# U.S. SECURITIES AND
EXCHANGE COMMISSIONWASHINGTON, D. C. 20549

# FORM 10-KSB

# ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

For the fiscal year
ended December 31, 2004 Commission File No.:  000-27481

# ROME BANCORP, INC.

(Name of small business issuer in its charter)



|Delaware(State or other jurisdiction ofincorporation or organization) | 16-1573070(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------- | ---------------------------------------------



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

Securities registered under Section
12(g) of the Exchange Act:

|Title of ClassCommon Stock, par value $0.0667 per share | Name of Exchange on which RegisteredThe Nasdaq Stock Market
|------------------------------------------------------- | -----------------------------------------------------------

Check
whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act during the past 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 ___

Check
if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.   [X ]

The
revenues for the issuers fiscal year ended December 31, 2004 were $16,270,000.

State
the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was sold, as
of a specified date within the last 60 days. On March 04, 2005: $22,282,000.

State
the number of shares outstanding of each of the issuers classes of common equity, as
of the latest practicable date. Rome Bancorp had 4,229,546 shares outstanding as of March
04, 2005.

# DOCUMENTS INCORPORATED
BY REFERENCE

The
definitive proxy statement pursuant to Regulation 14A to be delivered to the Commission
for filing and the 2004 Annual Report to Shareholders for the fiscal year ended December
31, 2004 which has not previously been mailed to the Commission, are incorporated by
reference into Parts II and III of this report.

Transitional Small
Business Disclosure Format (check one):Yes     No X

---

TABLE OF CONTENTS






PART I
    
    PageITEM
        1.
    DESCRIPTION OF THE
        BUSINESS
    3ITEM 2.
    DESCRIPTION
        OF PROPERTY
    33ITEM 3.
    LEGAL
        PROCEEDINGS
    33ITEM 4.
    SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS
    33PART
        IIITEM
        5.
    MARKET
        FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
    33ITEM 6.
    MANAGEMENT'S
        DISCUSSION AND ANALYSIS OF FINANCIAL OR PLAN OF OPERATION
    33ITEM 7.
    FINANCIAL
        STATEMENTS
    34ITEM 8.
    CHANGES
        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    34ITEM 8A.
    CONTROLS
        AND PROCEDURES
    34ITEM 8B.
    OTHER
        INFORMATION
    34PART
        IIIITEM 9.
    DIRECTORS AND EXECUTIVE
        OFFICERS OF THE REGISTRANT
    35ITEM 10.
    EXECUTIVE COMPENSATION
    35ITEM 11.
    SECURITY OWNERSHIP
        OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
    35ITEM 12.
    CERTAIN RELATIONSHIPS
        AND RELATED TRANSACTIONS
    36ITEM 13.
    EXHIBITS
    36ITEM 14.
    PRINCIPAL ACCOUNTANT
        FEES AND SERVICES
    37

Forward looking
Statements


Statements
included in this Form 10-KSB and in future filings by Rome Bancorp, Inc. with the
Securities and Exchange Commission, in Rome Bancorp, Inc. press releases, and in oral
statements made with the approval of an authorized executive officer, which are not
historical or current facts, are forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and
are subject to certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or projected. Rome
Bancorp, Inc. wishes to caution readers not to place undue reliance on such
forward-looking statements, which speak only as of the date made. The following important
factors, among others, in some cases have affected and in the future could affect Rome
Bancorp, Inc. actual results, and could cause Rome Bancorp, Inc. actual financial
performance to differ materially from that expressed in any forward-looking statement: (1)
competitive pressures among depository and other financial institutions may increase
significantly; (2) revenues may be lower than expected; (3) changes in the interest rate
environment may reduce interest margins; (4) general economic conditions, either
nationally or regionally, may be less favorable than expected, resulting in, among other
things, a deterioration in credit quality and/or a reduced demand for credit; (5)
legislative or regulatory changes, including changes in accounting standards, may
adversely affect the business in which the Company is engaged; (6) competitors may have
greater financial resources and developed products that enable such competitors to compete
more successfully than the Company; and (7) adverse changes may occur in the securities
markets or with respect to inflation. The foregoing list should not be construed as
exhaustive, and Rome Bancorp, Inc. disclaims any obligation to subsequently revise any
forward-looking statements to reflect events or circumstances after the date of such
statements, or to reflect the occurrence of anticipated or unanticipated events.



PART I


ITEM 1.
DESCRIPTION OF THE 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), 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.


On
October 15, 2003, the Board of Trustees of Rome, MHC, a New York-chartered mutual holding
company and the majority shareholder of Rome Bancorp, and the Boards of Directors of Rome
Savings and Rome Bancorp adopted a Plan of Charter Conversion. Pursuant to the Plan of
Charter Conversion, Rome MHC established a federal mutual holding company (the
Federal MHC). Rome MHC was merged with and into the Federal MHC, with the
Federal MHC as the surviving entity. Concurrently, Rome Savings exchanged its New York
stock savings bank charter for a federal stock savings bank charter (the Federal
Savings Bank). As a result of the charter conversion, which was completed on April
27, 2004, Rome, MHC and Rome Bancorp became savings and loan holding companies regulated
by the Office of Thrift Supervision (the OTS) and Rome Savings became a
federal savings bank regulated by the OTS.



3


On
  November 11, 2004, the Boards of Directors of Rome, MHC, Rome Bancorp and Rome
  Savings adopted a Plan of Conversion and Agreement and Plan of Reorganization
  pursuant to which Rome, MHC would convert to a stock form holding company and
  its ownership interest in Rome Bancorp would be offered to the public (the Second-Step
  Conversion). On December 7, 2004, Rome Savings formed New Rome Bancorp,
  Inc., as a Delaware corporation, with the intent that this stock corporation
  would, as a result of effectuating the steps of the Second Step Conversion,
  become the new Rome Bancorp, Inc. and parent corporation of Rome Savings. The
  Plan of Conversion was amended and restated on December 7, 2004, adding New
  Rome Bancorp as a party. On February 11, 2005 the OTS approved the conversion
  and stock offering. New Rome Bancorp conducted a subscription and community
  offering from February 18, 2005 to March 15, 2005 and commenced a syndicated
  community offering on March 17, 2005. On March 22, 2005, the members of Rome,
  MHC and the stockholders of Rome Bancorp approved the Amended and Restated Plan
  of Conversion. The conversion and stock offerings are expected to close before
  the end of March 2005, or as soon thereafter as possible.


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, 2004,
Rome Bancorp had assets of $268.2 million, deposits of $208.8 million and
shareholders equity of $36.3 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.



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. As of June 30, 2004, Rome Savings maintained a 6.62% share of all
Oneida County, New York deposits, ranking 5th in size of deposits in Oneida County. Rome
Savings also maintained 44.20% market share of all reported funds on deposit in the City
of Rome as of June 30, 2004, 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), 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, 2004, Rome
Savings total loan portfolio consisted of



4


$225.6 million in loans located in
the State of New York, while $7.7 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 into the
          secondary market. At December 31, 2004, Rome Savings had total loans of $233.3
          million, of which $117.6 million, or 50.4%, were one-to-four family residential
          mortgages. Of residential mortgage loans outstanding at that date, 18% were
          adjustable-rate mortgage (ARM) loans and 82% were fixed-rate loans.
          The remainder of Rome Savings loans at December 31, 2004, amounting to
          $115.7 million, or 49.6% 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, 2004, 22.03% of Rome Savings loan portfolio
          was in commercial real estate loans and 9.22% was in commercial loans. In
          addition, as of December 31, 2004, 18.35% of Rome Savings loan portfolio
          was in consumer loans. Rome Savings also originates guaranteed student 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.




5


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.

At
              December 31,2004
        2003
        2002
        2001
        2000Percent
        
        Percent
        
        Percent
        
        Percent
        
        Percentof
        
        of
        
        of
        
        of
        
        ofAmount
        Total
        Amount
        Total
        Amount
        Total
        Amount
        Total
        Amount
        Total(Dollars in thousands)Mortgage loans:One to four family
        $114,138
        48.93%
        $96,217
        45.94%
        $71,687
        39.11%
        $62,099
        36.70%
        $62,937
        37.57 %Commercial real estate
        49,364
        21.16%
        50,239
        23.98
        53,530
        29.20
        49,266
        29.12
        47,512
        28.36Construction and land
        5,469
        2.34%
        4,197
        2.00
        1,520
        .83
        2,165
        1.28
        1,047
        0.62Total mortgage loans
        168,971
        72.43%
        150,653
        71.92
        126,737
        69.14
        113,530
        67.10
        111,496
        66.55Commercial loans
        21,507
        9.22%
        19,171
        9.15
        16,752
        9.14
        15,440
        9.13
        17,815
        10.63Consumer loans:Automobile
        15,529
        6.66%
        15,780
        7.53
        17,628
        9.62
        20,085
        11.87
        22,248
        13.28Property improvement
        12,766
        5.47%
        9,460
        4.52
        6,422
        3.51
        3,018
        1.78
        2,201
        1.31Education
        -
        -
        -
        -
        1,451
        .79
        4,523
        2.67
        4,648
        2.78Other
        14,499
        6.22%
        14,401
        6.88
        14,304
        7.80
        12,608
        7.45
        9,126
        5.45Total consumer loans
        42,794
        18.35%
        39,641
        18.93
        39,805
        21.72
        40,234
        23.77
        38,223
        22.82Total loans
        233,272
        100.00%
        209,465
        100.00%
        183,294
        100.00%
        169,204
        100.00%
        167,534
        100.00%Less: Allowance for loan losses
        2,000
        
        1,809
        
        1,730
        
        1,597
        
        1,688Loans, net
        $231,272
        
        $207,656
        
        $181,564
        
        $167,607
        
        $165,846
6


Loan
Maturity.  The following table presents the contractual maturity of our loan portfolio
at December 31, 2004. The table does not include the effect of prepayments or scheduled
principal amortization.

At
            December 31, 2004Residential
Mortgage Loans
        
        Commercial Real Estate Loans
        
        ConsumerLoans
        
        Commercial Loans(In thousands)Amounts
            due:Within one year
        $ 14
        
        $ 513
        
        $ 1,836
        
        $10,353After one year:One to three years
        929
        
        6,215
        
        13,472
        
        1,846Three to five years
        2,373
        
        1,078
        
        21,351
        
        2,399Five to ten years
        12,274
        
        9,963
        
        4,096
        
        4,393Ten to twenty years
        51,101
        
        26,991
        
        551
        
        1,286After twenty years
        50,900
        
        6,620
        
        1,488
        
        1,230Total due after one year
        117,577
        
        50,867
        
        40,958
        
        11,154Total loans
        $ 117,591
        
        $51,380
        
        $42,794
        
        $21,507The
following table presents, as of December 31, 2004, the dollar amount of all loans, due
after December 31, 2005, and whether these loans have fixed interest rates or adjustable
interest rates.


Due
              After December 31, 2004Fixed
        
        Adjustable
        
        Total(In thousands)Residential mortgage loans
        $96,265
        
        $21,312
        
        $117,577Commercial real estate loans
        27,912
        
        22,955
        
        50,867Consumer loans
        27,951
        
        13,007
        
        40,958Commercial loans
        6,930
        
        4,224
        
        11,154Total loans
        $ 159,058
        
        $ 61,498
        
        $ 220,556The
following table presents Rome Savings loan originations, purchases, sales, and
principal payments for the periods indicated.



For
              the Year Ended December 31,2004
        
        2003
        
        2002Total loans:Balance outstanding at beginning of period
        $209,465
        
        $183,294
        
        $169,204Originations:Mortgage loans
        44,073
        
        54,161
        
        32,250Commercial and consumer loans
        22,610
        
        22,397
        
        25,730Total originations
        66,683
        
        76,558
        
        57,980Principal repayments:Mortgage loans
        25,717
        
        30,284
        
        18,809Commercial and consumer loans
        16,688
        
        18,095
        
        21,150Total principal payments
        42,405
        
        48,379
        
        39,959Transfers to foreclosed real estate
        87
        
        202
        
        184Loan sales - guaranteed student loans
        -
        
        1,266
        
        3,375Loans charged off
        384
        
        540
        
        372Balance outstanding at end of period
        $233,272
        
        $209,465
        
        $183,294
7



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, 2004, loans on one- to four-family residential properties accounted for
$117.6 million, or 50.4%, of Rome Savings total loan portfolio. Of residential
mortgage loans outstanding on that date, 18.1% were ARM loans and 81.9% were fixed rate
loans. Rome Savings may seek to expand its residential lending activities with the
proceeds received in the offering 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 20 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 100%. All mortgages originated with a loan-to-value ratio of 90% or greater have
Private Mortgage Insurance (PMI) with 25% coverage. Mortgages between 80 and
90% loan to value ratio may require PMI based on credit scores and other financial
attributes of the applicants. 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 base. 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 90% 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 the closing of the construction 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



8


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.


During
the year ended December 31, 2004, Rome Savings originated $7.9 million in adjustable-rate
residential mortgage loans and $26.2 million in fixed-rate one-to-four family residential
loans. Approximately 4.6% of all residential loan originations during fiscal 2003 were
refinancings of loans already in Rome Savings portfolio. At December 31, 2004, Rome
Savings loan portfolio included $21.3 million in adjustable-rate one-to-four family
residential mortgage loans, or 9.1% of its total loan portfolio, and $96.3 million in
fixed-rate one-to-four family residential mortgage loans, or 41.3% 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,
2004, our commercial real estate loan portfolio consisted of 174 loans, totaling $51.4
million, or 22.0%, 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 $2.0 million 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, 2004, our commercial loan portfolio consisted of 395
loans, totaling $21.5 million, or 9.2% 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.



9


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.


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, 2004, the
consumer loan portfolio totaled $42.8 million or 18.3% 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; andmobile 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 36.3% 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 with 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.


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 and condition of the collateral. Rome Savings obtains a
title lien on the vehicle and collision insurance policies are required on all these
loans.



10


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
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 presented to the Residential Mortgage Committee (which consists
of bank officers) for approval. Loans over $300,000 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 $5.0 million.
The maximum amount of any single loan, or combination of loans secured by the same
collateral, is $2.0 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 stockholders equity. 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.
11


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 to the head of the Consumer Lending Department;
$100,000 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 120thday of delinquency unless specific
limited circumstances warrant an exception. Rome Savings holds property foreclosed upon as
other real



12


estate owned. Rome 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 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 the
senior loan officer or the President of Rome Savings. Those charge-offs in excess of
$2,500 must be approved by a second senior officer and reported to the Executive Committee
or the Lending Committee 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 $829,000 and $1.6 million at December 31, 2004 and
December 31, 2003, 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 31,2004
        
        2003
        
        2002
        
        2001
        
        2000(Dollars in thousands)Nonaccruing loans:Mortgage loans
        $362
        
        $689
        
        $531
        
        $51
        
        $41Commercial loans
        268
        
        513
        
        377
        
        420
        
        1,076Consumer loans
        113
        
        138
        
        148
        
        103
        
        41Total
        743
        
        1,340
        
        1,056
        
        574
        
        1,158Accruing loans delinquent 90days or more
        86
        
        66
        
        460
        
        181
        
        188Total non-performing loans
        829
        
        1,406
        
        1,516
        
        755
        
        1,346Foreclosed real estate, net
        -
        
        202
        
        55
        
        -
        
        -Total non-performing assets
        $ 829
        
        $1,608
        
        $1,571
        
        $755
        
        $1,346Non-performing loans to total loans
        0.36%
        
        0.67%
        
        0.83%
        
        0.45%
        
        0.80%Non-performing assets to total assets
        0.31%
        
        0.61%
        
        0.63%
        
        0.31%
        
        0.55%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



13


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 $268,000 and $284,000 at December 31, 2004 and 2003, respectively. If all
non-accrual loans had been current in accordance with their terms during the year ended
December 31, 2004 and 2003, interest income on such loans would have amounted to $53,300
and $83,800, respectively. At December 31, 2003, Rome Savings did not have any loans not
included above which are troubled debt restructurings 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 31,2004
        
        2003
        
        2002
        
        2001
        
        2000(Dollars in thousands)Balance at beginning of year
        $1,809
        
        $1,730
        
        $1,597
        
        $ 1,688
        
        $1,776Provision for loan losses
        390
        
        510
        
        330
        
        325
        
        650Charge-offs:Mortgage loans
        47
        
        160
        
        51
        
        37
        
        36Commercial loans
        31
        
        85
        
        32
        
        341
        
        795Consumer loans
        306
        
        295
        
        289
        
        213
        
        153Total
        384
        
        540
        
        372
        
        591
        
        984Recoveries
        185
        
        109
        
        175
        
        175
        
        246Net charge-offs
        199
        
        431
        
        197
        
        416
        
        738Balance at end of year
        $ 2,000
        
        $1,809
        
        $1,730
        
        $1,597
        
        $1,688Ratio of net charge-offs to average loans outstanding during the period
        0.09%
        
        0.22%
        
        0.11%
        
        0.25%
        
        0.49%Allowance for loan losses as a percent of loans
        0.86%
        
        0.86%
        
        0.94%
        
        0.94%
        
        1.01%Allowance for loan losses as a percent of non-performing Loans
        241.25%
        
        128.66%
        
        114.12%
        
        211.52%
        
        125.41%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



14


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.



15


For
the year ended December 31, 2004, we increased our allowance for loan losses through a
$390,000 provision for loan losses based on our evaluation of the items discussed above.
We believe that the allowance for loan 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, $12.0 million in potential problem
loans at December 31, 2004. Payments are current on $9.6 million or 80.0% 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, 2004 and 2003  Provision for
Loan Losses.


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 31,2004
    
    2003
    
    2002
    2001
    2000Loans
            in
    
    
    
    Loans
            in
    
    
    
    Loans
            in
    
    
    
    Loans
            in
    
    
    
    Loans
            inEach
    
    
    
    Each
    
    
    
    Each
    
    
    
    Each
    
    
    
    EachCategory
            to
    
    
    
    Category
            to
    
    
    
    Category
            to
    
    
    
    Category
            to
    
    
    
    Category
            toAmount
    
    Total
              Loans
    
    Amount
    
    Total
              Loans
    
    Amount
    
    Total
              Loans
    
    Amount
    
    Total
              Loans
    
    Amount
    
    Total
              LoansMortgage
          loans:One-to-four
          family
    $
          236
    
    48.93%
    
    $
          192
    
    45.94%
    
    $
          220
    
    39.11%
    
    $
          222
    
    36.70%
    
    $
          231
    
    37.57%Commercial
          real estate
    828
    
    21.16
    
    702
    
    23.98
    
    767
    
    29.20
    
    762
    
    29.12
    
    613
    
    28.36Construction & land
    0
    
    2.34
    
    0
    
    2.00
    
    0
    
    0.83
    
    0
    
    1.28
    
    0
    
    0.62Total
          mortgage loans
    1,064
    
    72
          43
    
    894
    
    71.92
    
    987
    
    69.14
    
    984
    
    67.10
    
    844
    
    66.55Commercial
          loans
    592
    
    9.22
    
    619
    
    9.15
    
    511
    
    9.14
    
    391
    
    9.13
    
    662
    
    10.63Consumer
          loans
    344
    
    18.35
    
    296
    
    18.93
    
    232
    
    21.72
    
    222
    
    23.77
    
    182
    
    22.82Total
          allowance for loan losses
	$
          2,000
    
    100.00%
    
    $1,809
    
    100.00%
    
    $1,730
    
    100.00%
    
    $1,597
    
    100.00%
    
    $1,688
    
    100.00%16
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 by the
Treasurer/Chief           Financial Officer. The Treasurer 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 Freddie Mac, Government National Mortgage Association (GNMA) or Fannie Mae,
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 has investments in FHLB stock and other
equity securities, which are classified as available for sale. As a result of converting
to a federal charter Rome Savings is required to liquidate its equity securities, other
than the FHLB stock, over a two-year period.



17


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 31,2004
    2003
    
    2002Amortized
    Fair
    
    Amortized
    Fair
    
    Amortized
    FairCost
    Value
    
    Cost
    Value
    
    Cost
    ValueHeld
        to Maturity:Mortgage-backed
        securitiesGNMA
    $
        100
    $108
    
    $
        151
    $164
    
    $
        220
    $242FNMA
    -
    -
    
    -
    -
    
    -
    -FHLMC
    6
    6
    
    1,025
    1,037
    
    1,054
    1,082U.S.
        Government securities
    1,320
    1,313
    
    1,463
    1,492
    
    1,262
    1,326Other
        bonds
    197
    197
    
    151
    151
    
    230
    230Total
        held to maturity
    1,623
    1,624
    
    2,790
    2,844
    
    2,766
    2,880Available
        for sale:U.S.
        Government agencies
    2,244
    2,325
    
    3,457
    3,593
    
    5,920
    6,187State
        and Municipal obligations
    7,004
    7,266
    
    8,654
    9,155
    
    9,154
    9,792Mortgage-backed
        securitiesFNMA
    126
    129
    
    252
    244
    
    739
    765FHLMC
    840
    883
    
    1,447
    1,524
    
    4,546
    4,750Corporate
        bonds
    3,024
    3,116
    
    6,499
    6,798
    
    12,243
    12,965Total
        available for sale debt securities
    13,238
    13,719
    
    20,309
    21,314
    
    32,602
    34,459Equity
        securities
    2,500
    2,672
    
    3,792
    4,109
    
    6,582
    5,215FHLB
        stock
    1,103
    1,103
    
    905
    905
    
    767
    767Total
        available for sale
    16,841
    17,494
    
    25,006
    26,328
    
    39,951
    40,441Total
        investment securities
    $18,464
    $19,118
    
    $27,796
    $
        29,172
    
    $42,717
    $
        43,321
18


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, 2004.

More Than One Year
        More Than Five YearsOne Year or Less
        less than Five Years
        less than Ten Years
        More Than Ten Years
        TotalWeighted
        
        
        
        Weighted
        
        
        
        Weighted
        
        
        
        Weighted
        
        
        
        WeightedCarrying
        
        Average
        
        Carrying
        
        Average
        
        Carrying
        
        Average
        
        Carrying
        
        Average
        
        Carrying
        
        AverageValue
        
        Yield
        
        Value
        
        Yield
        
        Value
        
        Yield
        
        Value
        
        Yield
        
        Value
        
        Yield(Dollars in thousands)Available for sale securities:U.S. Government agencies
        -
        
        -
        
        $597
        
        2.95%
        
        $1,728
        
        3.05%
        
        -
        
        -
        
        $ 2,325
        
        3.02%State and Municipal obligations (1)
        $2,530
        
        6.57%
        
        4,429
        
        6.60%
        
        -
        
        -
        
        $ 307
        
        7.26%
        
        7,266
        
        6.62%Mortgage-backed securities
        68
        
        6.00%
        
        944
        
        5.71%
        
        -
        
        -
        
        -
        
        -
        
        1,012
        
        5.72%Corporate bonds
        1,018
        
        6.26%
        
        2,098
        
        6.05%
        
        -
        
        -
        
        -
        
        -
        
        3,116
        
        6.12%Held to maturity securities:U.S. Government securities
        100
        
        2.16%
        
        1,220
        
        2.74%
        
        -
        
        -
        
        -
        
        -
        
        1,320
        
        2.70%Mortgage-backed securities
        -
        
        -
        
        54
        
        9.32%
        
        52
        
        9.97%
        
        -
        
        -
        
        106
        
        9.64%Other
        -
        
        -
        
        -
        
        -
        
        8
        
        7.58%
        
        189
        
        5.96%
        
        197
        
        6.02%Total debt securities
        $ 3,716
        
        6.35%
        
        $ 9,342
        
        5.66%
        
        $ 1,788
        
        3.27%
        
        $ 496
        
        6.77%
        
        $15,342
        
        5.59%(1)    
          Yields are presented on a tax-equivalent basis.



19


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 67.0% and 65.2%
of total deposits on December 31, 2004 and 2003, respectively. At December 31, 2004 and
2003, time deposits with remaining terms to maturity of less than one year amounted to
$45.9 million and $48.4 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, 2004
and 2003.


At
December 31, 2004, we had $11.0 million in time deposits with balances of $100,000 or more
maturing as follows:


Maturity Period
        Amount(In thousands)Three months or less
        $ 2,356Over three months through six months
        2,001Over six months through 12 months
        2,144Over 12 months
        4,494Total
        $ 10,995Borrowings. At
December 31, 2004 the Company had outstanding borrowings of $18.8 million           which
were used to fund loan growth. 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 $26.2 million, of which $4.0 million           was drawn at
December 31, 2004.



Subsidiary Activities


Rome
Savings has four subsidiaries, 100 On the Mall Corporation, Clocktower Insurance Agency
Incorporated, Clocktower Financial Corporation 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



20


Dunkin Donuts franchise adjacent to
one of our branch offices.  Clocktower Financial Corporation and RSB Capital, Inc. are
currently inactive.



Employees


At
December 31, 2004, Rome Savings had 99 full-time and 15 part-time employees. 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
Savings is a federal savings bank subject to regulation, examination, and supervision by
the OTS and is subject to the examination and supervision of the Federal Deposit Insurance
Corporation (FDIC) as its deposit insurer. Rome Savings is a member of the
Bank Insurance Fund (BIF), and its deposit accounts are insured up to
applicable limits by the FDIC. All of the deposit premiums paid by Rome Savings to the
FDIC for deposit insurance are currently paid to the BIF. Rome Savings is also a member of
the Federal Home Loan Bank (FHLB) of New York, which is one of the 12 regional
FHLBs. Rome Savings must file reports with the OTS concerning its activities and financial
condition, and it must obtain regulatory approvals prior to entering into certain
transactions, such as mergers with, or acquisitions of, other depository institutions. The
OTS conducts periodic examinations to assess Rome Savings compliance with various
regulatory requirements. This regulation and supervision establishes a comprehensive
framework of activities in which a savings association can engage and is intended
primarily for the protection of the insurance fund and depositors. As a savings and loan
holding company, we must file certain reports with, and otherwise comply with, the rules
and regulations of the OTS and of the Securities and Exchange Commission (SEC)
under the federal securities laws.


The
OTS and the FDIC have significant discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves for
regulatory purposes. Any change in such policies, whether by the OTS, the FDIC, SEC or the
United States Congress, could have a material adverse impact on us, Rome Savings, and our
operations and stockholders.


On
April 27, 2004, Rome Savings converted to its federal charter from a New York state
banking charter. At this time, Rome, MHC also converted its charter to that of a federal
mutual holding company. Rome Bancorp became a savings and loan holding company, rather
than a bank holding company, and its federal regulator became the OTS rather than the
Board of Governors of the Federal Reserve Board (the FRB).


The
following discussion is intended to be a summary of the material statutes and regulations
applicable to savings associations and their holding companies, and it does not purport to
be a comprehensive description of all such statutes and regulations.



Regulation Of Federal
Savings Associations


Business
Activities.  Rome Savings derives its lending and investment powers from the Home
Owners Loan Act, as amended (HOLA), and OTS regulations. Under these
laws and regulations, Rome Savings may invest in 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



21


certain real estate equity investments and
securities and insurance brokerage. Rome Savings authority to invest in certain
types of loans or other investments is limited by federal law.


Loans
to One Borrower. Rome Savings is generally subject to the same limits
on loans to one borrower as is 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.  The HOLA requires that Rome Savings, as a savings association, to
comply with the qualified thrift lender (QTL) test. Under the QTL test, Rome
Savings is required to maintain at least 65% of its portfolio assets in certain
qualified thrift investments for at least nine months of the most recent
twelve-month period. Portfolio assets means, in general, Rome Savings
total assets less the sum of:

specified liquid assets up to 20% of total assets;goodwill and other intangible assets; andthe value of property used to conduct Rome Savings' business.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, as amended (the
Code). Rome Savings met the QTL test at December 31, 2004 and in each of the
prior 12 months, and, therefore, qualified as a thrift lender. If Rome Savings fails the
QTL test, it must either operate under certain restrictions on its activities or convert
to a national charter.


Capital
Requirements.  The OTS regulations require savings associations to meet
three minimum capital standards: (i) a tangible capital ratio requirement of 1.5% of total
assets as adjusted under the OTS regulations; (ii) a leverage ratio requirement of 3.0% of
core capital to such adjusted total assets, if a savings association has been assigned the
highest composite rating of 1 under the Uniform Financial Institutions Rating System; and
(iii) a risk-based capital ratio requirement of 8.0% of core and supplementary capital to
total risk-based assets. 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
regulation based on the risks found by the OTS to be inherent in the type of asset.


Tangible
capital is defined, generally, as common stockholders equity (including retained
earnings), certain non-cumulative 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 is defined
similarly to tangible capital, but core capital also includes certain qualifying
supervisory goodwill and certain purchased credit card relationships. Supplementary
capital currently includes cumulative and other preferred stock, mandatory convertible
debt securities, subordinated debt



22


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 supplementary capital is limited to a maximum of 1.25% of
risk-weighted assets, and the amount of supplementary capital that may be included as
total capital cannot exceed the amount of core capital.


At
December 31, 2004, Rome Savings met each of its capital requirements, in each case on a
fully phased-in basis.


Capital
Distributions.  The OTS imposes various restrictions or requirements on
Rome Savings ability to make capital distributions, including cash dividends. A
savings institution 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, including the proposed distribution, 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 of a notice of application if:


Rome Savings would be undercapitalized following the distribution;the proposed capital distribution raises safety and soundness concerns;the capital distribution would violate a prohibition contained in any statute, regulation, or agreement; orour ability to pay dividends, service our debt obligations, and repurchase our common stock is dependent upon receipt of dividend payments from Rome Savings.Branching. Subject
to certain limitations, HOLA and OTS regulations permit           federally-chartered
savings associations to establish branches in any state of           the United States.
The authority to establish such a branch is available: (i) in           states that
expressly authorize branches of savings associations located in           another state;
and (ii) to an association that qualifies as a domestic           building and loan
association under the Code, which imposes qualification           requirements
similar to those for a qualified thrift lender under HOLA. See           QTL
Test. The authority for a federal savings association to           establish an
interstate branch network would facilitate a geographic           diversification of the
associations activities. This authority under HOLA           and OTS regulations
preempts any state law purporting to regulate branching by           federal savings
associations.


Community
Reinvestment.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 Office of Thrift Supervision, in connection with its examination of a savings
association, to assess the associations record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain applications
by such association. The CRA also requires all institutions



23


to publicly disclose their CRA
ratings. Rome Savings received a Satisfactory CRA rating in its most recent
examination.


The
CRA regulations establish an assessment system that bases an associations rating on
its actual performance in meeting community needs. In particular, the assessment system
focuses on three tests: (i) a lending test, to evaluate the institutions record of
making loans in its assessment areas; (ii) 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; and
(iii) a service test, to evaluate the institutions delivery of services through its
branches, ATMs, and other offices.


Transactions
with Related Parties.Rome Savings authority to engage in transactions with its
affiliates is limited by the OTS regulations and by Sections 23A and 23B of the Federal
Reserve Act (the FRA). 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 are restricted to an aggregate percentage of Rome
Savings capital. Collateral in specified amounts must usually be provided by
affiliates in order to receive loans from Rome Savings. In addition, the OTS 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 the
securities of any affiliate, other than a subsidiary.


Effective
April 1, 2003, the FRB rescinded its interpretations of Sections 23A and 23B of the FRA
and replaced these interpretations with Regulation W. In addition, Regulation W makes
various changes to existing law regarding Sections 23A and 23B, including expanding the
definition of what constitutes an affiliate subject to Sections 23A and 23B and exempting
certain subsidiaries of state-chartered banks from the restrictions of Sections 23A and
23B. Under Regulation W, all transactions entered into on or before December 12, 2002,
which either became subject to Sections 23A and 23B solely because of Regulation W, and
all transactions covered by Sections 23A and 23B, the treatment of which will change
solely because of Regulation W, became subject to Regulation W on July 1, 2003. All other
covered affiliate transactions become subject to Regulation W on April 1, 2003. The
Federal Reserve Board expects each depository institution that is subject to Sections 23A
and 23B to implement policies and procedures to ensure compliance with Regulation W.


Rome
Savings authority to extend credit to its directors, executive officers and 10%
stockholders, as well as to entities controlled by such persons, is currently governed by
the requirements of Sections 22(g) and 22(h) of the FRA and Regulation O of the Federal
Reserve Board. Among other things, these provisions require that extensions of credit to
insiders: (i) 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 unaffiliated persons and that do not involve more than the normal risk
of repayment or present other unfavorable features; and (ii) 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.
The regulations allow small discounts on fees on residential mortgages for directors,
officers and employees. In addition, extensions for credit in excess of certain limits
must be approved by Rome Savings Board of Directors.


Section
402 of the Sarbanes-Oxley Act of 2002 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 Federal Reserve Act.



24


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 and to unsafe or
          unsound practices.


Standards
for Safety and Soundness. Under federal law, the OTS has adopted a set
of guidelines prescribing safety and soundness standards. These guidelines establish
general standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset growth,
asset quality, earnings standards, compensation, fees and benefits. In general, the
guidelines require appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines. In addition, the OTS adopted regulations that
authorize, but do not require, the OTS to order an institution that has been given notice
that it is not satisfying these safety and soundness standards to submit a compliance
plan. If, after being notified, an institution fails to submit an acceptable plan of
compliance or fails in any material respect to implement an accepted plan, the OTS must
issue an order directing action to correct the deficiency and may issue an order directing
other actions of the types to which an undercapitalized association is subject under the
prompt corrective action provisions of federal law. If an institution fails to
comply with such an order, the OTS may seek to enforce such order in judicial proceedings
and to impose civil money penalties.


Real
Estate Lending Standards. The OTS and the other federal banking agencies adopted
regulations to prescribe standards for extensions of credit that: (i) are secured by real
estate; or (ii) are made for the purpose of financing the construction of improvements on
real estate. The OTS regulations require each savings association to establish and
maintain written internal real estate lending standards that are consistent with safe and
sound banking practices and appropriate to the size of the association and the nature and
scope of its real estate lending activities. The standards also must be consistent with
accompanying OTS guidelines, which include loan-to-value ratios for the different types of
real estate loans. Associations are also permitted to make a limited amount of loans that
do not conform to the proposed loan-to-value limitations so long as such exceptions are
reviewed and justified appropriately. The guidelines also list a number of lending
situations in which exceptions to the loan-to-value standards are justified.


Prompt
Corrective Regulatory Action. 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 would be placed in one of the following four categories based on the
associations capital:


well-capitalized;adequately capitalized;undercapitalized; orcritically undercapitalized.At
December 31, 2004, Rome Savings met the criteria for being considered well-capitalized.
When appropriate, the OTS can require corrective action by a savings association holding
company under the prompt corrective action provision of federal law.



25


Insurance
of Deposit Accounts. Rome Savings is a member of the BIF, and Rome
Savings pays its deposit insurance assessments to the BIF, as prior to April 27, 2004,
Rome Savings was a New York-chartered bank. The FDIC also maintains another insurance
fund, the Savings Association Insurance Fund, which ordinarily insures the deposits of
federal savings association and state-chartered savings banks.


Under
federal law, the FDIC established a risk based assessment system for determining
    the deposit insurance assessments to be paid by insured depository institutions.
    Under the
assessment system, the FDIC assigns an institution to one of three capital categories
based on the institutions financial information as of the quarter ending
three
months before the beginning of the assessment period. An institutions assessment
rate depends on the capital category and supervisory category to which it is
assigned. Under the regulation, there are nine risk assessment classifications
(i.e,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates currently range from 0.0% 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 0.27% of deposits for an
institution in the
lowest category (i.e., undercapitalized and substantial supervisory concern).
The FDIC is authorized to raise the assessment rates as necessary to maintain
the required
reserve ratio of 1.25%.


In
addition, all FDIC-insured institutions are required to pay assessments to the FDIC at an
annual rate of approximately 0.0168% of insured deposits to fund interest payments on
bonds issued by the Financing Corporation, an agency of the federal government established
to recapitalize the predecessor to the BIF. These assessments will continue until the
Financing Corporation bonds mature in 2017.


Federal
Home Loan Bank System. Rome Savings is a member of 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: (i) the greater of $1,000
or 0.20% of the members mortgage-related assets; and (ii) 4.50% of the dollar amount
of any outstanding advances under such members advances, collateral pledge and
security agreement with the FHLB of New York. 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 in
an amount at least equal to 0.12% of the total assets of Rome Savings. Rome Savings is
also required to own activity based stock, which is based on 4.45% of Rome Savings
outstanding advances. These percentages 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, 2004 of $1.1 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.


Under
the Gramm-Leach-Bliley Act (the GLB Act), membership in the FHLB is now
voluntary for all federally-chartered savings associations, such as Rome Savings. The GLB
Act also replaces the existing redeemable stock structure of the FHLB System with a
capital structure that requires each FHLB to meet a leverage limit and a risk-based
permanent capital requirement. Two classes of stock are authorized: Class A (redeemable on
six-months notice) and Class B (redeemable on five-years notice).


Federal
Reserve System. Rome Savings is subject to provisions of the FRA and the FRBs
regulations pursuant to which depositary institutions may be required to maintain
non-interest-earning reserves against their deposit accounts and certain other
liabilities. Currently, reserves must be maintained



26


against transaction accounts (primarily NOW and regular checking accounts).  The FRB regulations generally require
that reserves be maintained in the amount of 3.0% ofthe aggregate of transaction
accounts up to $42.1 million. The amount of aggregate transaction accounts in excess of
$42.1 million are currently subject to a reserve ratioof 10.0%. The FRB
regulations currently exempt $6.0 million of otherwise reservable balances from the
reserve requirements, which exemption is adjusted by the FRB at the end of each year. Rome
Savings is in compliance with the foregoing reserve requirements. Because required
reserves must be maintained in the form of either vault cash, a non interest-bearing
account at a Federal Reserve Bank, or a pass-through account as defined by the FRB, 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 FRB may be
used to satisfy liquidity requirements imposed by the Office of Thrift Supervision. FHLB
System members are also authorized to borrow from the Federal Reserve discount window, but
FRB regulations require such institutions to exhaust all FHLB sources before borrowing
from a Federal Reserve Bank.


Privacy
Regulations. Pursuant to the GLB Act, the OTS has published final regulations
implementing the privacy protection provisions of the GLB Act. The new regulations
generally require that Rome Savings disclose its privacy policy, including identifying
with whom it shares a customers non-public personal information, to
customers at the time of establishing the customer relationship and annually thereafter.
In addition, Rome Savings is required to provide its customers with the ability to
opt-out of having their personal information shared with unaffiliated third
parties and not to disclose account numbers or access codes to non-affiliated third
parties for marketing purposes. Rome Savings currently has a privacy protection policy in
place and believes that such policy is in compliance with the regulations.


The
USA PATRIOT Act. Rome Savings is subject to the USA PATRIOT Act, which gives the
federal government new powers to address terrorist threats through enhanced domestic
security measures, expanded surveillance powers, increased information sharing, and
broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy
Act, Title III of the USA PATRIOT Act takes measures intended to encourage information
sharing among 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, Title III of the USA PATRIOT Act imposes the following requirements
with respect to financial institutions:


Pursuant to Section 352, *all* 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.Pursuant to Section 326, on May 9, 2003, the Secretary of the Department of Treasury, in
conjunction with other bank regulators, issued Joint Final Rules that provide for minimum
standards with respect to customer identification and verification. These rules became
effective on October 1, 2003.Section 312 requires 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) to establish appropriate, specific, and, where necessary, enhanced due diligence policies, procedures, and controls designed to detect and report money laundering.
27


Effective December 25, 2001, 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 will be subject
to certain record keeping obligations with respect to correspondent accounts of foreign
banks.Bank regulators are directed to consider a holding companys effectiveness in
combating money laundering when ruling on Federal Reserve Act and Bank Merger Act
applications.
Holding Company Regulation


Rome
Bancorp and Rome, MHC are savings and loan holding companies regulated by the Office of
Thrift Supervision. As such, Rome Bancorp and Rome, MHC are registered with and are
subject to OTS examination and supervision, as well as certain reporting requirements. In
addition, the OTS has enforcement authority over Rome Bancorp and Rome, MHC and any of
their non-savings institution 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 institution. Unlike bank
holding companies, federal savings and loan holding companies are not subject to any
regulatory capital requirements or to supervision by the Federal Reserve System.


Restrictions
Applicable to Rome Bancorp. Because Rome Bancorp was acquired after May 4, 1999,
under the GLB Act it is prohibited from engaging in non-financial activities. Unitary
savings and loan associations acquired before this date are grandfathered
under the GLB Act and generally have no restrictions on their business activities. Rome
Bancorps activities, however, will be restricted to:


furnishing or performing management services for a savings institution subsidiary of such holding company;conducting an insurance agency or escrow business;holding, managing, or liquidating assets owned or acquired from a savings institution subsidiary of such company;holding or managing properties used or occupied by a savings institution subsidiary of such company;acting as trustee under a deed of trust;any other activity (i) that the FRB, by regulation, has determined to be permissible for
bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956 (the
BHC Act), unless the Director of the OTS, by regulation, prohibits or limits
any such activity for savings and loan holding companies, or (ii) in which multiple
savings and loan holding companies were authorized by regulation to directly engage in on
March 5, 1987;
28


purchasing, holding, or disposing of stock acquired in connection with a qualified stock
issuance if the purchase of such stock by such holding company is approved by the
Director of the OTS; andany activity permissible for financial holding companies under section 4(k) of the BHC Act.Permissible
activities which are deemed to be financial in nature or incidental thereto under section
4(k) of the BHC Act 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 FRB to be closely related to banking;activities that bank holding companies are permitted to engage in outside of the U.S.; andportfolio investments made by an insurance company.In
addition, Rome Bancorp cannot be acquired or acquire a company unless the acquirer is
engaged solely in financial activities.


Restrictions
Applicable to Activities of Mutual Holding Companies. Under federal law, a mutual
holding company may engage only in the following activities:


investing in the stock of a savings institution;acquiring a mutual association through the merger of such association into a savings
institution subsidiary of such holding company or an interim savings institution
subsidiary of such holding company;merging with or acquiring another holding company, one of whose subsidiaries is a savings institution;investing in a corporation the capital stock of which is available for purchase by a
savings institution under federal law or under the law of any state where the subsidiary
savings institution or association is located; and
29


the permissible activities described above for non-grandfathered savings and loan holding companies.If
a mutual holding company acquires or merges with another holding company, the holding
company acquired or the holding company resulting from such merger or acquisition may
only invest in assets and engage in the activities listed above, and it has a period of
two years to cease any non-conforming activities and divest any non-conforming
investments.


Restrictions
Applicable to All Savings and Loan Holding Companies. Federal law
prohibits a savings and loan holding company, including Rome Bancorp and Rome, MHC,
directly or indirectly, from acquiring:

control (as defined under HOLA) of another savings institution (or a holding company
parent) without prior OTS approval;through merger, consolidation, or purchase of
assets, another savings institution or a holding company thereof, or acquiring all
or substantially all of the assets of such institution (or a holding company) without
prior OTS approval; orcontrol of any depository institution not insured by the FDIC (except through a merger
with and into the holding companys savings institution subsidiary that is approved
by the OTS).A
savings and loan holding company may not acquire as a separate subsidiary an insured
institution that has a principal office outside of the state where the principal office of
its subsidiary institution is located, except:


in the case of certain emergency acquisitions approved by the FDIC;if such holding company controls a savings institution subsidiary that operated a home
or branch office in such additional state as of March 5, 1987; orif the laws of the state in which the savings institution to be acquired is located
specifically authorize a savings institution chartered by that state to be acquired by a
savings institution chartered by the state where the acquiring savings institution or
savings and loan holding company is located or by a holding company that controls such a
state-chartered association.If
the savings institution subsidiary of a federal mutual holding company fails to meet the
QTL test set forth in Section 10(m) of the HOLA and regulations of the Office of Thrift
Supervision, the holding company must register with the FRB as a bank holding company
under the BHC Act within one year of the savings institutions failure to so qualify.


Prohibitions
Against Tying Arrangements.Federal savings banks are subject to the prohibitions of
12 U.S.C. § 1972 on certain tying arrangements. A depository institution is
prohibited, subject to some exceptions, from extending credit to 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 institution or
its affiliates or not obtain services of a competitor of the institution.



30


Federal
Securities Laws. Our common stock will be registered with the SEC under Section 12(g)
of the Securities Exchange Act of 1934, as amended (the Exchange Act). We are
subject to information, proxy solicitation, insider trading restrictions, and other
requirements under the Exchange Act.


The
Sarbanes-Oxley Act.As a public company, we are 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 that restrict non-audit services that accountants may provide to 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;the requirement that audit committee members must be independent and are absolutely
barred from accepting consulting, advisory or other compensatory fees from the issuer;the requirement that companies disclose whether at least one member of the committee is
a financial expert (as such term is defined by the SEC) and if none, 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 the requirement of filing of a Form 8-K for a change or waiver of such code;
31


mandatory disclosure by analysts of potential conflicts of interest; anda range of enhanced penalties for fraud and other violations.Although
we anticipate that we will incur additional expense in complying with the provisions of
the Sarbanes-Oxley Act and the resulting regulations, management does not expect that such
compliance will have a material impact on our results of operations or financial
condition.


Quotation
on Nasdaq.  We expect our common stock to be quoted on The Nasdaq Stock Market. In
order to maintain such quotation, we are subject to certain corporate governance
requirements, including:


a majority of our board must be composed of independent directors;we are 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 (NASD) and by Exchange Act
regulations;our nominating committee and compensation committee must also be composed entirely of independent directors; andeach of our audit committee and nominating committee must have a publicly available written charter.
32


ITEM 2.
DESCRIPTION
OF PROPERTYWe
conduct our business through our executive office, operations center and three banking
offices. At December 31, 2004, the net book value of the computer equipment and other
furniture, fixtures and equipment of Rome Savings and Rome Bancorp at their offices
totaled $1,051,000. For more information, see Note 5 of Notes to Consolidated Financial
Statements.

Location
    Leased
        or
      Owned
    Original
        Date Acquired
    Net
        Book Value
      December
        31, 2003(In
        thousands)Executive
        Office:100
        West Dominick St.
      Rome,
        NY
    Owned
    1956
    $1,198Branch
        Offices:1629
        Black River Boulevard
      Rome,
        NY
    Owned
    1963
    2791300
        Erie Boulevard
      Rome,
        NY
    Owned
    1997
    1,02182
        Seneca Turnpike
      New
        Hartford, NY
    Owned
    1983
    127Mortgage
        Center:137
        West Dominick Street
      Rome,
        NY
    Owned
    2002
    468Accounting
        Center:139
        West Dominick Street
      Rome,
        NY
    Owned
    1995
    359ITEM 3.
LEGAL PROCEEDINGSAs
of the date of this Form 10-KSB, 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.



PART II


ITEM 5.
MARKET FOR ROME BANCORP'S COMMON STOCK AND RELATED                   SHAREHOLDER MATTERSThe
following information included in the Rome Bancorp, Inc. 2004 Annual Report to
Shareholders (the Annual Report) is incorporated herein by reference:
Market for Rome Bancorps Common Stock.


ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONSThe
following information included in the Rome Bancorp, Inc. 2004 Annual Report to
Shareholders (the Annual Report) is incorporated herein by reference:
Managements Discussion and Analysis of



33


Financial Condition and Results
  of Operations and Financial Highlights, on pages 4 through
  16 of the Annual Report.


ITEM 7.
FINANCIAL STATEMENTSThe
following information included in the Annual Report is incorporated herein by reference:
Consolidated Financial Statements and Notes to Consolidated Financial
Statements.


ITEM 8.
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSUREEffective
February 25, 2004, the Audit Committee of the Board of Directors of the Company terminated
the engagement of its principal accountant, KPMG LLP (KPMG) as the
Companys independent accountant, effective upon the completion of KPMGs audit
of the Companys consolidated financial statements for the year ended December 31,
2003.


The
audit reports of KPMG on the consolidated financial statements of the Company as of and
for the years ended December 31, 2002 and 2001 did not contain an adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or
accounting principles.


During
2002 and 2001 and any subsequent interim periods through February 25, 2004, there were no
disagreements with KPMG on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if not
resolved to KPMGs satisfaction, would have caused it to make reference in connection
with its report to the subject matter of the disagreement.


On
February 25, 2004, the Audit Committee of the Board of Directors of the Company
recommended, approved and appointed Crowe Chizek and Company LLC as the Companys
independent accountant to audit the Companys consolidated financial statements for
the fiscal year ending December 31, 2004. Effective as of that date, the Audit Committee
formally engaged Crowe Chizek and Company LLC as the Companys independent accountant
for the fiscal year ending December 31, 2004.


The
Company has not consulted the newly engaged accountant regarding either the application of
accounting principles to a specified transaction either completed or proposed, the type of
audit opinion that might be rendered on the Companys financial statements or any
matter that was either the subject of a disagreement or a reportable event as described in
Item 304(a)(1) of Regulation S-B.



PART III


ITEM 8A.
CONTROLS AND PROCEDURESManagement,
including the Companys President and Chief Executive Officer and Chief Financial
Officer and Treasurer, 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 Chief Financial Officer and
Treasurer concluded that the disclosure controls and procedures were effective, in all
material respects, to ensure that information required to be disclosed in the reports the
Company files and submits under the Exchange Act is recorded, processed, summarized and
reported as and when required.


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.


ITEM 8B.
OTHER INFORMATION
None.



34


ITEM 9.
DIRECTORS AND PRINCIPAL OFFICERS OF ROME BANCORPThe
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 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. 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.


ITEM 10.
EXECUTIVE COMPENSATIONThe
information set forth in the following subsections of the section entitled
Information About Board of Directors and Management of the Proxy Statement are
incorporated herein by reference: Directors Compensation,
Executive Compensation (including the Summary Compensation Table),
Benefit Plans and Transactions with Certain Related Persons.


ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTThe
following subsections of the section entitled Security Ownership of Certain
Beneficial Owners and Management included in the Proxy Statement are incorporated
herein by reference: Principal Shareholders of Rome Bancorp and Security
Ownership of Management.


The
following table sets forth the aggregate information of our equity compensation plans in
effect as of December 31, 2004.


Plan category
        Number of securitiesto be issuedupon 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
        113,000
        
        $4.96
        
        114,104Equity compensation plans not approved by security holders
        --
        
        --
        
        --Total
        113,000
        
        $4.96
        
        114,104(1)
          The number of securities remaining for future issuance under equity compensation
          plans includes 10,560 shares granted but unvested under the 2000 Recognition and
          Retention Plan, 22,187 shares available for issuance under the 2000 Recognition
          and Retention Plan and 81,357 shares available for issuance under the 2000 Stock
          Option Plan.
35


ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSThe
following information included in the Proxy Statement is incorporated herein by
reference:  "Transactions with Certain Related Persons."


ITEM 13.
EXHIBITS(a)
    
    The following financial statements
included in the 2004 Annual Report are           incorporated herein by reference:Consolidated Balance
        Sheets  At December 31, 2004 and
    2003;Consolidated
        Statements of Income  Years Ended December
    31, 2004 and 2003;Consolidated Statements of Shareholders' Equity and Comprehensive
      Income - Years Ended
December 31, 2004 and 2003;Consolidated
        Statements of Cash Flows  Years Ended
    December 31, 2004 and 2003; andNotes to Consolidated
        Financial Statements  Years Ended
    December 31, 2004 and 2003(b)
    
    Exhibits. The following exhibits are either filed as part
      of this report or are incorporated herein by
reference:2.1
    Amended Plan of Reorganization of The Rome Savings Bank.(1)2.2
    Amended and Restated Plan of Conversion and Agreement of Reorganization
    (2)3.1
    Certificate of Incorporation of Rome Bancorp, Inc.(1)3.2
    Bylaws of Rome Bancorp, Inc.(1)4.3
    Form of Stock Certificate of Rome Bancorp, Inc.(1)10.1
    Form of Employee Stock Ownership Plan of Rome Bancorp, Inc.(1)10.2
    Form of Executive Employment Agreement, by and between Charles M. Sprock
    and Rome Bancorp, Inc.(1)10.3
    Form of Benefit Restoration Plan of Rome Bancorp, Inc.(1)10.4
    Rome Bancorp, Inc. 2000 Stock Option Plan filed on April 5, 2000 as Exhibit
      B to Registrant's Proxy Statement on Schedule 14A, is incorporated herein
    by reference.10.5
    Rome Bancorp, Inc. 2000 Recognition and Retention Plan filed on April
      5, 2000 as Exhibit B to Registrant's Proxy Statement on Schedule 14A, is
    incorporated herein by reference.13.1
    Annual Report to Shareholders for the Year Ended December 31, 2004.14.1
    Code of Conduct and Ethics (3)21.1
    Subsidiaries of the Registrant.(1)23.1
    Consent of Crowe Chizek and Company LLC23.2
    Consent of KPMG, LLP31.1
    Rule 13a-14a)/15d-14(a) Certifications32.1
    Section 1350 Certifications(1)
          Incorporated herein by reference in the Registration Statement on Form SB-2
          (Registration No. 333-80487), filed with the Securities and Exchange Commission
          on June 11, 1999, as amended.(2)
            Incorporated
                herein by reference to the Exhibit 2.1 Amendment No. 2 to the
                Registration statement of Form S-1 (File No. 333-12124 S) filed
            with the Securities and Exchange Commission on February 9, 2005.(3)
            Incorporated
                herein by reference to Exhibit 14.1 to the Registrants
                Form 10-KSB for the year ended December 31, 2003 filed on March
            29, 2004.
36


ITEM 14.
PRINCIPAL
ACCOUNTANT FEES AND SERVICESThe following information included in the Proxy Statement is incorporated herein by reference:
 Principal Accountant Fees and Services.



37


SIGNATURES


In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.



ROME BANCORP, INC.

By:
    /s/Charles M. SprockPresident, Chairman of the Board and
      Chief Executive OfficerIn
accordance with the Exchange Act, 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 29, 2005Charles M. Sprock/s/David
      C. Nolan
    
    Treasurer and Chief Financial Officer (Principal
      Financial Officer)
    
    March 29, 2005David C. Nolan/s/Bruce
      R. Engelbert
    
    Director
    
    March 29, 2005Bruce R. Engelbert/s/David
      C. Grow
    
    Director
    
    March 29, 2005David C. Grow/s/Kirk
      B. Hinman
    
    Director
    
    March 29, 2005Kirk B. Hinman/s/T.
      Richard Leidig
    
    Director
    
    March 29, 2005T. Richard Leidig/s/Richard
      H. McMahon
    
    Director
    
    March 29, 2005Richard H. McMahon/s/Michael
      J. Valentine
    
    Director
    
    March 29, 2005Michael J. Valentine/s/Marion
      C. Scoville
    
    Director
    
    March 29, 2005Marion C. Scoville


38