                     | 5,768   |   |   | 4,464 |   |
| Loans                made to customers, net                                                                     |   |                                     | (99,568 | ) |   | (106,635 | ) |
| Payment                for Bank of Smithtown Insurance Agents & Brokers, Inc.                               |   |                                     | (1,554  | ) |   | (1,596 | ) |
| Payment                for acquisition of Payne & Palmieri insurance company                                |   |                                     | (229    | ) |   | - |   |
| Purchases                of premises and equipment                                                              |   |                                     | (3,064  | ) |   | (2,945 | ) |
|                                                                                                            |   |                                     |         |   |   |  |   |
|  Cash                used in investing activities                                                          |   |                                     | (56,546 | ) |   | (108,889 | ) |
|                                                                                                            |   |                                     |         |   |   |  |   |
| **Cash                flows from financing activities**                                                         |   |                                     |         |   |   |  |   |
| Net                increase in demand deposits, money market, NOW and savings                                   |   |                                     | 92,304  |   |   | 38,637 |   |
| Net                increase (decrease) in time deposits                                                         |   |                                     | (20,025 | ) |   | 114,078 |   |
| Cash                dividends paid                                                                              |   |                                     | (1,104  | ) |   | (1,066 | ) |
| Maturities                of Federal Home Loan Bank term advances                                               |   |                                     | (30,000 | ) |   | (14,000 | ) |
| Net                decrease in overnight borrowings                                                             |   |                                     | (4,580  | ) |   | (38,949 | ) |
| Proceeds                from subordinated debt issue                                                            |   |                                     | -       |   |   | 7,000 |   |
| Purchase                of treasury stock                                                                       |   |                                     | -       |   |   | (323 | ) |
|                                                                                                            |   |                                     |         |   |   |  |   |
| Cash                provided by financing activities                                                            |   |                                     | 36,595  |   |   | 105,377 |   |
|                                                                                                            |   |                                     |         |   |   |  |   |
| Net                increase (decrease) in cash and cash equivalents                                             |   |                                     | (11,589 | ) |   | 8,384 |   |
| Cash                and cash equivalents, beginning of period                                                   |   |                                     | 27,620  |   |   | 13,467 |   |
|                                                                                                            |   |                                     |         |   |   |  |   |
| Cash                and cash equivalents, end of period                                                         |   | $                                        | 16,031  |   | $ | 21,851 |   |
|                                                                                                            |   |                                     |         |   |   |  |   |
| Supplemental                disclosures of cash flow information                                                |   |                                     |         |   |   |  |   |
| Cash                paid during the year for:                                                                   |   |                                     |         |   |   |  |   |
| Interest                                                                                                        |   | $                                        | 28,230  |   | $ | 19,173 |   |
| Income                taxes                                                                                     |   |                                     | 9,123   |   |   | 6,055 |   |
| Noncash                financing activities                                                                     |   |                                     |    |   |   |   |   |
| Proceeds                from issuance of common stock                                                           |   | $                                        | 225     |   | $ | - |   |
|                                                                                                            |   |                                     |    |   |   |   |   |
| See                notes to consolidated financial statements.                                                  |   |                                     |    |   |   |   |   |

----

----

|                                                                 |   | Three                Months Ended |      |
|----------------------------------------------------------------------|--------|-----------------------------------|-----------|
|                                                                 |   | September                30,      |      | September                30, |   |
|                                                                 |   | 2007                              |      | 2006 |   |
| Computation                of per share income                       |   |                              |      |   |   |
| (in                thousands, except share and per share data)       |   |                              |      |   |   |
|                                                                 |   |                              |      |   |   |
| Net                income                                            |   | $                                 | 3,818     |   | $ | 3,649 |   |
|                                                                 |   |                              |      |   |   |   |   |
| Common                equivalent shares:                             |   |                              |      |   |   |   |   |
|                                                                 |   |                              |      |   |   |   |   |
| Weighted                average common shares outstanding*           |   |                              | 9,770,828 |   |   | 9,754,764 |   |
| Weighted                average common equivalent shares*            |   |                              | 2,365     |   |   | 3,250 |   |
| Weighted                average common and common equivalent shares* |   |                              | 9,773,193 |   |   | 9,758,014 |   |
| Basic                earnings per share                              |   | $                                 | 0.39      |   | $ | 0.37 |   |
| Diluted                earnings per share                            |   | $                                 | 0.39      |   | $ | 0.37 |   |

|                                                                 |   | Nine                Months Ended |      |
|----------------------------------------------------------------------|--------|----------------------------------|-----------|
|                                                                 |   | September                30,     |      | September                30, |   |
|                                                                 |   | 2007                             |      | 2006 |   |
| Computation                of per share income                       |   |                             |      |   |   |
| (in                thousands, except share and per share data)       |   |                             |      |   |   |
|                                                                 |   |                             |      |   |   |
| Net                income                                            |   | $                                | 10,874    |   | $ | 10,272 |   |
|                                                                 |   |                             |      |   |   |   |   |
| Common                equivalent shares:                             |   |                             |      |   |   |   |   |
|                                                                 |   |                             |      |   |   |   |   |
| Weighted                average common shares outstanding*           |   |                             | 9,768,807 |   |   | 9,753,585 |   |
| Weighted                average common equivalent shares*            |   |                             | 2,772     |   |   | 2,346 |   |
| Weighted                average common and common equivalent shares* |   |                             | 9,771,579 |   |   | 9,755,931 |   |
| Basic                earnings per share                              |   | $                                | 1.12      |   | $ | 1.05 |   |
| Diluted                earnings per share                            |   | $                                | 1.12      |   | $ | 1.05 |   |

----

|                                            |   | Weighted                Average |   |
|-------------------------------------------------|--------|---------------------------------|--------|
|                                            |   | Shares                     |   | Grant                Date Share Value |   |
| Nonvested                at beginning of period |   |                            | 30,500 |   | $ | 21.49 |   |
| Granted                                         |   |                            | 0      |   |   | 0 |   |
| Vested                                          |   |                            | (2,042 | ) |   | 20.82 |   |
| Nonvested                at end of period       |   |                            | 28,458 |   | $ | 21.54 |   |

|                                            |   | Weighted                Average |   |
|-------------------------------------------------|--------|---------------------------------|--------|
|                                            |   |  Shares               |   | Grant                Date Share Value |   |
| Nonvested                at beginning of period |   |                            | 19,792 |   | $ | 18.70 |   |
| Granted                                         |   |                            | -      |   |   | - |   |
| Vested                                          |   |                            | (1,184 | ) |   | 18.43 |   |
| Nonvested                at end of period       |   |                            | 18,608 |   | $ | 18.72 |   |

|                                              |   | For                  the Three Months Ended |   |
|---------------------------------------------------|--------|---------------------------------------------|--------|
|                                              |   | September                  30,              |   |
|                                              |   | 2007                                        |   | 2006 |   |
| 401(K)                  Defined Contribution Plan |   | $                                           | 55     |   | $ | 41 |   |
| Employee                  Stock Ownership Plan    |   |                                        | 56     |   |   | 50 |   |

----

|                                              |   | For                  the Nine Months Ended |   |
|---------------------------------------------------|--------|--------------------------------------------|--------|
|                                              |   | September                  30,             |   |
|                                              |   | 2007                                       |   | 2006 |   |
| 401(K)                  Defined Contribution Plan |   | $                                          | 165    |   | $ | 145 |   |
| Employee                  Stock Ownership Plan    |   |                                       | 169    |   |   | 151 |   |

|                                |   |                           |   | Amortization |   | Amortization                 |   | Total                  Net |   |
|-------------------------------------|--------|--------------------------------|--------|--------------|--------|------------------------------|--------|----------------------------|--------|
|                                |   | Interest                  Cost |   | Cost         |   | of                  Net Gain |   | Expense                    |   |
| September                  30, 2007 |   | $                              | 4      |         | $      | 8                            |   | $                          | 2      |   | $ | 10 |   |
| September                  30, 2006 |   |                           | 4      |         |   | 8                            |   |                       | 2      |   |   | 10 |   |

|                                |   |                           |   | Amortization |   | Amortization                 |   | Total                  Net |   |
|-------------------------------------|--------|--------------------------------|--------|--------------|--------|------------------------------|--------|----------------------------|--------|
|                                |   | Interest                  Cost |   | Cost         |   | of                  Net Gain |   | Expense                    |   |
| September                  30, 2007 |   | $                              | 12     |         | $      | 24                           |   | $                          | 6      |   | $ | 30 |   |
| September                  30, 2006 |   |                           | 12     |         |   | 24                           |   |                       | 5      |   |   | 31 |   |

|                                       |   | For                  the Three Months Ended |   | For                  the Nine Months Ended |   |
|--------------------------------------------|--------|---------------------------------------------|--------|--------------------------------------------|--------|
|                                       |   | September                  30,              |   | September                  30,             |   |
|                                       |   | 2007                                        |   | 2006                                       |   | 2007 |   | 2006 |   |
| Incentive                  Retirement Plan |   | $                                           | 77     |                                       | $      | 66 |   | $ | 223 |   | $ | 191 |   |

* *

|                                                         |   | For                  the Three Months Ended |   | For                  the Nine Months Ended |   |
|--------------------------------------------------------------|--------|---------------------------------------------|--------|--------------------------------------------|--------|
|                                                         |   | September                  30,              |   | September                  30,             |   |
|                                                         |   | 2007                                        |   | 2006                                       |   | 2007 |   | 2006 |   |
| Supplemental                  Executive Retirement Agreement |   | $                                           | 100    |                                       | $      | 66 |   | $ | 286 |   | $ | 191 |   |

----

| Customer                  Relationship Intangible |   |
|---------------------------------------------------|--------|
| Year                  1                           |   | $ | 29 |   |
| Year                  2                           |   |   | 70 |   |
| Year                  3                           |   |   | 50 |   |
| Year                  4                           |   |   | 36 |   |
| Year                  5                           |   |   | 26 |   |
| Total                                             |   | $ | 211 |   |

| Covenant                  Intangible |   |   |   |
|--------------------------------------|--------|--------|--------|
| Year                  1              |   | $      | 1      |   |
| Year                  2              |   |   | 5      |   |
| Year                  3              |   |   | 5      |   |
| Year                  4              |   |   | 5      |   |
| Year                  5              |   |   | 5      |   |
|                                 |   | $      | 21     |   |

| Receivables                              |   | $      | 25  |   |
|------------------------------------------|--------|--------|-----|--------|
| Goodwill                                 |   |   | 222 |   |
| Customer                  intangible     |   |   | 275 |   |
| Covenant                  not to compete |   |   | 27  |   |
| Total                  assets acquired   |   | $      | 549 |   |

----

|   | · | EPS                  growth of 5.41% over the 2006 linked quarter, and 6.67% over the                  linked                  nine month period |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|
|   | · | Annualized                  loan growth of 15.6% with total loans funded of $81,340 for the                  third                  quarter |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Annualized                  deposit growth of 10.8% |
|--------|--------|-----------------------------------------------------|

|   |   |   |
|--------|--------|--------|
|   | · | An                  eight basis point increase in net interest margin for the third                  quarter                  over the second quarter of 2007 from 4.11% to                  4.19% |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An                  increase of four basis points in net interest margin from June                  30 to                  September 30 |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|
|   | · | Net                  charged off loans as a percentage of average loans equal to                  .0093% |
|--------|--------|----------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | An                  ROAA and ROAE of 1.35% and 20.15% at September 30, 2007 as compared                  to 1.33% and 20.08% at June 30, 2007 |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|                                             |   | September                30,                2007 |    | December                31,                2006 |   |
|--------------------------------------------------|--------|--------------------------------------------------|---------|-------------------------------------------------|--------|
| Real                estate                loans  |   |                                             |    |                                            |   |   |   |   |   |
| Construction                                     |   | $                                                | 282,072 |                                            |   | 29.65 | % | $ | 219,641 |   |   | 25.80 | % |
| Residential                                      |   |                                             | 195,760 |                                            |   | 20.58 |   |   | 191,550 |   |   | 22.50 |   |
| Commercial                                       |   |                                             | 427,548 |                                            |   | 44.94 |   |   | 391,758 |   |   | 46.02 |   |
| Agricultural                                     |   |                                             | 1       |                                            |   | .00 |   |   | 1,695 |   |   | 0.20 |   |
| Commercial                and industrial         |   |                                             | 41,206  |                                            |   | 4.33 |   |   | 43,775 |   |   | 5.15 |   |
| Consumer                                         |   |                                             | 3,575   |                                            |   | .38 |   |   | 2,471 |   |   | 0.29 |   |
| Other                loans                  |   |                                             | 1,170   |                                            |   | .12 |   |   | 367 |   |   | 0.04 |   |
| Total                loans Less:                 |        |                                                  | 951,332 |                                            |   | 100.00 | % |   | 851,257 |   |   | 100.00 | % |
| Deferred                fees                     |   |                                             | 2,506   |                                            |   |   |   |   | 1,999 |   |   |   |   |
| Allowance                for loan losses         |   |                                             | 7,967   |                                            |   |   |   |   | 7,051 |   |   |   |   |
| Loans,                net                        |   | $                                                | 940,859 |                                            |   |   |   | $ | 842,207 |   |   |   |   |

----

|                                                            |   | September                30,                2007 |   | December                31, 2006 |   |
|-----------------------------------------------------------------|--------|--------------------------------------------------|--------|----------------------------------|--------|
| Securities                available for sale                    |   |                                             |   |                             |   |
| Obligations                of U.S. government agencies          |   | $                                                | 44,706 |                             | $      | 84,713 |   |
| Mortgage-backed                securities                       |   |                                             | 1,781  |                             |   | 2,972 |   |
| Obligations                of state and political subdivisions  |   |                                             | 6,650  |                             |   | 8,943 |   |
| Other                securities                                 |   |                                             | 11,553 |                             |   | 3,968 |   |
| Total                securities available for sale              |   | $                                                | 64,690 |                             | $      | 100,596 |   |
|                                                            |   |                                             |   |                             |   |   |   |
| Securities                held to maturity                      |   |                                             |   |                             |   |   |   |
| Mortgage-backed                securities                       |   | $                                                | 15     |                             |   | 41 |   |
| Obligations                of state and political subdivisions  |   |                                             | 202    |                             |   | 374 |   |
| Total                securities                held to maturity |   | $                                                | 217    |                             | $      | 415 |   |
|                                                            |   |                                             |   |                             |   |   |   |
| Total                investment securities                 |   | $                                                | 64,907 |                             | $      | 101,011 |   |

----

|                                         |   | September                30,                2007  |    | December                31, 2006 |   |
|----------------------------------------------|--------|--------------------------------------------------------|---------|----------------------------------|--------|
| Demand                (non interest bearing) |   | $                                                      | 107,492 |                             | $      | 102,608 |   |
| Money                market                  |   |                                                   | 358,405 |                             |   | 264,876 |   |
| NOW                                          |   |                                                   | 31,971  |                             |   | 42,003 |   |
| Savings                                      |   |                                                   | 54,113  |                             |   | 50,190 |   |
| Time                                         |   |                                                   | 412,615 |                             |   | 432,640 |   |
| Total                deposits                |   | $                                                      | 964,596 |                             | $      | 892,317 |   |

----

----

|                                                                                              |   |  For                the Nine Months Ended         |      |  For                the Nine Months Ended         |   |
|---------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|-----------|--------------------------------------------------------|--------|
|                                                                                              |   |  September                30,                2007 |      |  September                30,                2006 |   |
|                                                                                              |   | Average                                                |      |                                                   |   | Average |   | Average |   |   |   | Average |   |
|                                                                                              |   | Balance                                                |      |  Interest                                         |   |  Rate |   |                  Balance |   |  Interest |   |    Rate |   |
| ASSETS                                                                                            |   |                                                   |      |                                                   |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |                                                   |      |                                                   |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                           |   |                                                   |      |                                                   |   |   |   |   |   |   |   |   |   |
| Investment                securities:                                                             |   |                                                   |      |                                                   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                           |   | $                                                      | 72,681    |                                                   | $      | 2,659 |   |   | 4.88 | % | $ | 103,653 |   | $ | 3,439 |   |   | 4.42 | % |
| Nontaxable                                                                                        |   |                                                   | 8,157     |                                                   |   | 341 |   |   | 5.57 |   |   | 12,791 |   |   | 528 |   |   | 5.50 |   |
| Total                investment securities                                                        |   |                                                   | 80,838    |                                                   |   | 3,000 |   |   | 4.95 |   |   | 116,444 |   |   | 3,967 |   |   | 4.54 |   |
|                                                                                              |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |   |   |   |   |   |
| Total                loans                                                                        |   |                                                   | 896,022   |                                                   |   | 54,954 |   |   | 8.18 |   |   | 754,853 |   |   | 44,680 |   |   | 7.89 |   |
| Federal                funds sold                                                                 |   |                                                   | 18,103    |                                                   |   | 712 |   |   | 5.19 |   |   | 9,592 |   |   | 349 |   |   | 4.80 |   |
| Other                interest-earning assets                                                      |   |                                                   | 2,975     |                                                   |   | 167 |   |   | 7.51 |   |   | 4,327 |   |   | 180 |   |   | 5.57 |   |
| Total                interest-earning assets                                                      |   |                                                   | 997,938   |                                                   |   | 58,833 |   |   | 7.87 |   |   | 885,216 |   |   | 49,176 |   |   | 7.41 |   |
| Noninterest-earning                assets                                                         |   |                                                   | 72,916    |                                                   |   |  |   |   |  |   |   | 58,156 |   |   |   |   |   |  |   |
|                                                                                              |   |                                                   |           |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| Total                assets                                                                       |   | $                                                      | 1,070,854 |                                                   |   |  |   |   |  |   | $ | 943,372 |   |   |  |   |   |  |   |
|                                                                                              |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| LIABILITIES                AND STOCKHOLDERS'EQUITY                                                |   |                                                        |      |                                                   |        |   |   |   |   |   |  |   |   |  |   |
|                                                                                              |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| Liabilities                                                                                       |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| Interest-bearing                liabilities:                                                      |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| Savings                deposits                (including                NOW)                     |   | $                                                      | 88,965    |                                                   | $      | 844 |   |   | 1.27 | % | $ | 80,663 |   | $ | 396 |   |   | 0.66 | % |
| Money                market                                                                       |   |                                                   | 338,207   |                                                   |   | 10,619 |   |   | 4.20 |   |   | 246,619 |   |   | 5,927 |   |   | 3.21 |   |
|  Time                deposits                                                                |   |                                                   | 405,707   |                                                   |   | 14,439 |   |   | 4.76 |   |   | 369,402 |   |   | 11,727 |   |   | 4.24 |   |
| Total                interest-bearing deposits                                                    |   |                                                   | 832,879   |                                                   |   | 25,902 |   |   | 4.16 |   |   | 696,684 |   |   | 18,050 |   |   | 3.46 |   |
|                                                                                              |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| Other                borrowings                                                                   |   |                                                   | 35,417    |                                                   |   | 1,090 |   |   | 4.12 |   |   | 65,375 |   |   | 1,965 |   |   | 4.02 |   |
| Subordinated                debt                                                                  |   |                                                   | 18,000    |                                                   |   | 1,040 |   |   | 7.62 |   |   | 15,744 |   |   | 903 |   |   | 7.56 |   |
| Total                interest-bearing liabilities                                                 |   |                                                   | 886,296   |                                                   |   | 28,032 |   |   | 4.23 |   |   | 777,803 |   |   | 20,918 |   |   | 3.59 |   |
| Non-interest                bearing liabilities:                                                  |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| Demand                deposits                                                                    |   |                                                   | 104,576   |                                                   |   |  |   |   |  |   |   | 100,787 |   |   |  |   |   |  |   |
| Other                liabilities                                                                  |   |                                                   | 8,021     |                                                   |   |  |   |   |  |   |   | 4,570 |   |   |  |   |   |  |   |
| Total                liabilities                                                                  |   |                                                   | 998,893   |                                                   |   |  |   |   |  |   |   | 883,160 |   |   |  |   |   |  |   |
| Stockholders'                equity                                                               |   |                                                   | 71,961    |                                                   |   |  |   |   |  |   |   | 60,212 |   |   |  |   |   |  |   |
|                                                                                              |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| Total                liabilites & stockholders equity                                         |   | $                                                      | 1,070,854 |                                                   |   |  |   |   |  |   | $ | 943,372 |   |   |  |   |   |  |   |
|                                                                                              |   |                                                   |      |                                                   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |
| Net                interest income/interest rate spread                                           |   |                                                   |      |                                                   | $      | 30,801 |   |   | 3.64 | % |   |   |   | $ | 28,258 |   |   | 3.82 | % |
|                                                                                                   |   |                                                   |      |                                                   |   |   |   |   |  |   |   |   |   |   |   |   |   |  |   |
| Net                  earning assets/net yield on average interest                  earning assets |   | $                                                      | 111,642   |                                                   |   |   |   |   | 4.11 | % | $ | 107,413 |   |   |   |   |   | 4.25 | % |

----

*Accounting      for Certain Hybrid Financial Instruments-an amendment to FASB Statements No.      133      and 140*

*Accounting      for Servicing of Financial Assets-an amendment of FASB Statement No.      140.”*

*Fair      Value Measurements*

*Accounting      for Deferred Compensation and Postretirement Benefit Aspects of Endorsement      Split-Dollar Life Insurance Arrangements*

----

| Change                  In Interest RatesIn                  Basis Points(Rate                  Shock) |   | As                  of August 31, 2007 Potential Change In Net Interest                  Income |   | As                  of June 30, 2007 Potential Change In Net Interest                  Income |   |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|--------|
|                                                                                                   |   | $                  Change                                                                       |   | %                  Change                                                                     |   | $                  Change |   | %                  Change |   |
| Up                  200 basis points                                                                   |   |                                                                                            | 1,276  |                                                                                          |   | 2.72 |   |   | 812 |   |   | 1.63 |   |
| Up                  100 basis points                                                                   |   |                                                                                            | 1,247  |                                                                                          |   | 2.65 |   |   | (58 | ) |   | (0.12 | ) |
| Static                                                                                                 |   |                                                                                            | -      |                                                                                          |   | - |   |   | - |   |   | - |   |
| Down                  100 basis points                                                                 |   |                                                                                            | 810    |                                                                                          |   | 1.72 |   |   | (681 | ) |   | (1.37 | ) |
| Down                  200 basis points                                                                 |   |                                                                                            | 765    |                                                                                          |   | 1.63 |   |   | (404 | ) |   | (0.81 | ) |

----

|                            |                                                                                                           |                                   |
|---------------------------------|----------------------------------------------------------------------------------------------------------------|----------------------------------------|
|                            |                                                                                                           | SMITHTOWN                BANCORP, INC. |
|                            |                                                                                                           |                                        |
|                                 |                                                                                                           |                                        |
| November                8, 2007 |                                                                                                                | /s/                Bradley E. Rock     |
|                            | Bradley                E. Rock, Chairman,                President andChief                  Executive Officer |
|                            |                                                                                                                |
|                            |                                                                                                           |
|                            | /s/                Anita M. Florek                                                                             |
|                            | Anita M. Florek, Executive Vice President andChief Financial                Officer                            |

----