---

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal
year ended December 31, 2006
Commission File No.: 000-27481

ROME BANCORP, INC. (Exact name of registrant as specified in its charter)

|                                |  |                    
|------------------------------- |  | -------------------
|Delaware                        |  | 16-1573070         
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

100 W. Dominick Street, Rome, New
York 13440-5810(Address
of principal executive offices)(315) 336-7300(Registrants Telephone
Number)

Securities
registered pursuant to Section 12(b) of the Act:

|                                          |                                     
|----------------------------------------- | ------------------------------------
|Title of Class                            | Name of exchange on which registered
|Common
  Stock, par value $0.01 per share | The
  NASDAQ Stock Market, LLC      

Indicate
by check mark of the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x

Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No x

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No o

Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K (Sect. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.o

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):

|                          |                     |                        
|------------------------- | ------------------- | -----------------------
|Large accelerated filer o | Accelerated filer x | Non-accelerated filer o

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act. Yes o No x

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Based
on the closing sales price on June 30, 2006, the aggregate market value of the
voting stock held by non-affiliates of the registrant was $89,482,000.

Rome
Bancorp had 8,471,983 shares of common stock outstanding as of March 9, 2007.

DOCUMENTS INCORPORATED BY REFERENCE

Portions
of the definitive proxy statement pursuant to Regulation 14A to be issued by
the Corporation in connection with the 2007 Annual Meeting and portions of the
2006 Annual Report to Shareholders for the fiscal year ended December 31, 2006
are incorporated by reference into Parts II and III of this report.

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5

TABLE OF
CONTENTS

|         |          |                                                                                                                |  |     
|-------- | -------- | -------------------------------------------------------------------------------------------------------------- |  | ----
|         |          |                                                                                                                |  | Page
|         |          |                                                                                                                |  |     
|PART I   |          |                                                                                                                | 
|         |          |                                                                                                                | 
|         | ITEM 1.  | BUSINESS                                                                                                       |  | 4   
|         | ITEM 1A. | RISK FACTORS                                                                                                   |  | 32  
|         | ITEM 1B. | UNRESOLVED STAFF COMMENTS                                                                                      |  | 35  
|         | ITEM 2.  | DESCRIPTION OF PROPERTY                                                                                        |  | 35  
|         | ITEM 3.  | LEGAL PROCEEDINGS                                                                                              |  | 35  
|         | ITEM 4.  | SUBMISSION OF MATTERS TO A VOTE OF
  SECURITY HOLDERS                                                          |  | 35  
|         |          |                                                                                                                |  |     
|PART II  |          |                                                                                                                | 
|         |          |                                                                                                                | 
|         | ITEM 5.  | MARKET FOR REGISTRANTS COMMON
  EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 36  
|         | ITEM 6.  | SELECTED FINANCIAL DATA                                                                                        |  | 36  
|         | ITEM 7.  | MANAGEMENTS DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 36  
|         | ITEM 7A. | QUANTITATIVE AND QUALITATIVE
  DISCLOSURES ABOUT MARKET RISK                                                   |  | 36  
|         | ITEM 8.  | FINANCIAL STATEMENTS AND
  SUPPLEMENTARY DATA                                                                  |  | 36  
|         | ITEM 9.  | CHANGES IN AND DISAGREEMENTS WITH
  ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  | 36  
|         | ITEM 9A. | CONTROLS AND PROCEDURES                                                                                        |  | 36  
|         | ITEM 9B. | OTHER INFORMATION                                                                                              |  | 37  
|         |          |                                                                                                                |  |     
|PART III |          |                                                                                                                | 
|         |          |                                                                                                                | 
|         | ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND
  CORPORATE GOVERNANCE                                                       |  | 37  
|         | ITEM 11. | EXECUTIVE COMPENSATION                                                                                         |  | 38  
|         | ITEM 12. | SECURITY OWNERSHIP OF CERTAIN
  BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS               |  | 38  
|         | ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED
  TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                    |  | 38  
|         | ITEM 14. | PRINCIPAL ACCOUNTING FEES AND
  SERVICES                                                                       |  | 38  
|         |          |                                                                                                                |  |     
|PART IV  |          |                                                                                                                | 
|         |          |                                                                                                                | 
|         | ITEM 15. | EXHIBITS, FINANCIAL STATEMENT
  SCHEDULES                                                                      |  | 38  

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Forward Looking Statements

This
Annual Report on Form 10-K contains forward-looking statements which may be
identified by the use of such words as believe, expect, anticipate,
should, planned, estimated, and potential. Examples of forward-looking
statements include, but are not limited to, estimates with respect to our
financial condition and results of operation and business that are subject to
various factors which could cause actual results to differ materially from
these estimates including, but not limited to, changes in the real estate
market or local economy, changes in interest rates, changes in laws and
regulations to which we are subject, and competition in our primary market
area.

Any
or all of our forward-looking statements in this Annual Report on Form 10-K and
in any other public statements we make may turn out to be wrong. They can be
affected by inaccurate assumptions we might make or unknown risks and
uncertainties. Consequently, no forward-looking statements can be guaranteed.
We disclaim 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.

PART I

|          |         
|--------- | --------
|ITEM
  1. | BUSINESS

General

Rome
Bancorp, Inc. (Rome Bancorp or the Company) is a Delaware corporation organized
on June 9, 1999 as the stock holding company for The Rome Savings Bank (Rome
Savings or the Bank), a federally chartered stock savings bank headquartered
in Rome, New York. Rome Bancorps principal business is to hold the capital
stock of Rome Savings.

The
Rome Savings Bank is a federal stock savings bank and the wholly-owned
subsidiary of Rome Bancorp. Rome Savings was originally chartered in 1851 as a
New York mutual savings bank. On October 6, 1999, Rome Savings reorganized into
a mutual holding company structure and formed Rome Bancorp and Rome, MHC. On
April 27, 2004, Rome, MHC, Rome Bancorp and Rome Savings completed their
conversions from New York-chartered companies to federally-chartered companies
regulated by the Office of Thrift Supervision (the OTS). On March 30, 2005,
Rome, MHC completed its second-step conversion and related stock offering and
ceased to exist.

Rome
Savings is a community and customer-oriented retail savings bank that offers
traditional deposit products, residential real estate mortgage loans and
consumer, commercial and commercial real estate loans. In addition, Rome
Savings purchases securities issued by the U.S. Government and government
agencies, municipal securities, mortgage-backed securities and other
investments permitted by applicable laws and regulations. At December 31, 2006,
Rome Bancorp had assets of $298.8 million, deposits of $196.0 million and
stockholders equity of $77.0 million.

Business Strategy

Our
business will be and has been to hold Rome Savings. Our revenues are derived
principally from interest on our loans and interest and dividends on our
investment securities. Our primary sources of funds are deposits, payments of
loan principal and mortgage-backed securities, maturities and calls of
investment securities, and funds provided by operations.

4

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Market Area

Operations
are conducted out of our executive office in Rome, New York and three branch
offices located in Oneida County, New York, two of which are located in Rome
and one in New Hartford, New York. A new branch in the Town of Lee, Oneida
County is anticipated to open in the spring of 2007. As of June 30, 2006, Rome
Savings maintained a 5.63% share of all Oneida County, New York deposits,
ranking 6th in size of deposits in Oneida County. Rome Savings also maintained
a 43.77% market share of all reported funds on deposit in the City of Rome as
of June 30, 2006, making it the largest depository institution in Rome.

Our
geographic market area for loans and deposits is principally Oneida County, New
York. The local economy is not dependent on one key employer. The principal
employment sectors are service-related (excluding financial industries),
wholesale and retail trade, and manufacturing.

Similar
to national trends, most of the job growth currently realized in Oneida County
has been in service related industries, and service jobs now account for the
largest portion of the workforce. Our market area also includes a growing
number of healthcare, engineering, software, and technical firms that have
located in Oneida County in order to take advantage of its well-educated work
force, including current and former military and defense industry personnel.
Rome, New York is located 15 miles west of Utica and approximately 45 miles
east of Syracuse. On occasion and depending on market conditions, we also
originate loans in the greater New York City metropolitan area, typically
through loan participations, and outside of New York State. At December 31,
2006, Rome Savings total loan portfolio consisted of $258.5 million in loans
located in the State of New York, while $6.0 million of such loans consisted of
loans made outside of New York.

Our
future growth opportunities will be influenced by growth and stability in the
regional and statewide economies, other demographic trends and the competitive
environment. We believe that Rome Savings has developed lending products and
marketing strategies to address the credit-related needs of the residents in
our local market area.

Competition

Rome
Savings faces intense competition both in making loans and attracting deposits.
New York has a high concentration of financial institutions, many of which are
branches of large money center and regional banks which have resulted from the
consolidation of the banking industry in New York and surrounding states. Some
of these competitors have greater resources than we do and may offer services
that we do not provide. For example, Rome Savings does not provide trust or
investment services, or credit cards. Customers who seek one-stop shopping
may be drawn to these institutions.

Competition
for loans comes principally from commercial banks, savings institutions,
mortgage banking firms, credit unions, finance companies, insurance companies,
and brokerage and investment banking firms. The most direct competition for
deposits has historically come from credit unions, commercial banks, savings
banks, and savings and loan associations. Rome Savings faces additional
competition for deposits from short-term money market funds, corporate and
government securities funds, and from brokerage firms, mutual funds, and
insurance companies.

Lending Activities

General. Rome Savings has a long-standing
commitment to originate commercial real estate, commercial and consumer loans,
in addition to a traditional emphasis on residential lending. We currently
retain substantially all of the loans that we originate. In the future, Rome Savings may sell longer
term loans

5

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into the secondary market.
At December 31, 2006, Rome Savings had total loans of $264.5 million, of which
$137.2 million, or 51.87%, were one- to four-family residential mortgages and
building loans. Of residential mortgage loans outstanding at that date, 25.50%
were adjustable-rate mortgage loans and 74.50% were fixed-rate loans. The
remainder of Rome Savings loans at December 31, 2006, amounting to $127.3
million, or 48.13% of total loans, consisted of commercial real estate,
commercial loans, and consumer loans. Rome Savings originates commercial real
estate and commercial business loans both within and outside of Oneida County,
New York. As of December 31, 2006, 20.77% of Rome Savings loan portfolio was
in commercial real estate loans and 9.14% was in commercial loans. In addition,
as of December 31, 2006, 18.22% of Rome Savings loan portfolio was in consumer
loans.

Our
loans are subject to federal and state laws and regulations. The interest rates
we charge on loans are affected principally by the demand for loans, the supply
of money available for lending purposes and the interest rates offered by our
competitors. These factors are, in turn, affected by general and local economic
conditions, monetary policies of the federal government, including the Federal
Reserve Board, legislative tax policies and governmental budgetary matters.

6

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Loan
Portfolio. The following table sets forth the
composition of our mortgage and other loan portfolios, by type of loan, in
dollar amounts and in percentages at the dates indicated.

|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|------------------------------- |  | ------ | ------- | -------------------- |  | ------ | - | -------------------- | ------- | ------ |  | -------------------- | - | ------ | ------- | -------------------- |  | ------ | - | -------------------- | ------- |  |  | ------ | - | - | ------- |  |  | ------ | -
|                                |  | 2006   |         | 2005                 |  | 2004   |   | 2003                 |         | 2002   | 
|                                |  |        |         |                      |  |        |   |                      |         |        | 
|                                |  | Amount |         | Percent
  of
  Total |  | Amount |   | Percent
  of
  Total |         | Amount |  | Percent
  of
  Total |   | Amount |         | Percent
  of
  Total |  | Amount |   | Percent
  of
  Total |        
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |        
|Mortgage loans:                 |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|                               
|One- to four-family             |  | $      | 135,078 |                      |  | 51.06  | % | $                    | 126,422 |        |  | 49.79                | % | $      | 114,138 |                      |  | 48.93  | % | $                    | 96,217  |  |  | 45.94  | % | $ | 71,687  |  |  | 39.11  | %
|Commercial real estate          |  |        | 54,493  |                      |  | 20.60  |   |                      | 52,748  |        |  | 20.78                |   |        | 49,364  |                      |  | 21.16  |   |                      | 50,239  |  |  | 23.98  |   |   | 53,530  |  |  | 29.20  |  
|Construction and land           |  |        | 2,562   |                      |  | 0.97   |   |                      | 3,317   |        |  | 1.31                 |   |        | 5,469   |                      |  | 2.34   |   |                      | 4,197   |  |  | 2.00   |   |   | 1,520   |  |  | 0.83   |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|Total mortgage loans            |  |        | 192,133 |                      |  | 72.63  |   |                      | 182,487 |        |  | 71.88                |   |        | 168,971 |                      |  | 72.43  |   |                      | 150,653 |  |  | 71.92  |   |   | 126,737 |  |  | 69.14  |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|Commercial loans                |  |        | 24,189  |                      |  | 9.14   |   |                      | 23,832  |        |  | 9.39                 |   |        | 21,507  |                      |  | 9.22   |   |                      | 19,171  |  |  | 9.15   |   |   | 16,752  |  |  | 9.14   |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|Consumer loans:                 |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|Automobile                      |  |        | 17,779  |                      |  | 6.72   |   |                      | 18,321  |        |  | 7.21                 |   |        | 15,529  |                      |  | 6.66   |   |                      | 15,780  |  |  | 7.53   |   |   | 17,628  |  |  | 9.62   |  
|Property improvement            |  |        | 15,536  |                      |  | 5.87   |   |                      | 15,434  |        |  | 6.08                 |   |        | 12,766  |                      |  | 5.47   |   |                      | 9,460   |  |  | 4.52   |   |   | 6,422   |  |  | 3.51   |  
|Education                       |  |        |        |                      |  |       |   |                      |        |        |  |                     |   |        |        |                      |  |       |   |                      |        |  |  |       |   |   | 1,451   |  |  | 0.79   |  
|Other                           |  |        | 14,900  |                      |  | 5.64   |   |                      | 13,804  |        |  | 5.44                 |   |        | 14,499  |                      |  | 6.22   |   |                      | 14,401  |  |  | 6.88   |   |   | 14,304  |  |  | 7.80   |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|Total consumer loans            |  |        | 48,215  |                      |  | 18.23  |   |                      | 47,559  |        |  | 18.73                |   |        | 42,794  |                      |  | 18.35  |   |                      | 39,641  |  |  | 18.93  |   |   | 39,805  |  |  | 21.72  |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|Total loans                     |  |        | 264,537 |                      |  | 100.00 | % |                      | 253,878 |        |  | 100.00               | % |        | 233,272 |                      |  | 100.00 | % |                      | 209,465 |  |  | 100.00 | % |   | 183,294 |  |  | 100.00 | %
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|Less: Allowance for loan losses |  |        | 1,965   |                      |  |        |   |                      | 1,960   |        |  |                      |   |        | 2,000   |                      |  |        |   |                      | 1,809   |  |  |        |   |   | 1,730   |  |  |        |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  
|Loans, net                      |  | $      | 262,572 |                      |  |        |   | $                    | 251,918 |        |  |                      |   | $      | 231,272 |                      |  |        |   | $                    | 207,656 |  |  |        |   | $ | 181,564 |  |  |        |  
|                                |  |        |         |                      |  |        |   |                      |         |        |  |                      |   |        |         |                      |  |        |   |                      |         |  |  |        |   |   |         |  |  |        |  

7

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Loan
Maturity. The following table presents the contractual
maturity of our loan portfolio at December 31, 2006. The table does not include
the effect of prepayments or scheduled principal amortization.

| |                          |  |                              |         |                                     |   |                   |  |                       |        |  |   |        | 
| | ------------------------ |  | ---------------------------- | ------- | ----------------------------------- | - | ----------------- |  | --------------------- | ------ |  | - | ------ | 
| |                          |  | At
  December 31, 2006       |        
| |                          |  | Residential
  Mortgage Loans |         | Commercial
  
  Real Estate
  Loans |   | Consumer 
  Loans |  | Commercial
  
  Loans |       
| |                          |  |                              |         |                                     |   |                   |  |                       |       
| |                          |  |                              |         |                                     |   |                   |  | (In
  thousands)      |       
| | Amounts due:             |  |                              |         |                                     |   |                   |  |                       |        |  |   |        | 
| | Within one
  year        |  | $                            | 110     |                                     | $ | 3,309             |  | $                     | 3,377  |  | $ | 11,244 | 
| | After one
  year:        |  |                              |         |                                     |   |                   |  |                       |        |  |   |        | 
| | One to three years       |  |                              | 953     |                                     |   | 4,793             |  |                       | 12,790 |  |   | 952    | 
| | Three to five years      |  |                              | 1,172   |                                     |   | 2,967             |  |                       | 17,625 |  |   | 2,773  | 
| | Five to ten years        |  |                              | 12,141  |                                     |   | 7,870             |  |                       | 9,998  |  |   | 4,820  | 
| | Ten to twenty years      |  |                              | 51,209  |                                     |   | 27,863            |  |                       | 2,374  |  |   | 2,673  | 
| | After twenty years       |  |                              | 71,596  |                                     |   | 8,150             |  |                       | 2,051  |  |   | 1,727  | 
| |                          |  |                              |         |                                     |   |                   |  |                       |        |  |   |        | 
| | Total due after one year |  |                              | 137,071 |                                     |   | 51,643            |  |                       | 44,838 |  |   | 12,945 | 
| |                          |  |                              |         |                                     |   |                   |  |                       |        |  |   |        | 
| | Total loans              |  | $                            | 137,181 |                                     | $ | 54,952            |  | $                     | 48,215 |  | $ | 24,189 | 
| |                          |  |                              |         |                                     |   |                   |  |                       |        |  |   |        | 

The
following table presents, as of December 31, 2006, the dollar amount of all
loans, due after December 31, 2007, and whether these loans have fixed interest
rates or adjustable interest rates.

| |                                |  |                               |         |            |   |        |  |   |         | 
| | ------------------------------ |  | ----------------------------- | ------- | ---------- | - | ------ |  | - | ------- | 
| |                                |  | Due After
  December 31, 2007 |        
| |                                |  |                               |        
| |                                |  | Fixed                         |         | Adjustable |   | Total  | 
| |                                |  |                               |         |            |   |        | 
| |                                |  | (In
  thousands)              |        
|
| | Residential
  mortgage loans   |  | $                             | 107,063 |            | $ | 30,008 |  | $ | 137,071 | 
| | Commercial
  real estate loans |  |                               | 28,618  |            |   | 23,025 |  |   | 51,643  | 
| | Consumer
  loans               |  |                               | 32,488  |            |   | 12,350 |  |   | 44,838  | 
| | Commercial
  loans             |  |                               | 6,984   |            |   | 5,961  |  |   | 12,945  | 
| |                                |  |                               |         |            |   |        | 
| | Total loans                    |  | $                             | 175,153 |            | $ | 71,344 |  | $ | 246,497 | 
| |                                |  |                               |         |            |   |        | 

The
following table presents Rome Savings loan originations, purchases, sales, and
principal payments for the periods indicated.

| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | ------------------------------------------ |  | --------------------------------- | ------- | ---- | - | ------- |  | - | ------- | 
| |                                            |  | For the
  Year Ended December 31, |        
| |                                            |  |                                   |        
| |                                            |  | 2006                              |         | 2005 |   | 2004    | 
| |                                            |  |                                   |         |      |   |         | 
| | Total loans:                               |  |                                   |         |      |   |         |  |   |         | 
| | Balance outstanding at beginning of
period |  | $                                 | 253,878 |      | $ | 233,272 |  | $ | 209,465 | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | Originations:                              |  |                                   |         |      |   |         |  |   |         | 
| | Mortgage loans                             |  |                                   | 40,043  |      |   | 41,872  |  |   | 44,073  | 
| | Commercial and consumer loans              |  |                                   | 17,925  |      |   | 23,408  |  |   | 22,610  | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | Total originations                         |  |                                   | 57,968  |      |   | 65,280  |  |   | 66,683  | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | Principal repayments:                      |  |                                   |         |      |   |         |  |   |         | 
| | Mortgage loans                             |  |                                   | 29,180  |      |   | 26,560  |  |   | 25,717  | 
| | Commercial and consumer loans              |  |                                   | 16,559  |      |   | 15,649  |  |   | 16,688  | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | Total principal payments                   |  |                                   | 45,739  |      |   | 42,209  |  |   | 42,405  | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | Transfers to foreclosed
  real estate      |  |                                   | 99      |      |   | 83      |  |   | 87      | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | Loan sales                                 |  |                                   | 1,099   |      |   | 1,695   |  |   |        | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | Loans charged off                          |  |                                   | 372     |      |   | 687     |  |   | 384     | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 
| | Balance outstanding at end of period       |  | $                                 | 264,537 |      | $ | 253,878 |  | $ | 233,272 | 
| |                                            |  |                                   |         |      |   |         |  |   |         | 

8

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Residential
Mortgage Lending. Rome Savings emphasizes the
origination of mortgage loans secured by one- to four-family properties that
serve as the primary residence of the owner. As of December 31, 2006, loans on
one-to four-family residential properties accounted for $137.2 million, or
51.87%, of Rome Savings total loan portfolio. Of residential mortgage loans
outstanding on that date, 25.50% were adjustable-rate mortgage loans and 74.50%
were fixed rate loans. Rome Savings may
seek to expand its residential lending activities primarily through the
marketing and sale to the secondary market of longer term fixed-rate mortgage
loans. Management of Rome Savings believes that the expansion of Rome Savings
residential lending will enhance its reputation as a service-oriented
institution that meets the needs of its local community.

Most
of Rome Savings loan originations are from existing or past customers, members
of Rome Savings local communities or referrals from local real estate agents,
attorneys, and builders. Management of Rome Savings believes that its branch
offices could be a significant source of new loan generation.

Rome
Savings mortgage loan originations are generally for terms from 10 to 30
years, amortized on a monthly basis with interest and principal due each month.
Residential real estate loans may remain outstanding for significantly shorter
periods than their contractual terms as borrowers may refinance or prepay loans
at their option without penalty. Conventional residential mortgage loans
granted by Rome Savings customarily contain due-on-sale clauses that permit
Rome Savings to accelerate the indebtedness of the loan upon transfer of
ownership of the mortgage property.

As
of September 2002, Rome Savings Board of Directors approved a plan to have
residential lending policies and procedures conform to secondary market
guidelines. In the future, Rome Savings may sell qualifying fixed rate longer
term loans into the secondary market, but expects to continue to retain fixed
rate loans with maturities of shorter terms. Rome Savings allows residential
mortgage loans with a loan to value ratio up to 103%. All mortgages originated
with a loan-to-value ratio of 90% or greater have Private Mortgage Insurance (PMI)
with 25% to 35% coverage. Mortgages between 80 and 90% loan to value ratio may
require PMI based on credit scores and other financial attributes of the
applicants. These loans are self insured with risk built into a pricing add-on.
PMI insurance is not required on loans with an 80% or less loan to value ratio.
Rome Savings at times may originate mortgages outside of secondary market
guidelines, tailored to the needs of its customers. Commitments issued in these
situations are reviewed with the board on a monthly basis. Rome Savings also
offers residential construction loans to customers in its primary lending
market.

Generally,
Rome Savings will make construction loans up to 80% loan to value ratio and up
to 95% with PMI. The program allows for mortgagors to receive up to five
advances during the construction phase. Rome Savings uses third party board
approved inspectors to determine the advance amount and obtains a clear title
report prior to making each advance. The loan converts to permanent financing at
the end of six months from the initial closing whether the house is completed
or not. The interest rate on the permanent financing is locked in at the time
of application for the construction/permanent mortgage. Rome Savings receives
at closing, in addition to standard fees and closing costs, up to 3⁄4 of 1% of
the loan amount as additional income.

Rome
Savings also offers adjustable-rate mortgage loans with a maximum term of 30
years. Adjustable-rate loans offered by Rome Savings include loans that provide
for an interest rate based on the interest paid on U.S. Treasury securities of
corresponding terms plus a margin of up to 2.75%. Rome Savings currently offers
adjustable-rate loans with initial rates below those which would prevail under
the foregoing computations, based upon a determination of market factors and
competitive rates for adjustable-rate loans in its market area. For
adjustable-rate loans, borrowers are qualified at the initial rate.

Rome
Savings adjustable-rate mortgages include limits on increase or decrease in
the interest rate of the loan. The interest rate may increase or decrease by a
maximum 2.0% per adjustment period with a ceiling rate of 11% over the life of
the loan. The retention of adjustable-rate mortgage loans in our loan portfolio
helps reduce exposure to changes in interest rates. However, there are
unquantifiable credit risks resulting from potential increased costs to the
borrower as a result of the pricing of adjustable-rate mortgage loans. During
periods of rising interest rates, the risk of default on adjustable-rate
mortgage loans may increase due to the upward adjustment of interest cost to
the borrower.

9

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During
the year ended December 31, 2006, Rome Savings originated $8.0 million in
adjustable-rate residential mortgage loans and $20.9 million in fixed-rate one-
to four- family residential loans. Approximately 3.8% of all residential loan
originations during fiscal 2006 were re-financings of loans already in Rome
Savings portfolio. At December 31, 2006, Rome Savings loan portfolio included
$35.0 million in adjustable-rate one- to four-family residential mortgage
loans, or 13.23% of its total loan portfolio, and $102.2 million in fixed-rate
one-to four- family residential mortgage loans, or 38.64% of its total loan
portfolio.

Commercial
Real Estate Loans. We originate commercial real estate
loans to finance the purchase of real property, which generally consists of
developed real estate. In underwriting commercial real estate loans,
consideration is given to the propertys historic cash flow, current and
projected occupancy, location and physical condition. At December 31, 2006, our
commercial real estate loan portfolio consisted of 178 loans, totaling $55.0
million, or 20.79%, of total loans. Most of the commercial real estate
portfolio consists of loans which are collateralized by properties in our
normal lending area. To a lesser extent, commercial real estate loans are
secured by out of market properties. Our commercial real estate loan portfolio
is diverse, and does not have any significant loan concentration by type of
industry or borrower. We lend up to a maximum loan-to-value ratio of 75% on
commercial properties and require a minimum debt coverage ratio of 1.25. Commercial real estate lending involves
additional risks compared with one-to-four family residential lending. Because
payments on loans secured by commercial real estate properties are often
dependent on the successful operation or management of the properties, and/or
the collateral value of the commercial real estate securing the loan, repayment
of such loans may be subject, to a greater extent, to adverse conditions in the
real estate market or the economy. Also, commercial real estate loans typically
involve large loan balances to single borrowers or groups of related borrowers.
Rome Savings loan policies limit the amount of loans to a single borrower or
group of borrowers to reduce this risk.

Rome
Savings commercial real estate loan portfolio includes $459,000 of construction
loans. From time to time Rome Savings approves commercial construction
mortgages. Recognizing the risks inherent to this type of lending, it is Rome
Savings practice to minimize lending risk by carefully studying project
feasibility, developing a detailed knowledge of the borrower/guarantors entire
business operation, assessing both primary and secondary sources of repayment,
and by structuring the credit in a manner appropriate to the project.

Rome
Savings will only consider construction lending where it holds a first position
mortgage lien on the subject premises. No construction loan will be advanced
without permanent financing approved by Rome Savings or another lender.
Commitments from any source other than this bank must be reviewed for capacity
and conditions. Rome Savings exposure cannot exceed 75% of the project cost.
Rome Savings requires that up-front equity requirements be met in cash or free
and clear value of the land directly associated with the project. The ratio of
projected cash flow versus debt service coverage must equal or exceed 1.25.
Construction loans may have interest only payments until completion of the
project but not beyond 12 months. Personal guaranties are required of the principals
of closely held entities. Funds are disbursed only after proper documentation
of work completed. A 5% to 10% retainage is normally required.

Commercial
Loans. In addition to commercial real estate loans, we
also engage in small business commercial lending, including business
installment loans, lines of credit and other commercial loans. At December 31, 2006, our commercial loan
portfolio consisted of 372 loans, totaling $24.2 million, or 9.14% of total
loans. A portion of Rome Savings commercial loans are participation loans.
Unless otherwise structured as a mortgage on commercial real estate, such loans
generally are limited to terms of five years or less. Substantially all such
commercial loans have variable interest rates tied to the prime rate. Whenever
possible, Rome Savings collateralizes these loans with a lien on commercial
real estate or, alternatively, with a lien on business assets and equipment and
the personal guarantees from principals of the borrower. Interest rates on
commercial loans generally have higher yields than residential mortgages.

Rome
Savings offers commercial services administered by Rome Savings commercial
loan department that are designed to give business owners borrowing
opportunities for modernization, inventory, equipment, construction,
consolidation, real estate, working capital, vehicle purchases, and the
refinancing of existing corporate debt.

10

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Commercial
loans are generally considered to involve a higher degree of risk than
residential mortgage loans because the collateral may be in the form of
intangible assets and/or inventory subject to market obsolescence. Commercial
loans may also involve relatively large loan balances to single borrowers or
groups of related borrowers, with the repayment of such loans typically
dependent on the successful operation and income stream of the borrower. Such
risks can be significantly affected by economic conditions. In addition,
commercial business lending generally requires substantially greater oversight
efforts compared to residential real estate lending. Rome Savings utilizes the
services of an outside consultant to conduct on-site reviews of the commercial
loan portfolio to ensure adherence to underwriting standards and policy
requirements.

Consumer
Loans. Rome Savings offers a variety of consumer
loans. At December 31, 2006, the consumer loan portfolio totaled $48.2 million
or 18.23% of total loans. Consumer loans generally are offered for terms of up
to five or 10 years, depending on the collateral, at fixed interest rates. Rome Savings consumer loan portfolio
consists primarily of property improvement loans (i.e., home equity loans and
home equity lines of credit) and used automobile loans. To a lesser extent, the
consumer loan portfolio also includes:

| |   |                                                       
| | - | ------------------------------------------------------
| |  | new automobile loans;                                 
| |   |                                                       
| |  | recreational vehicles,
  boats, and conversion vans;  
| |   |                                                       
| |  | motorcycles, ATVs,
  snowmobiles, and equipment loans;
| |   |                                                       
| |  | secured passbook loans;                               
| |   |                                                       
| |  | unsecured loans;                                      
| |   |                                                       
| |  | education loans; and                                  
| |   |                                                       
| |  | mobile or manufactured
  home loans.                  

Rome
Savings expects consumer lending to be an area of steady lending growth, with
installment loans continuing to account for the major portion of our consumer
lending volume. Automobile loans currently comprise the largest portion at
36.87% of the consumer loan portfolio, which consists primarily of loans for
used cars. Rome Savings makes loans secured by deposit accounts up to 90.0% of
the amount of the depositors savings account balance. Rome Savings also makes
other consumer loans, which may or may not be secured. The terms of such loans
vary depending on the collateral.

Rome
Savings provides home equity lines of credit for any purpose, using the
applicants principal residence. The normal loan to value for these lines is
90%, with certain conditions allowing for up to 100%. This product has a
ten-year interest-only draw period. During this period, principal reductions
are at the applicants discretion. At the end of the ten-year period, any outstanding
principal balance due is termed out over 15 years with payments to principal
plus interest monthly. These lines have a variable interest at prime rate.
Access to these lines are by customer checks. All closing costs are waived providing
that the line remains open for at least three years. In addition, Rome Savings
offers fixed rate amortizing installment home equity loans with terms of five
to fifteen years.

Rome
Savings makes loans for automobiles, both new and used, directly to the borrowers.
The term of automobile loans is generally limited to five years. The financial
terms of the loans are determined by the age of the collateral. Rome Savings
obtains a title lien on the vehicle and collision insurance policies are
required on all these loans. Rome Savings pays a referral fee of no more than
$200 to automobile dealers who refer it customers. There is no difference in
interest rates and terms for customers who are referred and those who are not.

Consumer
loans are generally originated at higher interest rates than residential
mortgage loans but also tend to have a higher credit risk than residential
loans due to the loan being unsecured or secured by rapidly depreciable assets.
Despite these risks, Rome Savings level of consumer loan delinquencies
generally has been low. No assurance

11

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can be given, however, that
Rome Savings delinquency rate on consumer loans will continue to remain low in
the future, or that we will not incur future losses on these activities.

Loan
Approval Procedures and Authority. Rome Savings lending policies are
established by its Board of Directors. The policies differ depending on the
type of loan involved.

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Residential Mortgage
  Loans: Once Rome Savings receives a completed application, each mortgage
  application is underwritten by Board approved and designated Bank employees
  and officers for approval. Loans over $417,000 must also be presented to the
  Executive Committee or the Lending Committee, which consists of the officers
  and directors of Rome Savings, for a second approval.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Commercial Loans and
  Commercial Mortgage Loans: The maximum commercial loan or commercial mortgage
  amount is dictated by Rome Savings portfolio management guidelines. The
  total of all credit extended to one borrower may not exceed $7.0 million. The
  maximum amount of any single loan, or combination of loans secured by the
  same collateral, is $3.0 million. The total of commercial mortgages and
  commercial loans by industry may not exceed 8.0% of assets. Rome Savings may
  not exceed the legal limits of lending to one borrower, currently 15% of
  unimpaired capital, not including accumulated other comprehensive income. See
  Regulations  Regulation of Federal Savings Associations  Loans to One
  Borrower. Per Rome Savings internal policies, loans to one borrower include
  group credit. A group credit is broadly defined as any credit, either direct,
  indirect, or contingent, including unused lines of credit and other
  commitments by Rome Savings to lend, extended either jointly or severally to
  individuals, joint ventures, partnerships, corporations, subsidiaries or
  affiliates, which are commonly controlled or where the credit reliance is
  similar. The minimum amount for a commercial loan is not specific in policy
  but loans under $5,000 are unusual. The minimum amount for a commercial
  mortgage is not specified in policy but mortgages under $25,000 are unusual.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   | Two designated vice
  presidents of Rome Savings each have authority to approve commercial loans up
  to $400,000 which are secured by liquid collateral. For other commercial
  loans, each of these officers may approve loans up to $250,000. Rome Savings
  President and Chief Executive Office may approve commercial loans up to
  $650,000 which are secured by liquid collateral, and all other commercial
  loans up to $400,000. A combination of any two of these three officers may
  approve commercial loans up to $800,000 which are secured by liquid
  collateral. Any two may approve all other commercial loans up to $500,000.
  Any commercial loan request in excess of the approval authority outlined
  above must be presented to the banks Lending Committee, Executive Committee,
  or Board of Directors for approval.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   | Two designated vice
  presidents of Rome Savings each have authority to approve commercial
  mortgages up to $300,000. Rome Savings President and Chief Executive Officer
  has authority to approve commercial mortgages up to $500,000. A combination
  of any two of these three officers may approve a commercial mortgage up to
  $700,000. Any commercial mortgage request in excess of the approval
  authorities outlined above must be presented to Rome Savings Lending
  Committee, Executive Committee, or Board of Directors for approval.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Consumer Loans: Rome
  Savings extends consumer loans in amounts starting at a minimum of $1,000,
  and with no upper limit, other than the portfolio management guidelines.
  Approvals begin at the interviewer level with various approval authorities
  ranging from $7,500 to $25,000. Loan requests above these amounts are then
  addressed up to $100,000 with the Vice President of Consumer Loans, up to
  $250,000 with the Senior Loan Officer, and up to $450,000 with the President
  and Chief Executive Officer. Requests above $450,000 are referred to the
  Lending Committee, Executive Committee, or the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Home Equity Lines of
  Credit: Lines of credit against an applicants principal residence extend
  from $7,500 to $250,000. Approvals for these lines are handled as follows: up
  to $75,000 by the assistant                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

12

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| |  |                                                                                                                                                                                                                                                                                                                                                                           
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to the head of the
  Consumer Lending Department; $150,000 by the Vice President of Consumer
  Lending or Mortgage Departments; and up to $250,000 by the Senior Loan
  Officer or Rome Savings President and Chief Executive Officer. Any exceptions
  to the normal parameters are approved by the Lending Committee, Executive
  Committee, or the Board of Directors.

Current
Lending Procedures. Upon receipt of a completed loan application
from a prospective borrower, Rome Savings orders a credit report and verifies
certain other information. If necessary, Rome Savings obtains additional
financial or credit related information. Rome Savings requires an appraisal for
all mortgage loans, including loans made to refinance existing mortgage loans.
Appraisals are performed by licensed or certified third-party appraisal firms
that have been approved by Rome Savings Board of Directors. Rome Savings
requires title insurance on all secondary market mortgage loans and certain
other loans. Rome Savings requires borrowers to obtain hazard insurance, and if
applicable, Rome Savings may require borrowers to obtain flood insurance prior
to closing. Available to borrowers is the option to advance funds on a monthly
basis, together with each payment of principal and interest, to a mortgage
escrow account from which Rome Savings makes disbursements for items such as
real estate taxes, flood insurance, and private mortgage insurance premiums, if
required.

Asset Quality

One
of Rome Savings key operating objectives has been and continues to be
maintaining a high level of asset quality. Through a variety of strategies,
including but not limited to borrower workout arrangements and aggressive
marketing of foreclosed properties, Rome Savings has been proactive in
addressing problem and non-performing assets. These strategies, as well as Rome
Savings high proportion of one-to-four family mortgage loans, the maintenance
of sound credit standards for new loan originations, and loan administration
procedures, have resulted in historically low delinquency ratios and, in recent
years, a reduction in non-performing assets. These factors have helped
strengthen Rome Savings financial condition.

Collection
Procedures. When a
borrower fails to make required payments on a loan, Rome Savings takes a number
of steps to induce the borrower to cure the delinquency and restore the loan to
a current status. In the case of mortgage loans, Rome Savings mortgage
servicing department is responsible for collection procedures from the 15th day
up to the 120th day of delinquency. A reminder letter requesting prompt payment
is sent on the 25th day. A late charge notice is sent at 30 days. At 30 days,
Rome Savings also attempts to establish telephone contact with the borrower. If
no contact is established, progressively stronger collection letters are sent
on the 45th and 55th days of delinquency. Late charge notices are sent on the
30th and 60th days of the delinquency. Between the 60th and 90th day of
delinquency, if telephone contact has not been established or if there has been
mail returned, the collector or his or her assistant makes a physical
inspection of the property. When contact is made with the borrower at any time
prior to foreclosure, Rome Savings attempts to obtain full payment of the
amount delinquent or work out a repayment schedule with the borrower in order
to avoid foreclosure. It has been Rome Savings experience that most loan
delinquencies are cured within 105 days and no legal action is taken.

Rome
Savings sends the right to cure foreclosure notice when a loan is
approximately 75 days delinquent. This contains a right to cure clause that
gives the customer the terms that must be met within 30 days of the date the
letter is sent in order to avoid foreclosure action. After this letter expires,
Rome Savings sends the loan to committee for approval to foreclose. Rome
Savings commences foreclosure if the loan is not brought current by the 120th day of delinquency unless specific limited circumstances
warrant an
exception. Rome Savings holds property foreclosed upon as other real estate
owned. Rome Savings carries foreclosed real estate at its fair market value
less estimated selling costs. If a foreclosure action is commenced and the loan
is brought current, paid in full, or refinanced before the foreclosure sale,
Rome Savings either sells the real property securing the loan at the
foreclosure sale or sells the property as soon thereafter as practical. The
collection procedures for Federal Housing Association (FHA) and Veterans
Administration (VA) one-to-four family mortgage loans follow the collection
guidelines outlined by those agencies.

The
collection procedures for consumer, commercial, and other loans, include the
sending of periodic late notices and letters to a borrower once a loan is past
due. Rome Savings attempts to make direct contact with a borrower once a loan
is 15 days past due. Rome Savings follows the same collection procedure as
mortgages in an

13

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attempt to reach individuals
by telephone and sending them letters and notices. Supervisory personnel in
Rome Savings lending area and in its collection area review loans 30 days or
more delinquent on a regular basis. If collection activity is unsuccessful
after 120 days, Rome Savings may charge off a loan and/or refer the matter to
its legal counsel for further collection effort. Loans deemed uncollectible by
the Collection Department are proposed for charge-off. All loan charge-offs,
regardless of amount, are to be approved by both the senior loan officer and
the President of Rome Savings. Regardless of amount, all charge-offs are
reported to the Board of Directors of Rome Savings at its next scheduled
meeting.

Rome
Savings policies require that management continuously monitor the status of
the loan portfolio and report to the Board of Directors on a monthly basis.
These reports include information on delinquent loans and foreclosed real
estate and Rome Savings actions and plans to cure the delinquent status of the
loans and to dispose of the real estate.

Non-Performing
Assets. Non-performing assets totaled $1.1 million and
$947,000 at December 31, 2006 and December 31, 2005, respectively.

The
following table presents information regarding non-accrual mortgage and
consumer and other loans, accruing loans delinquent 90 days or more, and
foreclosed real estate as of the dates indicated.

|                                          |  |                          |       |      |   |      |   |      |      |      |   |       |   |   |       |  
|----------------------------------------- |  | ------------------------ | ----- | ---- | - | ---- | - | ---- | ---- | ---- | - | ----- | - | - | ----- | -
|                                          |  | At
  December 31,        |      
|                                          |  |                          |      
|                                          |  | 2006                     |       | 2005 |   | 2004 |   | 2003 |      | 2002 |  
|                                          |  |                          |       |      |   |      |   |      |      |      |  
|                                          |  | (Dollars
  in thousands) |      
|Nonaccruing loans:                        |  |                          |       |      |   |      |   |      |      |      |   |       |   |   |       |  
|Mortgage loans                            |  | $                        | 575   |      | $ | 539  |   | $    | 362  |      | $ | 689   |   | $ | 531   |  
|Commercial loans                          |  |                          | 423   |      |   | 216  |   |      | 268  |      |   | 513   |   |   | 377   |  
|Consumer loans                            |  |                          | 98    |      |   | 117  |   |      | 113  |      |   | 138   |   |   | 148   |  
|                                          |  |                          |       |      |   |      |   |      |      |      |   |       |   |   |       |  
|Total                                     |  |                          | 1,096 |      |   | 872  |   |      | 743  |      |   | 1,340 |   |   | 1,056 |  
|Accruing loans delinquent 90 days or more |  |                          | 8     |      |   | 75   |   |      | 86   |      |   | 66    |   |   | 460   |  
|                                          |  |                          |       |      |   |      |   |      |      |      |   |       |   |   |       |  
|Total non-performing loans                |  |                          | 1,104 |      |   | 947  |   |      | 829  |      |   | 1,406 |   |   | 1,516 |  
|Foreclosed real estate, net               |  |                          | 45    |      |   |     |   |      |     |      |   | 202   |   |   | 55    |  
|                                          |  |                          |       |      |   |      |   |      |      |      |   |       |   |   |       |  
|Total non-performing assets               |  | $                        | 1,149 |      | $ | 947  |   | $    | 829  |      | $ | 1,608 |   | $ | 1,571 |  
|                                          |  |                          |       |      |   |      |   |      |      |      |   |       |   |   |       |  
|Non-performing loans to total loans       |  |                          | 0.42  | %    |   | 0.37 | % |      | 0.36 | %    |   | 0.67  | % |   | 0.83  | %
|Non-performing assets to total assets     |  |                          | 0.38  | %    |   | 0.31 | % |      | 0.31 | %    |   | 0.61  | % |   | 0.63  | %

With
the exception of first mortgage loans insured or guaranteed by the FHA or VA or
for which the borrower has obtained private mortgage insurance, Rome Savings
stops accruing income on loans when interest or principal payments are 90 days
in arrears or earlier when the timely collectibility of such interest or
principal is doubtful. Rome Savings designates loans on which it stops accruing
income as non-accrual loans and it reverses outstanding interest that it
previously credited. Rome Savings may recognize income in the period that it
collects such income, when the ultimate collectibility of principal is no
longer in doubt. Rome Savings returns a non-accrual loan to accrual status when
factors indicating doubtful collection no longer exist. Rome Savings defines
non-performing loans as loans that are both non-accruing and accruing loans
whose payments are 90 days or more past due.

We
define the population for evaluation of impaired loans to be all non-accrual
commercial real estate and commercial loans greater than $250,000. Impaired
loans are individually assessed to determine whether a loans carrying value is
not in excess of the fair value of the collateral or the present value of the
loans cash flows. Smaller balance homogeneous loans that are collectively
evaluated for impairment, such as residential mortgage loans and consumer
loans, are specifically excluded from the impaired loan portfolio. The
Companys recorded investment in loans that are considered impaired totaled
$299,000 and $211,000 at December 31, 2006 and 2005, respectively. If all
non-accrual loans had been current in accordance with their terms during the
year

14

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ended December
31, 2006, 2005 and 2004, interest income on such loans would have amounted to
$75,800, $62,500 and $53,300, respectively. At December 31, 2006, Rome Savings
had one loan, with a book balance of $138,000 included above which is
considered a troubled debt restructuring as defined in SFAS No. 15.

Allowance
for Loan Losses. The following table sets forth
activity in Rome Savings allowance for loan losses and other ratios at or for
the dates indicated.

|                                                                          |  |                          |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|------------------------------------------------------------------------- |  | ------------------------ | ------ | ---- | - | ------ | - | ---- | ------ | ---- | - | ------ | - | - | ------ | -
|                                                                          |  | At
  December 31,        |       
|                                                                          |  |                          |       
|                                                                          |  | 2006                     |        | 2005 |   | 2004   |   | 2003 |        | 2002 |  
|                                                                          |  |                          |        |      |   |        |   |      |        |      |  
|                                                                          |  | (Dollars
  in thousands) |       
|Balance at beginning
  of year                                            |  | $                        | 1,960  |      | $ | 2,000  |   | $    | 1,809  |      | $ | 1,730  |   | $ | 1,597  |  
|Provision
  for loan losses                                               |  |                          | 147    |      |   | 115    |   |      | 390    |      |   | 510    |   |   | 330    |  
|Charge-offs:                                                              |  |                          |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Mortgage loans                                                            |  |                          | 19     |      |   | 18     |   |      | 47     |      |   | 160    |   |   | 51     |  
|Commercial loans                                                          |  |                          | 50     |      |   | 174    |   |      | 31     |      |   | 85     |   |   | 32     |  
|Consumer loans                                                            |  |                          | 303    |      |   | 495    |   |      | 306    |      |   | 295    |   |   | 289    |  
|                                                                          |  |                          |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Total                                                                     |  |                          | 372    |      |   | 687    |   |      | 384    |      |   | 540    |   |   | 372    |  
|Recoveries                                                                |  |                          |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Mortgage loans                                                            |  |                          | 10     |      |   | 4      |   |      | 12     |      |   |       |   |   | 1      |  
|Commercial loans                                                          |  |                          | 79     |      |   | 419    |   |      | 36     |      |   | 3      |   |   | 75     |  
|Consumer loans                                                            |  |                          | 141    |      |   | 109    |   |      | 137    |      |   | 106    |   |   | 99     |  
|                                                                          |  |                          |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Total                                                                     |  |                          | 230    |      |   | 532    |   |      | 185    |      |   | 109    |   |   | 175    |  
|                                                                          |  |                          |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Net charge-offs                                                           |  |                          | 142    |      |   | 155    |   |      | 199    |      |   | 431    |   |   | 197    |  
|                                                                          |  |                          |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Balance at end of year                                                    |  | $                        | 1,965  |      | $ | 1,960  |   | $    | 2,000  |      | $ | 1,809  |   | $ | 1,730  |  
|                                                                          |  |                          |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Ratio of net charge-offs to average loans
  outstanding during the period |  |                          | 0.06   | %    |   | 0.06   | % |      | 0.09   | %    |   | 0.22   | % |   | 0.11   | %
|Allowance for loan losses as a percent of
  loans                         |  |                          | 0.74   | %    |   | 0.77   | % |      | 0.86   | %    |   | 0.86   | % |   | 0.94   | %
|Allowance for loan losses as a percent of
  non-performing Loans          |  |                          | 177.99 | %    |   | 207.00 | % |      | 241.25 | %    |   | 128.66 | % |   | 114.12 | %

The
allowance for loan losses is a valuation account that reflects our evaluation
of the losses inherent in our loan portfolio. We maintain the allowance through
provisions for loan losses that we charge to income. We charge losses on loans
against the allowance for loan losses when we believe the collection of loan
principal is unlikely.

Our
evaluation of risk in maintaining the allowance for loan losses includes the
review of all loans on which the collectibility of principal may not be
reasonably assured. We consider the following factors as part of this
evaluation: our historical loan loss experience, known and inherent risks in
the loan portfolio, the estimated value of the underlying collateral and
current economic and market trends. There may be other factors that may warrant
our consideration in maintaining an allowance at a level sufficient to provide
for probable losses. Although we believe that we have established and
maintained the allowance for loan losses at adequate levels, future additions
may be necessary if economic and other conditions in the future differ
substantially from the current operating environment.

In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review our loan and foreclosed real estate portfolios and
the related allowance for loan losses and valuation allowance for foreclosed
real estate. These agencies, including the OTS, may require us to increase the
allowance for loan losses or the valuation allowance for foreclosed real estate
based on their judgments of information available to them at the time of their
examination, thereby adversely affecting our results of operations.

For
the year ended December 31, 2006, we increased our allowance for loan losses
through a $147,000 provision for loan losses based on our evaluation of the
items discussed above. We believe that the allowance for loan

15

---



losses accurately reflects the level of risk
in the loan portfolio. In addition to the non-performing loans, management has
identified, through normal internal credit review procedures, $5.2 million in
potential problem loans at December 31, 2006. Payments are current on $4.2
million or 80.77% of these loans. These problem loans are defined as loans not
included as non-performing loans, but about which management has developed
information regarding possible credit problems, which may cause the borrowers
future difficulties in complying with loan repayments. Rome Savings will
continue to be aggressive in identifying, monitoring and resolving potential
problem loans. See Managements Discussion and Analysis - Comparison of
Results of Operations for the Years Ended December 31, 2006, 2005 and 2004 -
Provision for Loan Losses.

16

---



The
following table presents our allocation of the allowance for loan losses by
loan category and the percentage of loans in each category to total loans at
the periods indicated.

|                                |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |       |  |  |        |   |   |       |  |  |        |  
|------------------------------- |  | ---------------------- | ----- | ------------------------------------------- |  | ------ | - | ------------------------------------------- | ----- | ------ |  | ------------------------------------------- | - | ------ | ----- | ------------------------------------------- |  | ------ | - | ------------------------------------------- | ----- |  |  | ------ | - | - | ----- |  |  | ------ | -
|                                |  | At December 31,        |      
|                                |  |                        |      
|                                |  | 2006                   |       | 2005                                        |  | 2004   |   | 2003                                        |       | 2002   | 
|                                |  |                        |       |                                             |  |        |   |                                             |       |        | 
|                                |  | Amount                 |       | Loans in
  Each
  Category to
  Total Loans |  | Amount |   | Loans in
  Each
  Category to
  Total Loans |       | Amount |  | Loans in
  Each
  Category to
  Total Loans |   | Amount |       | Loans in
  Each
  Category to
  Total Loans |  | Amount |   | Loans in
  Each
  Category to
  Total Loans |      
|                                |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |      
|                                |  | (Dollars in thousands) |      
|Mortgage loans:                 |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |       |  |  |        |   |   |       |  |  |        |  
|One-to four-family              |  | $                      | 117   |                                             |  | 51.06  | % | $                                           | 129   |        |  | 49.79                                       | % | $      | 236   |                                             |  | 48.93  | % | $                                           | 192   |  |  | 45.94  | % | $ | 220   |  |  | 39.11  | %
|Commercial real estate          |  |                        | 721   |                                             |  | 20.60  |   |                                             | 664   |        |  | 20.78                                       |   |        | 828   |                                             |  | 21.16  |   |                                             | 702   |  |  | 23.98  |   |   | 767   |  |  | 29.20  |  
|Construction & land             |  |                        | 0     |                                             |  | 0.97   |   |                                             | 0     |        |  | 1.31                                        |   |        | 0     |                                             |  | 2.34   |   |                                             | 0     |  |  | 2.00   |   |   | 0     |  |  | 0.83   |  
|                                |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |       |  |  |        |   |   |       |  |  |        |  
|Total mortgage loans            |  |                        | 838   |                                             |  | 72.63  |   |                                             | 793   |        |  | 71.88                                       |   |        | 1,064 |                                             |  | 72.43  |   |                                             | 894   |  |  | 71.92  |   |   | 987   |  |  | 69.14  |  
|                                |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |       |  |  |        |   |   |       |  |  |        |  
|Commercial loans                |  |                        | 667   |                                             |  | 9.14   |   |                                             | 712   |        |  | 9.39                                        |   |        | 592   |                                             |  | 9.22   |   |                                             | 619   |  |  | 9.15   |   |   | 511   |  |  | 9.14   |  
|                                |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |       |  |  |        |   |   |       |  |  |        |  
|Consumer loans                  |  |                        | 460   |                                             |  | 18.23  |   |                                             | 455   |        |  | 18.73                                       |   |        | 344   |                                             |  | 18.35  |   |                                             | 296   |  |  | 18.93  |   |   | 232   |  |  | 21.72  |  
|                                |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |       |  |  |        |   |   |       |  |  |        |  
|                                |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |       |  |  |        |   |   |       |  |  |        |  
|Total allowance for loan losses |  | $                      | 1,965 |                                             |  | 100.00 | % | $                                           | 1,960 |        |  | 100.00                                      | % | $      | 2,000 |                                             |  | 100.00 | % | $                                           | 1,809 |  |  | 100.00 | % | $ | 1,730 |  |  | 100.00 | %
|                                |  |                        |       |                                             |  |        |   |                                             |       |        |  |                                             |   |        |       |                                             |  |        |   |                                             |       |  |  |        |   |   |       |  |  |        |  

17

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Investment
Activities

General.
The Board of Directors reviews and approves our investment policy on an annual
basis. The Board of Directors has delegated primary responsibility for ensuring
that the guidelines in the investment policy are followed to the Executive Vice
President/Chief Financial Officer. The Executive Vice President/Chief Financial
Officer reports to the Asset Liability Management Committee and to the
Executive Committee monthly.

Our
investment policy is designed primarily to manage the interest rate sensitivity
of our assets and liabilities, to generate a favorable return without incurring
undue interest rate and credit risk, to complement our lending activities and
to provide and maintain liquidity within established guidelines. In
establishing our investment strategies, we consider our interest rate
sensitivity, the types of securities to be held, liquidity and other factors.
Federal chartered savings banks have authority to invest in various types of
assets, including U.S. Government obligations, securities of various federal
agencies, obligations of states and municipalities, mortgage-backed securities,
certain time deposits of insured banks and savings institutions, certain
bankers acceptances, repurchase agreements, loans of federal funds, and,
subject to certain limits, corporate debt and commercial paper.

Rome Savings classifies securities as held to
maturity or available for sale at the date of purchase. Held to maturity
securities are reported at cost, adjusted for amortization of premium and
accretion of discount. Available for sale securities are reported at fair
market value. Rome Savings classifies U.S. Government securities and U.S.
Government agency securities, as available for sale. These securities
predominately have maturities of less than five years although Rome Savings
also invests in adjustable rate U.S. Government agency securities with
maturities up to 15 years. Rome Savings mortgage-backed securities, all of
which are directly or indirectly insured or guaranteed by the Federal Home Loan
Mortgage Corporation (FHLMC), Government National Mortgage Association
(GNMA) or Federal National Mortgage Association (FNMA), consist of both
30-year securities and seven-year balloon securities. The latter are so named
because they mature (i.e., balloon) prior to completing their
normal 30-year amortization. The 30 year mortgage-backed securities are
classified as held to maturity while the seven-year balloon securities are
classified as available for sale.

Rome Savings also invests in privately
insured state and municipal obligations with a maturity of fifteen years or
less rated AAA by Moodys, Standard & Poors, or Fitch. Rome Savings invests
in these securities because of their favorable after tax yields in comparison
to U.S. Government and U.S. Government Agency securities of comparable
maturity. These securities are classified as available for sale. Rome Savings
purchases A and AA rated corporate bonds, principally of financial institutions,
as means of increasing yields on available for sale investments while
minimizing risk. In the past three years, spreads to the comparable three to
five year government agency securities, which Rome Savings had typically
purchased, has been 15 - 97 basis points favoring these corporate bonds.
Finally, Rome Savings and Rome Bancorp have investments in Federal Home Loan
Bank (FHLB) stock and other equity securities, which are classified as
available for sale.

18

---



The
following table presents the composition of our securities portfolios in dollar
amount and in percentage of each investment type at the dates indicated. It
also presents the coupon type for the mortgage-backed securities portfolio.

|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|------------------------------------------ |  | ---------------------- | ----- | ------------ | - | ---------------- |  | ------------ | ------ | ---------------- | - | ------------ |  | - | ------ |  | - | ------ | 
|                                           |  | At December 31,        |      
|                                           |  |                        |      
|                                           |  | 2006                   |       | 2005         |   | 2004             | 
|                                           |  |                        |       |              |   |                  | 
|                                           |  | Amortized
  Cost       |       | Fair
  Value |   | Amortized
  Cost |  | Fair
  Value |        | Amortized
  Cost |   | Fair
  Value | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              | 
|                                           |  | (Dollars in thousands) |      
|Held to
  Maturity:                        |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|Mortgage-backed
  securities               |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|                                          
|GNMA                                       |  | $                      | 28    |              | $ | 29               |  | $            | 48     |                  | $ | 51           |  | $ | 100    |  | $ | 108    | 
|FHLMC                                      |  |                        | 2     |              |   | 2                |  |              | 3      |                  |   | 3            |  |   | 6      |  |   | 6      | 
|U.S. Government
  securities               |  |                        | 1,001 |              |   | 997              |  |              | 1,208  |                  |   | 1,193        |  |   | 1,320  |  |   | 1,313  | 
|Other bonds                                |  |                        | 147   |              |   | 147              |  |              | 181    |                  |   | 181          |  |   | 197    |  |   | 197    | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|Total held to
  maturity                   |  |                        | 1,178 |              |   | 1,175            |  |              | 1,440  |                  |   | 1,428        |  |   | 1,623  |  |   | 1,624  | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|Available for
  sale:                      |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|U.S. Government
  agencies                 |  |                        | 441   |              |   | 455              |  |              | 949    |                  |   | 985          |  |   | 2,244  |  |   | 2,325  | 
|State and
  Municipal obligations          |  |                        | 2,335 |              |   | 2,377            |  |              | 4,506  |                  |   | 4,595        |  |   | 7,004  |  |   | 7,266  | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|Mortgage-backed
  securities               |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|FNMA                                       |  |                        |      |              |   |                 |  |              |       |                  |   |             |  |   | 126    |  |   | 129    | 
|FHLMC                                      |  |                        | 336   |              |   | 339              |  |              | 570    |                  |   | 583          |  |   | 840    |  |   | 883    | 
|Corporate bonds                            |  |                        |      |              |   |                 |  |              | 2,008  |                  |   | 2,017        |  |   | 3,024  |  |   | 3,116  | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|Total available
  for sale debt securities |  |                        | 3,112 |              |   | 3,171            |  |              | 8,033  |                  |   | 8,180        |  |   | 13,238 |  |   | 13,719 | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|Equity
  securities                        |  |                        | 1,137 |              |   | 1,148            |  |              | 1,491  |                  |   | 1,486        |  |   | 2,500  |  |   | 2,672  | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|Total available
  for sale                 |  |                        | 4,249 |              |   | 4,319            |  |              | 9,524  |                  |   | 9,666        |  |   | 15,738 |  |   | 16,391 | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|FHLB stock                                 |  |                        | 1,344 |              |   | 1,344            |  |              | 776    |                  |   | 776          |  |   | 1,103  |  |   | 1,103  | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 
|Total investment
  securities              |  | $                      | 6,771 |              | $ | 6,838            |  | $            | 11,740 |                  | $ | 11,870       |  | $ | 18,464 |  | $ | 19,118 | 
|                                           |  |                        |       |              |   |                  |  |              |        |                  |   |              |  |   |        |  |   |        | 

19

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Carrying
Values, Yields and Maturities. The following table sets forth the
scheduled maturities, book value, market value and weighted average yields for
Rome Savings debt securities at December 31, 2006.

|                                    |  |                        |       |                                           |      |                                            |   |                            |  |                  |   |                            |     |                  |      |                            |   |                  |  |                            |   |   |       |  |       |  
|----------------------------------- |  | ---------------------- | ----- | ----------------------------------------- | ---- | ------------------------------------------ | - | -------------------------- |  | ---------------- | - | -------------------------- | --- | ---------------- | ---- | -------------------------- | - | ---------------- |  | -------------------------- | - | - | ----- |  | ----- | -
|                                    |  | One Year or Less       |       | More Than One Year
  less than Five Years |      | More Than Five Years
  less than Ten Years |   | More Than Ten Years        |  | Total            |  
|                                    |  |                        |       |                                           |      |                                            |   |                            |  |                  |  
|                                    |  | Carrying
  Value       |       | Weighted
  Average
  Yield                |      | Carrying
  Value                           |   | Weighted
  Average
  Yield |  | Carrying
  Value |   | Weighted
  Average
  Yield |     | Carrying
  Value |      | Weighted
  Average
  Yield |   | Carrying
  Value |  | Weighted
  Average
  Yield |  
|                                    |  |                        |       |                                           |      |                                            |   |                            |  |                  |   |                            |     |                  |      |                            |   |                  |  |                            |  
|                                    |  | (Dollars in thousands) |      
|Available for sale securities:      |  |                        |       |                                           |      |                                            |   |                            |  |                  |   |                            |     |                  |      |                            |   |                  |  |                            |   |   |       |  |       |  
|U.S. Government agencies            |  |                        |      |                                           |     |                                            |   |                           |  |                 |   | $                          | 397 |                  | 6.32 | %                          |   |                 |  |                           |   | $ | 397   |  | 6.32  | %
|State and Municipal obligations (1) |  | $                      | 1,086 |                                           | 6.71 | %                                          |   | 991                        |  | 6.80             | % |                            |    |                  |     |                            | $ | 300              |  | 6.90                       | % |   | 2,377 |  | 6.77  | %
|                                    |  |                       
|Mortgage-backed securities          |  |                        |      |                                           |     |                                            |   | 397                        |  | 5.87             | % |                            |    |                  |     |                            |   |                 |  |                           |   |   | 397   |  | 5.87  | %
|                                    |  |                        |       |                                           |      |                                            |   |                            |  |                  |   |                            |     |                  |      |                            |   |                  |  |                            |   |   |       |  |       |  
|Held to maturity securities:        |  |                        |       |                                           |      |                                            |   |                            |  |                  |   |                            |     |                  |      |                            |   |                  |  |                            |   |   |       |  |       |  
|U.S. Government securities          |  |                        |      |                                           |     |                                            |   | 1,001                      |  | 4.59             | % |                            |    |                  |     |                            |   |                 |  |                           |   |   | 1,001 |  | 4.59  | %
|Mortgage-backed securities          |  |                        |      |                                           |     |                                            |   | 30                         |  | 10.92            | % |                            |    |                  |     |                            |   |                 |  |                           |   |   | 30    |  | 10.92 | %
|Other                               |  |                        |      |                                           |     |                                            |   |                           |  |                 |   |                            |    |                  |     |                            |   | 147              |  | 5.69                       | % |   | 147   |  | 5.69  | %
|                                    |  |                        |       |                                           |      |                                            |   |                            |  |                  |   |                            |     |                  |      |                            |   |                  |  |                            |   |   |       |  |       |  
|                                    |  |                       
|Total debt securities               |  | $                      | 1,086 |                                           | 6.71 | %                                          | $ | 2,419                      |  | 5.78             | % | $                          | 397 |                  | 6.32 | %                          | $ | 447              |  | 6.50                       | % | $ | 4,349 |  | 6.14  | %
|                                    |  |                        |       |                                           |      |                                            |   |                            |  |                  |   |                            |     |                  |      |                            |   |                  |  |                            |   |   |       |  |       |  

|    |                                                
|--- | -----------------------------------------------
|   
|(1) | Yields are presented on a tax-equivalent basis.

20

---



Deposit Activity and Other Sources of Funds

General.
Deposits, borrowings, scheduled amortization and prepayments of loan principal,
maturities and calls of investments securities and funds provided by operations
are our primary sources of funds for use in lending, investing and for other
general purposes. See Managements Discussion and Analysis - Liquidity and
Capital Resources.

Deposits.
We offer a variety of deposit accounts having a range of interest rates and
terms. We currently offer regular savings deposits (consisting of passbook and
statement savings accounts), interest-bearing demand accounts,
non-interest-bearing demand accounts, money market accounts and time deposits.

Deposit
flows are influenced significantly by general and local economic conditions,
changes in prevailing interest rates, pricing of deposits and competition. Our
deposits are primarily obtained from areas surrounding our offices and we rely
primarily on paying competitive rates, service and long-standing relationships
with customers to attract and retain these deposits. We do not use brokers to
obtain deposits.

When
we determine our deposit rates, we consider local competition, U.S. Treasury
securities offerings and the rates charged on other sources of funds. Core
deposits (defined as savings deposits, money market accounts and demand
accounts) represented 66.1% and 67.1% of total deposits on December 31, 2006
and 2005, respectively. At December 31, 2006 and 2005, time deposits with remaining
terms to maturity of less than one year amounted to $43.9 million and $43.5
million, respectively. See Managements Discussion and Analysis - Analysis of
Net Interest Income for information relating to the average balances and costs
of our deposit accounts for the years ended December 31, 2006, 2005 and 2004.

At
December 31, 2006, we had $13.1 million in time deposits with balances of
$100,000 or more maturing as follows:

|                                     |  |                |        | 
|------------------------------------ |  | -------------- | ------ | 
|Maturity
  Period                    |  | Amount         |       
|                                     |  |                |       
|                                     |  | (In thousands) |       
|Three months or less                 |  | $              | 3,073  | 
|Over three months through six months |  |                | 2,069  | 
|Over six months through 12 months    |  |                | 2,930  | 
|Over 12 months                       |  |                | 5,038  | 
|                                     |  |                |        | 
|Total                                |  | $              | 13,110 | 
|                                     |  |                |        | 

Borrowings.
At December 31, 2006 the Company had outstanding borrowings of $20.2 million
which were used to fund loan growth, purchase treasury stock and finance other
investments. In the future, we expect to continue to utilize borrowings as a
funding source and may borrow funds pursuant to repurchase agreements, whereby
we sell an asset with an agreement to repurchase it at some future date. We are
a member of the Federal Home Loan Bank of New York and have available a line of
credit of $62.7 million, of which $50.9 million remained available at December
31, 2006.

Subsidiary Activities

Rome
Savings has four subsidiaries: 100 On the Mall Corporation, Clocktower
Insurance Agency Incorporated, RSB Properties, Inc. and RSB Capital Inc. 100 On
the Mall acts as a manager, and developer of real estate. Its only activity is
ownership of Rome Savings main office building and premises. Clocktower
Insurance owns real estate for future expansion, which is currently being
leased to a Dunkin Donuts franchise adjacent to one of our branch offices. RSB
Properties, Inc. is a real estate investment trust. RSB Capital, Inc. is
currently inactive.

21

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Employees

At
December 31, 2006, Rome Savings had 99 full-time employees and 1 part-time
employee. Rome Savings employees are not represented by a collective
bargaining agreement, and Rome Savings considers its relationship with its
employees to be good.

REGULATION AND SUPERVISION

General. Rome Bancorp is regulated as a savings
and
loan holding company by the Office of Thrift Supervision (the OTS). Rome
Bancorp is required to file reports with and otherwise comply with the rules
and regulations of the OTS and the SEC under the federal securities laws. Rome
Savings, as a federal savings bank, is subject to regulation, examination and
supervision by the OTS as its chartering authority, and by the Federal Deposit
Insurance Corporation (the FDIC) as its deposit insurer. Rome Savings must
file reports with the OTS and the FDIC concerning its activities and financial
condition.

The
following references to the laws and regulations under which Rome Bancorp and
Rome Savings are regulated are brief summaries thereof, do not purport to be
complete, and are qualified in their entirety by reference to such laws and
regulations. The OTS and the FDIC have significant discretion in connection
with their supervisory and enforcement activities and examination policies
under the applicable laws and regulations. Any change in such laws, regulations
or policies, whether by the OTS, the FDIC, the SEC or the Congress, could have
a material adverse impact on Rome Bancorp and Rome Savings, and their
operations and stockholders.

Regulation of Federal Savings
Associations

Business
Activities. Rome
Savings derives its lending and investment powers from the Home Owners Loan
Act, as amended (the HOLA), and the regulations of the OTS. The HOLA and the
OTS regulations also limit Rome Savings authority to invest in certain types
of loans or other investments. Permissible investments include mortgage loans
secured by residential and commercial real estate, commercial and consumer
loans, certain types of debt securities, and certain other assets. Rome Savings
may also establish service corporations that may engage in activities not
otherwise permissible for Rome Savings, including certain real estate equity
investments.

Loans
to One Borrower. Rome
Savings is generally subject to the same limits on loans to one borrower as a
national bank. With specified exceptions, Rome Savings total loans or
extensions of credit to a single borrower cannot exceed 15% of Rome Savings
unimpaired capital and surplus which does not include accumulated other
comprehensive income. Rome Savings may lend additional amounts up to 10% of its
unimpaired capital and surplus which does not include accumulated other
comprehensive income, if the loans or extensions of credit are fully-secured by
readily-marketable collateral. Rome Savings currently complies with applicable
loans-to-one borrower limitations.

QTL
Test. Under the HOLA,
Rome Savings must comply with the qualified thrift lender, or QTL, test. Under
the QTL test, Rome Savings is required to maintain at least 65% of its
portfolio assets in certain qualified thrift investments in at least nine
months of the most recent 12-month period. Portfolio assets mean, in general,
Rome Savings total assets less the sum of:

| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | specified liquid assets up
  to 20% of total assets;           
| |   |                                                                
| |  | goodwill and other
  intangible assets; and                    
| |   |                                                                
| |  | the value of property used
  to conduct Rome Savings business.

22

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Rome Savings may also
satisfy the QTL test by qualifying as a domestic building and loan association
as defined in the Internal Revenue Code of 1986. If Rome Savings fails the QTL
test, and is unable to correct that failure for a period of time, it must
either operate under certain restrictions on its activities or convert to a
bank charter.

Rome
Savings met the QTL test at December 31, 2006, and in each of the prior 12
months and, therefore is a qualified thrift lender.

Capital
Requirements. OTS
regulations require savings associations to meet three minimum capital
standards:

| |     |                                                                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | a tangible capital ratio
  requirement of 1.5% of total assets as adjusted under the OTS regulations;                                                                                                                                             
| |     |                                                                                                                                                                                                                                                   
| | (2) | a leverage ratio
  requirement of 3.0% of core capital to such adjusted total assets, if Rome
  Savings has been assigned the highest composite rating of 1 under the Uniform
  Financial Institutions Rating System; and                         
| |     |                                                                                                                                                                                                                                                   
| | (3) | a risk-based capital ratio
  requirement of 8.0% of core and supplementary capital to total risk-based
  assets, provided that the amount of supplementary capital used to satisfy
  this requirement shall not exceed the amount of core capital.

The
minimum leverage capital ratio for any other depository institution that does
not have a composite rating of 1 will be 4%, unless a higher leverage capital
ratio is warranted by the particular circumstances or risk profile of the
depository institution. In determining the amount of risk-weighted assets for
purposes of the risk-based capital requirement, a savings association must
compute its risk-based assets by multiplying its assets and certain off-balance
sheet items by risk-weights, which range from 0% for cash and obligations
issued by the United States Government or its agencies to 100% for consumer and
commercial loans, as assigned by the OTS capital regulations based on the risks
found by the OTS to be inherent in the type of asset.

Tangible
capital is defined, generally, as common stockholders equity (including retained
earnings), certain noncumulative perpetual preferred stock and related
earnings, minority interests in equity accounts of fully consolidated
subsidiaries, less intangibles (other than certain mortgage servicing rights)
and investments in and loans to subsidiaries engaged in activities not
permissible for a national bank. Core capital (or Tier 1 capital) is defined
similarly to tangible capital, but core capital also includes certain
qualifying supervisory goodwill and certain purchased credit card relationships.
Supplementary capital (or Tier 2 capital) includes cumulative and other
preferred stock, mandatory convertible debt securities, subordinated debt and
intermediate preferred stock and the allowance for loan and lease losses. In
addition, up to 45% of unrealized gains on available-for-sale equity securities
with a readily determinable fair value may be included in Tier 2 capital. The
allowance for loan and lease losses includable in Tier 2 capital is limited to
a maximum of 1.25% of risk-weighted assets.

At
December 31, 2006, Rome Savings met each of its capital requirements.

Community
Reinvestment Act.
Under the Community Reinvestment Act (the CRA), as implemented by OTS
regulations, a savings association has a continuing and affirmative obligation
consistent with its safe and sound operation to help meet the credit needs of
its entire community, including low and moderate income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial
institutions nor does it limit an institutions discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the OTS, in connection
with its examination of a savings association, to assess the savings
associations record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain

23

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applications by such savings
association. The CRA also requires all institutions to make public disclosure
of their CRA ratings.

The
CRA regulations establish an assessment system that bases a savings
associations rating on its actual performance in meeting community needs. In
particular, the assessment system focuses on three tests:

| |   |                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a lending test, to
  evaluate the institutions record of making loans in its assessment areas;                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                               
| |  | an investment test, to
  evaluate the institutions record of investing in community development
  projects, affordable housing, and programs benefiting low or moderate income
  individuals and businesses in its assessment area or a broader area that
  includes its assessment area; and
| |   |                                                                                                                                                                                                                                                                                               
| |  | a service test, to
  evaluate the institutions delivery of services through its retail banking channels
  and the extent and innovativeness of its community development services.                                                                                                           

Rome Savings received a
Satisfactory CRA rating in its most recent examination, dated January 16,
2007.

Transactions
with Affiliates. Rome
Savings authority to engage in transactions with its Aaffiliates is limited by the OTS
regulations,
the Federal Reserve Boards Regulation W and Sections 23A and 23B of the
Federal Reserve Act (the FRA), as made applicable to federal savings
associations by the HOLA and the OTS regulations. In general, these
transactions must be on terms which are as favorable to Rome Savings as
comparable transactions with non-affiliates. In addition, certain types of
these transactions referred to as covered transaction are subject to quantitative
limits based on a percentage of Rome Savings capital, thereby restricting the
total dollar amount of transactions Rome Savings may engage in with each
individual affiliate and with all affiliates in the aggregate. Affiliates must
pledge qualifying collateral in amounts between 100% and 130% of the covered
transaction in order to receive loans from Rome Savings. In addition,
applicable regulations prohibit a savings association from lending to any of
its affiliates that engage in activities that are not permissible for bank
holding companies and from purchasing low-quality (i.e., non-performing) assets
from an affiliate or purchasing the securities of any affiliate, other than a
subsidiary.

Loans
to Insiders. Rome
Savings authority to extend credit to its directors, executive officers and
principal shareholders, as well as to entities controlled by such persons, is
governed by the requirements of Sections 22(g) and 22(h) of the FRA and
Regulation O of the Federal Reserve Board, as made applicable to federal
savings associations by the HOLA and the OTS regulations. Among other things,
these provisions require that extensions of credit to insiders:

| |   |                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | be made on terms that are
  substantially the same as, and follow credit underwriting procedures that are
  not less stringent than, those prevailing for comparable transactions with
  non-insiders and that do not involve more that the normal risk of repayment
  or present other features that are unfavorable to Rome Savings; and
| |   |                                                                                                                                                                                                                                                                                                                                           
| |  | not exceed certain
  limitations on the amount of credit extended to such persons, individually
  and in the aggregate, which limits are based, in part, on the amount of Rome
  Savings capital.                                                                                                                                        

In addition, extensions for
credit to insiders in excess of certain limits must be approved by Rome
Savings Board of Directors.

Enforcement. The OTS has primary enforcement
responsibility over savings associations, including Rome Savings. This
enforcement authority includes, among other things, the ability to assess civil
money penalties, to issue cease and desist orders and to remove directors and
officers. In general, these enforcement actions may be initiated in response to
violations of laws and regulations as well as in response to unsafe or

24

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unsound practices.

Standards
for Safety and Soundness.
Pursuant to the Federal Deposit Insurance Act (the FDIA), the OTS has adopted
a set of guidelines prescribing safety and soundness standards. These
guidelines establish general standards relating to internal controls,
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate risk exposure, asset growth, asset quality,
earnings standards, compensation, fees and benefits. In general, the guidelines
require appropriate systems and practices to identify and mange the risks and
exposures specified in the guidelines.

In
addition, the OTS adopted regulations that authorize, but do not require, the
OTS to order a savings association that has been given notice that it is not
satisfying these safety and soundness standards to submit a compliance plan.
If, after being notified, a savings association fails to submit an acceptable
plan or fails in any material respect to implement an accepted plan, the OTS
must issue an order directing action to correct the deficiency. Further, the
OTS may issue an order directing corrective actions and may issue an order
directing other actions of the types to which an undercapitalized savings
association is subject under the prompt corrective action provisions of the
FDIA. If a savings association fails to comply with such an order, the OTS may
seek to enforce such order in judicial proceedings and to impose civil money
penalties.

Limitations
on Capital Distributions.
The OTS imposes various restrictions or requirements on Rome Savings ability
to make capital distributions, including the payment of cash dividends. A
savings association that is the subsidiary of a savings and loan holding
company must file a notice with the OTS at least 30 days before making a
capital distribution. Rome Savings must file an application for prior approval
if the total amount of its capital distributions for the applicable calendar
year would exceed an amount equal to Rome Savings net income for that year
plus Rome Savings retained net income for the previous two years.

The
OTS may disapprove a notice or application if:

| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | Rome Savings would be
  undercapitalized following the distribution;                                       
| |   |                                                                                                            
| |  | the proposed capital
  distribution raises safety and soundness concerns; or                               
| |   |                                                                                                            
| |  | the capital distribution
  would violate a prohibition contained in any statute, regulation or
  agreement.

Rome
Bancorps ability to pay dividends, service debt obligations and repurchase
common stock is dependent upon receipt of dividend payments from Rome Savings.

Liquidity. Rome Savings is required to maintain a
sufficient amount of liquid assets to ensure its safe and sound operation.

Prompt
Corrective Action Regulations. Under the OTS prompt corrective action regulations, the OTS is
required to take certain, and is authorized to take other, supervisory actions
against undercapitalized savings associations. For this purpose, a savings
association is placed in one of the following four categories based on the
associations capital:

| |   |                        
| | - | -----------------------
| |  | well capitalized;      
| |   |                        
| |  | adequately capitalized;
| |   |                        
| |  | undercapitalized; or   

25

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| |   |                               
| | - | ------------------------------
| |  | critically
  undercapitalized.

When appropriate, the OTS
can require corrective action by a savings association holding company under
the prompt corrective action provision of the FDIA.

At
December 31, 2006, Rome Savings met the criteria for being considered
well-capitalized.

Insurance
of Deposit Accounts.
Rome Savings is a member of the Deposit Insurance Fund (the DIF), maintained
by the FDIC, and Rome Savings pays its deposit insurance assessments to the
DIF. The DIF was formed on March 31, 2006 following the merger of the Bank
Insurance Fund and the Savings Association Insurance Fund in accordance with
the Federal Deposit Insurance Reform Act of 2005 (the DIF Act). In addition
to merging the insurance funds, the DIF Act established a statutory minimum and
maximum designated reserve ratio for the Deposit Insurance Fund and granted the
FDIC greater flexibility in establishing the required reserve ratio. In its
regulations implementing the DIF Act, the FDIC has set the current annual
designated reserve ratio for the DIF at 1.25%.

In
order to maintain the DIF, member institutions are assessed an insurance
premium. The amount of each institutions premium is currently based on the
balance of insured deposits and the degree of risk the institution poses to the
DIF. Under the assessment system, the FDIC assigns an institution to one of nine
risk categories using a two-step process based first on capital ratios (the
capital group assignment) and then on other relevant information (the
supervisory subgroup assignment). Each risk category is assigned an assessment
rate. Assessment rates currently range from 0% of deposits for an institution
in the highest category (i.e., well-capitalized and financially sound, with no
more than a few minor weaknesses) to 0.43% of deposits for an institution in
the lowest category (i.e., undercapitalized and substantial supervisory
concerns). The FDIC is authorized to raise the assessment rates as necessary to
maintain the Deposit Insurance Fund. The Rome Savings assessment rate at
December 31, 2006 was 0%. Any increase in insurance assessments could have an
adverse effect on the earnings of insured institutions, including Rome Savings.

In
addition, all FDIC -insured institutions are required to pay a pro rata portion
of the interest due on obligations issued by the Financing Corporation to fund
the closing and disposal of failed thrift institutions by the Resolution Trust
Corporation. At December 31, 2006, the FDIC assessed DIF-insured deposits 1.24
basis points per $100 of deposits to cover those obligations. The Financing
Corporation rate is adjusted quarterly to reflect changes in assessment bases
of the DIF. This obligation will continue until the Financing Corporation bonds
mature in 2017.

Federal
Home Loan Bank System.
Rome Savings is a member of the Federal Home Loan Bank (the FHLB) of New
York, which is one of the regional FHLBs composing the FHLB System. Each FHLB
provides a central credit facility primarily for its member institutions. Rome
Savings, as a member of the FHLB of New York, is required to acquire and hold
shares of capital stock in the FHLB of New York. While the required percentages
of stock ownership are subject to change by the FHLB, Rome Savings was in
compliance with this requirement with an investment in FHLB of New York stock
at December 31, 2006 of $1.3 million. Any advances from a FHLB must be secured
by specified types of collateral, and all long-term advances may be obtained
only for the purpose of providing funds for residential housing finance.

The
FHLBs are required to provide funds for the resolution of insolvent thrifts and
to contribute funds for affordable housing programs. These requirements could
reduce the amount of earnings that the FHLBs can pay as dividends to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to their members. If dividends were reduced, or interest on future
FHLB advances increased, Rome Savings net interest income would be affected.

Federal
Reserve System. Rome
Savings is subject to provisions of the FRA and the Federal Reserve

26

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Boards
regulations pursuant to which depository institutions may be required to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board
regulations exempt $8.5 million of otherwise reservable balances from the
reserve requirements. A 3.0% reserve is required for transaction account
balances over $8.5 million and up to $45.8 million. Transaction account
balances over $45.8 million are subject to a reserve requirement of $1,119,000
plus 10% of the amount over $45.8 million. Rome Savings is in compliance with
these requirements. Because required reserves must be maintained in the form of
either vault cash, a noninterest-bearing account at a Federal Reserve Bank or a
pass-through account as defined by the Federal Reserve Board, the effect of
this reserve requirement is to reduce Rome Savings interest-earning assets.
The balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements imposed by the OTS.
FHLB System members are also authorized to borrow from the Federal Reserve
discount window, but Federal Reserve Board regulations require such
institutions to exhaust all FHLB sources before borrowing from a Federal
Reserve Bank.

Prohibitions
Against Tying Arrangements. Federal savings
associations are subject to prohibitions on certain tying arrangements. A
federal savings association is prohibited, subject to some exceptions, from
extending credit or offering any other service, or fixing or varying the
consideration for such extension of credit or service, on the condition that
the customer obtain some additional service from the savings association or its
affiliates or not obtain credit or services of a competitor of the savings
association.

The
Bank Secrecy Act.
Rome Savings and Rome Bancorp are subject to the Bank Secrecy Act, as
amended by the USA PATRIOT Act, which gives the federal government powers to
address money laundering and terrorist threats through enhanced domestic
security measures, expanded surveillance powers, and mandatory transaction
reporting obligations. By way of example, the Bank Secrecy Act imposes an
affirmative obligation on Rome Savings to report currency transactions that
exceed certain thresholds and to report other transactions determined to be
suspicious.

Title
III of the USA PATRIOT Act takes measures intended to encourage information
sharing among financial institutions, bank regulatory agencies and law
enforcement bodies. Further, certain provisions of Title III impose affirmative
obligations on a broad range of financial institutions, including banks,
thrifts, brokers, dealers, credit unions, money transfer agents and parties
registered under the Commodity Exchange Act. Among other requirements, the USA
PATRIOT Act imposes the following obligations on financial institutions:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | financial
  institutions must establish anti-money laundering programs that include, at
  minimum: (i) internal policies, procedures, and controls, (ii) specific
  designation of an anti-money laundering compliance officer, (iii) ongoing
  employee training programs, and (iv) an independent audit function to test
  the anti-money laundering program;                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | financial
  institutions must establish and meet minimum standards for customer due
  diligence, identification and verification;                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | financial
  institutions that establish, maintain, administer, or manage private banking
  accounts or correspondent accounts in the United States for non-United States
  persons or their representatives (including foreign individuals visiting the
  United States) must establish appropriate, specific, and, where necessary,
  enhanced due diligence policies, procedures, and controls designed to detect
  and report money laundering through those accounts;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | financial
  institutions are prohibited from establishing, maintaining, administering or
  managing correspondent accounts for foreign shell banks (foreign banks that
  do not have a physical presence in any country), and are subject to certain
  recordkeeping obligations with respect to                                                                                                                                                                         

27

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| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | correspondent
  accounts of foreign banks;                                                                                                                                                     
| |   |                                                                                                                                                                                                
| |  | bank
  regulators are directed to consider a depository institutions or holding
  companys effectiveness in combating money laundering when ruling on FRA and
  Bank Merger Act applications.

Office
of Foreign Asset Control. Rome Savings and Rome
Bancorp, like all United States companies and individuals, are prohibited from
transacting business with certain individuals and entities named on the Office
of Foreign Asset Controls list of Specially Designated Nationals and Blocked
Persons. Failure to comply may result in fines and other penalties. The Office
of Foreign Asset Control has issued guidance directed at financial institutions
in which it asserts that it may, in its discretion, examine institutions
determined to be high-risk or to be lacking in their efforts to comply with
these prohibitions.

Holding Company
Regulation

Rome
Bancorp is a savings and loan holding company regulated by the OTS. As such,
Rome Bancorp is registered with and subject to OTS examination and supervision,
as well as certain reporting requirements. In addition, the OTS has enforcement
authority over Rome Bancorp and any of its non-savings association
subsidiaries. Among other things, this authority permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to the financial
safety, soundness or stability of a subsidiary savings association. Unlike bank
holding companies, federal savings and loan holding companies are not subject
to regulatory capital requirements or to supervision by the Federal Reserve
Board.

HOLA
prohibits a savings and loan holding company, directly or indirectly, or through
one or more subsidiaries, from acquiring control (as defined under HOLA) of
another savings association without prior OTS approval. In addition, a savings
and loan holding company is prohibited from directly or indirectly acquiring
control of any depository institution not insured by the FDIC (except through a
merger with and into the holding companys savings association subsidiary that
is approved by the OTS).

A
savings and loan holding company may not acquire as a separate subsidiary a savings
association that has a principal office outside of the state where the
principal office of its subsidiary savings association in located, except, (i)
in the case of certain emergency acquisitions approved by the FDIC; (ii) if the
holding company controls a savings association subsidiary that operated a home
or branch office in such additional state as of March 5, 1987; or (iii) if the
laws of the home state of the savings association to be acquired specifically
authorize a savings association chartered by that state to be acquired by a
savings association chartered by the state where the acquiring savings
association or savings and loan holding company is located or by a holding
company that controls such a state chartered savings association.

Under
the Gramm Leach Bliley Act (the GLB Act) Rome Bancorp is prohibited from
engaging in non-financial activities. As a result, Rome Bancorps activities
are restricted to:

| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | furnishing
  or performing management services for its savings association subsidiary;                
| |   |                                                                                                       
| |  | conducting
  an insurance agency or escrow business;                                                  
| |   |                                                                                                       
| |  | holding,
  managing or liquidating assets owned or acquired from its savings association
  subsidiary;
| |   |                                                                                                       
| |  | holding or
  managing properties used or occupied by its savings association subsidiary;              
| |   |                                                                                                       
| |  | acting as
  trustee under a deed of trust;                                                            

28

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any other
  activity (a) that the Federal Reserve Board, by regulation, has determined to
  be permissible for bank holding companies under Section 4(c) of the Bank
  Holding Company Act of 1956 (the BHCA), unless the Director of the OTS, by
  regulation, prohibits or limits any such activity for savings and loan
  holding companies, or (b) in which multiple savings and loan holding
  companies were authorized by regulation to directly engage on March 5, 1987;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | purchasing,
  holding or disposing of stock acquired in connection with a qualified stock
  issuance if the purchase of such stock is approved by the Director of the
  OTS; and                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | any activity
  permissible for financial holding companies under section 4(k) of the BHCA.                                                                                                                                                                                                                                                                                                                                                                                        

Permissible
activities which are deemed to be financial in nature or incidental thereto
under section 4(k) of the BHCA include:

| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | lending,
  exchanging, transferring, investing for others or safeguarding money or
  securities;                       
| |   |                                                                                                                        
| |  | insurance
  activities or providing and issuing annuities, and acting as principal, agent
  or broker;                 
| |   |                                                                                                                        
| |  | financial,
  investment or economic advisory services;                                                                 
| |   |                                                                                                                        
| |  | issuing or
  selling instruments representing interests in pools of assets that a bank is
  permitted to hold directly;
| |   |                                                                                                                        
| |  | underwriting,
  dealing in or making a market in securities;                                                           
| |   |                                                                                                                        
| |  | activities
  previously determined by the Federal Reserve Board to be closely related to
  banking;                    
| |   |                                                                                                                        
| |  | activities that
  bank holding companies are permitted to engage in outside of the U.S.; and                           
| |   |                                                                                                                        
| |  | portfolio
  investments made by an insurance company.                                                                  

In addition,
Rome Bancorp cannot acquire or be acquired by a company unless the company is
engaged solely in financial activities.

Transactions
between the Rome Savings and Rome Bancorp and its other subsidiaries are
subject to various conditions and limitations. See Regulation of Federal
Savings Associations - Transactions with Affiliates and Regulation of Federal
Savings Associations - Limitation on Capital Distributions.

Federal
Securities Laws. Rome Bancorps common stock is
registered with the SEC under Section 12(b) of the Securities Exchange Act of
1934, as amended (the Exchange Act). Rome Bancorp is subject to information,
proxy solicitation, insider trading restrictions and other requirements under
the Exchange Act.

The
Sarbanes-Oxley Act. As a public company, Rome Bancorp
is subject to the Sarbanes-Oxley Act, which implements a broad range of
corporate governance and accounting measures for public companies designed to
promote honesty and transparency in corporate America and better protect
investors from corporate wrongdoing. The Sarbanes-Oxley Acts principal
legislation and the derivative regulation and rule making promulgated by the
SEC includes:

| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | the creation
  of an independent accounting oversight board;                                         
| |   |                                                                                                      
| |  | auditor
  independence provisions which restrict non-audit services that accountants
  may provide to

29

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | their audit
  clients;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | additional
  corporate governance and responsibility measures, including the requirement
  that the chief executive officer and chief financial officer certify
  financial statements;                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | a
  requirement that companies establish and maintain a system of internal
  control over financial reporting and that a companys management provide an
  annual report regarding its assessment of the effectiveness of such internal
  control over financial reporting to the companys independent accountants and
  that such accountants provide an attestation report with respect to
  managements assessment of the effectiveness of the companys internal
  control over financial reporting;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | the
  forfeiture of bonuses or other incentive-based compensation and profits from
  the sale of an issuers securities by directors and senior officers in the
  twelve month period following initial publication of any financial statements
  that later require restatement;                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | an increase
  in the oversight of, and enhancement of certain requirements relating to
  audit committees of public companies and how they interact with the companys
  independent auditors;                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | requirement
  that audit committee members must be independent and are absolutely barred
  from accepting consulting, advisory or other compensatory fees from the
  issuer;                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | requirement
  that companies disclose whether at least one member of the committee is a
  financial expert (as such term is defined by the Securities and Exchange
  Commission) and if not, why not;                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | expanded
  disclosure requirements for corporate insiders, including accelerated
  reporting of stock transactions by insiders and a prohibition on insider
  trading during pension blackout periods;                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | a
  prohibition on personal loans to directors and officers, except certain loans
  made by insured financial institutions;                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | disclosure
  of a code of ethics and filing a Form 8-K for a change or waiver of such
  code;                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | mandatory
  disclosure by analysts of potential conflicts of interest; and                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | a range of
  enhanced penalties for fraud and other violations.                                                                                                                                                                                                                                                                                                                                                                                                                                           

Section
402 of the Sarbanes-Oxley Act prohibits the extension of personal loans to
directors and executive officers of issuers (as defined in Sarbanes-Oxley). The
prohibition, however, does not apply to mortgages advanced by an insured
depository institution, such as Rome Savings, that are subject to the insider
lending restrictions of Section 22(h) of the FRA.

Quotation
on Nasdaq. Rome Bancorps common stock is quoted on
The Nasdaq Stock Market. In order to maintain such quotation, Rome Bancorp is
subject to certain corporate governance requirements, including:

| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a majority
  of its board must be composed of independent directors;                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                     
| |  | it is
  required to have an audit committee composed of at least three directors,
  each of whom is an independent director, as such term is defined by both the
  rules of the National Association of Securities Dealers (the NASD) and by
  the regulations promulgated under the Exchange Act;

30

---



| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | the
  nominating committee and compensation committee must also be composed
  entirely of independent directors;
| |   |                                                                                                                 
| |  | each of the
  audit committee, and nominating committee must have a publicly available
  written charter.       

31

---



|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

Our
loan portfolio includes loans with a higher risk of loss. Rome Savings originates commercial mortgage loans, commercial loans,
consumer loans and residential mortgage loans primarily within its market area,
although a number of loans are in other states. Commercial mortgage,
commercial, and consumer loans may expose a lender to greater credit risk than
loans secured by residential real estate because the collateral securing these
loans may not be sold as easily as residential real estate. These loans also
have greater credit risk than residential real estate for the following
reasons:

| |   |                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Commercial
  Mortgage Loans. Repayment is dependent upon income
  being generated in amounts sufficient to cover operating expenses and debt
  service.                                                                
| |   |                                                                                                                                                                                                                        
| |  | Commercial
  Loans. Repayment is generally dependent upon the
  successful operation of the borrowers business.                                                                                                       
| |   |                                                                                                                                                                                                                        
| |  | Consumer
  Loans. Consumer loans (such as personal lines of
  credit) are collateralized, if at all, with assets that may not provide an
  adequate source of payment of the loan due to depreciation, damage, or loss.

If
our allowance for loan losses is not sufficient to cover actual loan losses,
our earnings could decrease. Our loan customers
may not repay their loans according to the terms of the loans, and the
collateral securing the payment of these loans may be insufficient to pay any
remaining loan balance. We therefore may experience significant loan losses,
which could have a material adverse effect on our operating results.

Material
additions to our allowance also would materially decrease our net income, and
the charge-off of loans may cause us to increase the allowance. We make various
assumptions and judgments about the collectibility of our loan portfolio,
including the creditworthiness of our borrowers and the value of the real
estate and other assets serving as collateral for the repayment of many of our
loans. We rely on our loan quality reviews, our experience and our evaluation
of economic conditions, among other factors, in determining the amount of the
allowance for loan losses. If our assumptions prove to be incorrect, our
allowance for loan losses may not be sufficient to cover losses inherent in our
loan portfolio, resulting in additions to our allowance.

Our
emphasis on a diverse loan portfolio has been one of the more significant
factors we have taken into account in evaluating our allowance for loan losses
and provision for loan losses. If we were to further increase the amount of
loans in our portfolio other than traditional real estate loans, we may decide
to make increased provisions for loan losses. In addition, bank regulators
periodically review our allowance for loan losses and may require us to
increase our provision for loan losses or recognize further loan charge-offs.

Our
return on equity is low compared to other companies. Net
earnings divided by average equity, known as return on equity, is a ratio
many investors use to compare the performance of a financial institution to its
peers. Our return on average equity amounted to 2.91% and 4.29% in 2006 and
2005 respectively. As a result of the second-step stock conversion and offering
completed in March of 2005, we currently have capital proceeds to deploy into
high-yielding earning assets. Our ability to leverage our new capital
profitably will be significantly affected by industry competition for loans and
deposits. Until the stock proceeds are fully invested in long-term interest
earning assets, we expect our return on equity to be below our historical
rations and the industry average, which may negatively impact the value of our
stock.

Because
Rome Savings loans are concentrated in a small geographical area, downturns in
its local economy may affect its profitability and future growth possibilities.
In recent years, Oneida County has experienced a negative population growth
rate. While the local economy has been improving in recent years, it has not
enjoyed the rate of economic growth experienced in other parts of the United
States. In the event of an economic downturn, we may have greater risk of loan
defaults and experience deposit runoff in our primary market area, which could
have an adverse impact on our profitability.

32

---



Low
demand for real estate loans may lower our profitability.
Making loans secured by real estate, including one-to-four family and
commercial real estate, is our primary business and primary source of revenue.
If customer demand for real estate loans decreases, our profits may decrease
because our alternative investments, primarily securities, earn less income for
us than real estate loans. Customer demand for loans secured by real estate
could be reduced by a weaker economy, an increase in unemployment, a decrease
in real estate values or an increase in interest rates.

We
depend on our executive officers and key personnel to implement our business
strategy and could be harmed by the loss of their services.
We believe that our growth and future success will depend in large part upon
the skills of our management team, particularly Charles M. Sprock, our
President and Chief Executive Officer. The competition for qualified personnel
in the financial services industry is intense, and the loss of our key
personnel or an inability to continue to attract, retain and motivate key
personnel could adversely affect our business. We cannot assure you that we
will be able to retain our existing key personnel or attract additional
qualified personnel. Although we have an employment agreement with our
President and Chief Executive Officer that contains a non-compete provision,
the loss of the services of one or more of our executive officers could impair
our ability to continue to develop our business strategy.

If
we fail to maintain an effective system of internal controls, we may not be
able to accurately report our financial results or prevent fraud. As a result,
current and potential stockholders could lose confidence in our financial
reporting, which would harm our business and the trading price of our stock. Effective
internal controls are necessary for us to provide reliable financial reports
and effectively prevent fraud. If we cannot provide reliable financial reports
or prevent fraud, our operating results could be harmed. We devote significant
attention to establishing and maintaining effective internal controls. We
document, review and, if appropriate, improve our internal controls and
procedures in connection with Section 404 of the Sarbanes-Oxley Act of 2002, which
requires annual management assessments of the effectiveness of our internal
controls over financial reporting and a report by our independent auditors
addressing these assessments. Both we and our independent auditors annually
test our internal controls in connection with the Section 404 requirements and
could identify areas for further attention or improvement. Implementing any
appropriate changes to our internal controls may require specific compliance
training of our directors, officers and employees, entail substantial costs in
order to modify our existing accounting systems, and take a significant period
of time to complete. Any failure to implement required new or improved
controls, or difficulties encountered in their implementation, could harm our
operating results or cause us to fail to meet our reporting obligations. Any
such failure could also adversely affect our assessment of the effectiveness of
our internal control over financial reporting. Inferior internal controls
could also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the market price of our
stock.

We
operate in a highly regulated environment and we may be adversely affected by
changes in laws and regulations. We are subject to
extensive regulation, supervision and examination by the OTS and by the Federal
Deposit Insurance Corporation, as insurer of deposits. Such regulation and
supervision governs the activities in which Rome Savings and we may engage and
are intended primarily for the protection of the insurance fund and deposits of
Rome Savings. Regulatory authorities have extensive discretion in connection
with their supervisory and enforcement activities, including the imposition of
restrictions on the operation of Rome Savings, the classification of its assets
and the adequacy of its allowance for loan losses. Any change in such
regulation and oversight, whether in the form of regulatory policy,
regulations, or legislation, including changes in the regulations governing
holding companies, could have a material impact on the combined operations of
us and Rome Savings.

Competition
in our primary market area may reduce our ability to attract and retain
deposits and obtain loans. We operate in a competitive
market for both attracting deposits, which is our primary source of funds, and
originating loans. Historically, our most direct competition for savings
deposits has come from credit unions, community banks, large commercial banks
and thrift institutions in our primary market area. Particularly in times of
extremely low or extremely high interest rates, we have faced additional
significant competition for investors funds from brokerage firms and other
firms short-term money market securities and corporate and government
securities. Our competition for loans comes principally from mortgage bankers,

33

---



commercial
banks, other thrift institutions, and insurance companies. Such competition for
the origination of loans may limit our future growth and earnings prospects.
Competition for loan originations and deposits may limit our future growth and
earnings prospects.

Changes
in interest rates could adversely affect our results of operations and
financial condition. Our results of operations and
financial condition are significantly affected by changes in interest rates.
Our results of operations depend substantially on our net interest income,
which is the difference between the interest income earned on our
interest-earning assets and the interest expense paid on our interest-bearing
liabilities. Increases in interest rates may decrease loan demand and make it
more difficult for borrowers to repay adjustable rate loans.

We
also are subject to reinvestment risk associated with changes in interest
rates. Changes in interest rates may affect the average life of loans and
mortgage-related securities. Decreases in interest rates can result in
increased prepayments of loans and mortgage-related securities, as borrowers
refinance to reduce borrowing costs. Under these circumstances, we are subject
to reinvestment risk to the extent that we are unable to reinvest the cash
received from such prepayments at rates that are comparable to the rates on
existing loans and securities.

Our
certificate of incorporation, bylaws and certain laws and regulations may
prevent transactions you might favor, including a sale or merger of Rome
Bancorp. Provisions of our Certificate of
Incorporation and Bylaws, federal regulations and various other factors may
make it more difficult for companies or persons to acquire control of us
without the consent of our Board of Directors. It is possible, however, that
you would want a takeover attempt to succeed because, for example, a potential
buyer could offer a premium over the then-prevailing price of our common stock.
The factors that may discourage takeover attempts or make them more difficult
include:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                       
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Office of
  Thrift Supervision regulations. OTS regulations
  prohibit, for three years following the completion of a mutual-to-stock
  conversion, the offer to acquire or the acquisition of more than 10% of any
  class of equity security of a converted institution without the prior
  approval of the OTS. In addition, the OTS has required, as a condition to
  approval of the conversion, that Rome Savings maintain a federal thrift
  charter for a period of three years.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Certificate
  of Incorporation and statutory provisions.
  Provisions of our Certificate of Incorporation and Bylaws and of Delaware law
  may make it more difficult and expensive to pursue a takeover attempt that
  management opposes. These provisions also make more difficult the removal of
  our current directors or management, or the election of new directors. These
  provisions include:                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | limitations
  on voting rights of the beneficial owners of more than 10% of our common
  stock;                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | supermajority
  voting requirements for certain business combinations and changes to some
  provisions of the Certificate of Incorporation and Bylaws;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | the election
  of directors to staggered terms of three years; and                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | provisions
  regarding the timing and content of stockholder proposals and nominations.                                                               

34

---



|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS

None.

|        |                        
|------- | -----------------------
|ITEM 2. | DESCRIPTION OF PROPERTY

We
conduct our business through our executive office, operations center, which
includes both the Mortgage Center and the Accounting Center listed below, and
three banking offices. A fourth banking office in Lee, New York is under
construction and expected to open in the early spring of 2007. In addition, the
Company has purchased land in Oneida, New York for potential expansion into
that market. At December 31, 2006, the net book value of the computer equipment
and other furniture, fixtures and equipment of Rome Savings and Rome Bancorp at
their offices totaled $6,072,000. For more information, see Note 5 of Notes to
Consolidated Financial Statements, in the Companys 2006 Annual Report to
shareholders (the Annual Report), which is incorporated herein by reference.

|                           |  |                   |  |                          |  |                                    |   |       |  | 
|-------------------------- |  | ----------------- |  | ------------------------ |  | ---------------------------------- | - | ----- |  | 
|                           |  |                   |  |                          |  |                                    |  
|Location                   |  | Leased or
  Owned |  | Original Date
  Acquired |  | Net Book Value
  December 31, 2006 |  
|                           |  |                   |  |                          |  | (In thousands)                     |  
|Executive Office:          |  |                   |  |                          |  |                                    |   |      
|100 West Dominick St.      |  |                   |  |                          |  |                                    |   |      
|Rome, NY                   |  | Owned             |  | 1956                     |  |                                    | $ | 2,040 |  | 
|                           |  |                   |  |                          |  |                                    |   |       |  | 
|Branch Offices:            |  |                   |  |                          |  |                                    |   |       |  | 
|1629 Black River Boulevard |  |                   |  |                          |  |                                    |   |       |  | 
|Rome, NY                   |  | Owned             |  | 1963                     |  |                                    |   | 309   |  | 
|1300 Erie Boulevard        |  |                   |  |                          |  |                                    |   |       |  | 
|Rome, NY                   |  | Owned             |  | 1997                     |  |                                    |   | 1,027 |  | 
|                           |  |                   |  |                          |  |                                    |   |       |  | 
|82 Seneca Turnpike         |  |                   |  |                          |  |                                    |   |       |  | 
|New Hartford, NY           |  | Owned             |  | 1983                     |  |                                    |   | 156   |  | 
|                           |  |                   |  |                          |  |                                    |   |       |  | 
|Rt. 26 and Elmer Hill Rd   |  |                   |  |                          |  |                                    |   |       |  | 
|Lee, NY                    |  | Owned             |  | 2006                     |  |                                    |   | 1,239 |  | 
|                           |  |                   |  |                          |  |                                    |   |       |  | 
|Mortgage Center:           |  |                   |  |                          |  |                                    |   |       |  | 
|137 West Dominick Street   |  |                   |  |                          |  |                                    |   |       |  | 
|Rome, NY                   |  | Owned             |  | 2002                     |  |                                    |   | 470   |  | 
|                           |  |                   |  |                          |  |                                    |   |       |  | 
|Accounting Center:         |  |                   |  |                          |  |                                    |   |       |  | 
|139 West Dominick Street   |  |                   |  |                          |  |                                    |   |       |  | 
|Rome, NY                   |  | Owned             |  | 1995                     |  |                                    |   | 368   |  | 
|                           |  |                   |  |                          |  |                                    |   |       |  | 
|Undeveloped Land:          |  |                   |  |                          |  |                                    |   |       |  | 
|Oneida, NY                 |  | Owned             |  | 2006                     |  |                                    |   | 463   |  | 

|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

As
of the date of this Form 10-K, we are not involved in any pending legal
proceedings other than routine legal proceedings occurring in the ordinary
course of business. We believe that these routine legal proceedings, in the
aggregate, are immaterial to our financial condition and results of operations.

|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

35

---



PART II

|        |                                                                                                                 
|------- | ----------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR ROME BANCORPS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
  AND ISSUER PURCHASES OF EQUITY SECURITIES

The
following information included in the Annual Report attached hereto as Exhibit
13.1 is incorporated herein by reference: Market for the Companys Common
Stock.

|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA

The
following information included in Annual Report attached hereto as Exhibit 13.1
is incorporated herein by reference: Selected Financial and Other Data.

|       |                                                                                        
|------ | ---------------------------------------------------------------------------------------
|ITEM 7 | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS

The
following information included in the Annual Report attached hereto as Exhibit
13.1 is incorporated herein by reference: Managements Discussion and Analysis
of Financial Condition and Results of Operations.

|        |                                                            
|------- | -----------------------------------------------------------
|ITEM 7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The
following information included in the Annual Report attached hereto as Exhibit
13.1 is incorporated herein by reference: Managements Discussion and Analysis
of Financial Condition and Results of Operations - Management of Interest Rate
Risk.

|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The
following information included in the Annual Report attached hereto as Exhibit
13.1 is incorporated herein by reference: Report of Independent Registered
Public Accounting Firm on Internal Control over Financial Reporting, Report
of Independent Registered Public Accounting Firm, Consolidated Financial
Statements and Notes to Consolidated Financial Statements.

|        |                                                                                    
|------- | -----------------------------------------------------------------------------------
|ITEM 9. | CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

None.

|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and
Procedures

Management,
including the Companys President and Chief Executive Officer and Executive
Vice President and Chief Financial Officer, has evaluated the effectiveness of
the Companys disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
report. Based upon that evaluation, the Companys President and Chief Executive
Officer and Executive Vice President and Chief Financial Officer concluded that
the disclosure controls and procedures were effective to ensure that
information required to be disclosed in the reports the Company files and submits
under the Exchange Act is (i) recorded, processed, summarized and reported as
and when required, and (ii)

36

---



accumulated
and communicated to the Companys management, including the President and Chief
Executive Officer and Executive Vice President and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.

Managements
annual report on internal control over financial reporting appears
in the Companys Annual Report to Shareholders for the year ended December 31,
2006, which is included as Exhibit 13.1 of this report, and is incorporated
herein by reference.

The
attestation report of the Companys registered public accounting firm on
managements assessment of the Companys internal control over financial
reporting appears in the Companys Annual Report to Shareholders for the year
ended December 31, 2006, which is included as Exhibit 13.1 of this report, and
is incorporated herein by reference.

There
have been no changes in the Companys internal control over financial reporting
identified in connection with the evaluation that occurred during the Companys
last fiscal quarter that has materially affected, or that is reasonably likely
to materially affect, the Companys internal control over financial reporting.

On
January 12, 2007, the Audit Committee of the Company determined, based on its
review and consultation with the Companys independent registered public
accounting firm, that the Company should restate its financial statements for
the quarterly periods ended June 30, 2006 and September 30, 2006, as filed on
Form 10-Q. The restatement was necessary in order to immediately fully expense
the award of certain stock-based compensation grants at the award date for those
recipients who were eligible for retirement at the award grant date. The
Company had been expensing these grants over a five year service vesting
period. In light of the Companys restatement of prior period financial
statements, the Company has enhanced internal reviews of related financial
reporting requirements.

|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION

None.

PART III

|         |                                                       
|-------- | ------------------------------------------------------
|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The
following information included in the Proxy Statement is incorporated herein by
reference: Proposal 1- Election of Directors and the following subsections of
the section entitled Information About Our Board of Directors and Management:
Board of Directors, Committees of the Board, Executive Officers Who Are
Not Directors and Section 16(a) Beneficial Ownership Reporting Compliance.

Code of Ethics

Rome
Bancorp has adopted a Code of Conduct and Ethics, which applies to all
employees, directors and officers of Rome Bancorp including the principal
executive officer, principal financial officer, principal accounting officer,
or controller, or persons performing similar functions. The Code of Conduct and
Ethics meets the requirements of a code of ethics as defined by Item 406 of
Regulation S-K. The Code of Conduct and Ethics was filed as Exhibit 14.1 to the
Form 10-KSB for the year ended December 31, 2003, and has not changed.

You
may obtain a copy of the Code of Conduct and Ethics, free of charge, by sending
a request in writing to Crystal M. Seymore at the following address:

Crystal M.
Seymore, Secretary
Rome Bancorp, Inc.
100 W. Dominick Street
Rome, New York 13440-5810

37

---



|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

The
information included in the Proxy Statement is incorporated herein by
reference: Compensation.

|         |                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
  RELATED STOCKHOLDER MATTERS

The
following section included in the Proxy Statement is incorporated herein by
reference: Security Ownership of Certain Beneficial Owners and Management.

The
following table sets forth the aggregate information of our equity compensation
plans in effect as of December 31, 2006.

|                                                             |  |                                                                                             |  |                                                                              |  |                                                                                                                                              |  |   |      |  |  |  |  |         |  | 
|------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---- |  |  |  |  | ------- |  | 
|Plan
category                                                |  | Number
of securities
to be issued
upon exercise of
outstanding options,
warrants and rights |  | Weighted-average

exercise price of
outstanding options,
warrants and rights |  | Number
of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))1 | 
|                                                             |  |                                                                                             |  |                                                                              |  |                                                                                                                                              | 
|                                                             |  | (a)                                                                                         |  | (b)                                                                          |  | (c)                                                                                                                                          | 
|Equity compensation plans approved by
  security holders     |  |                                                                                             |  | 524,889                                                                      |  |                                                                                                                                              |  | $ | 9.37 |  |  |  |  | 490,061 |  | 
|                                                             |  |                                                                                             |  |                                                                              |  |                                                                                                                                              |  |   |      |  |  |  |  |         |  | 
|Equity compensation plans not approved by
  security holders |  |                                                                                             |  |                                                                             |  |                                                                                                                                              |  |   |     |  |  |  |  |        |  | 
|                                                             |  |                                                                                             |  |                                                                              |  |                                                                                                                                              |  |   |      |  |  |  |  |         |  | 
|                                                             |  |                                                                                             |  |                                                                              |  |                                                                                                                                              |  |   |      |  |  |  |  |         |  | 
|Total                                                        |  |                                                                                             |  | 524,889                                                                      |  |                                                                                                                                              |  | $ | 9.37 |  |  |  |  | 490,061 |  | 
|                                                             |  |                                                                                             |  |                                                                              |  |                                                                                                                                              |  |   |      |  |  |  |  |         |  | 

|    |                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | The number
  of securities remaining for future issuance under equity compensation plans
  includes: 136,061 shares available for issuance under the 2000 Stock Option
  Plan, 236,000 shares available for issuance under the 2006 Stock Option Plan
  and 118,000 shares available for issuance under the 2006 Recognition and
  Retention Plan

|         |                                                                            
|-------- | ---------------------------------------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
  INDEPENDENCE

The
following information included in the Proxy Statement is incorporated herein by
reference: Transactions with Certain Related Persons.

|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES

The
following information included in the Proxy Statement is incorporated herein by
reference: Principal Accounting Fees and Services and Audit Committee
Preapproval Policy.

PART IV

|         |                               
|-------- | ------------------------------
|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS

(a) The
following financial statements included in the Annual Report attached hereto as
Exhibit 13.1 are incorporated herein by reference:

38

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| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | Report of
  Independent Registered Accounting Firm                                                                          
| |                                                                                                                             
| | Consolidated
  Balance Sheets - At December 31, 2006 and 2005;                                                              
| |                                                                                                                             
| | Consolidated
  Statements of Income - Years Ended December 31, 2006, 2005 and 2004;                                         
| |                                                                                                                             
| | Consolidated
  Statements of Stockholders Equity and Comprehensive Income - Years Ended
  December 31, 2006, 2005 and 2004;
| |                                                                                                                             
| | Consolidated
  Statements of Cash Flows - Years Ended December 31, 2006, 2005 and 2004; and                                 
| |                                                                                                                             
| | Notes to
  Consolidated Financial Statements - Years Ended December 31, 2006, 2005 and
  2004                               

(b) The
following exhibits are either filed as part of this report or are incorporated
herein by reference:

|      |                                                                                                                                     
|----- | ------------------------------------------------------------------------------------------------------------------------------------
|2.1   | Amended and
  Restated Plan of Conversion and Agreement and Plan of Reorganization. (1)                                             
|      |                                                                                                                                     
|3.1   | Certificate
  of Incorporation of New Rome Bancorp, Inc. (1)                                                                        
|      |                                                                                                                                     
|3.2   | Bylaws of
  New Rome Bancorp, Inc. (1)                                                                                              
|      |                                                                                                                                     
|4.1   | Form of
  Stock Certificate of New Rome Bancorp, Inc. (1)                                                                           
|      |                                                                                                                                     
|10.1  | Form of
  Employee Stock Ownership Plan of Rome Bancorp, Inc. (2)                                                                   
|      |                                                                                                                                     
|10.2  | Amendment
  No. 1 to Employee Stock Ownership Plan of Rome Bancorp, Inc. (1)                                                        
|      |                                                                                                                                     
|10.3  | Amendment
  No. 2 to Employee Stock Ownership Plan of Rome Bancorp, Inc. (1)                                                        
|      |                                                                                                                                     
|10.4  | Form of
  Executive Employment Agreement by and between Charles M. Sprock and Rome
  Bancorp, Inc. (2)                              
|      |                                                                                                                                     
|10.5  | Form of One
  Year Change in Control Agreement by and among certain officers and Rome
  Bancorp, Inc. and The Rome Savings Bank. (1)
|      |                                                                                                                                     
|10.6  | Form of
  Employment Agreement between New Rome Bancorp, Inc. and Charles M. Sprock.
  (1)                                          
|      |                                                                                                                                     
|10.7  | Form of
  Employment Agreement between The Rome Savings Bank and Charles M. Sprock. (1)                                             
|      |                                                                                                                                     
|10.8  | Rome
  Bancorp, Inc. 2000 Stock Option Plan. (3)                                                                                    
|      |                                                                                                                                     
|10.9  | Rome
  Bancorp, Inc. 2000 Recognition and Retention Plan. (3)                                                                       
|      |                                                                                                                                     
|10.10 | Amended and
  Restated Benefit Restoration Plan of Rome Bancorp, Inc. (4)                                                           
|      |                                                                                                                                     
|10.11 | Amended and
  Restated Directors Deferred Compensation Plan of Rome Bancorp, Inc. (4)                                              
|      |                                                                                                                                     
|10.12 | Loan
  Agreement by and between the Employee Stock Ownership Plan Trust of Rome
  Bancorp, Inc. and Rome Bancorp, Inc. (5)          
|      |                                                                                                                                     
|10.13 | Amendment
  No. 3 to the Employee Stock Ownership Plan of Rome Bancorp, Inc. (6)                                                    
|      |                                                                                                                                     
|10.14 | Rome
  Bancorp, Inc. 2006 Stock Option Plan. (7)                                                                                    
|      |                                                                                                                                     
|10.15 | Rome
  Bancorp, inc. 2006 Recognition and Retention Plan. (7)                                                                       
|      |                                                                                                                                     
|13.1  | Annual
  Report to Shareholders for the Year Ended December 31, 2006.                                                               
|      |                                                                                                                                     
|14.1  | Code of
  Conduct and Ethics. (7)                                                                                                   
|      |                                                                                                                                     
|21.1  | Subsidiaries
  of the Company. (1)                                                                                                  
|      |                                                                                                                                     
|23.1  | Consent of
  Crowe Chizek and Company LLC.                                                                                          
|      |                                                                                                                                     
|31.1  | Rule
  13a-14a/15d-14a Certification                                                                                                
|      |                                                                                                                                     
|31.2  | Rule 13a-14a/15d-14a Certification                                                                                                  
|      |                                                                                                                                     
|32.1  | Section 1350 Certification                                                                                                          
|      |                                                                                                                                     
|32.2  | Section 1350 Certification                                                                                                          

|    |                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Incorporated
  by reference to Rome Bancorp, Inc.s Form S-1 (Registration No. 333-121245),
  filed with the Commission on December 14, 2004, as amended.     
|    |                                                                                                                                                               
|(2) | Incorporated
  by reference to Rome Bancorp, Inc.s Form SB-2 (Registration No. 333-80487),
  filed with the Commission on June 11, 1999, as amended.         
|    |                                                                                                                                                               
|(3) | Incorporated
  by reference to Rome Bancorp, Incs Proxy Statement on Schedule 14A, filed
  with the Commission on April 5, 2000 and amended on April 2, 2001.
|    |                                                                                                                                                               
|(4) | Incorporated
  by reference to Rome Bancorp, Inc.s Form 8-K filed with the Commission on
  December 27, 2005.                                                
|    |                                                                                                                                                               
|(5) | Incorporated
  by reference to Rome Bancorp, Inc.s Form 8-K filed with the Commission on
  March 29, 2005.                                                   
|    |                                                                                                                                                               
|(6) | Incorporated
  by reference to Rome Bancorp, Inc.s Form 8-K filed with the Commission on
  August 29, 2005.                                                  

39

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|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(7) | Incorporated
  by reference to Rome Bancorp, Inc.s Form S-8 filed with the commission on
  May 19, 2006, as amended.

40

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SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

| |                                      |                       
| | ------------------------------------ | ----------------------
| | ROME BANCORP, INC.                  
| |                                     
| | By:                                  | /s/Charles
  M. Sprock
| |                                      |                       
| | President, Chairman of the Board and
| | Chief Executive Officer             

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|                          |  |                                                                                                      |               
|------------------------- |  | ---------------------------------------------------------------------------------------------------- | --------------
|Name                      |  | Title                                                                                                | Date          
|                          |  |                                                                                                      |               
|                          |  |                                                                                                      |               
|/s/Charles
  M. Sprock    |  | Chairman of
  the Board, 
  President and Chief 
  Executive Officer
  (Principal Executive Officer) | March 15, 2007
|                          | 
|Charles M.
  Sprock       | 
|                          |  |                                                                                                      |               
|/s/David C.
  Nolan       |  | Executive
  Vice-President 
  and Chief Financial Officer 
  (Principal Financial Officer)           | March 15, 2007
|                          | 
|David C.
  Nolan          | 
|                          |  |                                                                                                      |               
|/s/Bruce R.
  Engelbert   |  | Director                                                                                             | March 15, 2007
|                          |  |                                                                                                      |               
|Bruce R.
  Engelbert      |  |                                                                                                      |               
|                          |  |                                                                                                      |               
|/s/David C.
  Grow        |  | Director                                                                                             | March 15, 2007
|                          |  |                                                                                                      |               
|David C.
  Grow           |  |                                                                                                      |               
|                          |  |                                                                                                      |               
|/s/Kirk B.
  Hinman       |  | Director                                                                                             | March 15, 2007
|                          |  |                                                                                                      |               
|Kirk B.
  Hinman          |  |                                                                                                      |               
|                          |  |                                                                                                      |               
|/s/Michael
  J. Valentine |  | Director                                                                                             | March 15, 2007
|                          |  |                                                                                                      |               
|Michael J.
  Valentine    |  |                                                                                                      |               
|                          |  |                                                                                                      |               
|/s/Dale A.
  Laval        |  | Director                                                                                             | March 15, 2007
|                          |  |                                                                                                      |               
|Dale A.
  Laval           |  |                                                                                                      |               
|                          |  |                                                                                                      |               
|/s/John A.
  Reinhardt    |  | Director                                                                                             | March 15, 2007
|                          |  |                                                                                                      |               
|John A.
  Reinhardt       |  |                                                                                                      |               

41

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