Table Of Contents

Chairman's Message...............................................................3

Proud of our past, focusing on the future...............................4

Financial Highlights...............................................................6

Management's Discussion & Analysis..................................8

Market for the Company's Common Stock..........................16

Independent Auditors' Report...............................................17

Consolidated Financial Statements.......................................18

Corporate Information..........................................................50

Chairman's Message



Dear Shareholder:

Our performance for this past year clearly can be labeled highly successful; however, the success of this institution's efforts is certainly tempered by the events of 9/11.

The unsolicited generosity of our staff towards the families of men they had worked with who will no longer be coming home is in my eyes our most outstanding achievement for me to report.

The Rome Savings Bank reached a significant milestone in 2001; its 150thanniversary. Our community; customers, friends, local government leaders, and shareholders alike; joined with us to celebrate. We were truly honored by the unexpected outpouring of praise, awards, and good wishes from our neighbors. This occasion was not only a celebration of our accomplishments since 1851, but also gave us the opportunity to look ahead to a bright and successful future in Central New York.

As we open the door to our future, our original foundation is intact. With exciting new products and services becoming available, we look for significant increase in an expanding customer base, continuing to offer exceptional, personalized customer service. Our commitment to providing an environment of stability and to promote community development remains in the forefront.

We can only take these bold steps into our future by thanking you, our shareholders, for our honored past. Our solid foundation will enable us to build an even stronger foothold in tomorrow's world of financial services. We value our relationship with each of you, and will work diligently to earn your continued faith and support. Thank you again for your continued confidence.





Sincerely,









Charles M. Sprock

Chairman of The Board

President

CEO



|                                   |                                                     | SELECTED FINANCIAL AND OTHER DATA |                                 |               
|---------------------------------- | --------------------------------------------------- | --------------------------------- | ------------------------------- | --------------
|                                   |                                                     |                                   |                                 | (in thousands)
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   | 2001                            | 2000          
|Selected Financial Condition Data: |                                                     |                                   |                                 |               
|                                   | Total assets                                        |                                   | $247,437                        | $244,831      
|                                   | Loans, net                                          |                                   | 167,607                         | 165,846       
|                                   | Securities                                          |                                   | 46,969                          | 49,196        
|                                   | Total cash and cash equivalents                     |                                   | 23,922                          | 20,800        
|                                   | Total deposits                                      |                                   | 189,216                         | 183,233       
|                                   | Borrowings                                          |                                   | 16,857                          | 19,635        
|                                   | Total equity                                        |                                   | 36,364                          | 38,047        
|                                   | Allowance for loan losses                           |                                   | 1,597                           | 1,688         
|                                   | Non-performing loans                                |                                   | 755                             | 1,346         
|                                   | Non-performing assets                               |                                   | 755                             | 1,346         
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   |                                 |               
|                                   |                                                     |                                   | For the Year Ended December 31,
|                                   |                                                     |                                   | 2001                            | 2000          
|                                   |                                                     |                                   |                                 |               
|Selected Operating Data:           |                                                     |                                   |                                 |               
|                                   | Interest income                                     |                                   | $17,006                         | $16,552       
|                                   | Interest expense                                    |                                   | 7,201                           | 6,820         
|                                   | Net interest income                                 |                                   | 9,805                           | 9,732         
|                                   | Provision for loan losses                           |                                   | 325                             | 650           
|                                   | Net interest income after provision for loan losses | 9,480                             | 9,082                           | 8,524         
|                                   | Non-interest income                                 |                                   |                                 |               
|                                   | Service charges and other income                    |                                   | 1,039                           | 921           
|                                   | Net (loss) gain on sale of securities               |                                   | 47                              | (142)         
|                                   | Total noninterest income                            |                                   | 1,086                           | 779           
|                                   | Total noninterest expense                           |                                   | 7,201                           | 7,385         
|                                   | Income before income taxes                          |                                   | 3,365                           | 2,476         
|                                   | Income taxes                                        |                                   | 1,058                           | 723           
|                                   | Net income                                          |                                   | $2,307                          | $1,753        
|                                   |                                                     |                                   |                                 |               



|                                         |                                                                                                                        |       |                         |         | At or for the |         |        
|---------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ----- | ----------------------- | ------- | ------------- | ------- | -------
|                                         |                                                                                                                        |       | Year Ended December 31,
|                                         |                                                                                                                        |       | 2001                    | 2000    | 1999          | 1998    | 1997   
|                                         |                                                                                                                        |       |                         |         |               |         |        
|Selected Financial Ratios and Other Data |                                                                                                                        |       |                         |         |               |        
|                                         | Performance Ratios:                                                                                                    |       |                         |         |               |         |        
|                                         | Basic earnings per share                                                                                               | 1     | $0.78                   | $0.56   | $0.02         | N/A     | N/A    
|                                         | Diluted earnings per share                                                                                             | 1     | $0.77                   | $0.56   | $0.02         | N/A     | N/A    
|                                         | Return on average assets                                                                                               | 2     | 0.94%                   | 0.76%   | 0.64%         | 0.70%   | 0.71%  
|                                         | Return on average equity                                                                                               | 2     | 6.09%                   | 4.62%   | 4.52%         | 5.34%   | 5.79%  
|                                         | Net interest rate spread                                                                                               | 3     | 3.42%                   | 3.71%   | 3.51%         | 3.47%   | 3.52%  
|                                         | Net interest margin                                                                                                    | 3     | 4.31%                   | 4.66%   | 4.31%         | 4.19%   | 4.13%  
|                                         | Non-interest expense to average assets                                                                                 | 2     | 2.93%                   | 3.21%   | 3.40%         | 3.04%   | 2.99%  
|                                         | Efficiency Ratio                                                                                                       | 2, 3  | 65.05%                  | 67.25%  | 75.47%        | 72.96%  | 70.14% 
|                                         | Avg interest earning assets to average                                                                                 |       |                         |         |               |         |        
|                                         | interest-bearing liabilities                                                                                           |       | 129.02%                 | 130.20% | 124.57%       | 120.15% | 116.83%
|                                         |                                                                                                                        |       |                         |         |               |         |        
|                                         | Capital Ratios:                                                                                                        |       |                         |         |               |         |        
|                                         | Average equity to average assets                                                                                       |       | 15.40%                  | 16.49%  | 14.18%        | 13.09%  | 12.34% 
|                                         | Equity to total assets at end of period                                                                                |       | 14.70%                  | 15.54%  | 16.91%        | 12.72%  | 12.50% 
|                                         | Book value per share                                                                                                   |       | $12.33                  | $12.00  | $11.28        | N/A     | N/A    
|                                         |                                                                                                                        |       |                         |         |               |         |        
|                                         | Regulatory Capital Ratios:                                                                                             |       |                         |         |               |         |        
|                                         | Core capital (Tier 1 capital)                                                                                          |       | 14.54%                  | 15.48%  | 16.84%        | 12.73%  | 12.33% 
|                                         | Total Risk-based capital                                                                                               |       | 21.75%                  | 24.29%  | 30.21%        | 22.80%  | 22.20% 
|                                         |                                                                                                                        |       |                         |         |               |         |        
|                                         | Asset Quality Ratios:                                                                                                  |       |                         |         |               |         |        
|                                         | Nonperforming loans as percent of loans                                                                                |       | 0.45%                   | 0.80%   | 0.34%         | 0.68%   | 1.11%  
|                                         | Nonperforming assets as percent of total assets                                                                        | 0.31% | 0.55%                   | 0.30%   | 0.54%         | 1.45%  
|                                         | Allowance for loan losses as a percent of loans                                                                        | 0.94% | 1.01%                   | 1.24%   | 1.43%         | 1.31%  
|                                         | Allowance for loan losses as a percent of                                                                              |       |                         |         |               |         |        
|                                         | non-performing loans                                                                                                   |       | 211.5%                  | 125.41% | 364.68%       | 210.32% | 118.18%
|                                         |                                                                                                                        |       |                         |         |               |         |        
|                                         | Other Data:                                                                                                            |       |                         |         |               |         |        
|                                         | Number of:                                                                                                             |       |                         |         |               |         |        
|                                         | Deposit accounts                                                                                                       |       | 32,446                  | 33,591  | 33,475        | 34,693  | 34,003 
|                                         | Full service offices                                                                                                   |       | 4                       | 4       | 4             | 4       | 4      
|                                         |                                                                                                                        |       |                         |         |               |         |        
|                                         |                                                                                                                        |       |                         |         |               |         |        
|                                         |                                                                                                                        |       |                         |         |               |         |        
|1                                        | Basic and diluted earnings per share for the year ended December 31, 1999 are only from October 6, 1999, the date of  
|                                         | conversion to a stock bank holding company, to the end of the year. Basic and diluted earnings per share prior to 1999
|                                         | are not applicable.                                                                                                    |       |                         |         |               |         |        
|                                         |                                                                                                                        |       |                         |         |               |         |        
|2                                        | Excluding the contribution to The Rome Savings Bank Foundation of $576,000 (or $346,000 after taxes) in 1999, the     
|                                         | performance ratios would have been as follows: Basic and diluted earnings per share - $0.13, Return on                 |      
|                                         | average assets - 0.79%, Return on average equity - 5.61%, Non-interest expense to average assets - 3.14%,              |      
|                                         | Efficiency ratio - 69.79%.                                                                                             |       |                         |         |               |         |        
|                                         |                                                                                                                        |       |                         |         |               |         |        
|3                                        | Includes tax equivalent adjustment for the Company's tax-exempt municipal securities.                                  |       |                        

Management's Discussion and Analysis

Overview

Rome Bancorp, Inc. (the "Company") commenced operations on October 6, 1999, when The Rome Savings Bank (the "Bank") converted from a New York mutual savings bank to a New York mutual holding company structure whereby the Bank became a wholly owned subsidiary of the Company, a majority owned subsidiary of Rome, MHC. In connection with the reorganization, the Company sold 1,598,365 shares of common stock to the public and issued 68,015 shares to The Rome Savings Bank Foundation and 1,734,396 shares to Rome, MHC, its mutual holding company parent.

The Company is a Delaware corporation whose sole business is conducted by its wholly owned subsidiary, the Bank. The Bank's principal business is accepting deposits from the general public and using those deposits to make residential and commercial real estate loans, as well as commercial and consumer loans to individuals and small businesses primarily in Oneida County and also elsewhere in New York State. The Bank also invests in long and short-term marketable securities and other liquid investments.

The preparation of consolidated financial statements requires management to make estimates and assumptions, in the application of certain of its accounting policies, about the effect of matters that are inherently uncertain. These estimates and assumptions affect the reported amounts of certain assets, liabilities, revenue and expenses. Different amounts could be reported under different conditions, or if different assumptions were used in the application of these accounting policies. The accounting policy considered critical in this respect is the determination of the allowances for loan losses. All significant accounting policies are discussed in Note 2 of the "Notes to Consolidated Financial Statements".

The Bank's results of operations depend primarily on its net interest income, which is the difference between the interest income it earns on its loans and investments and the interest it pays on its deposits and other interest-bearing liabilities. Net interest income is affected by the relative amounts of interest-bearing assets and interest-bearing liabilities and the interest rates earned or paid on these balances. The Bank's operations are also affected by non-interest income, such as service fees and gains and losses on sales of securities, the provision for loan losses and non-interest expense such as salaries and employee benefits, occupancy costs, and other general and administrative expenses. Financial institutions in general, including the Bank, are significantly affected by economic conditions, competition and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions and funds availability. Deposit balances and cost of funds are influenced by prevailing market rates on competing investments, customer preferences and levels of personal income and savings in the Bank's primary market area.

The consolidated financial condition and operating results of the Company are primarily dependent on its wholly owned subsidiary, the Bank, and all references to the Company prior to October 6, 1999, except where otherwise indicated, are to the Bank.

Comparison of Financial Condition at December 31, 2001 and December 31, 2000:

The Company's total assets at December 31, 2001 were $247.4 million, an increase of $2.6 million or 1.1% from $244.8 million at December 31, 2000.

Federal funds sold and other short-term investments were $17.9 million at December 31, 2001, an increase of $3.7 million or 26.0% from $14.2 million at December 31, 2000. This increase is due to proceeds from maturities and principal payments on securities being reinvested in Federal funds sold. As rates have declined over the year, management chose not to reinvest these funds in securities at the present time.

Securities available for sale were $45.2 million at December 31, 2001, a decrease of $2.2 million or 4.6% from $47.4 million at December 31, 2000. This decrease is due to maturities and principal reductions discussed above as well as the sale of two corporate bonds. These bonds were sold due to a decline in rating.

Total loans increased $1.7 million or 1.0% to $169.2 million at December 31, 2001 from $167.5 million at December 31, 2000. This loan growth reflects stable loan demand. The majority of the loan growth was in commercial mortgages which increased $1.8 million from $47.5 million at December 31, 2000 to $49.3 million at December 31, 2001.





Comparison of Results of Operations for the Years Ended December 31, 2001 and December 31, 2000:

Net income for the year ended December 31, 2001 was $2.3 million, an increase of $554,000 or 31.6% from $1.8 million for the year ended December 31, 2000. The increase in net income was principally a result of a reduction in provision for loan losses of $325,000, an increase of $307,000 in non-interest income, a $184,000 decrease in non-interest expense, and an increase in the Company's net interest income of $73,000, partially offset by a $335,000 increase in income taxes.

Net Interest Income

Net interest income, on a tax equivalent basis, was $10.0 million in 2001, a decrease of $30,000 or 0.3% from $10.1 million in 2000. The decrease is primarily due to an increase in the volume of average borrowings, a decrease in yields on loans and securities and a decrease in volume of securities, partially offset by an increase in the volume of loans and a decrease in rate on savings deposits.

Toward the end of 2000 the Company purchased $20.2 million in loans from other institutions. This purchase was funded by borrowings. Thus, the increase in volume of loans and borrowings is due to the purchased loans and borrowings being outstanding for the full year in 2001. Average loans increased from $150.3 million in 2000 to $166.6 million in 2001. Average borrowings increased from $5.3 million in 2000 to $18.3 million in 2001. The increase in interest income on loans due to increased volume was partially offset by a decrease in yield due to declining market rates causing our adjustable rate loans to reprice at lower rates. In addition, many customers with fixed rate loans refinanced at lower rates throughout the year. The yield on loans in 2001 was 8.19% compared to 8.38% in 2000.

Interest expense on savings deposits decreased in 2001 due to the Company decreasing the rate paid on these accounts consistent with the decline in market rates. The average rate paid on savings deposits in 2001 was 2.38% compared to 3.11% in 2000.

Interest income on securities decreased in 2001 due to a decline in yield and volume. As securities matured, management invested the proceeds in Federal funds sold since yields on investment alternatives decreased throughout the year. Average securities decreased from $56.0 million in 2000 to $49.1 million in 2001 while the yield on securities decreased from 6.63% in 2000 to 5.93% in 2001.

Average Balances, Interest and Average Yields of the following table sets forth certain information relating to the Company's average balance sheets and reflects the average yield on interest-earnings assets and average cost of interest-bearing liabilities, interest earned and interest paid for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are derived from daily balances over the periods indicated. The average balances for loans are net of allowance for loan losses, but include non-accrual loans. Interest income on securities include a tax equivalent adjustment for bank qualified municipals.

|                                        |                                 |                                           | Average Balances, Interest and Average Yields
|--------------------------------------- | ------------------------------- | ----------------------------------------- | ---------------------------------------------
|                                        |                                 |                                           | For the year ended December 31, 2001         
|                                        |                                 |                                           |                                              
|                                        |                                 |                                           | Average                                      
|                                        |                                 |                                           | Balance                                      
|Assets:                                 |                                 |                                           |                                              
|Interest-earning assets:                |                                 |                                           |                                              
|                                        | Loans                           | $ 166,610                                 | $ 13,642                                     
|                                        | Securities                      | 49,127                                    | 2,912                                        
|                                        | Federal funds sold & other      |                                           |                                              
|                                        |                                 | interest bearing deposits                 | 16,932                                       
|                                        |                                 | Total interest-earnings assets            | 232,669                                      
|Noninterest-earning assets              | 13,128                          |                                           |                                              
|                                        |                                 | Total assets                              | 245,797                                      
|Liabilities and Shareholders'Equity:    |                                 |                                           |                                              
|Interest-bearing liabilities:           |                                 |                                           |                                              
|                                        | Savings accounts                | 79,491                                    | 1,889                                        
|                                        | Time deposits                   | 73,673                                    | 3,870                                        
|                                        | Money market accounts           | 6,302                                     | 162                                          
|                                        | Other interest bearing deposits | 2,550                                     | 43                                           
|                                        |                                 | Total interest-bearing deposits           | 162,016                                      
|                                        | Borrowings                      | 18,313                                    | 1,237                                        
|                                        |                                 | Total interest-bearing liabilities        | 180,329                                      
|Noninterest-bearing deposits            | 23,048                          |                                           |                                              
|Other liabilities                       | 4,556                           |                                           |                                              
|                                        | Total liabilities               | 207,933                                   |                                              
|Shareholders'equity                     | 37,864                          |                                           |                                              
|                                        |                                 | Total liabilities and shareholders'equity | $ 245,797                                    
|Net interest income                     |                                 | 10,031                                    |                                              
|Net interest rate spread                |                                 |                                           | 3.42                                         
|Net interest margin                     |                                 |                                           | 4.31%                                        
|Ratio of interest-earning assets to     |                                 |                                           |                                              
|                                        | interest-bearing liabilities    |                                           |                                              
|Tax equivalent adjustment on securities |                                 | (226)                                     |                                              
|Net interest income per consolidated    |                                 |                                           |                                              
|                                        | financial statements            |                                           | $ 9,805                                      



Rate Volume Analysis analyzes the dollar amount of changes in interest income and interest expense for each of the interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It shows the amount of the change in interest income or expense caused by either changes in outstanding balances (volume) or changes in interest rates. The effect of a change in volume is measured by applying the average rate during the first period to the volume change between the two periods. The effect of changes in rate is measured by applying the change in rate between the two periods to the average volume during the first period. Changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the absolute value of the change due to volume and the change due to rate.



|                              |                                 |                                    | Rate Volume Analysis        
|----------------------------- | ------------------------------- | ---------------------------------- | ----------------------------
|                              |                                 |                                    | Year Ended December 31, 2001
|                              |                                 |                                    |                             
|                              |                                 |                                    | Increases (decreases) due to
|                              |                                 |                                    | Rate                        
|                              |                                 |                                    |                             
|Assets:                       |                                 |                                    |                             
|Interest-earning assets:      |                                 |                                    |                             
|                              | Loans                           | $ (276)                            | $ 1,325                     
|                              | Securities                      | (369)                              | (429)                       
|                              | Federal funds sold & other      |                                    |                             
|                              |                                 | interest bearing deposits          | (78)                        
|                              |                                 | Total interest-earnings assets     | (723)                       
|                              |                                 |                                    |                             
|Interest-bearing liabilities: |                                 |                                    |                             
|                              | Savings accounts                | (587)                              | 36                          
|                              | Time deposits                   | 73                                 | 43                          
|                              | Money market accounts           | (18)                               | (5)                         
|                              | Other interest bearing deposits | (35)                               | (6)                         
|                              |                                 | Total interest-bearing deposits    | (567)                       
|                              | Borrowings                      | -                                  | 880                         
|                              |                                 | Total interest-bearing liabilities | (567)                       
|                              |                                 |                                    |                             
|Net change in interest income | $ (156)                         | $ 126                              | $ (30)                      



Provision for Loan Losses

The provision for loan losses was $325,000 in 2001 compared to $650,000 in 2000. The allowance for loan losses was $1.6 million or 0.94% of total loans at December 31, 2001 compared to $1.7 million or 1.01% of total loans at December 31, 2000. The allowance for loan losses as a percent of non-performing loans was 212% at December 31, 2001 compared to 125% at December 31, 2000. Non-performing loans were $755,000 or 0.45% of total loans at December 31, 2001 compared to $1.3 million or 0.80% at December 31, 2000. Net loan charge-offs decreased $322,000 from $738,000 in 2000 to $416,000 in 2001.

We establish provisions for loan losses, which are charged to operations, in order to maintain the allowance for loan losses at a level management considers necessary to absorb probable incurred credit losses in the loan portfolio. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or later events occur. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses in order to maintain the adequacy of the allowance. The decrease in the provision for loan losses, non-performing loans and net charge-offs in 2001 is due to the resolution of one commercial relationship whose credit quality had deteriorated toward the end of 2000. The outstanding balance of this relationship was $651,000 at December 31, 2000 and was collected in April 2001.

Non-interest Income

Non-interest income increased $307,000 to $1.1 million in 2001 from $779,000 in 2000. This increase is primarily due to net securities transactions resulting in a gain of $47,000 in 2001 compared to a loss of $142,000 in 2000. Service charges also increased from $757,000 in 2000 to $895,000 in 2001. The increase in service charges was primarily due to an increase in service charges on commercial checking accounts beginning in the third quarter of 2000.

Non-interest Expense

Non-interest expense was $7.2 million for the year ended December 31, 2001 compared to $7.4 million for the year ended December 31, 2000, a decrease of $184,000 or 2.5%. The decrease was principally due to a decrease in consulting fees and employee benefits, partially offset by an increase in loan operations expense. The decrease in consulting fees is primarily due to fees paid in 2000 in connection with the implementation of tax strategies and fees for assistance in improving the Company's operating efficiency and marketing expertise. Employee benefits expense decreased due to the Company's pension credit increasing $144,000 from $72,000 in 2000 to $216,000 in 2001. In addition, the Company purchased $96,000 in annuity contracts for retirees in 2000. These decreases were partially offset by a $61,000 increase in ESOP expense that is based on the market price of Company stock, which increased in 2001.

Income Tax Expense

Income tax expense was $1.1 million for 2001, an increase of $335,000 or 46.3% from 2000 income tax expense of $723,000. The increase is primarily due to a 35.9% increase in income before income tax expense as well as an increase in the effective tax rate from 29.2% in 2000 to 31.4% in 2001. The increase in the effective rate is due to a lower amount of tax exempt income.

Liquidity and Capital Resources

The Company's primary sources of funds consist of deposits, scheduled amortization and prepayments of loans and mortgage-backed securities, maturities of investments, interest bearing deposits at other financial institutions and funds provided from operations. The Bank also has a written agreement with the Federal Home Loan Bank of New York that allows it to borrow up to $24.5 million on a line of credit. At December 31, 2001, the Bank had no outstanding borrowings on this line of credit, but did have outstanding advances and an amortizing note totaling $16.9 million.

Loan repayments and maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of investment securities, and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions, and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds.

The Company's primary investing activities include the origination of loans and to a lesser extent the purchase of investment securities. In 2001 the Company originated approximately $36.9 million in loans compared to originating approximately $33.3 million and purchasing $20.2 million in 2000. Purchases of investment securities were $20.9 million in 2001 and $10.7 million in 2000.

At December 31, 2001, the Company had loan commitments to borrowers of approximately $7.7 million, and available letters and lines of credit of approximately $6.2 million. Total deposits were $189.2 million at December 31, 2001, an increase of $6.0 million from $183.2 million at December 31, 2000.

Time deposit accounts scheduled to mature within one year were $52.1 million at December 31, 2001. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of these time deposits will remain with the Company. We are committed to maintaining a strong liquidity position therefore, the Company monitors its liquidity position on a daily basis. The Company anticipates that it will have sufficient funds to meet its current funding commitments. The marginal cost of new funding however, whether from deposits or borrowings from the Federal Home Loan Bank, will be carefully considered as the Company monitors its liquidity needs. Therefore, in order to minimize its cost of funds, the Company may consider additional borrowings from the Federal Home Loan Bank in the future.

At December 31, 2001 and 2000, the Company and the Bank exceeded each of the applicable regulatory capital requirements. The Company's and the Bank's leverage (Tier 1) capital at December 31, 2001 was $35.7 million and $33.3 million, respectively or 14.5% and 13.5% of average assets, respectively. At December 31, 2000, the Company's and the Bank's leverage (Tier 1) capital was $37.8 million and $33.5 million, respectively or 15.5% and 13.7% of average assets, respectively. In order to be classified as "well-capitalized" by the FDIC, at December 31, 2001 and 2000, the Bank is required to have leverage (Tier 1) capital of $12.3 million and $12.2 million, respectively, or 5.0% of average assets. To be classified as a "well-capitalized" bank by the FDIC, the Bank must also have a risk-based total capital ratio of 10.0%. At December 31, 2001 and 2000, the Bank had a risk-based total capital ratio of 20.3% and 21.6%, respectively.

The Company paid cash dividends of $0.28 per share and repurchased 228,700 shares of common stock in 2001.

The Company does not anticipate any material capital expenditures, nor does it have any balloon or other payments due on any long-term obligations or any off-balance sheet items other than the commitments and unused lines of credit noted above.

Management of Interest Rate Risk

Interest rate risk is the most significant market risk affecting the Company. Other types of market risk, such as movements in foreign currency exchange rates and commodity prices, do not arise in the normal course of the Company's business operations. Interest rate risk can be defined as an exposure to a movement in interest rates that could have an adverse effect on the Company's net interest income. Interest rate risk arises naturally from the imbalance in the repricing, maturity and/or cash flow characteristics of assets and liabilities. In periods of falling interest rates, prepayments of loans typically increase, which would lead to reduced net interest income if such proceeds could not be reinvested at a comparable spread. Also in a falling rate environment, certain categories of deposits may reach a point where market forces prevent further reduction in the interest rate paid on those instruments. Generally, during extended periods when short-term and long-term interest rates are relatively close, a flat yield curve, net interest margins could become smaller, thereby reducing net interest income. The net effect of these circumstances is reduced interest income, offset only by a nominal decrease in interest expense, thereby narrowing the net interest margin.

Managing interest rate risk is of primary importance to the Company. The responsibility for interest rate risk management is the function of the Company's Asset/Liability Committee ("ALCO") which includes the President and CEO, Treasurer and CFO and certain members of the Company's Board of Directors. The Company's ALCO meets at least monthly to review the Company's asset/liability policies and identify and measure potential risks to earnings due to changes in interest rates. The primary goal of the Company's interest rate risk management is to minimize the potential loss in net interest income that could arise from changes in interest rates. A simulation model is the primary tool used to assess the impact of changes in interest rates on net interest income. Key assumptions used in the model include prepayment speeds on loans and mortgage-backed securities, loan volumes and pricing, customer preferences and sensitivity to changing rates, and management's projected financial plans. These assumptions are compared to actual results and revised as necessary. The Company's analysis compares net interest income under a scenario of no change from current interest rates with one of a 300 basis point increase in interest rates and one of a 300 basis point decrease in rates. The change in interest rates is assumed to occur in the first twelve months following the current financial statement date. Net interest income is measured for each of the three twelve-month periods following the balance sheet date. The Company's policy is that net interest income should not vary by more than 20% for each of the three forecasted twelve-month periods. At December 31, 2001, based on simulation model results, the Company was within these guidelines.

Another method the Company uses to monitor interest rate risk is the gap analysis. The matching of the repricing characteristics of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest rate sensitive" within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. Our policy sets an objective of maintaining the one-year cumulative gap between a negative 20% of total assets to a positive 20% of total assets. At December 31, 2001, the one-year cumulative gap position, as presented in the table below, was $5.0 million asset sensitive, or 2.02% of total assets.

Amounts Maturing or Repricing as of December 31, 2000

|                                                                 |  | Less than              |  | Six Months  |  | 1 - 2   |  | 2 - 3   |  | 3 - 5   |  | Over 5   |  |        
|---------------------------------------------------------------- |  | ---------------------- |  | ----------- |  | ------- |  | ------- |  | ------- |  | -------- |  | -------
|                                                                 |  | Six Months             |  | to One Year |  | Years   |  | Years   |  | Years   |  | Years    |  | Total  
|                                                                 |  | (Dollars in thousands)
|Interest-earning assets:                                         |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|                                                                 |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|Mortgage loans                                                   |  | 11,327                 |  | 19,201      |  | 18,600  |  | 13,726  |  | 22,601  |  | 28,075   |  | 113,530
|Consumer and other loans                                         |  | 20,952                 |  | 6,416       |  | 10,378  |  | 8,569   |  | 7,821   |  | 1,898    |  | 55,674 
|Federal funds sold                                               |  | 17,895                 |  |             |  |         |  |         |  |         |  |          |  | 17,895 
|Investment securities                                            |  | 8,015                  |  | 1,067       |  | 5,699   |  | 8,869   |  | 13,298  |  | 10,021   |  | 46,969 
|Total interest-earning assets                                    |  | 57,829                 |  | 26,684      |  | 34,677  |  | 31,164  |  | 43,720  |  | 39,994   |  | 234,068
|                                                                 |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|                                                                 |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|Interest-bearing liabilities:                                    |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|                                                                 |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|Savings accounts                                                 |  | 5,899                  |  | 5,899       |  | 5,192   |  | 5,192   |  | 10,385  |  | 48,211   |  | 80,778 
|Other Interest Bearing Deposits                                  |  | 1,099                  |  | -           |  | -       |  | -       |  | -       |  | 1,651    |  | 2,750  
|Money market accounts                                            |  | 1,307                  |  | 1,261       |  | 746     |  | 610     |  | 906     |  | 1,824    |  | 6,654  
|Time deposits                                                    |  | 32,997                 |  | 19,115      |  | 11,450  |  | 3,288   |  | 7,262   |  | -        |  | 74,112 
|Total interest-bearing deposits                                  |  | 41,302                 |  | 26,275      |  | 17,388  |  | 9,090   |  | 18,533  |  | 51,686   |  | 164,292
|Borrowings                                                       |  | 1,198                  |  | 10,739      |  | 2,608   |  | 2,312   |  | -       |  | -        |  | 16,857 
|Total interest-bearing liabilities                               |  | 42,500                 |  | 37,014      |  | 19,996  |  | 11,402  |  | 18,553  |  | 51,686   |  | 181,151
|                                                                 |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|Interest sensitivity gap                                         |  | 15,329                 |  | (10,330)    |  | 14,681  |  | 19,762  |  | 25,167  |  | (11,692) |  |        
|                                                                 |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|Cumulative interest sensitivity gap                              |  | 15,329                 |  | 4,999       |  | 19,680  |  | 39,442  |  | 64,609  |  | 52,917   |  |        
|                                                                 |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|Ratio of cumulative gap to total assets                          |  | 6.20%                  |  | 2.02%       |  | 7.95%   |  | 15.94%  |  | 26.11%  |  | 21.39%   |  |        
|                                                                 |  |                        |  |             |  |         |  |         |  |         |  |          |  |        
|Ratio of interest earning assets to interest bearing liabilities |  | 136.07%                |  | 72.09%      |  | 173.42% |  | 273.32% |  | 235.65% |  | 77.38%   |  |        





Because the cumulative gap analysis is only a snapshot at a particular date and does not fully reflect that certain assets and liabilities may have similar repricing periods but may in fact reprice at different times within that period and at differing rate levels, management uses the interest rate sensitivity gap only as a general indicator of the potential effects of interest rate changes on net interest income. Management believes that the gap analysis is a useful tool only when used in conjunction with its simulation model for net interest income analysis and managing interest rate risk.



Recent Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142., "Goodwill and Other Intangible Assets." SFAS No. 141 supercedes Accounting Principles Board (APB) No. 16, "Business Combinations", and requires all business combinations to be accounted for under the purchase method of accounting, thus eliminating the pooling of interests method of accounting. The Statement did not change many of the provisions of APB No. 16 related to the application of the purchase method. However, the Statement does specify criteria for recognizing intangible assets separate from goodwill and requires additional disclosures regarding business combinations. The Statement is effective for business combinations initiated after June 30, 2001.

SFAS No. 142 requires acquired intangible assets (other than goodwill) to be amortized over their useful economic life, while goodwill and any acquired intangible assets with an indefinite useful economic life would not be amortized, but would be reviewed for impairment on an annual basis based upon guidelines specified by the Statement. SFAS No. 142 also requires additional disclosures pertaining to good will and intangible assets. The provisions of SFAS No. 142 are required to be adopted starting with fiscal years beginning after December 15, 2001. For any goodwill and other intangibles acquired after June 30, 2001, the non-amortization and amortization provisions of this Statement are effective immediately.

At December 31, 2001, the Company did not have any goodwill; therefore, the adoption of the Statement is not anticipated to have a material effect on the Company's results of operations.

Forward-Looking Statements

Statements included in this discussion and in future filings by Rome Bancorp, Inc. with the Securities and Exchange Commission, in Rome Bancorp, Inc. press releases, and in oral statements made with the approval of an authorized executive officer, which are not historical or current facts, are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Rome Bancorp, Inc. wishes to caution readers not to place undue reliance on such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect Rome Bancorp, Inc. actual results, and could cause Rome Bancorp, Inc. actual financial performance to differ materially from that expressed in any forward-looking statement: (1) competitive pressures among depository and other financial institutions may increase significantly; (2) revenues may be lower than expected; (3) changes in the interest rate environment may reduce interest margins; (4) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit; (5) legislative or regulatory changes, including changes in accounting standards, may adversely affect the business in which the Company is engaged; (6) competitors may have greater financial resources and developed products that enable such competitors to compete more successfully than the Company; and (7) adverse changes may occur in the securities markets or with respect to inflation. The foregoing list should not be construed as exhaustive, and Rome Bancorp, Inc. disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.

MARKET FOR THE COMPANY'S COMMON STOCK



The Company's common stock is traded on the Nasdaq National Market under the symbol "ROME".

The Company's common stock began trading on October 6, 1999, the date of the reorganization and initial public offering. At December 31, 2001, the last trading date in the Company's fiscal year, the common stock of the Company closed at $17.00 per share. At March 8, 2002, there were 2,919,133 shares of the Company's common stock outstanding, which were held of record by approximately 848 registered shareholders.

The table below shows the high and low sales price of the Company common stock during the periods indicated. The Company paid quarterly cash dividends of $0.07 per share in 2001. The Company also paid a quarterly cash dividend of $0.09 per share to shareholders of record as of February 3, 2002. Our ability to pay dividends depends on a number of factors including:

- investment opportunities available to the Bank or the Company;
- the Bank's capital requirements;
- our financial results;
- tax considerations; and
- general economic conditions.

We do not guarantee that we will pay dividends, or that we will not reduce or eliminate dividends in the future.

|                                 | Price Range |        
|-------------------------------- | ----------- | -------
|Date                             | High        | Low    
|                                 |             |        
|Year ended December 31, 2001:    |             |        
|                                 |             |        
|Quarter ended March 31, 2001     | $ 17.38     | $ 10.12
|Quarter ended June 30, 2001      | 16.29       | 12.74  
|Quarter ended September 30, 2001 | 17.83       | 13.30  
|Quarter ended December 31, 2001  | 17.57       | 14.94  
|                                 |             |        
|Year ended December 31, 2000:    |             |        
|                                 |             |        
|Quarter ended March 31, 2000     | $ 6.88      | $ 6.06 
|Quarter ended June 30, 2000      | 7.50        | 6.50   
|Quarter ended September 30, 2000 | 9.38        | 7.38   
|Quarter ended December 31, 2000  | 10.56       | 8.75   

Independent Auditors'Report

The Board of Directors

Rome Bancorp, Inc.:



We have audited the accompanying consolidated balance sheets of Rome Bancorp, Inc. and subsidiary as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rome Bancorp, Inc. and subsidiary at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.



/s/ KPMG LLP

KPMG LLP

Syracuse, New York

January 22, 2002

|ROME BANCORP, INC. AND SUBSIDIARY                            |                                                                  |                                                             |        |                                          
|------------------------------------------------------------ | ---------------------------------------------------------------- | ----------------------------------------------------------- | ------ | -----------------------------------------
|                                                             |                                                                  |                                                             |        |                                          
|Consolidated Balance Sheets                                  |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        |                                          
|December 31, 2001 and 2000                                   |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        |                                          
|(in thousands, except share data)                            |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        |                                          
|Assets                                                       |                                                                  |                                                             |        | 2001                                     
|                                                             |                                                                  |                                                             |        |                                          
|Cash and due from banks                                      | $                                                                | 6,027                                                       |        | 6,600                                    
|Federal funds sold and other short-term investments          |                                                                  | 17,895                                                      |        | 14,200                                   
|                                                             | Total cash and cash equivalents                                  |                                                             | 23,922 |                                          
|Securities available for sale, at fair value                 |                                                                  | 45,243                                                      |        | 47,403                                   
|Securities held to maturity (fair value of $1,811 and $1,854 |                                                                  |                                                             |        |                                          
|                                                             | at December 31, 2001 and 2000, respectively)                     |                                                             | 1,726  |                                          
|Loans                                                        |                                                                  |                                                             |        |                                          
|                                                             | Less: Allowance for loan losses                                  |                                                             | 1,597  |                                          
|                                                             |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        | Net loans                                
|                                                             |                                                                  |                                                             |        |                                          
|Premises and equipment, net                                  |                                                                  | 3,195                                                       |        | 3,389                                    
|Accrued interest receivable                                  |                                                                  | 1,524                                                       |        | 1,678                                    
|Other assets                                                 |                                                                  |                                                             |        | 4,220                                    
|                                                             |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        | Total assets                             
|                                                             |                                                                  |                                                             |        |                                          
|Liabilities                                                  |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        |                                          
|Liabilities:                                                 |                                                                  |                                                             |        |                                          
|                                                             | Deposits:                                                        |                                                             |        |                                          
|                                                             |                                                                  | Non-interest bearing                                        |        | 24,922                                   
|                                                             |                                                                  | Savings                                                     |        |                                          
|                                                             |                                                                  | Money market                                                |        | 6,654                                    
|                                                             |                                                                  | Time                                                        |        |                                          
|                                                             |                                                                  | Other interest bearing                                      |        | 2,750                                    
|                                                             |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        | Total deposits                           
|                                                             | Due to broker                                                    |                                                             | 935    |                                          
|                                                             | Borrowings                                                       |                                                             |        | 16,857                                   
|                                                             | Other liabilities                                                |                                                             | 4,065  |                                          
|                                                             |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        | Total liabilities                        
|                                                             |                                                                  |                                                             |        |                                          
|Shareholders' equity:                                        |                                                                  |                                                             |        |                                          
|                                                             | Common stock, $.01 par value; authorized: 5,000,000 shares;      |                                                             |        |                                          
|                                                             |                                                                  | issued: 3,400,776 shares; outstanding: 2,948,845 shares at  |        |                                          
|                                                             |                                                                  | December 31, 2001 and 3,170,985 shares at December 31, 2000 | 34     |                                          
|                                                             | Additional paid-in capital                                       |                                                             | 10,331 |                                          
|                                                             | Retained earnings                                                |                                                             | 31,816 |                                          
|                                                             | Treasury stock, at cost; 451,931 shares at December 31, 2001 and |                                                             |        |                                          
|                                                             | 229,791 shares at December 31, 2000                              | (5,335)                                                     |        | (1,722)                                  
|                                                             | Accumulated other comprehensive income                           |                                                             | 448    |                                          
|                                                             | Unallocated shares of employee stock ownership plan (ESOP)       |                                                             |        |                                          
|                                                             |                                                                  | 106,649 shares at December 31, 2001; 115,536 shares at      |        |                                          
|                                                             |                                                                  | December 31, 2000                                           |        | (747)                                    
|                                                             | Unearned compensation                                            |                                                             | (183)  |                                          
|                                                             |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        | Total shareholders' equity               
|                                                             |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        | Total liabilities and shareholders'equity
|                                                             |                                                                  |                                                             |        |                                          
|                                                             |                                                                  |                                                             |        |                                          
|See accompanying notes to consolidated financial statements. |                                                                  |                                                             |        |                                          



|ROME BANCORP, INC. AND SUBSIDIARY                            |                                            |                                                     |       |       
|------------------------------------------------------------ | ------------------------------------------ | --------------------------------------------------- | ----- | ------
|                                                             |                                            |                                                     |       |       
|Consolidated Statements of Income                            |                                            |                                                     |       |       
|                                                             |                                            |                                                     |       |       
|Years ended December 31, 2001 and 2000                       |                                            |                                                     |       |       
|                                                             |                                            |                                                     |       |       
|(in thousands, except share data)                            |                                            |                                                     |       |       
|                                                             |                                            |                                                     |       |       
|                                                             |                                            |                                                     |       |       
|                                                             |                                            |                                                     |       |       
|Interest income:                                             |                                            |                                                     |       |       
|                                                             | Loans                                      |                                                     |       | $     
|                                                             | Securities                                 |                                                     | 2,686 |       
|                                                             | Other short-term investments               |                                                     | 678   |       
|                                                             |                                            |                                                     |       |       
|                                                             |                                            | Total interest income                               |       | 17,006
|Interest expense:                                            |                                            |                                                     |       |       
|                                                             | Deposits                                   |                                                     |       | 5,964 
|                                                             | Borrowings                                 |                                                     | 1,237 |       
|                                                             |                                            |                                                     |       |       
|                                                             |                                            | Total interest expense                              |       | 7,201 
|                                                             |                                            |                                                     |       |       
|                                                             |                                            | Net interest income                                 |       | 9,805 
|                                                             |                                            |                                                     |       |       
|Provision for loan losses                                    |                                            | 325                                                 |       | 650   
|                                                             |                                            |                                                     |       |       
|                                                             |                                            | Net interest income after provision for loan losses |       | 9,480 
|                                                             |                                            |                                                     |       |       
|Non-interest income:                                         |                                            |                                                     |       |       
|                                                             | Service charges                            |                                                     | 895   |       
|                                                             | Net (loss) gain on securities transactions |                                                     | 47    |       
|                                                             | Other income                               |                                                     | 144   |       
|                                                             |                                            |                                                     |       |       
|                                                             |                                            | Total non-interest income                           |       | 1,086 
|                                                             |                                            |                                                     |       |       
|Non-interest expense:                                        |                                            |                                                     |       |       
|                                                             | Salaries and employee benefits             |                                                     | 3,647 |       
|                                                             | Building, occupancy and equipment          |                                                     | 1,248 |       
|                                                             | Directors' fees                            |                                                     | 188   |       
|                                                             | Legal fees                                 |                                                     | 192   |       
|                                                             | Consulting fees                            |                                                     | 145   |       
|                                                             | ATM service fees                           |                                                     | 223   |       
|                                                             | Loan operations                            |                                                     | 197   |       
|                                                             | Other                                      |                                                     |       |       
|                                                             |                                            |                                                     |       |       
|                                                             |                                            | Total non-interest expense                          |       | 7,201 
|                                                             |                                            |                                                     |       |       
|                                                             |                                            | Income before income tax expense                    |       | 3,365 
|                                                             |                                            |                                                     |       |       
|Income tax expense                                           |                                            | 1,058                                               |       | 723   
|                                                             |                                            |                                                     |       |       
|                                                             |                                            | Net income                                          | $     | 2,307 
|                                                             |                                            |                                                     |       |       
|                                                             |                                            |                                                     |       |       
|Basic earnings per share                                     | $                                          | 0.78                                                |       | 0.56  
|Diluted earnings per share                                   | $                                          | 0.77                                                |       | 0.56  
|                                                             |                                            |                                                     |       |       
|See accompanying notes to consolidated financial statements. |                                            |                                                     |       |       
|                                                             |                                            |                                                     |       |       
|                                                             |                                            |                                                    



|ROME BANCORP, INC. AND SUBSIDIARY                                        |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|------------------------------------------------------------------------ | -------------------------- | -- | -------------------------- | ------ | - | ------ | ------ | ------- | ---------- | ----- | -------- | ----- | -------- | -------------
|Consolidated Statements of Shareholders' Equity and Comprehensive Income |                            |    |                            |        |   |        |        |         |            |      
|Years ended December 31, 2001 and 2000                                   |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|(in thousands, except share data)                                        |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    |                            |        |   |        |        |         | Additional |       |          |       |          | comprehensive
|                                                                         |                            |    |                            |        |   |        | Common |         | paid-in    |       | Retained |       | Treasury |              
|                                                                         |                            |    |                            |        |   |        | stock  |         | capital    |       | earnings |       | Stock    |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|Balances at December 31, 1999                                            |                            | 34 |                            | 10,214 |   | 29,249 |        | -       |            | (259) |          | (871) |          | -            
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|Comprehensive income:                                                    |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         | Net income                 |    | -                          |        | - |        | 1,753  |         | -          |       | -        |       | -        |              
|                                                                         | Other comprehensive income |    | -                          |        | - |        | -      |         | -          |       | 475      |       | -        |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    | Total comprehensive income |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|Purchase of treasury stock (264,991 shares)                              |                            | -  |                            | -      |   | -      |        | (1,982) |            | -     |          | -     |          | -            
|Stock awarded under Recognition & Retention Plan (35,200 shares)         | -                          |    | 2                          |        | - |        | 260    |         | -          |       | -        |       | (262)    |              
|Amortization of Unearned Compensation                                    |                            | -  |                            | -      |   | -      |        | -       |            | -     |          | -     |          | 27           
|Dividends paid ($0.21 per share)                                         |                            | -  |                            | -      |   | (659)  |        | -       |            | -     |          | -     |          | -            
|ESOP shares released for allocation (8,887 shares)                       | -                          |    | -                          |        | 4 |        | -      |         | -          |       | 62       |       | -        |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|Balances at December 31, 2000                                            | $                          | 34 |                            | 10,216 |   | 30,347 |        | (1,722) |            | 216   |          | (809) |          | (235)        
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|Comprehensive income:                                                    |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         | Net income                 |    | -                          |        | - |        | 2,307  |         | -          |       | -        |       | -        |              
|                                                                         | Other comprehensive income |    | -                          |        | - |        | -      |         | -          |       | 232      |       | -        |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    | Total comprehensive income |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|Purchase of treasury stock (228,700 shares)                              |                            | -  |                            | -      |   | -      |        | (3,670) |            | -     |          | -     |          | -            
|Exercise of stock options and related tax benefit (6,560 shares)         | -                          |    | 9                          |        | - |        | 57     |         | -          |       | -        |       | -        |              
|Amortization and tax benefits of Unearned Compensation                   |                            | -  |                            | 40     |   | -      |        | -       |            | -     |          | -     |          | 52           
|Dividends paid ($0.28 per share)                                         |                            | -  |                            | -      |   | (841)  |        | -       |            | -     |          | -     |          | -            
|ESOP shares released for allocation (8,887 shares)                       | -                          |    | 66                         |        | 3 |        | -      |         | -          |       | 62       |       | -        |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|Balances at December 31, 2001                                            | $                          | 34 |                            | 10,331 |   | 31,816 |        | (5,335) |            | 448   |          | (747) |          | (183)        
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|                                                                         |                            |    |                            |        |   |        |        |         |            |       |          |       |          |              
|See accompanying notes to consolidated financial statements.             |                            |    |                            |        |   |        |        |         |            |       |          |      



|ROME BANCORP, INC. AND SUBSIDIARY                            |                                                      |                                            |                                                    |                                                    
|------------------------------------------------------------ | ---------------------------------------------------- | ------------------------------------------ | -------------------------------------------------- | ---------------------------------------------------
|                                                             |                                                      |                                            |                                                    |                                                    
|Consolidated Statements of Cash Flows                        |                                                      |                                            |                                                    |                                                    
|                                                             |                                                      |                                            |                                                    |                                                    
|Years ended December 31, 2001 and 2000                       |                                                      |                                            |                                                    |                                                    
|                                                             |                                                      |                                            |                                                    |                                                    
|(in thousands)                                               |                                                      |                                            |                                                    |                                                    
|                                                             |                                                      |                                            |                                                    |                                                    
|Cash flows from operating activities:                        |                                                      |                                            |                                                    |                                                    
|                                                             | Net income                                           |                                            |                                                    |                                                    
|                                                             | Adjustments to reconcile net income to net cash      |                                            |                                                    |                                                    
|                                                             |                                                      | provided by operating activities:          |                                                    |                                                    
|                                                             |                                                      |                                            | Depreciation and amortization                      |                                                    
|                                                             |                                                      |                                            | Decrease (increase) in accrued interest receivable |                                                    
|                                                             |                                                      |                                            | Provision for loan losses                          |                                                    
|                                                             |                                                      |                                            | Net (gain) loss on securities transactions         |                                                    
|                                                             |                                                      |                                            | Net (gain) loss on sales of real estate owned      |                                                    
|                                                             |                                                      |                                            | Net accretion on securities                        |                                                    
|                                                             |                                                      |                                            | Increase in other liabilities                      |                                                    
|                                                             |                                                      |                                            | Deferred income tax expense (benefit)              |                                                    
|                                                             |                                                      |                                            | (Increase) decrease in other assets                |                                                    
|                                                             |                                                      |                                            | Allocation of ESOP shares                          |                                                    
|                                                             |                                                      |                                            | Amortization of Unearned Compensation              |                                                    
|                                                             |                                                      |                                            | Tax benefit from exercise of stock options         |                                                    
|                                                             |                                                      |                                            |                                                    |                                                    
|                                                             |                                                      |                                            |                                                    | Net cash provided by operating activities          
|                                                             |                                                      |                                            |                                                    |                                                    
|Cash flows from investing activities:                        |                                                      |                                            |                                                    |                                                    
|                                                             | Net increase in loans                                |                                            | (2,949)                                            |                                                    
|                                                             | Purchases of loans                                   |                                            | -                                                  |                                                    
|                                                             | Proceeds from sale of education loans                |                                            | 818                                                |                                                    
|                                                             | Proceeds from sales of securities available for sale |                                            | 1,122                                              |                                                    
|                                                             | Proceeds from maturities and principal reductions of |                                            |                                                    |                                                    
|                                                             |                                                      | securities available for sale              |                                                    | 23,353                                             
|                                                             | Purchases of securities available for sale           |                                            | (20,867)                                           |                                                    
|                                                             | Purchases of securities held to maturity             |                                            | (69)                                               |                                                    
|                                                             | Proceeds from maturities and principal reductions of |                                            |                                                    |                                                    
|                                                             |                                                      | securities held to maturity                |                                                    | 142                                                
|                                                             | Proceeds from sale of real estate owned              |                                            | 50                                                 |                                                    
|                                                             | Additions to premises and equipment                  |                                            | (196)                                              |                                                    
|                                                             |                                                      |                                            |                                                    |                                                    
|                                                             |                                                      |                                            |                                                    | Net cash provided by (used in) investing activities
|                                                             |                                                      |                                            |                                                    |                                                    
|Cash flows from financing activities:                        |                                                      |                                            |                                                    |                                                    
|                                                             | Increase (decrease) in time deposits                 |                                            | 1,248                                              |                                                    
|                                                             | Increase in other deposits                           |                                            | 4,735                                              |                                                    
|                                                             | Borrowings                                           |                                            |                                                    |                                                    
|                                                             | Repayments of borrowings                             |                                            | (2,778)                                            |                                                    
|                                                             | Purchase of treasury stock                           |                                            | (3,670)                                            |                                                    
|                                                             | Dividends                                            |                                            |                                                    |                                                    
|                                                             | Exercise of stock options                            |                                            | 49                                                 |                                                    
|                                                             |                                                      |                                            |                                                    |                                                    
|                                                             |                                                      |                                            |                                                    | Net cash (used in) provided by financing activities
|                                                             |                                                      |                                            |                                                    |                                                    
|Net increase in cash and cash equivalents                    |                                                      | 3,122                                      |                                                    | 4,739                                              
|Cash and cash equivalents at beginning of year               |                                                      | 20,800                                     |                                                    | 16,061                                             
|                                                             |                                                      |                                            |                                                    |                                                    
|Cash and cash equivalents at end of year                     | $                                                    | 23,922                                     |                                                    | 20,800                                             
|Supplemental disclosure of cash flow information:            |                                                      |                                            |                                                    |                                                    
|                                                             | Non-cash investing activities:                       |                                            |                                                    |                                                    
|                                                             |                                                      | Change in securities purchased not settled | $                                                  | 935                                                
|                                                             |                                                      | Additions to real estate owned             |                                                    | 45                                                 
|                                                             | Cash paid during the period for:                     |                                            |                                                    |                                                    
|                                                             |                                                      | Interest                                   |                                                    |                                                    
|                                                             |                                                      | Income taxes                               |                                                    |                                                    
|                                                             |                                                      |                                            |                                                    |                                                    
|                                                             |                                                      |                                            |                                                    |                                                    
|See accompanying notes to consolidated financial statements. |                                                      |                                            |                                                    |                                                    





Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000









Rome Bancorp, Inc. (the "Company") is a registered bank holding company, organized under the laws of Delaware and is the parent company of The Rome Savings Bank and subsidiaries (the "Bank"). The Company commenced operations on October 6, 1999, when the Bank converted from a state chartered mutual savings bank to a state chartered stock savings bank.

The Company provides traditional community banking services for individuals and small-to medium-sized businesses, through the Bank's four branches in Oneida County of New York State. The Bank is subject to regulation by the New York State Banking Department and the Federal Deposit Insurance Corporation (FDIC).



(2)	Summary of Significant Accounting Policies

(a)	Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Amounts in the prior year's consolidated financial statements are reclassified when necessary to conform with the current year's presentation. A description of the significant accounting policies is presented below. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses for the period. Actual results could differ from those estimates.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions are eliminated in consolidation.















ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(b)	Securities

The Company classifies its debt securities as either available-for-sale or held-to-maturity as the Company does not hold any securities considered to be trading. Held-to-maturity securities are those debt securities the Company has the ability and intent to hold until maturity. All other debt securities are classified as available for sale.

Held-to-maturity securities are recorded at amortized cost. Available-for-sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and reported as accumulated other comprehensive income, a component of shareholders' equity, until realized.

A decline in the fair value of an available-for-sale or held-to-maturity security below cost that is deemed to be other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the interest method. Dividend and interest income are recognized when earned. Purchases and sales are recorded on a trade date basis with settlement occurring shortly thereafter. Realized gains and losses on securities sold are derived using the specific identification method for determining the cost of securities sold.

(c)	Loans

Loans are reported at the principal amount outstanding. Origination fees and certain direct origination costs related to lending activities are recognized in the period that the loan is closed. The difference between origination fees and the related direct origination costs are not material. The Company has the ability and intent to hold its loans to maturity except for education loans which are sold to a third party upon reaching repayment status.

Interest on loans is accrued and included in income at contractual rates applied to principal outstanding. The accrual of interest on loans (including impaired loans) is generally discontinued, and previously accrued interest is reversed, when loan payments are 90 days or more past due or when, by the judgment of management, collectibility becomes uncertain. Subsequent recognition of income occurs only to the extent that payment is received. Loans are generally returned to an accrual status when both principal and interest become current and the loan is determined to be performing in accordance with the applicable loan terms. When the future collectibility of the recorded loan balance is expected, interest income may be recognized on a cash basis.







ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(d)	Allowance for Loan Losses

The allowance for loan losses is increased by the provision for loan losses charged to operations and is decreased by the charge-off of loans, net of recoveries. Loans are charged off when management determines that ultimate success of the loan's collectibility is remote.

Management's evaluation of the adequacy of the allowance considers the Company's historical loan loss experience, review of specific loans, current economic conditions and such other factors considered appropriate to estimate losses. Management uses presently available information to estimate probable losses on loans; however, future additions to the allowance may be necessary based on changes in estimates, assumptions or economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgment of information available to them at the time of their examination.

The allowance for loan losses is evaluated on a quarterly basis by management in order to maintain the allowance at a level sufficient to absorb probable incurred loan losses based upon known and inherent risks in the loan portfolio.

The Company estimates losses on impaired loans based on the present value of expected future cash flows (discounted at the loan's effective interest rate) or the fair value of the underlying collateral if the loan is collateral dependent. An impairment loss exists if the recorded investment in a loan exceeds the value of the loan as measured by the aforementioned methods. Impairment losses are included as a component of the allowance for loan losses. A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Generally, all commercial mortgage loans and commercial loans greater than $250,000 in a nonaccrual status are considered impaired. Commercial mortgage loans and commercial loans less than $250,000 and all residential mortgage loans, consumer loans and education loans are evaluated collectively by portfolio since they are homogeneous and generally carry smaller individual balances. The Company recognizes interest income on impaired loans using the cash basis of income recognition. Cash receipts on impaired loans are generally applied according to the terms of the loan agreement, or as a reduction of principal, based upon management's judgement and the related factors discussed above.















ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(e)	Real Estate Owned

Real estate acquired through foreclosure or deed in lieu of foreclosure is recorded at the lower of the unpaid loan balance on the property at the date of transfer, or fair value less estimated costs to sell. Write-downs from cost to fair value which are required at the time of foreclosure are charged to the allowance for loan losses. Adjustments to the carrying value of such properties that result from subsequent declines in value are charged to operations in the period in which the declines occur. Operating costs associated with the properties are charged to expense as incurred.

(f)	Premises and Equipment

Land is carried at cost and buildings and improvements and furniture and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives of the assets (7 to 40 years for buildings and 3 to 10 years for furniture and equipment). Amortization of leasehold improvements is computed on the straight-line method over the shorter of the lease term or the estimated useful life of the improvements.

(g)	Employee Benefit Plans

The Company maintains a non-contributory defined benefit pension plan that covers substantially all employees. The benefits under the pension plan are based on the employee's years of service and compensation. The projected unit credit method is utilized for measuring net periodic pension costs over the employees' service lives. The Company's funding policy is to contribute annually at least the minimum required to meet the funding standards set forth under provisions of the Employee Retirement Income Security Act of 1974.

The Company provides health care and life insurance benefits to retired employees. The estimated costs of providing benefits are accrued over the years the employees render services necessary to earn those benefits.























ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





The Company also sponsors a non-contributory Employee Stock Ownership Plan (ESOP) covering substantially all employees. The number of shares allocable to Plan participants is determined by the Board of Directors. Allocations to individual participant accounts are based on participant compensation. As shares are committed to be released to participants, the Company reports compensation expense equal to the current market price of the shares and the shares become outstanding for earnings per share computations.

(h)	Income Taxes

The Company and its subsidiary file a consolidated tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

(i)	Stock Option Plan

The Company applies APB Opinion No. 25 and related Interpretations in accounting for its Stock Option Plan. Accordingly, compensation expense is recognized only if the exercise price of the option is less than the fair value of the underlying stock at the grant date. Statement of Financial Accounting Standards (SFAS) No. 123 requires companies not using a fair value based method of accounting for stock options or similar plans, to provide pro forma disclosure of net income and earnings per share as if that method of accounting had been applied.



































ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(j)	Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold which represents short-term highly liquid investments.

(k)	Financial Instruments With Off-Balance Sheet Risk

The Company's off-balance sheet financial instruments are limited to commitments to extend credit. The Company's policy is to record such instruments when funded.

(l)	Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the year. Stock options and unvested stock grants are regarded as common stock equivalents and are considered in earnings per share calculations if dilutive. Unallocated shares held by the Company's ESOP are not included in the weighted average number of shares outstanding.

(m)	Segment Reporting

The Company's operations are solely in the financial services industry providing traditional community banking services in the geographical region of Oneida County and surrounding areas in New York State. The Company has determined that it has no reportable segments as defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information.



















ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000



(n)	Recent Accounting Pronouncements

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities. This standard requires that all derivative financial instruments be measured at fair value and recognized in the statement of condition as either assets or liabilities. Changes in the fair value of the derivative financial instruments will be reported in either earnings or comprehensive income, depending on the use of the derivative and whether or not it qualifies for hedge accounting. Consequently, there may be increased volatility in net income and shareholders' equity on an ongoing basis as a result of accounting for derivatives in accordance with the standards.

The Company adopted the standards on January 1, 2001 and the initial adoption did not have a material effect on the Company's consolidated financial statements. The Company does not currently utilize derivative financial instruments, accordingly, all disclosures required by the standards have been omitted.

In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 140 replaces identically titled SFAS No. 125 and carries forward most of SFAS No. 125's provisions without change. It does revise accounting standards for securitizations and certain other transfers of financial assets and collateral. The statement is generally applied prospectively to transactions and servicing activities occurring after March 31, 2001, although provisions with respect to collateral and certain disclosure requirements were adopted on December 31, 2000 and did not have a material impact on the consolidated financial statements of the Company. The remaining provisions of this statement were adopted on April 1, 2001 and the initial adoption did not have a material impact on the consolidated financial statements of the Company.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 supercedes Accounting Principles Board (APB) No. 16, "Business Combinations", and requires all business combinations to be accounted for under the purchase method of accounting, thus eliminating the pooling of interests method of accounting. The Statement did not change many of the provisions of APB No. 16 related to the application of the purchase method. However, the Statement does specify criteria for recognizing intangible assets separate from goodwill and requires additional disclosures regarding business combinations. The Statement is effective for business combinations initiated after June 30, 2001.

SFAS No. 142 requires acquired intangible assets (other than goodwill) to be amortized over their useful economic life, while goodwill and any acquired intangible assets with an indefinite useful economic life would not be amortized, but would be reviewed for impairment on an annual basis based upon guidelines specified by the Statement. SFAS No. 142 also requires additional disclosures pertaining to good will and intangible assets. The provisions of SFAS No. 142 are required to be adopted starting with fiscal years beginning after December 15, 2001. For any goodwill and other intangibles acquired after June 30, 2001, the non-amortization and amortization provisions of this Statement are effective immediately.

At December 31, 2001, the Company did not have any goodwill; therefore, the adoption of the Statement is not anticipated to have a material effect on the Company's results of operations.



|ROME BANCORP, INC. AND SUBSIDIARY          |                                                      |                                 |   |                       |  |       
|------------------------------------------ | ---------------------------------------------------- | ------------------------------- | - | --------------------- |  | ------
|                                           |                                                      |                                 |   |                       |  |       
|Notes to Consolidated Financial Statements |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|Years ended December 31, 2001 and 2000     |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|(3)                                        | Securities                                           |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           | Securities are summarized as follows (in thousands): |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           | Available-for-sale:                                  |                                 |   |                       |  |       
|                                           |                                                      | U.S. Government agencies        |   | 9,634                 |  | 325   
|                                           |                                                      | State and Municipal obligations |   | 9,790                 |  | 318   
|                                           |                                                      | Mortgage-backed securities      |   | 6,422                 |  | 85    
|                                           |                                                      | Corporate bonds                 |   |                       |  | 12,195
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   | Total debt securities |  | 38,041
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      | FHLB stock                      |   |                       |  | 926   
|                                           |                                                      | Equity and other securities     |   | 5,531                 |  | 38    
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           | Held-to-maturity:                                    |                                 |   |                       |  |       
|                                           |                                                      | U.S. Government securities      |   | 988                   |  | 53    
|                                           |                                                      | Mortgage-backed securities      |   | 334                   |  | 32    
|                                           |                                                      | Other bonds                     |   |                       |  | 404   
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           | Available-for-sale:                                  |                                 |   |                       |  |       
|                                           |                                                      | U.S. Government securities      | $ | 1,000                 |  | -     
|                                           |                                                      | U.S. Government agencies        |   | 20,690                |  | 168   
|                                           |                                                      | State and Municipal obligations |   | 9,686                 |  | 103   
|                                           |                                                      | Mortgage-backed securities      |   | 4,597                 |  | 27    
|                                           |                                                      | Corporate bonds                 |   |                       |  | 5,886 
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   | Total debt securities |  | 41,859
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      | FHLB stock                      |   |                       |  | 1,000 
|                                           |                                                      | Equity and other securities     |   | 4,184                 |  | 118   
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       
|                                           | Held-to-maturity:                                    |                                 |   |                       |  |       
|                                           |                                                      | U.S. Government securities      |   | 983                   |  | 35    
|                                           |                                                      | Mortgage-backed securities      |   | 434                   |  | 26    
|                                           |                                                      | Other bonds                     |   |                       |  | 376   
|                                           |                                                      |                                 |   |                       |  |       
|                                           |                                                      |                                 |   |                       |  |       

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





The following table presents the amortized cost and fair value of debt securities based on the contractual maturity date (in thousands). Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.

|                    |                              |            | December 31, 2001
|------------------- | ---------------------------- | ---------- | -----------------
|                    |                              |            | Amortized        
|                    |                              |            | cost             
|Available-for-sale: |                              |           
|                    | Due within one year          | $ 1,999    | 2,009            
|                    | Due after one year through   |            |                  
|                    |                              | five years | 25,428           
|                    | Due after five years through |            |                  
|                    |                              | ten years  | 8,423            
|                    | Due after ten years          | 2,191      | 2,286            
|                    |                              |            |                  
|                    |                              |            | $ 38,041         
|Held-to-maturity:   |                              |           
|                    | Due within one year          | 501        | 514              
|                    | Due after one year through   |            |                  
|                    |                              | five years | 543              
|                    | Due after five years through |            |                  
|                    |                              | ten years  | 220              
|                    | Due after ten years          | 462        | 465              
|                    |                              |            |                  
|                    |                              |            | $ 1,726          



Gross gains of $47,000 and $131,000 were realized on sales of securities in 2001 and 2000, respectively. Gross losses of $273,000 were realized on sales of securities in 2000.



ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000

(4)	Loans

Loans are summarized as follows (in thousands) at December 31:

|                |                       |               | 2001      | 2000   
|--------------- | --------------------- | ------------- | --------- | -------
|Mortgage loans: |                       |              
|                | Residential           | $ 62,099      | 62,937   
|                | Commercial            | 49,266        | 47,512   
|                | Construction and land | 2,165         | 1,047    
|                |                       |               |           |        
|                |                       |               | 113,530   | 111,496
|Other loans:    |                       |              
|                | Commercial            | 17,602        | 17,815   
|                | Automobile loans      | 20,085        | 22,248   
|                | Property improvement  |               |          
|                |                       | and equipment | 3,018     | 2,201  
|                | Education             | 4,523         | 4,648    
|                | Other consumer        | 10,446        | 9,126    
|                |                       |               |           |        
|                |                       |               | 55,674    | 56,038 
|                |                       |               |           |        
|                |                       |               | $ 169,204 | 167,534

The Company serviced loans for third parties totaling $3,192,000 and $3,977,000 at December 31, 2001 and 2000 respectively.

Changes in the allowance for loan losses are summarized as follows (in thousands):

|                                | Years ended 
|------------------------------- | ------------
|                                | December 31,
|                                | 2001        
|                                |             
|Balance at beginning of period  | $ 1,688     
|Provision charged to operations | 325         
|Recoveries                      | 175         
|Loans charged off               | (591)       
|                                |             
|Balance at end of period        | $ 1,597     













ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





The Company's recorded investment in loans that are considered impaired totaled $389,000 and $651,000 at December 31, 2001 and 2000, respectively. The average recorded investment in impaired loans was $217,000 and $329,000 in 2001 and 2000, respectively. At December 31, 2001, the recorded investment in impaired loans includes $389,000 of loans which had related reserves of $117,000. At December 31, 2000, the recorded investment in impaired loans includes $651,000 of loans which had related reserves of $326,000. The Company recognized no interest on impaired loans during the years ended December 31, 2001 and 2000.

The principal balances of loans not accruing interest amounted to $574,000 and $1,158,000 at December 31, 2001 and 2000, respectively. The differences between the amount of interest income that would have been recorded if nonaccrual loans had been paid in accordance with their original terms and the amount of interest income that was recorded during the years ended December 31, 2001 and 2000 was immaterial. There are no commitments to extend further credit on non-performing loans.

A substantial portion of the Company's loans are mortgage and consumer loans in Oneida County. Accordingly, the ultimate collectibility of a substantial portion of the Company's loan portfolio is susceptible to changes in market conditions in this area. A majority of the Company's loan portfolio is secured by real estate. Other than general economic risks, management is not aware of any material concentrations of credit risk to any industry or individual borrower.



(5)	Premises and Equipment

Premises and equipment at December 31 are summarized as follows (in thousands):

|                                  |              | 2001    | 2000   
|--------------------------------- | ------------ | ------- | -------
|                                  |              |         |        
|Land                              | $ 836        | $ 836  
|Buildings and improvements        | 4,473        | 4,451  
|Furniture and equipment           | 5,201        | 5,027  
|                                  |              |         |        
|                                  |              | 10,510  | 10,314 
|Less accumulated depreciation and |              |        
|                                  | amortization | 7,315   | 6,925  
|                                  |              |         |        
|                                  |              | $ 3,195 | $ 3,389

Depreciation and amortization expense included in building, occupancy and equipment expense amounted to $390,000 and $477,000 during the years ended December 31, 2001 and 2000, respectively.









ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(6)	Deposits

Contractual maturities of time deposits at December 31 are summarized as follows (in thousands):



|                         |                     | 2001    
|------------------------ | ------------------- | --------
|                         |                     |         
|Within one year          | $ 52,112           
|One through two years    | 11,450             
|Two through three years  | 3,288              
|Three through four years | 4,889              
|Four through five years  | 2,373              
|                         |                     |         
|                         | Total time deposits | $ 74,112



At December 31, 2001 and 2000, time deposits with balances of $100,000 or more totaled approximately $9,730,000 and $9,071,000, respectively.

Interest expense on deposits for the years ended December 31 is summarized as follows (in thousands):

|                       | 2001    | 2000   
|---------------------- | ------- | -------
|                       |         |        
|Savings                | $ 1,889 | $ 2,440
|Money market           | 162     | 185    
|Time                   | 3,870   | 3,754  
|Other interest bearing | 43      | 84     
|                       |         |        
|                       | $ 5,964 | $ 6,463































ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000



(7)	Borrowings

The Company is a member of the Federal Home Loan Bank of New York (FHLB). As a member, the Company is required to own capital stock in the FHLB and is authorized to apply for advances from the FHLB. The following is a summary of advances from the FHLB at December 31 (in thousands):

|                                             |   | 2001  |     | 2000 
|-------------------------------------------- | - | ----- | --- | -----
|Bearing interest at 6.73% fixed, due 10/9/01 | - |       | 500
|Bearing interest at 6.73% fixed, due 10/7/02 |   | 9,500 |     | 9,500
|                                             |   |       |    

The Company also has a four-year amortizing note payable to the FHLB with a balance of $7,357,000 and $9,635,000 at December 31, 2001 and 2000, respectively. This note bears a fixed interest rate of 6.79%. The Company has pledged $35,889,000 of one-to-four family mortgage loans as collateral for the above borrowings.

The following table summarizes the combined aggregate amount of maturities for the above advances and note for each of the five years after December 31, 2001:



|Due in one year             | $ 11,937
|--------------------------- | --------
|Due one through two years   | 2,608   
|Due two through three years | 2,312   
|                            |         
|Total                       | $ 16,857



At December 31, 2001, the Company had available an unused line of credit of $24,525,000 with the FHLB which is subject to review and renewal.





























ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000



(8)	Income Taxes

The components of income tax expense (benefit) attributable to income from operations for the years ended December 31 consist of (in thousands):

|          |         | 2001    | 2000 
|--------- | ------- | ------- | -----
|Current:  |         |        
|          | Federal | $ 809   | $ 836
|          | State   | 90      | 110  
|          |         |         |      
|          |         | 899     | 946  
|Deferred: |         |        
|          | Federal | 146     | (176)
|          | State   | 13      | (47) 
|          |         |         |      
|          |         | 159     | (223)
|          |         |         |      
|          |         | $ 1,058 | $ 723

Actual tax expense differs from "expected" tax expense, computed by applying the U.S. Federal statutory tax rate of 34% to income before income taxes for the years ended December 31, as follows (in thousands):

|                                |                                       |                                         |                     | 2001    | 2000 
|------------------------------- | ------------------------------------- | --------------------------------------- | ------------------- | ------- | -----
|                                |                                       |                                         |                     |         |      
|Computed "expected" tax expense | $ 1,144                               | $ 842                                  
|                                | Increases (decreases) in income taxes |                                         |                    
|                                |                                       | resulting from:                         |                     |        
|                                |                                       | State taxes, net of Federal tax benefit | 68                  | 42     
|                                |                                       |                                         | Tax exempt interest | (125)   | (179)
|                                |                                       |                                         | Other, net          | (29)    | 18   
|                                |                                       |                                         |                     |         |      
|                                |                                       |                                         |                     | $ 1,058 | $ 723
|                                |                                       |                                         |                     |         |      
|                                |                                       |                                         |                     | 31.4%   | 29.2%



ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities for December 31 are (in thousands):

|                          |                                       |                                      | 2001    | 2000 
|------------------------- | ------------------------------------- | ------------------------------------ | ------- | -----
|                          |                                       |                                      |         |      
|Deferred tax assets:      |                                       |                                     
|                          | Allowance for loan losses             | 532                                  | 700    
|                          | Accrued postretirement benefits       | 827                                  | 770    
|                          | Deferred compensation                 | 415                                  | 341    
|                          | Charitable contribution carry forward | -                                    | 65     
|                          | Other                                 | 81                                   | 82     
|                          |                                       |                                      |         |      
|                          |                                       | Total gross deferred tax assets      | 1,855   | 1,958
|                          |                                       |                                      |         |      
|Deferred tax liabilities: |                                       |                                     
|                          | Accumulated depreciation on           |                                      |        
|                          |                                       | premises and equipment               | 31      | 52   
|                          | Prepaid pension cost                  | 324                                  | 240    
|                          | Undistributed income of subsidiary    | 31                                   | 57     
|                          | Unrealized gains on available-        |                                      |        
|                          |                                       | for-sale securities                  | 297     | 144  
|                          | Other                                 | 51                                   | 32     
|                          |                                       |                                      |         |      
|                          |                                       | Total gross deferred tax liabilities | 734     | 525  
|                          |                                       |                                      |         |      
|                          |                                       | Net deferred tax assets              | $ 1,121 | 1,433

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the carryback period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income and projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Management believes that no valuation allowance is necessary.

In accordance with SFAS No. 109, the Company has not recognized deferred tax liabilities with respect to the Bank's Federal and state base-year reserves of approximately $3.4 million at December 31, 2001, since the Company does not expect that these amounts will become taxable in the foreseeable future. Under the tax laws, as amended, events that would result in taxation of these reserves include redemptions of the Bank's stock or certain excess distributions to the Holding Company. The unrecognized deferred tax liability at December 31, 2001 with respect to the base-year reserve was approximately $1.4 million.



ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(9)	Pension and Postretirement Benefits

The following table sets forth the changes in the Company's pension and postretirement plans' accumulated benefit obligations, fair value of assets and funded status and amounts recognized in the consolidated balance sheets at December 31, 2001 and 2000:

|                              |                                         |                                          | Pension benefits | Postretirement benefits
|----------------------------- | --------------------------------------- | ---------------------------------------- | ---------------- | -----------------------
|(in thousands)                | 2001                                    | 2000                                     | 2001             | 2000                   
|Change in benefit obligation: |                                         |                                          |                  |                        
|                              | Benefit obligation at beginning of year | $ 5,966                                  | $ 5,805          | 2,136                  
|                              | Service cost                            | 166                                      | 162              | 27                     
|                              | Interest cost                           | 465                                      | 437              | 167                    
|                              | Amendments                              | -                                        | -                | (130)                  
|                              | Actuarial loss (gain)                   | 303                                      | (239)            | (304)                  
|                              | Benefits paid                           | (286)                                    | (199)            | (94)                   
|                              | Participant contributions               | -                                        | -                | 39                     
|                              |                                         |                                          |                  |                        
|                              |                                         | Benefit obligation at end of year        | 6,614            | 5,966                  
|                              |                                         |                                          |                  |                        
|Change in plan assets:        |                                         |                                          |                  |                        
|                              | Fair value of plan assets               |                                          |                  |                        
|                              |                                         | at beginning of year                     | 8,764            | 7,664                  
|                              | Actual return on plan assets            | (1,264)                                  | 1,299            | -                      
|                              | Employer contributions                  | -                                        | -                | 55                     
|                              | Participant contributions               | -                                        | -                | 39                     
|                              | Benefits paid                           | (286)                                    | (199)            | (94)                   
|                              |                                         |                                          |                  |                        
|                              |                                         | Fair value of plan assets at end of year | 7,214            | 8,764                  
|                              |                                         |                                          |                  |                        
|Funded status                 | 600                                     | 2,798                                    | (1,841)          | (2,136)                
|                              | Unrecognized net actuarial loss (gain)  | 255                                      | (2,151)          | (214)                  
|                              | Unrecognized prior service cost         | (23)                                     | (31)             | (69)                   
|                              |                                         |                                          |                  |                        
|                              |                                         | Prepaid (accrued) benefit cost           | $ 832            | $ 616                  
|                              |                                         |                                          |                  |                        
|Assumptions as of measurement |                                         |                                          |                  |                        
|                              | date, September 30:                     |                                          |                  |                        
|                              |                                         | Discount rate                            | 7.25%            | 8.00%                  
|                              |                                         | Expected return on plan assets           | 9.00%            | 8.00%                  
|                              |                                         | Rate of compensation increase            | 4.50%            | 5.50%                  





ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





The components of net periodic benefit cost includes the following:

|                            | Pension benefits | Postretirement benefits
|--------------------------- | ---------------- | -----------------------
|(in thousands)              | 2001             | 2000                   
|                            |                  |                        
|Service cost                | $ 166            | $ 162                  
|Interest cost               | 465              | 437                    
|Expected return on assets   | (780)            | (605)                  
|Amortization                | (67)             | (66)                   
|                            |                  |                        
|Net periodic (benefit) cost | $ (216)          | $ (72)                 



There is no assumed increase in the per capita cost of current health care benefits since the employer contributions are fixed with the retiree paying for any cost increases.



(10)	Stock Option Plan

On May 3, 2000, the Company's shareholders approved the Rome Bancorp, Inc. 2000 Stock Option Plan (the "Stock Option Plan"). The primary objective of the Stock Option Plan is to provide officers and directors with a proprietary interest in the Company and an incentive to encourage such persons to remain with the Company.

Under the Stock Option Plan, 166,638 shares of authorized but unissued common stock are reserved for issuance upon option exercises. The Company also has the alternative to fund the Stock Option Plan with treasury stock. Options under the plan may be either non-qualified stock options or incentive stock options. Each option entitles the holder to purchase one share of common stock at an exercise price equal to the fair market value on the date of grant. On June 28, 2000, 112,400 options were awarded at an exercise price of $7.44 per share. These options have a ten-year term and vest at a rate of 20% per year from the grant date. At December 31, 2001 and 2000 the remaining contractual life of these options was 8.5 years and 9.5 years, respectively.

The following table presents the stock option activity for the years ended December 31, 2001 and 2000 (in thousands):

|                                 |  |         | 2001 |          |  | 2000   
|-------------------------------- |  | ------- | ---- | -------- |  | -------
|                                 |  |         |      | Weighted |  |        
|                                 |  |         |      | Average  |  |        
|                                 |  |         |      | Exercise |  |        
|                                 |  | Shares  |      | Price    |  | Shares 
|                                 |  |         |      |          |  |        
|Outstanding at beginning of year |  | 112,400 |      | $ 7.44   |  | -      
|Granted                          |  | -       |      | -        |  | 112,400
|Exercised                        |  | (6,560) |      | 7.44     |  | -      
|Outstanding at end of year       |  | 105,840 |      | 7.44     |  | 112,400
|Exercisable at end of year       |  | 15,920  |      | 7.44     |  | -      



ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





The fair value of each option grant is estimated on the dates of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants made on June 28, 2000; dividend yield of 2.00%; expected volatility of 47.50%; risk free interest rate of 6.30%; expected lives of five years. The estimated weighted average fair value of the options granted on June 28, 2000 was $3.18 per option.

Pro forma disclosures for the Company for the years ended December 31, 2001 and 2000 utilizing the estimated fair value of the options granted and an assumed 5% forfeiture rate are as follows:

|                            |  | 2001                                  |  | 2000   
|--------------------------- |  | ------------------------------------- |  | -------
|                            |  | (in thousands, except per share data)
|Net income:                 |  |                                       |  |        
|As reported                 |  | $ 2,307                               |  | $ 1,753
|Pro forma                   |  | $ 2,274                               |  | $ 1,733
|                            |  |                                       |  |        
|Basic earnings per share:   |  |                                       |  |        
|As reported                 |  | $ 0.78                                |  | $ 0.56 
|Pro forma                   |  | $ 0.77                                |  | $ 0.55 
|                            |  |                                       |  |        
|Diluted earnings per share: |  |                                       |  |        
|As reported                 |  | $ 0.77                                |  | $ 0.56 
|Pro forma                   |  | $ 0.76                                |  | $ 0.55 
|                            |  |                                       | 



Because the Company's stock options have characteristics significantly different from those of traded options for which the Black-Scholes model was developed, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models, in management's opinion, do not necessarily provide a reliable single measure of the fair value of its stock options. In addition, the effect on reported net income and earnings per share for the years ended December 31, 2001 and 2000 may not be representative of the effects on reported net income or earnings per share for future years.





























ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(11)	Recognition and Retention Plan

The Company's shareholders approved the Rome Bancorp, Inc. 2000 Recognition and Retention Plan ("RRP") on May 3, 2000. The purpose of the plan is to promote the long-term interests of the Company and its shareholders by providing a stock-based compensation program to attract and retain officers and directors.

During 2000, 35,200 shares were awarded under the RRP. The shares vest at a rate of 20% per year from the grant date. The fair market value of the shares awarded under the plan was $262,000 at the grant date, and is being amortized to compensation expense on a straight-line basis over the vesting periods of the underlying shares. Compensation expense of $52,000 and $27,000 was recorded in 2001 and 2000, respectively. The remaining unearned compensation cost is shown as a reduction of shareholders' equity. The shares awarded under the RRP were transferred from treasury stock at cost with the difference between the fair market value on the grant date and the cost of the shares recorded as additional paid-in capital.



(12)	Other Employee Benefits

The Company has a defined contribution 401(k) Savings Plan for all full time salaried employees. Employees are permitted to contribute up to 15% of base pay to the Savings Plan, subject to certain limitations. The Company matches 50% of each employee's contributions up to a limit of 3% of the employee's base pay.

Contributions to the defined contribution 401(k) Savings Plan were $55,000 and $60,000 during the years ended December 31, 2001 and 2000, respectively.

In connection with establishing the ESOP in 1999, the ESOP borrowed $933,000 from the Company to purchase 133,310 shares of the Company's common stock. The loan bears interest at 8% and is payable in fifteen annual installments. At December 31, 2001, 26,661 shares had been released or committed to be released and 106,649 remained as unallocated shares. The fair value of the unallocated shares on December 31, 2001 was $1,813,000. The Company recognized compensation expense of $131,000 and $70,000 in 2001 and 2000, respectively in connection with the ESOP.















ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(13)	Comprehensive Income (Loss)

Comprehensive income represents net income and other comprehensive income which is the net change in the unrealized gains or losses on securities available-for-sale net of taxes. The following summarizes the components of other comprehensive income (in thousands):

|                                             |                                    |                     |                    | Years ended December 31,
|-------------------------------------------- | ---------------------------------- | ------------------- | ------------------ | ------------------------
|                                             |                                    |                     |                    | 2001                    
|Net change in unrealized gain on             |                                    |                    
|                                             | available-for-sale securities      | $ 432               | $ 651             
|Reclassification adjustment for net realized |                                    |                    
|                                             | loss (gain) included in net income | (47)                | 142               
|                                             |                                    |                     |                    |                         
|Other comprehensive income, before tax       | 385                                | 793                
|Deferred tax expense                         | 153                                | 318                
|                                             |                                    |                     |                    |                         
|                                             |                                    | Other comprehensive |                    |                         
|                                             |                                    |                     | income, net of tax | $ 232                   





(14)	Commitments and Contingencies

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and involve, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts recognized in the consolidated balance sheet. Credit risk represents the accounting loss that would be recognized at the reporting date if obligated counterparties failed completely to perform as contracted. Market risk represents risk that future changes in market prices make financial instruments less valuable.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's evaluation of the customer's financial position. Collateral held varies, but may include real estate, accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. Substantially all commitments to extend credit, if exercised, will represent loans secured by real estate.







ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





At December 31, 2001 and 2000 the Company was committed to originate mortgage and other loans of approximately $7,672,000 and $3,319,000, respectively. Commitments under unused lines of credit and letters of credit were approximately $6,233,000 and $5,443,000 at December 31, 2001 and 2000, respectively.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments is represented by the contractual or notional amount of these instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments. The Company controls its credit risk through credit approvals, limits, and monitoring procedures.

In the normal course of business, there are various outstanding legal proceedings. In the opinion of management, the aggregate amount involved in such proceedings is not material to the financial condition or results of operations of the Company.



(15)	Earnings Per Share

The following summarizes the computation of earnings per share for the years ended December 31 (in thousands except per share data):

|                                            | 2001    | 2000 
|------------------------------------------- | ------- | -----
|Basic earnings per share:                   |         |      
|Net Income available to common shareholders | $ 2,307 | 1,753
|Weighted average basic shares outstanding   | 2,942   | 3,132
|                                            |         |      
|Basic earnings per share                    | $ 0.78  | 0.56 
|                                            |         |      
|Diluted earnings per share:                 |         |      
|Net Income available to common shareholders | $ 2,307 | 1,753
|Weighted average basic shares outstanding   | 2,942   | 3,132
|Effect of dilutive securities:              |         |      
|Stock options                               | 53      | 9    
|Unearned compensation                       | 9       | 2    
|Weighted average diluted shares outstanding | 3,004   | 3,143
|                                            |         |      
|Diluted earnings per share                  | $ 0.77  | 0.56 











ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





(16)	Shareholders' Equity and Regulatory Matters

The Bank is required to maintain certain reserves of vault cash and/or deposits with the Federal Reserve Bank of New York. The amount of this reserve requirement, included in cash on hand, is $520,000 at December 31, 2001.

The Company's ability to pay dividends is primarily dependent upon the ability of its subsidiary bank to pay dividends to the Company. The payment of dividends by the Bank is subject to continued compliance with minimum regulatory capital requirements. In addition, regulatory approval is generally required prior to the Bank declaring dividends in an amount in excess of net income for that year plus net income retained in the preceding two years.

The Company and the Bank are subject to various regulatory requirements administered by the federal banking agencies and the Bank is further regulated by the New York State Banking Department.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the Company's and Bank's financial statements.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), established capital levels for which insured institutions are categorized as well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, or critically undercapitalized.

As of September 30, 2000, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective actions. To be categorized as well capitalized, the Bank must meet the minimum ratios as set forth in the table. There have been no conditions or events since that notification that management believes have changed the Bank's category. Management believes, as of December 31, 2001, that the Company and Bank meet all capital adequacy requirements to which they are subject.



















ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





The following is a summary of the Company's and Bank's actual capital amounts and ratios compared to the regulatory minimum capital adequacy requirements and the FDIC requirements for classification as a well capitalized institution under prompt corrective action provisions (dollars in thousands):

|                         |                         |                   |         |          |              |                 |              | To be classified as
|------------------------ | ----------------------- | ----------------- | ------- | -------- | ------------ | --------------- | ------------ | -------------------
|                         |                         |                   |         |          |              |                 |              | well-capitalized   
|                         |                         |                   |         |          |              | Minimum capital | under prompt
|                         |                         |                   |         |          |              | adequacy        |              | corrective action  
|                         |                         |                   |         | Actual   | requirements | provisions     
|                         |                         |                   |         | Amount   | Ratio        | Amount          | Ratio        | Amount             
|As of December 31, 2001: |                         |                   |         |          |              |                
|                         | Total capital (to risk  |                   |         |          |              |                 |             
|                         |                         | weighted assets): |         |          |              |                 |              |                    
|                         |                         |                   | Company | $ 37,295 | 21.8%        | 13,716          | >= 8%        |                    
|                         |                         |                   | Bank    | 34,875   | 20.3%        | 13,714          | >=8%         | 17,143             
|                         |                         |                   |         |          |              |                 |              |                    
|                         | Tier 1 Capital (to risk |                   |         |          |              |                 |             
|                         |                         | weighted assets): |         |          |              |                 |              |                    
|                         |                         |                   | Company | 35,699   | 20.8%        | 6,858           | >=4%         |                    
|                         |                         |                   | Bank    | 33,278   | 19.4%        | 6,857           | >=4%         | 10,286             
|                         |                         |                   |         |          |              |                 |              |                    
|                         | Tier 1 Capital (to      |                   |         |          |              |                 |             
|                         |                         | average assets):  |         |          |              |                 |              |                    
|                         |                         |                   | Company | 35,699   | 14.5%        | 7,364           | >=3%         |                    
|                         |                         |                   | Bank    | 33,278   | 13.5%        | 7,402           | >=3%         | 12,337             
|                         |                         |                   |         |          |              |                 |              |                    
|As of December 31, 2000: |                         |                   |         |          |              |                
|                         | Total capital (to risk  |                   |         |          |              |                 |             
|                         |                         | weighted assets): |         |          |              |                 |              |                    
|                         |                         |                   | Company | $ 39,524 | 24.3%        | 13,016          | >= 8%        |                    
|                         |                         |                   | Bank    | 35,174   | 21.6%        | 13,050          | >=8%         | 16,312             
|                         |                         |                   |         |          |              |                 |              |                    
|                         | Tier 1 Capital (to risk |                   |         |          |              |                 |             
|                         |                         | weighted assets): |         |          |              |                 |              |                    
|                         |                         |                   | Company | 37,831   | 23.3%        | 6,508           | >=4%         |                    
|                         |                         |                   | Bank    | 33,480   | 20.5%        | 6,525           | >=4%         | 9,787              
|                         |                         |                   |         |          |              |                 |              |                    
|                         | Tier 1 Capital (to      |                   |         |          |              |                 |             
|                         |                         | average assets):  |         |          |              |                 |              |                    
|                         |                         |                   | Company | 37,831   | 15.5%        | 7,331           | >=3%         |                    
|                         |                         |                   | Bank    | 33,480   | 13.7%        | 7,326           | >=3%         | 12,210             



ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





In order to grant priority in the Conversion to the eligible depositors, the Bank established a special account at the time of conversion in an amount equal to its total net worth at March 31, 1999. In the event of a future liquidation of the converted bank (and only in such event), eligible account holders who continue to maintain accounts shall be entitled to receive a distribution from the special account. The total amount of the special account will be decreased (as balances of eligible accounts are reduced) on annual determination dates. No cash dividends may be paid to the stockholders and no shares may be repurchased by the Company if such actions would reduce the Bank's stockholders' equity below the amount required for the special account. At December 31, 2001, the amount remaining in this liquidation account was approximately $9.7 million.



(17)	Fair Value of Financial Instruments

The following methods and assumptions were used by the Bank in estimating fair values of financial instruments:

Cash and cash equivalents: For these short-term instruments that generally mature in ninety days or less. The carrying value approximates fair value.

Securities: Fair values of securities are based on exchange quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of similar instruments.

Loans: For variable rate loans that reprice frequently and loans due on demand with no significant change in credit risk, fair values are considered to approximate carrying values. The fair values for certain mortgage loans (e.g., one-to-four family residential) and other consumer loans are based on quoted market prices of similar loans sold on the secondary market, adjusted for differences in loan characteristics. The fair values for other loans (e.g., commercial real estate and rental property mortgage loans) are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit rating. The carrying amount of accrued interest receivable approximates its fair value.

Deposits: The fair values of demand deposits (interest and non-interest checking) savings accounts and money market accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposits, are estimated using a discounted cash flow calculation that applies interest rates currently being offered on these products to a schedule of aggregated expected monthly maturities on time deposits.









ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





Off-balance-sheet instruments: Fair values for the Company's off-balance-sheet instruments (lines of credit and commitments to fund loans) are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The fair value of these financial instruments is immaterial and has therefore been excluded from the table below.

These estimated fair valued do not include the value of core deposit relationships which comprise a significant portion of the Company's deposit base. Management believes that the Company's core deposit relationships provide a relatively stable low-cost funding source which has a substantial intangible value separate from the deposit balances.

The estimated carrying values and fair values of the Company's financial instruments for December 31 are as follows (in thousands):

|                       |                               | 2001     | 2000   
|---------------------- | ----------------------------- | -------- | -------
|                       |                               | Carrying | Fair   
|                       |                               | amount   | value  
|Financial assets:      |                               |          |        
|                       | Cash and cash equivalents     | $ 23,922 | 23,922 
|                       | Securities available for sale | 45,243   | 45,243 
|                       | Securities held to maturity   | 1,726    | 1,811  
|                       | Loans, net                    | 167,607  | 170,915
|                       | Accrued interest receivable   | 1,524    | 1,524  
|                       |                               |          |        
|Financial liabilities: |                               |          |        
|                       | Non-interest bearing deposits | 24,922   | 24,922 
|                       | Interest bearing deposits     | 164,294  | 166,368
|                       | Borrowings                    | 16,857   | 17,729 



Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

























ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000



(18)	Parent Company Only Financial Statements

Presented below are the condensed balance sheets as of December 31, 2001 and 2000 and statements of income and statements of cash flows for the years ended December 31, 2001 and 2000 (in thousands):

|Condensed Balance Sheet                                                                | 2001                          | 2000                                                                                                                     
|-------------------------------------------------------------------------------------- | ----------------------------- | -------------------------------------------------------------------------------------------------------------------------
|                                                                                       |                               |                                                                                                                          
|Assets:                                                                                |                               |                                                                                                                          
|                                                                                       | Cash and due from banks       | $ 1,209                                                                                                                  
|                                                                                       | Investment in subsidiary bank | 33,944                                                                                                                   
|                                                                                       | Loan receivable from ESOP     | 775                                                                                                                      
|                                                                                       | Other assets                  | 485                                                                                                                      
|                                                                                       |                               |                                                                                                                          
|                                                                                       |                               | Total assets                                                                                                             
|                                                                                       |                               |                                                                                                                          
|Total liabilities                                                                      | 49                            | 688                                                                                                                      
|Total shareholders' equity                                                             | 36,364                        | 38,047                                                                                                                   
|                                                                                       |                               |                                                                                                                          
|                                                                                       |                               | Total liabilities and shareholders' equity                                                                               
|                                                                                       |                               |                                                                                                                          
|                                                                                       |                               |                                                                                                                          
|Condensed Statement of Income                                                          |                               |                                                                                                                          
|                                                                                       |                               |                                                                                                                          
|Interest income                                                                        | $ 165                         | 256                                                                                                                      
|Dividends from subsidiary bank                                                         | 2,550                         | 1,500                                                                                                                    
|                                                                                       |                               |                                                                                                                          
|                                                                                       |                               | Total operating income                                                                                                   
|                                                                                       |                               |                                                                                                                          
|Other operating expenses                                                               | 315                           | 252                                                                                                                      
|                                                                                       |                               | Net income before income taxes and dividends in excess of net income (equity in undistributed income) of subsidiary bank.
|                                                                                       |                               |                                                                                                                          
|Income tax (benefit) expense                                                           | (54)                          | 1                                                                                                                        
|(Dividends in excess of net income) equity in undistributed income) of subsidiary bank | (147)                         | 250                                                                                                                      
|                                                                                       |                               |                                                                                                                          
|                                                                                       |                               | Net income                                                                                                               



ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000





|Condensed Statement of Cash Flows              | 2001                       | 2000                                       
|---------------------------------------------- | -------------------------- | -------------------------------------------
|                                               |                            |                                            
|Operating activities:                          |                            |                                            
|                                               | Net income                 | $ 2,307                                    
|                                               |                            | Adjustments to reconcile net income to cash
|                                               |                            | provided by operating activities:          
|                                               |                            |                                            
|                                               |                            |                                            
|                                               |                            |                                            
|                                               |                            |                                            
|                                               |                            |                                            
|                                               |                            |                                            
|                                               |                            |                                            
|Investing activities:                          |                            |                                            
|                                               | Decrease in loan to ESOP   | 38                                         
|                                               |                            |                                            
|                                               |                            |                                            
|                                               |                            |                                            
|Financing activities:                          |                            |                                            
|                                               | Purchase of treasury stock | (3,670)                                    
|                                               | Dividends                  | (841)                                      
|                                               | Exercise of stock options  | 49                                         
|                                               |                            |                                            
|                                               |                            |                                            
|                                               |                            |                                            
|Net decrease in cash and cash equivalents      | (1,178)                    | (1,984)                                    
|                                               |                            |                                            
|Cash and cash equivalents at beginning of year | 2,387                      | 4,371                                      
|                                               |                            |                                            
|Cash and cash equivalents at end of year       | $ 1,209                    | 2,387                                      





|Directors of Rome Bancorp, Inc.                   | Corporate Information                         
|------------------------------------------------- | ----------------------------------------------
|and The Rome Savings Bank                         |                                               
|                                                  | Transfer Agent and Registrar                  
|Charles M. Sprock                                 | Inquiries regarding stockholder administration
|Chairman of the Board, President and Chief        | and services should be directed to:           
|Executive Officer                                 |                                               
|                                                  |                                               
|Bruce R. Engelbert                                |                                               
|Retired, Former Owner and President, Engelbert's  |                                               
|Jewelers, Inc., a retail jewelry business         |                                               
|                                                  |                                               
|David C. Grow                                     | Independent Auditors                          
|Partner, law firm of McMahon, Grow & Getty        | KPMG LLP                                      
|                                                  | 113 South Salina Street                       
|Kirk B. Hinman                                    | Syracuse, NY 13202                            
|President, Rome Strip Steel Company, Inc.         | (315) 471-8167                                
|                                                  |                                               
|T. Richard Leidig                                 | Special Legal Counsel                         
|Business Consultant                               | Thacher Proffitt & Wood                       
|                                                  | 1700 Pennsylvania Avenue, NW                  
|Richard H. McMahon                                | Suite 800                                     
|Partner, law firm of McMahon, Grow & Getty        | Washington, DC 20006                          
|                                                  | (202) 347-8400                                
|Marion C. Scoville                                |                                               
|Retired, Former Corporate Secretary and           | Stock Information                             
|Executive Assistant to the President,             | Rome Bancorp's common stock trades on the     
|The Rome Savings Bank                             | Nasdaq National Market System under the       
|                                                  | symbol"ROME".                                 
|Michael J. Valentine                              |                                               
|President, Mele Manufacturing Company, Inc.,      | Investor Relations                            
|manufacturing jewel cases, stationery, custom     | Inquiries regarding The Rome Savings Bank     
|packaging and sports flooring                     | and Rome Bancorp, Inc. should be directed to: 
|                                                  |                                               
|                                                  |                                               
|Executive Officers of The Rome Savings Bank       |                                               
|                                                  |                                               
|Charles M. Sprock                                 |                                               
|President and Chief Executive Officer             |                                               
|                                                  |                                               
|David C. Nolan                                    | Annual Meeting of Stockholders                
|Treasurer and Chief Financial Officer             | Rome Bancorp's Annual Meeting of Stockholders 
|                                                  | will be held at 6:00 p.m. local time, on      
|James F. Sullivan                                 | Wednesday, May 1, 2002, at the main office of 
|Vice President/Senior Loan Officer                | The Rome Savings Bank, 100 W. Dominick        
|                                                  | Street, Rome, New York, 13440-5810. Holders   
|D. Bruce Fraser                                   | of common stock as of March 8, 2002 will      
|Vice President/Branch Administration and Security | be eligible to vote.