UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 10-Q

Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934

For
the quarterly period ended September 30, 2006

Commission file number 000-27481

Rome Bancorp, Inc.(Exact name of registrant as
specified in its charter)

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

100 West Dominick Street, Rome, NY 13440-5810(Address of
Principal executive offices) (315) 336-7300 (Registrants
telephone number, including area code)

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

Indicate
by check mark whether the registrant is a large accelerated file, an
accelerated filer, or a non-accelerated filer.

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

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

Indicate
the number of shares outstanding of each class of issuers classes of common
stock as of the last practicable date:

|                               |           |                                    
|------------------------------ | --------- | -----------------------------------
|Class                          |           | Outstanding
  at
  November 9, 2006
|                               |           |                                    
|Common
  Stock, par value $.01 | 8,533,874

1

---



ROME BANCORP, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2006

TABLE OF CONTENTS

|         |                                                                                         |  |     
|-------- | --------------------------------------------------------------------------------------- |  | ----
|         |                                                                                         |  | PAGE
|         |                                                                                         |  |     
|PART I   | FINANCIAL
  INFORMATION                                                                 |  |     
|         |                                                                                         |  |     
|ITEM 1.  | FINANCIAL
  STATEMENTS (unaudited):                                                     |  |     
|         | CONDENSED
  CONSOLIDATED BALANCE SHEET                                                  |  | 3   
|         | CONDENSED
  CONSOLIDATED STATEMENTS OF INCOME                                           |  | 4   
|         | CONDENSED CONSOLIDATED STATEMENT OF
SHAREHOLDERS
  EQUITY AND COMPREHENSIVE INCOME     |  | 5   
|         | CONDENSED
  CONSOLIDATED STATEMENTS OF CASH FLOWS                                       |  | 6   
|         | NOTES TO
  UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                        |  | 8   
|         |                                                                                         |  |     
|ITEM 2.  | MANAGEMENTS
  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 14  
|ITEM 3.  | QUANTITATIVE
  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 25  
|ITEM 4.  | CONTROLS
  AND PROCEDURES                                                               |  | 25  
|         |                                                                                         |  |     
|PART II  | OTHER
  INFORMATION                                                                     |  |     
|         |                                                                                         |  |     
|ITEM 1.  | LEGAL
  PROCEEDINGS                                                                     |  | 25  
|ITEM 1A. | RISK
  FACTORS                                                                          |  | 25  
|ITEM 2.  | UNREGISTERED
  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           |  | 25  
|ITEM 3.  | DEFAULTS
  UPON SENIOR SECURITIES                                                       |  | 26  
|ITEM 4.  | SUBMISSION
  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 26  
|ITEM 5.  | OTHER
  INFORMATION                                                                     |  | 26  
|ITEM 6.  | EXHIBITS                                                                                |  | 27  
|         |                                                                                         |  |     
|         | SIGNATURES                                                                              |  | 28  
|         |                                                                                         |  |     

2

---



PART I FINANCIAL INFORMATION

Item 1.  Financial
Statements

ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Balance Sheet
September 30, 2006 and December 31, 2005
(in thousands, except share data)

|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ------- | ------------------- | - | ------- | -
|                                                                                                                                                                                                     |  | (Unaudited)
  September 30,
  2006 |         | December 31,
  2005 |  
|                                                                                                                                                                                                     |  |                                    |         |                     |  
|Assets                                                                                                                                                                                               |  |                                    |         |                     |   |         |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Cash and due from banks                                                                                                                                                                              |  | $                                  | 6,657   |                     | $ | 7,457   |  
|Federal funds sold and other short-term investments                                                                                                                                                  |  |                                    | 937     |                     |   | 26,778  |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Total cash and cash equivalents                                                                                                                                                                      |  |                                    | 7,594   |                     |   | 34,235  |  
|Securities available for sale, at fair value                                                                                                                                                         |  |                                    | 5,109   |                     |   | 9,666   |  
|Securities held to maturity (fair value of $1,182 and $1,428 at
  September 30, 2006 and December 31, 2005, respectively)                                                                            |  |                                    | 1,183   |                     |   | 1,440   |  
|Federal Home Loan Bank Stock                                                                                                                                                                         |  |                                    | 955     |                     |   | 776     |  
|Loans                                                                                                                                                                                                |  |                                    | 263,321 |                     |   | 253,878 |  
|Less: Allowance for loan loss                                                                                                                                                                        |  |                                    | (1,950  | )                   |   | (1,960  | )
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Net loans                                                                                                                                                                                            |  |                                    | 261,371 |                     |   | 251,918 |  
|Premises and equipment, net                                                                                                                                                                          |  |                                    | 4,940   |                     |   | 4,503   |  
|Accrued interest receivable                                                                                                                                                                          |  |                                    | 1,148   |                     |   | 1,053   |  
|Other assets                                                                                                                                                                                         |  |                                    | 13,713  |                     |   | 5,262   |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Total assets                                                                                                                                                                                         |  | $                                  | 296,013 |                     | $ | 308,853 |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Liabilities & Equity                                                                                                                                                                                 |  |                                    |         |                     |   |         |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Liabilities                                                                                                                                                                                          |  |                                    |         |                     |   |         |  
|Deposits:                                                                                                                                                                                            |  |                                    |         |                     |   |         |  
|Non-interest bearing                                                                                                                                                                                 |  | $                                  | 30,898  |                     | $ | 30,039  |  
|Savings                                                                                                                                                                                              |  |                                    | 86,241  |                     |   | 89,138  |  
|Money market                                                                                                                                                                                         |  |                                    | 5,271   |                     |   | 4,929   |  
|Time                                                                                                                                                                                                 |  |                                    | 65,963  |                     |   | 66,298  |  
|Other interest bearing                                                                                                                                                                               |  |                                    | 11,064  |                     |   | 11,064  |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Total deposits                                                                                                                                                                                       |  |                                    | 199,437 |                     |   | 201,468 |  
|Borrowings                                                                                                                                                                                           |  |                                    | 11,526  |                     |   | 9,374   |  
|Other liabilities                                                                                                                                                                                    |  |                                    | 4,495   |                     |   | 4,533   |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Total liabilities                                                                                                                                                                                    |  |                                    | 215,458 |                     |   | 215,375 |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Shareholders equity                                                                                                                                                                                 |  |                                    |         |                     |   |         |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Common Stock, $.01 par value; authorized:
30,000,000 shares; issued
  and outstanding 9,715,020 and 8,728,220 shares at September 30, 2006 and
  9,678,128 and 9,678,128 shares at December 31, 2005 |  |                                    | 97      |                     |   | 97      |  
|Additional paid-in capital                                                                                                                                                                           |  |                                    | 59,158  |                     |   | 60,013  |  
|Retained earnings                                                                                                                                                                                    |  |                                    | 36,496  |                     |   | 35,983  |  
|Accumulated other comprehensive income                                                                                                                                                               |  |                                    | 69      |                     |   | 85      |  
|Treasury stock; 986,800 shares at September 30,
2006                                                                                                                                                 |  |                                    | (12,730 | )                   |   |        |  
|Unallocated shares of employee stock ownership plan
(ESOP); 427,662
  shares at September 30, 2006 and 462,135 shares at December 31, 2005                                                           |  |                                    | (2,535  | )                   |   | (2,700  | )
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Total shareholders equity                                                                                                                                                                           |  |                                    | 80,555  |                     |   | 93,478  |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  
|Total liabilities and shareholders
equity                                                                                                                                                           |  | $                                  | 296,013 |                     | $ | 308,853 |  
|                                                                                                                                                                                                     |  |                                    |         |                     |   |         |  

See accompanying notes to unaudited condensed consolidated financial statements.

3

---



ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statements of Income
For the Three and Nine Months Ended September 30, 2006 and 2005
(in thousands, except share data) (unaudited)

|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|--------------------------------------------------- |  | ------------------------------------------ | ----- | ----------------------------------------- | - | ----- |  | ---- | ------ |  | - | ------ | 
|                                                    |  | For the three months ended
  September 30, |       | For the nine months ended
  September 30, |  
|                                                    |  |                                            |       |                                           |  
|                                                    |  | 2006                                       |       | 2005                                      |   | 2006  |  | 2005 |       
|                                                    |  |                                            |       |                                           |   |       |  |      |       
|Interest income:                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Loans                                               |  | $                                          | 4,132 |                                           | $ | 3,815 |  | $    | 12,120 |  | $ | 11,045 | 
|Securities                                          |  |                                            | 75    |                                           |   | 164   |  |      | 305    |  |   | 567    | 
|Other short-term investments                        |  |                                            | 74    |                                           |   | 260   |  |      | 650    |  |   | 505    | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Total interest income                               |  |                                            | 4,281 |                                           |   | 4,239 |  |      | 13,075 |  |   | 12,117 | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Interest expense:                                   |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Deposits                                            |  |                                            | 794   |                                           |   | 679   |  |      | 2,273  |  |   | 1,951  | 
|Borrowings                                          |  |                                            | 79    |                                           |   | 85    |  |      | 238    |  |   | 310    | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Total interest expense                              |  |                                            | 873   |                                           |   | 764   |  |      | 2,511  |  |   | 2,261  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Net interest income                                 |  |                                            | 3,408 |                                           |   | 3,475 |  |      | 10,564 |  |   | 9,856  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Provision for loan losses                           |  |                                            | 25    |                                           |   |      |  |      | 140    |  |   |       | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Net interest income after provision for loan
losses |  |                                            | 3,383 |                                           |   | 3,475 |  |      | 10,424 |  |   | 9,856  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Non-interest income:                                |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Net gain on securities transactions                 |  |                                            |      |                                           |   |      |  |      | 11     |  |   | 46     | 
|Other                                               |  |                                            | 503   |                                           |   | 454   |  |      | 1,382  |  |   | 1,460  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Total non-interest income                           |  |                                            | 503   |                                           |   | 454   |  |      | 1,393  |  |   | 1,506  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Non-interest expense:                               |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Salaries and employee benefits                      |  |                                            | 1,416 |                                           |   | 1,284 |  |      | 4,165  |  |   | 3,936  | 
|Building, occupancy and equipment                   |  |                                            | 451   |                                           |   | 383   |  |      | 1,360  |  |   | 1,251  | 
|Other                                               |  |                                            | 646   |                                           |   | 613   |  |      | 2,228  |  |   | 1,982  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Total non-interest expense                          |  |                                            | 2,513 |                                           |   | 2,280 |  |      | 7,753  |  |   | 7,169  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Income before income tax expense                    |  |                                            | 1,373 |                                           |   | 1,649 |  |      | 4,064  |  |   | 4,193  | 
|Income tax expense                                  |  |                                            | 518   |                                           |   | 637   |  |      | 1,540  |  |   | 1,572  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Net income                                          |  | $                                          | 855   |                                           | $ | 1,012 |  | $    | 2,524  |  | $ | 2,621  | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Basic earnings per share                            |  | $                                          | 0.10  |                                           | $ | 0.11  |  | $    | 0.28   |  | $ | 0.28   | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 
|Diluted earnings per share                          |  | $                                          | 0.10  |                                           | $ | 0.11  |  | $    | 0.28   |  | $ | 0.27   | 
|                                                    |  |                                            |       |                                           |   |       |  |      |        |  |   |        | 

See accompanying notes to unaudited condensed consolidated financial
statements.

4

---



ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statement of ShareholdersEquity and Comprehensive
Income
For the Nine Months Ended September 30, 2006 and 2005
(in thousands, except share and per share data) (unaudited)

|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|--------------------------------------------------------------------------------- |  | -------------- | --- | ------------------------------ | - | ------------------- | - | ---------------- | ------ | -------------------------------------------- | - | --------------------------- | - | ----------------------- | ---- | ----- | - | ------ | - | - | --- | - | - | ------- | -
|                                                                                  |  | Common
  stock |     | Additional
  Paid-in
  Capital |   | Retained
  earnings |   | Treasury
  Stock |        | Accumulated
  other
  comprehensive
  income |   | Unallocated
  ESOP
  shares |   | Unearned
  compensation |      | Total |  
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |  
|Balances at January 1, 2005                                                       |  | $              | 33  |                                | $ | 10,756              |   | $                | 34,627 |                                              | $ | (8,963                      | ) | $                       | 391  |       | $ | (560   | ) | $ | (26 | ) | $ | 36,258  |  
|Comprehensive income:                                                             |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|Net Income                                                                        |  |                |    |                                |   |                    |   |                  | 2,621  |                                              |   |                            |   |                         |     |       |   |       |   |   |    |   |   | 2,621   |  
|Other comprehensive loss                                                          |  |                |    |                                |   |                    |   |                  |        |                                              |   |                            |   |                         | (235 | )     |   |       |   |   |    |   |   | (235    | )
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|Total comprehensive income                                                        |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   | 2,386   |  
|Proceeds of common stock offering and conversion of existing shares,
  net of tax |  |                | 75  |                                |   | 57,759              |   |                  |       |                                              |   |                             |   |                         |     |       |   | (2,360 | ) |   |    |   |   | 55,474  |  
|Retirement of 1,747,266 treasury shares                                           |  |                | (12 | )                              |   | (8,963              | ) |                  |       |                                              |   | 8,963                       |   |                         |     |       |   |       |   |   |    |   |   | (12     | )
|Amortization of unearned compensation                                             |  |                |    |                                |   |                    |   |                  |       |                                              |   |                            |   |                         |     |       |   |       |   |   | 26  |   |   | 26      |  
|Dividends paid ($0.199 per share)                                                 |  |                |    |                                |   |                    |   |                  | (1,440 | )                                            |   |                            |   |                         |     |       |   |       |   |   |    |   |   | (1,440  | )
|Exercise of stock options                                                         |  |                |    |                                |   | 35                  |   |                  |       |                                              |   |                            |   |                         |     |       |   |       |   |   |    |   |   | 35      |  
|Tax benefit of vested RRP shares                                                  |  |                |    |                                |   | 73                  |   |                  |       |                                              |   |                            |   |                         |     |       |   |       |   |   |    |   |   | 73      |  
|ESOP shares released for allocation (30,450 shares)                               |  |                |    |                                |   | 190                 |   |                  |       |                                              |   |                            |   |                         |     |       |   | 125    |   |   |    |   |   | 315     |  
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|Balances at September 30, 2005                                                    |  | $              | 96  |                                | $ | 59,850              |   | $                | 35,808 |                                              | $ |                            |   | $                       | 156  |       | $ | (2,795 | ) | $ |    |   | $ | 93,116  |  
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|Balances at January 1, 2006                                                       |  | $              | 97  |                                | $ | 60,013              |   | $                | 35,983 |                                              | $ |                            |   | $                       | 85   |       | $ | (2,700 | ) | $ |    |   | $ | 93,478  |  
|Comprehensive income:                                                             |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|Net Income                                                                        |  |                |    |                                |   |                    |   |                  | 2,524  |                                              |   |                            |   |                         |     |       |   |       |   |   |    |   |   | 2,524   |  
|Other comprehensive loss                                                          |  |                |    |                                |   |                    |   |                  |       |                                              |   |                            |   |                         | (16  | )     |   |       |   |   |    |   |   | (16     | )
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|Total comprehensive income                                                        |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   | 2,508   |  
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|Purchases of 1,104,800 treasury shares                                            |  |                |    |                                |   |                    |   |                  |       |                                              |   | (14,241                     | ) |                         |     |       |   |       |   |   |    |   |   | (14,241 | )
|Transfer of 118,000 treasury shares to RRP plan                                   |  |                |    |                                |   | (1,511              | ) |                  |       |                                              |   | 1,511                       |   |                         |     |       |   |       |   |   |    |   |   |        |  
|Amortization of unearned compensation                                             |  |                |    |                                |   | 213                 |   |                  |       |                                              |   |                            |   |                         |     |       |   |       |   |   |    |   |   | 213     |  
|Dividends paid ($0.225 per share)                                                 |  |                |    |                                |   |                    |   |                  | (2,011 | )                                            |   |                            |   |                         |     |       |   |       |   |   |    |   |   | (2,011  | )
|Exercise of stock options                                                         |  |                |    |                                |   | 186                 |   |                  |       |                                              |   |                            |   |                         |     |       |   |       |   |   |    |   |   | 186     |  
|ESOP shares released for allocation (34,473 shares)                               |  |                |    |                                |   | 257                 |   |                  |       |                                              |   |                            |   |                         |     |       |   | 165    |   |   |    |   |   | 422     |  
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  
|Balances at September 30, 2006                                                    |  | $              | 97  |                                | $ | 59,158              |   | $                | 36,496 |                                              | $ | (12,730                     | ) | $                       | 69   |       | $ | (2,535 | ) | $ |    |   | $ | 80,555  |  
|                                                                                 
|                                                                                  |  |                |     |                                |   |                     |   |                  |        |                                              |   |                             |   |                         |      |       |   |        |   |   |     |   |   |         |  

See accompanying notes to unaudited condensed consolidated financial
statements.

5

---



ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2006 and 2005
(unaudited) (in thousands)

|                                                                                     |  |      |         |      |   |         |  
|------------------------------------------------------------------------------------ |  | ---- | ------- | ---- | - | ------- | -
|                                                                                     |  | 2006 |         | 2005 |  
|                                                                                     |  |      |         |      |  
|Cash flows from operating
  activities:                                              |  |      |         |      |   |         |  
|Net income                                                                           |  | $    | 2,524   |      | $ | 2,621   |  
|Adjustments to reconcile net income to net cash
Provided by operating
  activities:  |  |      |         |      |   |         |  
|Depreciation and amortization                                                        |  |      | 408     |      |   | 378     |  
|Increase in accrued interest receivable                                              |  |      | (95     | )    |   | (108    | )
|Net gain on securities sold                                                          |  |      | (11     | )    |   | (46     | )
|Provision for loan losses                                                            |  |      | 140     |      |   |        |  
|Net loss (gain) on sales of real estate
owned                                        |  |      | 13      |      |   | (15     | )
|Loss on disposal of fixed asset                                                      |  |      | 3       |      |   |        |  
|Net accretion on securities                                                          |  |      | (7      | )    |   | 6       |  
|Proceeds from sales of loans                                                         |  |      | 783     |      |   | 1,373   |  
|Net gain on loans sold                                                               |  |      | (11     | )    |   | (16     | )
|Originations of loans held for sale                                                  |  |      | (772    | )    |   | (1,357  | )
|(Decrease) increase in other liabilities                                             |  |      | (38     | )    |   | 92      |  
|(Increase) decrease in other assets                                                  |  |      | (552    | )    |   | 429     |  
|Allocation of ESOP shares                                                            |  |      | 422     |      |   | 315     |  
|Amortization of unearned compensation                                                |  |      | 213     |      |   | 26      |  
|                                                                                     |  |      |         |      |   |         |  
|Net cash provided by operating
activities                                            |  |      | 3,020   |      |   | 3,698   |  
|                                                                                     |  |      |         |      |   |         |  
|                                                                                     |  |      |         |      |   |         |  
|Cash flows from investing
  activities:                                              |  |      |         |      |   |         |  
|Net increase in loans                                                                |  |      | (9,539  | )    |   | (18,829 | )
|Purchase of bank owned life insurance                                                |  |      | (8,000  | )    |   |        |  
|Proceeds from sales of securities available for
sale                                 |  |      | 365     |      |   | 746     |  
|Proceeds from maturities and principal reductions
of securities
  available for sale |  |      | 4,189   |      |   | 3,104   |  
|Purchases of securities available for
sale                                           |  |      |        |      |   | (1      | )
|Purchases of Federal Home Loan Bank stock                                            |  |      | (179    | )    |   | (175    | )
|Proceeds from maturities and principal reductions
of securities held
  to maturity   |  |      | 250     |      |   | 55      |  
|Proceeds of sales of fixed assets                                                    |  |      | 8       |      |   |        |  
|Proceeds of sales of real estate owned                                               |  |      | 41      |      |   | 98      |  
|Additions to premises and equipment                                                  |  |      | (851    | )    |   | (451    | )
|                                                                                     |  |      |         |      |   |         |  
|Net cash used in investing activities                                                |  |      | (13,716 | )    |   | (15,453 | )
|                                                                                     |  |      |         |      |   |         |  
|                                                                                     |  |      |         |      |   |         |  
|Cash flows from financing
  activities:                                              |  |      |         |      |   |         |  
|Decrease in time deposits                                                            |  |      | (335    | )    |   | (1,897  | )
|Decrease in other deposits                                                           |  |      | (1,696  | )    |   | (3,531  | )
|Net proceeds of stock offering and
conversion                                        |  |      |        |      |   | 55,462  |  
|Repayments of borrowings                                                             |  |      | (1,448  | )    |   | (12,223 | )
|Additional borrowings                                                                |  |      | 3,600   |      |   | 3,000   |  
|Purchase of treasury stock                                                           |  |      | (14,241 | )    |   |        |  
|Dividends paid                                                                       |  |      | (2,011  | )    |   | (1,440  | )
|Exercise of stock options                                                            |  |      | 186     |      |   | 35      |  
|                                                                                     |  |      |         |      |   |         |  
|Net cash (used in) provided by financing
activities                                  |  |      | (15,945 | )    |   | 39,406  |  
|                                                                                     |  |      |         |      |   |         |  
|                                                                                     |  |      |         |      |   |         |  
|Net (decrease) increase in
  cash and cash equivalents                               |  |      | (26,641 | )    |   | 27,651  |  
|Cash and cash equivalents
  at beginning of period                                   |  |      | 34,235  |      |   | 6,929   |  
|                                                                                     |  |      |         |      |   |         |  
|Cash and cash equivalents
  at end of period                                         |  | $    | 7,594   |      | $ | 34,580  |  
|                                                                                     |  |      |         |      |   |         |  

Condensed Consolidated Statements of Cash Flows continued on next page.

6

---



ROME BANCORP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2006 and 2005
(unaudited) (in thousands)

|                                                    |  |      |       |      |   |       | 
|--------------------------------------------------- |  | ---- | ----- | ---- | - | ----- | 
|                                                    |  | 2006 |       | 2005 |  
|                                                    |  |      |       |      |  
|Supplemental disclosure of
  cash flow information: |  |      |       |      |   |       | 
|Non-cash investing activities:                      |  |      |       |      |   |       | 
|Transfer of loans to real estate owned              |  | $    | 54    |      | $ | 83    | 
|Cash paid during the period for:                    |  |      |       |      |   |       | 
|Interest                                            |  |      | 2,514 |      |   | 2,269 | 
|                                                   
|Income taxes                                        |  |      | 1,480 |      |   | 1,350 | 

See accompanying notes to unaudited condensed consolidated financial
statements.

7

---



ROME BANCORP, INC.Notes to Unaudited Condensed Consolidated Financial Statements

(1) The
accompanying unaudited condensed consolidated financial statements include the
accounts of Rome Bancorp, Inc. (Rome Bancorp or the Company) and The Rome
Savings Bank (the Bank), a wholly-owned subsidiary of the Company, as of
September 30, 2006 and December 31, 2005 and for the three and nine month
periods ended September 30, 2006 and 2005. All inter-company accounts and
transactions have been eliminated in consolidation.  The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q.   Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.  The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
Actual results could differ from those estimates.  In the opinion of management, the unaudited
condensed consolidated financial statements include all necessary adjustments,
consisting of normal recurring accruals, necessary for a fair presentation for
the periods presented.

The
Company believes that the disclosures are adequate to make the information
presented not misleading; however, the results of operations and other data
presented for the periods presented are not necessarily indicative of results
to be expected for the entire fiscal year.

The
data in the condensed consolidated balance sheet for December 31, 2005 was
derived from the Companys 2005 Annual Report on Form 10-K.  That data, along with the interim financial
information presented in the condensed consolidated balance sheet, statements
of income, statement of shareholders equity and comprehensive income and statements of cash flows
should be read in conjunction with the 2005 consolidated financial statements,
including the notes thereto included in the Companys Annual Report on Form 10-
K.

Amounts
in the prior periods consolidated financial statements are reclassified when
necessary to conform with the current periods presentation.

(2) Stock
Offering and Conversion

Stock
Offering and Conversion

On
March 30, 2005, the second step conversion of Rome, MHC into a stock holding
company structure and the related stock offering of this new stock holding
company were completed. As a result of the second-step conversion, New Rome
Bancorp, Inc. became the holding company for the Bank and was immediately
renamed Rome Bancorp, Inc. Rome Bancorp issued 5,900,000 shares of common
stock  at a price of $10.00 per share in
the related stock offering and exchanged 1,650,254 shares of common stock of
the now predecessor Rome Bancorp, Inc. into 3,742,246 shares of common stock of
the newly formed Rome Bancorp, Inc. pursuant to an exchange ratio of 2.26784,
cashing out fractional shares. The reorganization was accounted for as a change
in corporate form with no resulting change in the historical basis of the
Companys assets, liabilities and equity. Direct offering costs totaling $3.1
million were deducted from the proceeds of the shares sold in the offering.
As a result of the exchange and stock offering, as of March 30, 2005,
the Company had 9,642,246 shares of common stock issued and outstanding. Net
proceeds of $53.5 million were raised in the stock offering, excluding $2.36
million which was loaned by the company to a trust for the Employee Stock
Ownership Plan (ESOP) enabling it to purchase 236,000 shares of common stock in
the stock offering for allocation under such plan. In addition, as part of the
conversion and dissolution of Rome, MHC, the Bank received $1.9 million of cash
previously held by Rome, MHC.

8

---



As
a result of the second-step conversion, all share and per share amounts have
been restated giving retroactive recognition to the second-step conversion
ratio of 2.26784. Options granted under the Companys 2000 Stock Option Plan
and common shares held by the Companys ESOP and Recognition and Retention Plan
prior to the conversion were also exchanged using the conversion ratio of
2.26784.

(3)  Earnings Per Share

The
following summarizes the computation of earnings per share for the three and
nine month periods ended September 30, 2006 and 2005.

|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|------------------------------------------- |  | ------------------------------------------------- | ----- | ----------------- | - | ----- |  | ---- | ----- |  | - | ----- | 
|                                            |  | Three and
  nine months ended
  September 30      |      
|                                            |  | (in
  thousands, except share and per share data) |      
|                                            |  |                                                   |      
|                                            |  | Three months ended                                |       | Nine months ended |  
|                                            |  |                                                   |       |                   |  
|                                            |  | 2006                                              |       | 2005              |   | 2006  |  | 2005 |      
|                                            |  |                                                   |       |                   |   |       |  |      |      
|Basic earnings per
  share:                 |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|Income available to common shareholders     |  | $                                                 | 855   |                   | $ | 1,012 |  | $    | 2,524 |  | $ | 2,621 | 
|Weighted average basic shares outstanding   |  |                                                   | 8,174 |                   |   | 9,394 |  |      | 8,719 |  |   | 9,365 | 
|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|Basic earnings per share                    |  | $                                                 | 0.10  |                   | $ | 0.11  |  | $    | 0.29  |  | $ | 0.28  | 
|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|Diluted earnings
  per share:               |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|Income available to common shareholders     |  | $                                                 | 855   |                   | $ | 1,012 |  | $    | 2,524 |  | $ | 2,621 | 
|Weighted average basic shares outstanding   |  |                                                   | 8,174 |                   |   | 9,394 |  |      | 8,719 |  |   | 9,365 | 
|Effect of dilutive securities:              |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|Stock options                               |  |                                                   | 140   |                   |   | 194   |  |      | 149   |  |   | 199   | 
|Unearned compensation                       |  |                                                   |      |                   |   |      |  |      |      |  |   | 7     | 
|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|Weighted average diluted shares outstanding |  |                                                   | 8,314 |                   |   | 9,588 |  |      | 8,868 |  |   | 9,571 | 
|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 
|Diluted earnings per share                  |  | $                                                 | 0.10  |                   | $ | 0.11  |  | $    | 0.28  |  | $ | 0.27  | 
|                                            |  |                                                   |       |                   |   |       |  |      |       |  |   |       | 

(4)  Other Comprehensive Income (Loss)

|                                                                                                  |  |                      |     |                     |   |       |   |      |       |   |   |       |  
|------------------------------------------------------------------------------------------------- |  | -------------------- | --- | ------------------- | - | ----- | - | ---- | ----- | - | - | ----- | -
|                                                                                                  |  | Three
  months ended |     | Nine
  months ended |  
|                                                                                                  |  | September
  30,      |     | September
  30,     |  
|                                                                                                  |  |                      |     |                     |  
|                                                                                                  |  | 2006                 |     | 2005                |   | 2006  |   | 2005 |      
|                                                                                                  |  |                      |     |                     |   |       |   |      |      
|Net change in unrealized gain
  (loss) on available-for-sale securities arising during the period |  | $                    | 51  |                     | $ | (67   | ) | $    | (38   | ) | $ | (345  | )
|Reclassification adjustment for
  net realized gain included in net income                        |  |                      |    |                     |   |      |   |      | (11   | ) |   | (46   | )
|                                                                                                  |  |                      |     |                     |   |       |   |      |       |   |   |       |  
|Other comprehensive income
  (loss), before tax                                                   |  |                      | 51  |                     |   | (67   | ) |      | (27   | ) |   | (391  | )
|Deferred tax expense (benefit)                                                                    |  |                      | 20  |                     |   | (27   | ) |      | (11   | ) |   | (130  | )
|                                                                                                  |  |                      |     |                     |   |       |   |      |       |   |   |       |  
|                                                                                                  |  |                      |     |                     |   |       |   |      |       |   |   |       |  
|Other comprehensive income
  (loss)                                                               |  |                      | 31  |                     |   | (40   | ) |      | (16   | ) |   | (235  | )
|Net income                                                                                        |  |                      | 855 |                     |   | 1,012 |   |      | 2,524 |   |   | 2,621 |  
|                                                                                                  |  |                      |     |                     |   |       |   |      |       |   |   |       |  
|Total comprehensive income                                                                        |  | $                    | 886 |                     | $ | 972   |   | $    | 2,508 |   | $ | 2,386 |  
|                                                                                                  |  |                      |     |                     |   |       |   |      |       |   |   |       |  

9

---



(5)
Securities

Securities
are summarized as follows (in thousands):

|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|------------------------------- |  | ------------------ | ----- | ----------------- | - | ---------------- |  | ------------ | ----- |  | - | ----- | 
|                                |  | September 30, 2006 |       | December 31, 2005 |  
|                                |  |                    |       |                   |  
|                                |  | Amortized
  Cost   |       | Fair
  value      |   | Amortized
  cost |  | Fair
  value |      
|                                |  |                    |       |                   |   |                  |  |              |      
|                               
|Available-for-sale:             |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|U.S. Government agencies        |  | $                  | 506   |                   | $ | 523              |  | $            | 949   |  | $ | 985   | 
|State and municipal obligations |  |                    | 2,481 |                   |   | 2,532            |  |              | 4,506 |  |   | 4,595 | 
|Mortgage-backed securities      |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|FHLMC                           |  |                    | 370   |                   |   | 373              |  |              | 570   |  |   | 583   | 
|Corporate bonds                 |  |                    | 500   |                   |   | 500              |  |              | 2,008 |  |   | 2,017 | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|Total debt securities           |  |                    | 3,857 |                   |   | 3,928            |  |              | 8,033 |  |   | 8,180 | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|Equity and other securities     |  |                    | 1,137 |                   |   | 1,181            |  |              | 1,491 |  |   | 1,486 | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|Total available for sale        |  | $                  | 4,994 |                   | $ | 5,109            |  | $            | 9,524 |  | $ | 9,666 | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|Held-to-maturity:               |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|U.S. Government securities      |  | $                  | 1,001 |                   | $ | 998              |  | $            | 1,208 |  | $ | 1,193 | 
|Mortgage-backed securities      |  |                    |       |                   |   |                 |  |              |      |  |   |       | 
|GNMA                            |  |                    | 30    |                   |   | 32               |  |              | 48    |  |   | 51    | 
|FHLMC                           |  |                    | 2     |                   |   | 2                |  |              | 3     |  |   | 3     | 
|Other bonds                     |  |                    | 150   |                   |   | 150              |  |              | 181   |  |   | 181   | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|Total held to maturity          |  | $                  | 1,183 |                   | $ | 1,182            |  | $            | 1,440 |  | $ | 1,428 | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 
|FHLB
  stock                    |  | $                  | 955   |                   | $ | 955              |  | $            | 776   |  | $ | 776   | 
|                                |  |                    |       |                   |   |                  |  |              |       |  |   |       | 

FHLB stock is
carried at cost since fair values are not readily determinable.

Securities pledged at both September 30, 2006 and December 31, 2005 had
a carrying amount of $1.0 million and $1.1 million, respectively. These
securities collateralize state and Treasury department programs. As of these
dates, there were no holdings of securities of any one issuer, other than the
U.S. Government and its agencies, in an amount greater than 10% of
shareholders equity.

10

---



(6) Loans

Loans are
summarized as follows (in thousands):

| |                                      |  |               |         |              |   |         | 
| | ------------------------------------ |  | ------------- | ------- | ------------ | - | ------- | 
| |                                      |  | September 30, |         | December 31, |  
| |                                      |  | 2006          |         | 2005         |  
| |                                      |  |               |         |              |  
| | Mortgage loans:                      |  |               |         |              |   |         | 
| | Residential (1-4 family)             |  | $             | 133,116 |              | $ | 126,422 | 
| | Commercial                           |  |               | 52,637  |              |   | 52,748  | 
| | Construction and land                |  |               | 5,283   |              |   | 3,317   | 
| |                                      |  |               |         |              |   |         | 
| |                                      |  |               |         |              |   |         | 
| | Total Mortgage loans                 |  |               | 191,036 |              |   | 182,487 | 
| |                                      |  |               |         |              |   |         | 
| | Other loans:                         |  |               |         |              |   |         | 
| | Commercial                           |  |               | 24,421  |              |   | 23,832  | 
| | Automobile loans                     |  |               | 18,349  |              |   | 18,321  | 
| | Property improvement and
  equipment |  |               | 15,550  |              |   | 15,434  | 
| | Other consumer                       |  |               | 13,965  |              |   | 13,804  | 
| |                                      |  |               |         |              |   |         | 
| |                                      |  |               |         |              |   |         | 
| | Total Other loans                    |  |               | 72,285  |              |   | 71,391  | 
| |                                      |  |               |         |              |   |         | 
| |                                      |  |               |         |              |   |         | 
| | Total Loans                          |  | $             | 263,321 |              | $ | 253,878 | 
| |                                      |  |               |         |              |   |         | 

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

| |                                 |  |                    |       |                   |   |       |   |      |       |   |   |       |  
| | ------------------------------- |  | ------------------ | ----- | ----------------- | - | ----- | - | ---- | ----- | - | - | ----- | -
| |                                 |  | Three months ended |       | Nine months ended |  
| |                                 |  | September 30,      |       | September 30,     |  
| |                                 |  |                    |       |                   |  
| |                                 |  | 2006               |       | 2005              |   | 2006  |   | 2005 |      
| |                                 |  |                    |       |                   |   |       |   |      |      
| |                                 |  |                    |       |                   |   |       |   |      |       |   |   |       |  
| | Balance at beginning of period  |  | $                  | 1,954 |                   | $ | 2,295 |   | $    | 1,960 |   | $ | 2,000 |  
| | Provision charged to operations |  |                    | 25    |                   |   |      |   |      | 140   |   |   |      |  
| | Loans charged off               |  |                    | (59   | )                 |   | (88   | ) |      | (303  | ) |   | (272  | )
| | Recoveries                      |  |                    | 30    |                   |   | 31    |   |      | 153   |   |   | 510   |  
| |                                 |  |                    |       |                   |   |       |   |      |       |   |   |       |  
| |                                 |  |                    |       |                   |   |       |   |      |       |   |   |       |  
| | Balance at end of period        |  | $                  | 1,950 |                   | $ | 2,238 |   | $    | 1,950 |   | $ | 2,238 |  
| |                                 |  |                    |       |                   |   |       |   |      |       |   |   |       |  

The
Companys recorded investment in loans that are considered impaired totaled
$318,000 and $211,000 at September 30, 2006 and December 31, 2005,
respectively.  These impaired loans
carried allowances of $177,000 at September 30, 2006 and $127,000 as of
year-end 2005. The average recorded investment in impaired loans was $309,000
and $252,000 in the first nine months of 2006 and 2005, respectively. The
Company recognized no interest on impaired loans during the nine month periods
ended September 30, 2006 and 2005.

The
principal balances of loans not accruing interest amounted to $1.1 million and
$871,000 at September 30, 2006 and December 31, 2005, respectively.  Loans 90 days past due and accruing interest
amounted to $55,000 and $75,000 at September 30, 2006 and December 31, 2005,
respectively. The differences between the amount of interest income that would
have been recorded if non-accrual loans had been paid in accordance with their
original terms and the amount of interest income that was recorded

11

---



during the
three months ended September 30, 2006 and 2005 was $52,300 and $45,200,
respectively. There are no commitments to extend further credit on non-accruing
loans.

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

(7)  Stock-Based Compensation

Effective
January 1, 2006, the Company adopted the fair value method of accounting
for share-based compensation arrangements in accordance with Statement of
Financial Accounting Standards No. 123 (revised 2004), Share-Based
Payment (FAS 123(R)), using the modified prospective method of transition.
Under the provisions of FAS 123(R), the estimated fair value of share-based
awards granted is recognized as compensation expense over the service period.
Using the modified prospective method, compensation expense is recognized
beginning with the effective date of adoption of FAS 123(R) for all share-based
payments (i) granted after the effective date of adoption and (ii) granted
prior to the effective date of adoption and that remain unvested on the date of
adoption. The Company had no unvested stock options outstanding at the date of
adoption.

Prior to
January 1, 2006, the Company accounted for share-based employee
compensation plans using the intrinsic value method of accounting in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25), and its related interpretations. Under the
provisions of APB 25, no compensation expense was recognized when stock options
were granted with exercise prices equal to or greater than market value on the
date of grant.

Prior to the
adoption of FAS 123(R), the Company presented all tax benefits resulting from
share-based compensation as cash flows from operating activities in the
condensed consolidated statements of cash flows. FAS 123(R) requires cash flows
resulting from tax deductions in excess of the grant-date fair value of
share-based awards to be included in cash flows from financing activities. This
tax benefit of $106,000 related to share-based compensation in the first nine
months of 2006 has been included in cash flows from financing activities.

Under the modified prospective
method of transition, the Company is not required to restate its prior period
financial statements to reflect disclosures of its net income and earnings per
share for the prior year period. The following table illustrates the effect on
net income and earnings per share if the Company had applied the fair value
recognition provisions of FAS 123 to stock-based employee compensation for the
three and nine months ended September 30, 2005:

12

---



|                                                                                                                  |  |                                                  |       |             |   |       |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----- | ----------- | - | ----- | -
|                                                                                                                  |  | Three and nine months ended
  September 30, 2005 |      
|                                                                                                                  |  |                                                  |      
|                                                                                                                  |  | (in thousands, except per share data)            |      
|                                                                                                                  |  |                                                  |      
|                                                                                                                  |  | Three Months                                     |       | Nine Months |  
|                                                                                                                  |  |                                                  |       |             |  
|Net income:                                                                                                       |  |                                                  |       |             |   |       |  
|As reported                                                                                                       |  | $                                                | 1,012 |             | $ | 2,621 |  
|Add: Stock based compensation
  expense included in net income, net of related tax expense                        |  |                                                  | 8     |             |   | 24    |  
|Deduct: Total stock based
  compensation expense determined under fair value method, net of related tax
  expense |  |                                                  | (17   | )           |   | (51   | )
|                                                                                                                  |  |                                                  |       |             |   |       |  
|Pro forma                                                                                                         |  | $                                                | 1,003 |             | $ | 2,594 |  
|                                                                                                                  |  |                                                  |       |             |   |       |  
|                                                                                                                  |  |                                                  |       |             |   |       |  
|Basic earnings per share:                                                                                         |  |                                                  |       |             |   |       |  
|As reported                                                                                                       |  | $                                                | 0.10  |             | $ | 0.28  |  
|Pro forma                                                                                                         |  | $                                                | 0.10  |             | $ | 0.28  |  
|                                                                                                                  |  |                                                  |       |             |   |       |  
|Diluted earnings per share:                                                                                       |  |                                                  |       |             |   |       |  
|As reported                                                                                                       |  | $                                                | 0.10  |             | $ | 0.27  |  
|Pro forma                                                                                                         |  | $                                                | 0.10  |             | $ | 0.27  |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On May 24,
  2006, the Companys Board of Directors issued 354,000 stock options to
  directors and key employees with an exercise price equal to the market price
  of the Companys stock on that day. These options have a ten year life and
  vest ratably over a five year period. The fair value of the options granted
  is estimated at grant date using a Black-Scholes option pricing model based
  upon the following assumptions: expected dividend yield 2.45%, expected stock
  price volatility 13.636%, risk free interest rate 5.073% and an expected
  option life of 10 years. As of September 30, 2006, unrecognized compensation
  cost related to these options was $955,000. This expense is being amortized
  on a straight line basis over the remainder of the sixty month vesting period
  of the options.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Following is
  a summary of the Companys 2006 year to date stock option activity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                         |  |                                      |         |                                     |   |                                 |  |   |      | 
|---------------------------------------- |  | ------------------------------------ | ------- | ----------------------------------- | - | ------------------------------- |  | - | ---- | 
|                                         |  | Nine Months ended September 30, 2006 |        
|                                         |  |                                      |        
|                                         |  | (Dollars in thousands)               |        
|                                         |  |                                      |        
|                                         |  | Shares                               |         | Weighted
  Average
  Exercise Price |   | Weighted
  Average
  Fair Value | 
|                                         |  |                                      |         |                                     |   |                                 | 
|Options outstanding, beginning of period |  |                                      | 219,798 |                                     | $ | 2.19                            |  | $ | 0.94 | 
|Exercised                                |  |                                      | (36,892 | )                                   |   | 2.19                            |  |   | 0.94 | 
|Granted                                  |  |                                      | 354,000 |                                     |   | 12.84                           |  |   | 2.89 | 
|                                         |  |                                      |         |                                     |   |                                 |  |   |      | 
|Options outstanding at end of period     |  |                                      | 536,906 |                                     | $ | 9.21                            |  | $ | 2.23 | 
|                                         |  |                                      |         |                                     |   |                                 |  |   |      | 
|Options exercisable at end of period     |  |                                      | 182,906 |                                     | $ | 2.19                            |  | $ | 0.94 | 
|                                         |  |                                      |         |                                     |   |                                 |  |   |      | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
  aggregate intrinsic value of all options outstanding and exercisable at
  September 30, 2006 was $1,953,000. The intrinsic value of options exercised
  during the quarter and nine months ended September 30, 2006 was $0 and $359,000,
  respectively.                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | On May 24,
  2006, the Companys Board of Directors awarded 168,300 shares of restricted
  stock to directors and certain key employees. These shares vest to the
  recipients ratably over a five year period and the related unrecognized compensation
  cost related to this grant will be expensed over the same period. At
  September 30, 2006, the unrecognized compensation cost attributable to
  restricted stock awards was $2.0 million. The aggregate intrinsic value of
  restricted stock that is expected to vest in the future was $2.2 million at
  September 30, 2006.

13

---



|    |                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Compensation
  cost for the Companys stock option and restricted stock plans in the 2006
  and 2005 third quarters was $160,000 and $0, respectively. For the nine
  months ended September 30, 2006 and 2005 compensation cost related to these
  plans was $213,000 and $26,000, respectively.
|    |                                                                                                                                                                                                                                                                                                  
|(8) | Pension and
  Postretirement Medical Benefit Expenses                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                  
|    | The
  components of net periodic pension and postretirement benefit cost consisted
  of the following:                                                                                                                                                                                           

|                                           |  |                                  |      |                         |   |      |   |      |    |   |   |    | 
|------------------------------------------ |  | -------------------------------- | ---- | ----------------------- | - | ---- | - | ---- | -- | - | - | -- | 
|                                           |  | Three months ended September 30, |     
|                                           |  |                                  |     
|                                           |  | (in thousands)                   |     
|                                           |  | Pension benefits                 |      | Postretirement benefits |  
|                                           |  |                                  |      |                         |  
|                                           |  | 2006                             |      | 2005                    |   | 2006 |   | 2005 |   
|                                           |  |                                  |      |                         |   |      |   |      |   
|Components
  of net periodic pension cost: |  |                                  |      |                         |   |      |   |      |    |   |   |    | 
|Service cost                               |  | $                                |     |                         | $ |     |   | $    | 6  |   | $ | 8  | 
|Interest cost                              |  |                                  | 106  |                         |   | 104  |   |      | 34 |   |   | 37 | 
|Expected return on plan assets             |  |                                  | (177 | )                       |   | (164 | ) |      |   |   |   |   | 
|Curtailment charge                         |  |                                  |     |                         |   |     |   |      |   |   |   |   | 
|Amortization                               |  |                                  | 17   |                         |   | 17   |   |      | (2 | ) |   |   | 
|                                           |  |                                  |      |                         |   |      |   |      |    |   |   |    | 
|                                           |  |                                  |      |                         |   |      |   |      |    |   |   |    | 
|Net periodic pension cost                  |  | $                                | (54  | )                       | $ | (43  | ) | $    | 38 |   | $ | 45 | 
|                                           |  |                                  |      |                         |   |      |   |      |    |   |   |    | 

|                                           |  |                                 |      |                         |   |      |   |      |     |   |   |     | 
|------------------------------------------ |  | ------------------------------- | ---- | ----------------------- | - | ---- | - | ---- | --- | - | - | --- | 
|                                           |  | Nine months ended September 30, |     
|                                           |  |                                 |     
|                                           |  | (in thousands)                  |     
|                                           |  | Pension benefits                |      | Postretirement benefits |  
|                                           |  |                                 |      |                         |  
|                                           |  | 2006                            |      | 2005                    |   | 2006 |   | 2005 |    
|                                           |  |                                 |      |                         |   |      |   |      |    
|Components
  of net periodic pension cost: |  |                                 |      |                         |   |      |   |      |     |   |   |     | 
|Service cost                               |  | $                               |     |                         | $ |     |   | $    | 18  |   | $ | 24  | 
|Interest cost                              |  |                                 | 318  |                         |   | 312  |   |      | 102 |   |   | 111 | 
|Expected return on plan assets             |  |                                 | (531 | )                       |   | (492 | ) |      |    |   |   |    | 
|Curtailment charge                         |  |                                 |     |                         |   |     |   |      |    |   |   |    | 
|Amortization                               |  |                                 | 51   |                         |   | 51   |   |      | (6  | ) |   |    | 
|                                           |  |                                 |      |                         |   |      |   |      |     |   |   |     | 
|                                           |  |                                 |      |                         |   |      |   |      |     |   |   |     | 
|Net periodic pension cost                  |  | $                               | (162 | )                       | $ | (129 | ) | $    | 114 |   | $ | 135 | 
|                                           |  |                                 |      |                         |   |      |   |      |     |   |   |     | 

| |                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In December
  of 2002, the Companys Board of Directors amended the defined benefit pension
  plan to cease the accrual of further benefits. For the fiscal year ended
  December 31, 2006, the Company expects to make no contributions to the
  defined benefit pension plan.
| |                                                                                                                                                                                                                                                                                
| | Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations                                                                                                                                                                                  

Forward-Looking Statements

Statements
included in this discussion and in future filings by Rome Bancorp, Inc. (Rome
Bancorp or the Company) with the Securities and Exchange Commission, in Rome
Bancorp 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 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 actual results, and could cause Rome Bancorp actual
financial performance to differ materially from that expressed in any
forward-looking statement: (1) changes in the real estate market or local
economy, (2) changes in interest rates, (3) changes in laws and regulations to
which we are subject, and (4) competition in our primary market area. Rome
Bancorp disclaims any obligation to subsequently revise any

14

---



forward-looking
statements to reflect events or circumstances after the date of such
statements, or to reflect the occurrence of anticipated or unanticipated
events.

General

The Company is
a Delaware corporation regulated by the Office of Thrift Supervision (OTS) as
a savings and loan holding company, whose sole business is conducted by its
wholly owned subsidiary, Rome Savings Bank (the Bank.) The Banks principal
business is accepting deposits from the general public and using those deposits
to make residential and commercial real estate loans, as well as commercial and
consumer loans to individuals and small businesses primarily in Oneida County
and also elsewhere in New York State. The Bank also invests in long and
short-term marketable securities and other liquid investments. Following its
conversion to a federal charter on April 27, 2004, the Bank has been regulated
by the OTS as a federal savings bank.

Overview

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

Net income for
the third quarter of 2006 was $855,000, a decrease of 15.5% over the prior
years third quarter net income of $1.0 million. The significant factors and
trends impacting the third quarter of 2006, which are discussed in greater
depth below, were as follows:

| |   |                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net interest
  income decreased by $67,000, or 1.9%, from the same quarter last year as a
  result of a decline in interest earning assets. The Companys net interest
  margin increased from 4.74% in the third quarter of 2005 to 5.07% in the same
  quarter of 2006.
| |   |                                                                                                                                                                                                                                                                          
| |  | Non-interest
  expense increased to $2.5 million in the third quarter of 2006 from $2.3
  million in the same quarter of the prior year, primarily due to higher
  benefit costs and professional fees.                                                                  
| |   |                                                                                                                                                                                                                                                                          
| |  | Non-interest
  income increased by $49,000 from third quarter 2005 levels primarily due
  income from increases in the cash surrender value of bank owned life
  insurance.                                                                                              
| |   |                                                                                                                                                                                                                                                                          
| |  | The Company
  recorded a provision for loan losses of $25,000 in the third quarter of 2006,
  while no provision was recorded in the same quarter of 2005.                                                                                                               

Critical Accounting Policies

The
preparation of consolidated financial statements requires management to make
estimates and assumptions. Changes in these estimates and assumptions affect
the reported amounts of certain assets, liabilities, revenue and expenses.
Different amounts could be reported under different conditions, or if different
assumptions were used in the application of these accounting policies.

15

---



It is
managements opinion that accounting estimates covering certain aspects of the
business have more significance than others due to the relative importance of
those areas to overall performance, or the level of subjectivity required in
making these estimates. Management of the Company considers the accounting
policy relating to the allowance for loan losses to be a critical accounting
policy given the uncertainty in evaluating the level of the allowance required
for probable credit losses and the material effect that such judgments can have
on the results of operations. Managements quarterly evaluation of the adequacy
of the allowance considers the Companys historical loan loss experience,
review of specific loans, current economic conditions and such other factors
considered appropriate to estimate losses. Management uses presently available
information to estimate probable losses on loans; however, future additions to
the allowance may be necessary based on changes in estimates, assumptions or
economic conditions. Significant factors that could give rise to changes in
these estimates include, but are not limited to, changes in economic conditions
in the local area, concentrations of risk and declines of local property
values.

The Companys
critical policies and their application are reviewed periodically by the Audit
Committee and the Board of Directors. All accounting policies are important,
and as such, we encourage the reader to review each of the policies included in
Note 2 to the consolidated financial statements reported on the Companys 2005
Annual Report on Form 10-K to obtain a better understanding of how our financial
performance is reported.

16

---



Analysis of Net Interest Income.

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

|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|------------------------------------------------------------------ |  | ----------------------------------------------- | ------- | --------------------------------------------- | - | ----------------------- | - | ----------------- | ---- | ---------------------------- | - | ----------------------- |  | - | ----- | - |  | ---- | -
|                                                                   |  | Average Balances, Interest and Average Yields   |        
|                                                                   |  |                                                 |        
|                                                                   |  | For the
  three months ended September 30, 2006 |         | For the three months ended September 30, 2005 |  
|                                                                   |  |                                                 |         |                                               |  
|                                                                   |  | Average
  Balance                               |         | Interest
  Income/
  Expense                  |   | Average
  Yield/
  Cost |   | Average
  Balance |      | Interest
  Income/
  Expense |   | Average
  Yield/
  Cost | 
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         | 
|                                                                   |  | (Dollars in thousands)                          |        
|Assets:                                                            |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Interest-earning assets:                                           |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Loans                                                              |  | $                                               | 255,331 |                                               | $ | 4,132                   |   |                   | 6.42 | %                            | $ | 246,785                 |  | $ | 3,815 |   |  | 6.13 | %
|Securities (1)                                                     |  |                                                 | 6,373   |                                               |   | 91                      |   |                   | 5.67 |                              |   | 15,194                  |  |   | 200   |   |  | 5.22 |  
|Federal funds sold & other                                         |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Interest bearing deposits                                          |  |                                                 | 6,144   |                                               |   | 74                      |   |                   | 4.76 |                              |   | 31,647                  |  |   | 260   |   |  | 3.27 |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Total interest-earnings assets                                     |  |                                                 | 267,848 |                                               |   | 4,297                   |   |                   | 6.36 |                              |   | 293,626                 |  |   | 4,275 |   |  | 5.78 |  
|Noninterest-earning assets                                         |  |                                                 | 25,150  |                                               |   |                         |   |                   |      |                              |   | 18,196                  |  |   |       |   |  |      |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Total assets                                                       |  | $                                               | 292,998 |                                               |   |                         |   |                   |      |                              | $ | 311,822                 |  |   |       |   |  |      |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Liabilities and Shareholders Equity:                              |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Interest-bearing liabilities:                                      |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Savings accounts                                                   |  | $                                               | 86,944  |                                               | $ | 165                     |   |                   | 0.75 |                              | $ | 93,147                  |  | $ | 176   |   |  | 0.75 |  
|Time deposits                                                      |  |                                                 | 66,344  |                                               |   | 585                     |   |                   | 3.50 |                              |   | 66,700                  |  |   | 468   |   |  | 2.79 |  
|Money market accounts                                              |  |                                                 | 5,593   |                                               |   | 25                      |   |                   | 1.75 |                              |   | 5,644                   |  |   | 13    |   |  | 0.89 |  
|Other interest bearing deposits                                    |  |                                                 | 11,602  |                                               |   | 19                      |   |                   | 0.65 |                              |   | 10,721                  |  |   | 22    |   |  | 0.82 |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Total interest-bearing deposits                                    |  |                                                 | 170,483 |                                               |   | 794                     |   |                   | 1.85 |                              |   | 176,212                 |  |   | 679   |   |  | 1.53 |  
|Borrowings                                                         |  |                                                 | 8,971   |                                               |   | 79                      |   |                   | 3.49 |                              |   | 9,707                   |  |   | 85    |   |  | 3.47 |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Total interest-bearing liabilities                                 |  |                                                 | 179,454 |                                               |   | 873                     |   |                   | 1.93 |                              |   | 185,919                 |  |   | 764   |   |  | 1.63 |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Noninterest-bearing deposits                                       |  |                                                 | 28,624  |                                               |   |                         |   |                   |      |                              |   | 27,385                  |  |   |       |   |  |      |  
|Other liabilities                                                  |  |                                                 | 3,841   |                                               |   |                         |   |                   |      |                              |   | 5,479                   |  |   |       |   |  |      |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Total liabilities                                                  |  |                                                 | 211,919 |                                               |   |                         |   |                   |      |                              |   | 218,783                 |  |   |       |   |  |      |  
|Shareholders equity                                               |  |                                                 | 81,079  |                                               |   |                         |   |                   |      |                              |   | 93,039                  |  |   |       |   |  |      |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Total liabilities and shareholders
equity                         |  | $                                               | 292,998 |                                               |   |                         |   |                   |      |                              | $ | 311,822                 |  |   |       |   |  |      |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Net interest income                                                |  |                                                 |         |                                               |   | 3,424                   |   |                   |      |                              |   |                         |  |   | 3,511 |   |  |      |  
|Tax equivalent adjustment on securities                            |  |                                                 |         |                                               |   | (16                     | ) |                   |      |                              |   |                         |  |   | (36   | ) |  |      |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Net interest income per consolidated financial
  statements        |  |                                                 |         |                                               | $ | 3,408                   |   |                   |      |                              |   |                         |  | $ | 3,475 |   |  |      |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|                                                                   |  |                                                 |         |                                               |   |                         |   |                   |      |                              |   |                         |  |   |       |   |  |      |  
|Net interest rate spread                                           |  |                                                 |         |                                               |   |                         |   |                   | 4.43 | %                            |   |                         |  |   |       |   |  | 4.15 | %
|Net interest margin                                                |  |                                                 |         |                                               |   |                         |   |                   | 5.07 | %                            |   |                         |  |   |       |   |  | 4.74 | %
|Ratio of interest-earning assets to
  interest-bearing liabilities |  |                                                 |         |                                               |   |                         |   |                   | 1.49 | x                            |   |                         |  |   |       |   |  | 1.58 | x

|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(1) | Includes
  tax equivalent adjustment for the Companys
  tax-exempt municipal securities.

17

---



|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|------------------------------------------------------------------ |  | ---------------------------------------------- | ------- | -------------------------------------------- | - | ----------------------- | - | ----------------- | ---- | ---------------------------- | - | ----------------------- |  | - | ------ | - |  | ---- | -
|                                                                   |  | Average Balances, Interest and Average Yields  |        
|                                                                   |  |                                                |        
|                                                                   |  | For the
  nine months ended September 30, 2006 |         | For the nine months ended September 30, 2005 |  
|                                                                   |  |                                                |         |                                              |  
|                                                                   |  | Average
  Balance                              |         | Interest
  Income/
  Expense                 |   | Average
  Yield/
  Cost |   | Average
  Balance |      | Interest
  Income/
  Expense |   | Average
  Yield/
  Cost | 
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         | 
|                                                                   |  | (Dollars in thousands)                         |        
|Assets:                                                            |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Interest-earning assets:                                           |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Loans                                                              |  | $                                              | 253,480 |                                              | $ | 12,120                  |   |                   | 6.39 | %                            | $ | 239,810                 |  | $ | 11,045 |   |  | 6.16 | %
|Securities (1)                                                     |  |                                                | 9,005   |                                              |   | 367                     |   |                   | 5.44 |                              |   | 16,433                  |  |   | 621    |   |  | 5.05 |  
|Federal funds sold & other                                         |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Interest bearing deposits                                          |  |                                                | 18,946  |                                              |   | 650                     |   |                   | 4,58 |                              |   | 25,915                  |  |   | 567    |   |  | 2.93 |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Total interest-earnings assets                                     |  |                                                | 281,431 |                                              |   | 13,137                  |   |                   | 6.24 |                              |   | 282,158                 |  |   | 12,233 |   |  | 5.80 |  
|Noninterest-earning assets                                         |  |                                                | 20,641  |                                              |   |                         |   |                   |      |                              |   | 17,423                  |  |   |        |   |  |      |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Total assets                                                       |  | $                                              | 302,072 |                                              |   |                         |   |                   |      |                              | $ | 299,581                 |  |   |        |   |  |      |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Liabilities and Shareholders Equity:                              |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Interest-bearing
  liabilities:                                    |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Savings accounts                                                   |  | $                                              | 88,545  |                                              | $ | 497                     |   |                   | 0.75 |                              | $ | 96,734                  |  | $ | 532    |   |  | 0.74 |  
|Time deposits                                                      |  |                                                | 67,111  |                                              |   | 1,662                   |   |                   | 3.31 |                              |   | 67,527                  |  |   | 1,329  |   |  | 2.63 |  
|Money market accounts                                              |  |                                                | 5,302   |                                              |   | 61                      |   |                   | 1.53 |                              |   | 6,407                   |  |   | 42     |   |  | 0.87 |  
|Other interest bearing deposits                                    |  |                                                | 11,408  |                                              |   | 53                      |   |                   | 0.62 |                              |   | 9,958                   |  |   | 48     |   |  | 0.64 |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Total interest-bearing deposits                                    |  |                                                | 172,366 |                                              |   | 2,273                   |   |                   | 1.76 |                              |   | 180,626                 |  |   | 1,951  |   |  | 1.44 |  
|Borrowings                                                         |  |                                                | 9,049   |                                              |   | 238                     |   |                   | 3.52 |                              |   | 12,444                  |  |   | 310    |   |  | 3.33 |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Total interest-bearing liabilities                                 |  |                                                | 181,415 |                                              |   | 2,511                   |   |                   | 1.85 |                              |   | 193,070                 |  |   | 2,261  |   |  | 1.57 |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Noninterest-bearing deposits                                       |  |                                                | 28,238  |                                              |   |                         |   |                   |      |                              |   | 27,399                  |  |   |        |   |  |      |  
|Other liabilities                                                  |  |                                                | 4,791   |                                              |   |                         |   |                   |      |                              |   | 4,657                   |  |   |        |   |  |      |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Total liabilities                                                  |  |                                                | 214,444 |                                              |   |                         |   |                   |      |                              |   | 225,126                 |  |   |        |   |  |      |  
|Shareholders equity                                               |  |                                                | 87,628  |                                              |   |                         |   |                   |      |                              |   | 74,455                  |  |   |        |   |  |      |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Total liabilities and shareholders equity                         |  | $                                              | 302,072 |                                              |   |                         |   |                   |      |                              | $ | 299,581                 |  |   |        |   |  |      |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Net interest income                                                |  |                                                |         |                                              |   | 10,626                  |   |                   |      |                              |   |                         |  |   | 9,972  |   |  |      |  
|Tax equivalent adjustment on securities                            |  |                                                |         |                                              |   | (62                     | ) |                   |      |                              |   |                         |  |   | (116   | ) |  |      |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Net interest income per consolidated financial
  statements        |  |                                                |         |                                              | $ | 10,564                  |   |                   |      |                              |   |                         |  | $ | 9,856  |   |  |      |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|                                                                   |  |                                                |         |                                              |   |                         |   |                   |      |                              |   |                         |  |   |        |   |  |      |  
|Net interest rate spread                                           |  |                                                |         |                                              |   |                         |   |                   | 4.39 | %                            |   |                         |  |   |        |   |  | 4.23 | %
|Net interest margin                                                |  |                                                |         |                                              |   |                         |   |                   | 5.05 | %                            |   |                         |  |   |        |   |  | 4.73 | %
|Ratio of interest-earning assets to
  interest-bearing liabilities |  |                                                |         |                                              |   |                         |   |                   | 1.55 | x                            |   |                         |  |   |        |   |  | 1.46 | x

|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(1) | Includes
  tax equivalent adjustment for the Companys
  tax-exempt municipal securities.

18

---



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

|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|---------------------------------- |  | ----------------------------------------------------------------------------------------- | --- | --------------------------------------------------------------------------------------- | - | ---- | - | ---- | ---- | ------ | - | --- | - | - | ---- | - | - | ----- | -
|                                   |  | Rate Volume Analysis                                                                      |    
|                                   |  |                                                                                           |    
|                                   |  | Three months ended September 30, 2006
  Compared to Three months ended September 30, 2005 |     | Nine months ended September 30, 2006
  Compared to Nine months ended September 30, 2005 |  
|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|                                   |  | Increases (decreases) due to                                                              |     | Increases (decreases) due to                                                            |  
|                                   |  | Rate                                                                                      |     | Volume                                                                                  |   | Net  |   | Rate |      | Volume |   | Net |  
|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |  
|                                   |  | (in thousands)                                                                            |     | (in thousands)                                                                          |  
|Assets:                            |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Interest-earning assets:           |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Loans                              |  | $                                                                                         | 194 |                                                                                         | $ | 124  |   | $    | 318  |        | $ | 463 |   | $ | 612  |   | $ | 1,075 |  
|Securities (1)                     |  |                                                                                           | 7   |                                                                                         |   | (116 | ) |      | (109 | )      |   | 27  |   |   | (281 | ) |   | (254  | )
|Federal funds sold & other         |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Interest bearing deposits          |  |                                                                                           | 23  |                                                                                         |   | (210 | ) |      | (187 | )      |   | 235 |   |   | (152 | ) |   | 83    |  
|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Total interest-earnings assets     |  |                                                                                           | 224 |                                                                                         |   | (202 | ) |      | 22   |        |   | 725 |   |   | 179  |   |   | 904   |  
|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Interest-bearing liabilities:      |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Savings accounts                   |  |                                                                                           |    |                                                                                         |   | (12  | ) |      | (12  | )      |   | 10  |   |   | (45  | ) |   | (35   | )
|Time deposits                      |  |                                                                                           | 121 |                                                                                         |   | (3   | ) |      | 118  |        |   | 341 |   |   | (8   | ) |   | 333   |  
|Money market accounts              |  |                                                                                           | 12  |                                                                                         |   |     |   |      | 12   |        |   | 26  |   |   | (7   | ) |   | 19    |  
|Other interest bearing deposits    |  |                                                                                           | (5  | )                                                                                       |   | 2    |   |      | (3   | )      |   | (2  | ) |   | 7    |   |   | 5     |  
|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Total interest-bearing deposits    |  |                                                                                           | 128 |                                                                                         |   | (13  | ) |      | 115  |        |   | 375 |   |   | (53  | ) |   | 322   |  
|Borrowings                         |  |                                                                                           |    |                                                                                         |   | (6   | ) |      | (6   | )      |   | 12  |   |   | (85  | ) |   | (73   | )
|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Total interest-bearing liabilities |  |                                                                                           | 128 |                                                                                         |   | (19  | ) |      | 109  |        |   | 387 |   |   | (138 | ) |   | 249   |  
|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  
|Net change in interest income (1)  |  | $                                                                                         | 96  |                                                                                         | $ | (183 | ) | $    | (87  | )      | $ | 338 |   | $ | 317  |   | $ | 655   |  
|                                   |  |                                                                                           |     |                                                                                         |   |      |   |      |      |        |   |     |   |   |      |   |   |       |  

(1)
Includes tax equivalent adjustment for the Companys tax-exempt municipal
securities.

Comparison of Financial Condition at
September 30, 2006 and December 31, 2005:

Total
assets at September 30, 2006 were $296.0 million, a decrease of $12.9 million
from $308.9 million at December 31, 2005.
Cash and federal funds decreased by $26.6 million in the first nine
months of 2006 from $34.2 million at December 31, 2005 to $7.6 million at
September 30, 2006 due to investments in treasury stock and bank owned life
insurance and funding of loan production. Securities decreased by $4.7 million
from $11.9 million to $7.2 million over the same period.  The decrease in securities was attributable
to the sale of shares in an equity mutual fund, as well as maturities in the
investment portfolio.

The
Companys loan portfolio increased by $9.4 million, or 3.7%, during the first
nine months of 2006 from $253.9 million at December 31, 2005 to $263.3 million
at September 30, 2006. During the first nine months of 2006, the Company
originated approximately $37.3 million of loans, as compared to approximately
$49.5 million of loans originated in the same period of 2005. The majority of
the loan originations for this year to date have been residential and
commercial mortgage loans. Non-performing loans as a percentage of total loans
increased to 0.43% at September 30, 2006, as compared to 0.37% at December 31,
2005. The allowance for loan losses as a percentage of total loans was 0.74%
and 0.77% at September 30, 2006 and December 31, 2005, respectively. In
addition, the allowance for loan losses as a percent of non-performing loans
was 173.3% at September 30, 2006, compared to 207.0% at December 31, 2005.

19

---



Total
deposits decreased to $199.4 million at September 30, 2006 from $201.5 million
at December 31, 2005, in part due to a competitive market for these funds.  During the first nine months of 2006,
savings deposits decreased by $2.9 million, or 3.3%. Balances of non-interest
bearing balances increased by $859,000, or 2.9%, and money market deposits
increased by $342,000, or 6.9%.  Time
deposits decreased by $335,000, or less than one percent, and the level of
other interest bearing deposits stayed constant.

In
June of 2006, the Company invested in bank owned life insurance covering
certain key employees. This $8.0 million investment is classified as an other
asset, and is the reason for the increase in these assets from $5.3 million at
December 31, 2005 to $13.7 million at September 30, 2006.

Comparison of Operating Results for the
Three-Month Periods Ended September 30, 2006 and 2005

General

During
the three months ended September 30, 2006, the Company recorded net income of $855,000,
compared to $1.0 million for the third quarter of 2005.  The decrease in net income is comprised of a
decrease in net interest income before loan loss provision of $67,000, an
increase in the provision of loan losses of $25,000 and an increase in
non-interest expense of $233,000, which were partially offset by a $49,000
increase in non-interest income and a $119,000 decrease in income tax
expense.

Diluted
earnings per share were $0.10 per diluted share for the quarter ended September
30, 2006 compared to $0.11 for the same quarter of 2005.  Average diluted shares decreased to
8,313,604 for the third quarter of 2006 from 9,588,432 in the same period of
2005 due to the Companys stock buyback program.

Net Interest Income

Net
interest income before loan loss provision for the quarter ended September 30,
2006 decreased by $67,000, or 1.9%, as compared to the same quarter of 2005.
This decrease is attributable to higher deposit interest expense and a lower
average balance of earning assets, partially offset by increased yields on the
Companys earning assets.

Interest Income

Interest
income increased to $4.3 million for the quarter ended September 30, 2006 from
$4.2 million for the same quarter of 2005.
Average loan balances for the third quarter of 2006 were $255.3 million,
an increase of $8.5 million over the average outstanding loans for the third
quarter of 2005. The yield on the Companys loan portfolio for the quarter
ended September 30, 2006 was 6.42% in comparison to a yield of 6.13% for the
same period last year. Interest income on securities declined $89,000 from
$164,000 for the quarter ended September 30, 2005 to $75,000 for the quarter
ended September 30, 2006. Comparatively, the average balance of securities
declined by $8.8 million, or 57.9%, from the third quarter of 2005 to $6.4
million for the current quarter and the yield on the Companys securities
increased from 5.22% to 5.67% for the same periods, respectively. Finally,
interest income on federal funds sold and other interest bearing deposits
decreased by $186,000 to $74,000 for the quarter ended September 30, 2006 from
the same quarter in 2005.  Average
balances of federal funds sold decreased by $25.5 million, to $6.1 million at
September 30, 2006 from $31.6 million at September 30, 2005, as the Company has
continued to invest the proceeds of its March 30, 2005 stock offering.

Interest Expense

Interest
expense increased to $873,000 in the quarter ended September 30, 2006 from
$764,000 for the same quarter of 2005. Interest expense on deposits increased
to $794,000 for the quarter ended September 30, 2006 from $679,000 for the
quarter ended September 30, 2005, due to rising rates paid on time deposits
consistent with current market rates. Interest expense on borrowed funds
decreased to $79,000 for the quarter

20

---



ended
September 30, 2006 from $85,000 for the comparative quarter of 2005 primarily
due to a decrease in the average balance of borrowings to $9.0 million in the
current quarter compared to $9.7 million in the third quarter of 2005.

Provision for Loan Losses

The
Company recorded a $25,000 provision for loan losses in either the third
quarter of 2006 compared to no provision in the third quarter of 2005. The
provision for loan losses for the current three month period was necessary to
replenish the loan loss reserve for routine charge-offs and because of growth
in the loan portfolio. Asset quality was slightly less favorable at September
30, 2006 than at December 31, 2005 with non-performing loans as a percent of
loans of 0.43% and the allowance for loan losses as a percent of non-performing
loans of 173.3% at September 30, 2006, compared to 0.37% and 207.0%,
respectively, at December 31, 2005. The allowance for loan losses as a
percentage of loans was at 0.74% at September 30, 2006 compared to 0.77% at
December 31, 2005.

In
determining the appropriate provision for loan losses, management considers the
level of and trend in non-performing loans, the level of and trend in net loan
charge-offs, the dollar amount and mix of the loan portfolio, as well as
general economic conditions and real estate trends in the Companys market
area, which can impact the inherent risk of loss in the Companys loan
portfolio.

Non-Interest Income and Non-Interest Expense

Non-interest
income increased $49,000 to $503,000 in the third quarter of 2006 from $454,000
in the same period of 2005. The increase is primarily attributable to earnings
related to increases in cash surrender value of Bank-owned life insurance.

Non-interest
expense increased by $233,000 to $2.5 million in the current quarter compared
to $2.3 million in the same period of 2005, primarily due to increased benefit
costs and professional fee expenditures related to compliance with Section 404
of the Sarbanes Oxley Act.

Income
tax expense for the third quarter of 2006 decreased to $518,000 from $637,000
in the same period of 2005, directly due to the decrease in pre-tax income.

Comparison of Operating Results for the
Nine-Month Periods Ended September 30, 2006 and 2005

General

During
the nine months ended September 30, 2006, the Company recorded net income of
$2.5 million compared to $2.6 million for the first nine months of 2005.  The decrease in net income is comprised of a
$140,000 increase in loan loss provision, a $113,000 decrease in non-interest
income and a $584,000 increase in non-interest expense, partially offset by an
increase in net interest income before loan loss provision of $708,000 and a
decrease of income tax expense of $32,000.

Diluted
earnings per share were $0.28 per diluted share for the nine months ended
September 30, 2006 compared to $0.27 per diluted share for the same period of
2005.  The increase in earnings per
share is attributable to a decrease in average outstanding diluted shares from
9,571,413 to 8,867,972.

Net Interest Income

Net
interest income before loan loss provision for the nine months ended September
30, 2006 increased by $708,000, or 7.2%, compared to the same period of 2005.
This increase is attributable to growth in the Companys net interest margin.

21

---



Interest Income

Interest
income increased to $13.1 million for the nine months ended September 30, 2006
from $12.1 million for the same period of 2005.  The increase in interest income was attributable an increase in
overall yields to 6.24% from 5.80% over the same period. Average loan balances
for the first nine months of 2006 were $253.5 million, an increase of $13.7
million over the average outstanding loans for the same period of 2005. The
yield on the Companys loan portfolio for the nine months ended September 30,
2006 was 6.39% compared to a yield of 6.16% for the same period last year,
reflecting increases in the current market interest rates. Interest income on
securities declined $262,000 from $567,000 for the nine months ended September
30, 2005 to $305,000 for the nine months ended September 30, 2006.
Comparatively, the average balance of securities declined by $7.4 million, or
45.1%, from the first nine months of 2005 to $9.0 million for the current year
to date and the yield on the Companys securities increased from 5.05% to 5.44%
for the same periods, respectively. Finally, interest income on federal funds
sold and other interest bearing deposits increased by $145,000 to $650,000 for
the first nine months of 2006 from the same period in 2005 due to increased
yields which were partially offset by a decrease in average balances.

Interest Expense

Interest
expense increased to $2.5 million for the first nine months of 2006 from $2.3
million for the nine months ended September 30, 2005. Interest expense on
deposits increased to $2.3 million for the nine months ended September 30, 2006
from $2.0 million for the nine months ended September 30, 2005, due to rising
rates paid on time deposits consistent with current market rates. Interest
expense on borrowed funds decreased to $238,000 for the nine months ended
September 30, 2006 from $310,000 for the comparative period of 2005 primarily
due to a decrease in the average balance of borrowings to $9.0 million in the
current nine months compared to $12.4 million in the nine months ended 2005.

Provision for Loan Losses

The
Company recorded a provision for loan losses of $140,000 in the first nine
months of 2006 compared to no provision for loan losses in the first nine
months of 2005. During the second quarter of 2005, the Company recorded the
receipt of a large recovery on a commercial loan that had been charged off in
2000. Receipt of this recovery prevented the need to record a loan loss
provision in the first nine months of 2005. The provision recorded in the nine
months ended September, 30, 2006 was necessary to replenish the loan loss
reserves for normal activity and to provide for growth of the loan portfolio.

In
determining the appropriate provision for loan losses, management considers the
level of and trend in non-performing loans, the level of and trend in net loan
charge-offs, the dollar amount and mix of the loan portfolio, as well as
general economic conditions and real estate trends in the Companys market
area, which can impact the inherent risk of loss in the Companys loan
portfolio.

Non-Interest Income and Non-Interest Expense

Non-interest
income decreased by $113,000 to $1.4 million for the first nine months of 2006
compared to $1.5 million in the same period of 2005. This decrease is primarily
attributable to the reimbursement of prior year legal fees expended in relation
to the above referenced loan loss recovery totaling $167,000. In addition, the
Company recognized $35,000 less gains on securities sales in the first nine
months of 2006 compared to the same period of 2005, due to a lower level of
sales activity. Partially offsetting these decreases was an increase in
customer fee revenue over the level earned in the same period of 2005 and
earnings on recently acquired bank owned life insurance in the amount of
$122,000.

Non-interest
expense increased to $7.8 million in the first nine months of 2006 from $7.2
million in the same period of 2005, primarily due to higher benefit costs
related to the Companys 2006 stock compensation

22

---



plans and
increased expenditures related to compliance with Section 404 of the
Sarbanes-Oxley Act and strategic planning initiatives.

Income
tax expense for the first nine months of 2006 decreased to $1.5 million from
$1.6 million in the same period of 2005, due to the decrease in pre-tax income.

Liquidity and Capital Resources

The
Companys primary sources of funds consist of deposits, scheduled amortization
and prepayments of loans and mortgage-backed securities, maturities of
investments, interest bearing deposits at other financial institutions and
funds provided from operations.  The
Bank also has a written agreement with the Federal Home Loan Bank of New York
that allows it to borrow up to $67.7 million.
At September 30, 2006, the Bank had outstanding borrowings of $2.9
million on this line of credit, as well as outstanding advances and amortizing
notes totaling $8.6 million.

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

The
Companys primary investing activities include the origination of loans and to
a lesser extent the purchase of investment securities.  For the nine months ended September 30,
2006, the Company originated loans of approximately $37.3 million, compared to
$49.5 of loans originated in the first nine months of 2005.

At
September 30, 2006, the Company had loan commitments to borrowers of
approximately $16.1 million, and available letters and lines of credit of
approximately $16.8 million.

In
June of 2006, the Company invested in bank owned life insurance in the amount
of $8.0 million, covering certain key employees.

Time
deposit accounts scheduled to mature within one year were $43.6 million at
September 30, 2006.  Based on our
deposit retention experience and current pricing strategy, we anticipate that a
significant portion of these time deposits will remain with us.  We are committed to maintaining a strong
liquidity position; therefore, the Company monitors its liquidity position on a
daily basis.  We anticipate that we will
have sufficient funds to meet our current funding commitments.  The marginal cost of new funding however,
whether from deposits or borrowings from the Federal Home Loan Bank, will be
carefully considered as we monitors our liquidity needs.  Therefore, in order to minimize its cost of
funds, we may consider additional borrowings from the Federal Home Loan Bank in
the future.

At
September 30, 2006, the Bank exceeded each of the applicable regulatory capital
requirements.  The Banks leverage (Tier
1) capital at September 30, 2006 was $61.9 million, or 21.0% of adjusted
assets. In order to be classified as well-capitalized by the OTS, the Bank is
required to have leverage (Tier 1) capital of $14.7 million, or 5.0% of
adjusted assets. To be classified as a well-capitalized bank by the OTS, the
Bank must also have a total risk-based capital ratio of 10.0%. At September 30,
2006, the Bank had a total risk-based capital ratio of 29.36%.

The
Company paid cash dividends of $0.075 per share during the three-month period
ended September 30, 2006 totaling $626,000.

During
the second quarter of 2006, the Companys Board of Directors authorized the
repurchase of 1,383,000 of the Companys outstanding common shares over the
following twelve month period. Through September 30, 2006 $14.2 million was
expended to repurchase shares.

23

---



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

Off-Balance Sheet Arrangements

The
Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Companys financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.

Recent Accounting Pronouncements

FASB
Staff Position on FAS No. 115-1 and FAS No. 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments,
was issued in November 2005 and addresses the determination of when an
investment is considered impaired, whether the impairment is
other-than-temporary, and how to measure an impairment loss. The FSP also
addresses accounting considerations subsequent to the recognition of an
other-than-temporary impairment on a debt security, and requires certain
disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. The FSP replaces the impairment guidance on
Emerging issues Task Force (EITF) Issue No. 03-1 with references to existing
authoritative literature concerning other-than-temporary determinations. Under
the FSP, losses arising from impairment deemed to be other-than-temporary, must
be recognized in earnings at an amount equal to the entire difference between
the securities cost and its fair value at the financial statement date, without
considering partial recoveries subsequent to that date. The FSP also required
that an investor recognize an other-than-temporary impairment loss when a
decision to sell a security has been made and the investor does not expect the
fair value of the security to fully recover prior to the expected time of sale.
The FSP became effective for reporting periods beginning after December 15,
2005 and its initial adoption of this statement had no material impact on the
Companys consolidated financial statements.

In
July 2006, the FASB released Interpretation No. 48, Accounting for Uncertainty
in Income Taxes. This Interpretation revises the recognition tests for tax
positions taken in tax returns such that a tax benefit is recorded only when it
is more likely than not that the tax position will be allowed upon examination
by taxing authorities. The amount of such a tax benefit to record is the
largest amount that is more likely than not to be allowed. Any reduction in
deferred tax assets or increase in tax liabilities upon adoption will
correspondingly reduce retained earnings. The Company has not yet determined
the effect of adopting this Interpretation, which is effective for it on January
1, 2007.

In
September 2006, the Financial Accounting Standards Board issued Statement No.
158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R). SFAS 158 requires employers to recognize the funded status of a
defined benefit postretirement plan as an asset or liability in its statement
of financial position and to recognize changes in that funded status in
comprehensive income in the year in which the changes occur. The funded status
of a defined benefit pension plan is measured as the difference between plan
assets at fair value and the plans projected benefit obligation. Under SFAS
158, employers are required to measure plan assets and benefit obligations at
the date of their fiscal year-end statement of financial position. SFAS 158 is
effective for the Company at the end of the 2006 calendar year. Based on the
projected benefit obligations of the Companys defined benefit plans and
deferred compensation plan, which were last measured at December 31, 2005, the
aggregate excess funded status of the Companys defined benefit postretirement
plans at December 31, 2005 was $677,000. If the Company were required to adopt
SFAS 158 based on its funded status at December 31, 2005, the Company would
continue to recognize as an asset this overfunded position of the plan but
would also derecognize an intangible asset for unrecognized net actuarial
losses of approximately $1.5 million. The impact of this change would be
recognized as an adjustment to other comprehensive loss of $900,000, which is
net of a $600,000 tax benefit. Since the benefit obligations will not be
measured until December 31, 2006, the Company cannot yet

24

---



quantify the
actual impact the adoption of SFAS 158 will have on its consolidated financial
statements. Management is also evaluating the impact of SFAS 158 on the
Companys liability for other post retirement benefits. This financial
statement impact related to other post retirement benefits is not expected to
be material.

In
September 2006, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 108. This SAB expresses the SECs views
regarding the process of quantifying financial statement misstatements. SAB No.
108 provides guidance on the consideration of the effects of prior year
misstatements for the purpose of a materiality assessment. SAB No. 108 is
effective for fiscal years beginning after November 15, 200. Management is in
the process of evaluating the effect on the Companys financial statements of
adoption of SAB No. 108.

Item 3. Quantitative and Qualitative
Disclosures about Market Risk

There
has been no material change in the Companys interest rate risk profile since
December 31, 2005. For a more complete discussion of the Companys asset and
liability management policies see Managements Discussion and Analysis of
Financial Condition and Results of Operations in the Companys 2005 Form 10-K.

Item 4.
Controls and Procedures

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

There
have been no significant changes in the Companys internal
controls 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.

Part II - OTHER INFORMATION

|                                                                                                                                                         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Item 1. Legal Proceedings                                                                                                                               
|                                                                                                                                                         | 
|None.                                                                                                                                                   
|                                                                                                                                                         | 
|Item 1A. Risk Factors                                                                                                                                   
|                                                                                                                                                         | 
|There
have been no material changes to the Companys risk factors previously
disclosed in the Companys Form 10-K for the year ending December 31, 2005.

|                                                                    | 
|------------------------------------------------------------------- | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The
following table provides information with respect to purchases made by or on
behalf of the Company or any affiliated purchases (as defined in rule 106-18
(a)(3) under the Securities Exchange Act of 1934) of the Companys common stock
during the quarter ended September 30, 2006.

25

---



COMPANY
PURCHASES OF EQUITY SECURITIES

|                                             |  |                                                    |        |                                             |   |                                                                                                           |  |                                                                                                                                               |        |  |  |         | 
|-------------------------------------------- |  | -------------------------------------------------- | ------ | ------------------------------------------- | - | --------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- | ------ |  |  | ------- | 
|Period                                       |  | (a)Total Number
  of Shares (or
  Units) Purchased |        | (b) Average Price
  Paid per Share(or Unit) |   | (c) Total
  Number of
  Shares (or Units)
  Purchased as Part of
  Publicly Announced
  Plans or Programs |  | (d)
  Maximum
  Number (or
  Approximate
  Dollar Value) of
  Shares (or Units)
  that may yet be
  Purchased under
  the Plans or
  Programs |       
|                                             |  |                                                    |        |                                             |   |                                                                                                           |  |                                                                                                                                               |       
|                                             |  |                                                    |        |                                             |   |                                                                                                           |  |                                                                                                                                               |        |  |  |         | 
|July 1, 2006 through July 30, 2006           |  |                                                    |       |                                             |   |                                                                                                          |  |                                                                                                                                               |       |  |  | 357,100 | 
|                                             |  |                                                    |        |                                             |   |                                                                                                           |  |                                                                                                                                               |        |  |  |         | 
|August 1, 2006 through August 31, 2006       |  |                                                    | 33,800 |                                             | $ | 12.77                                                                                                     |  |                                                                                                                                               | 33,800 |  |  | 323,300 | 
|                                             |  |                                                    |        |                                             |   |                                                                                                           |  |                                                                                                                                               |        |  |  |         | 
|September 1, 2006 through September 30, 2006 |  |                                                    | 45,100 |                                             | $ | 12.74                                                                                                     |  |                                                                                                                                               | 45,100 |  |  | 278,200 | 
|                                             |  |                                                    |        |                                             |   |                                                                                                           |  |                                                                                                                                               |       
|Total                                        |  |                                                    | 78,900 |                                             | $ | 12.75                                                                                                     |  |                                                                                                                                               | 78,900 |  |  | 278,200 | 
|                                             |  |                                                    |        |                                             |   |                                                                                                           |  |                                                                                                                                               |       

|                                                            | 
|----------------------------------------------------------- | 
|Item 3. Defaults Upon Senior Securities                    
|                                                            | 
|None.                                                      
|                                                            | 
|Item 4. Submission of Matters to a Vote of Security Holders
|                                                            | 
|None.                                                      
|                                                            | 
|Item 5. Other Information                                  
|                                                            | 
|None.                                                      

26

---



|                 | 
|---------------- | 
|Item 6. Exhibits

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

|    |                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Incorporated by reference
  to Rome Bancorp, Inc.s Form S-1 (Registration No. 333-121245), filed with
  the Commission on December 14, 2004, as amended.     
|    |                                                                                                                                                               
|(2) | Incorporated by reference
  to Rome Bancorp, Inc.s Form SB-2 (Registration No. 333-80487), filed with
  the Commission on June 11, 1999, as amended.         
|    |                                                                                                                                                               
|(3) | Incorporated by reference
  to Rome Bancorp, Incs Proxy Statement on Schedule 14A, filed with the
  Commission on April 5, 2000 and amended on April 2, 2001.
|    |                                                                                                                                                               
|(4) | Incorporated by reference
  to Rome Bancorp, Inc.s Form 8-K filed with the Commission on December 27,
  2005.                                                
|    |                                                                                                                                                               
|(5) | Incorporated by reference
  to Rome Bancorp, Inc.s Form 8-K filed with the Commission on March 29, 2005.                                                     
|    |                                                                                                                                                               
|(6) | Incorporated by reference
  to Rome Bancorp, Inc.s Form 8-K filed with the Commission on August 29,
  2005.                                                  
|    |                                                                                                                                                               
|(7) | Incorporated by reference
  to Rome Bancorp, Inc.s Proxy statement on Schedule 14A, filed with the
  Commission on March 29, 2006.                           

27

---



SIGNATURES

Pursuant
to the requirement of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

ROME BANCORP, INC.

|                        |  |                            |  |                   
|----------------------- |  | -------------------------- |  | ------------------
|Name                    |  | Title                      |  | Date              
|                        |  |                            |  |                   
|/s/ Charles
  M. Sprock |  | Chairman of
  the Board,   |  | November 9,
  2006
|                        |  | President
  and Chief      |  |                   
|Charles M.
  Sprock     |  | Executive
  Officer        |  |                   
|                        |  | (Principal
  Executive     |  |                   
|                        |  | Officer)                   |  |                   
|                        |  |                            |  |                   
|                        |  |                            |  |                   
|                        |  |                            |  |                   
|/s/ David C.
  Nolan    |  | Executive
  Vice President |  | November 9,
  2006
|                        |  | and Chief
  Financial      |  |                   
|David C.
  Nolan        |  | Officer
  (Principal       |  |                   
|                        |  | Financial
  Officer)       |  |                   

28

---