UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 10-Q

Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended September 30, 2008Commission file number 000-27481Rome Bancorp, Inc.(Exact name of registrant as specified in its charter)

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

100 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.     Yesx      Noo

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

Large accelerated fileroAccelerated
filerxNon-accelerated fileroSmaller
Reporting Companyo

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act.)      YesoNox

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

|                              | Outstanding
            at     | 
|----------------------------- | ------------------------------ | 
|Class                         | November
              5, 2008 | 
|Common Stock, par value $0.01 | 7,134,566                      | 
|                             

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ROME BANCORP, INC.FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2008TABLE 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 |  | 15  
|ITEM 3.      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 24  
|ITEM 4.      |  | CONTROLS AND PROCEDURES                                                               |  | 24  
|            
|PART II      |  | OTHER INFORMATION                                                                     |  |     
|            
|ITEM 1.      |  | LEGAL PROCEEDINGS                                                                     |  | 24  
|ITEM
    1A. |  | RISK FACTORS                                                                          |  | 24  
|ITEM 2.      |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           |  | 25  
|ITEM 3.      |  | DEFAULTS UPON SENIOR SECURITIES                                                       |  | 25  
|ITEM 4.      |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 25  
|ITEM 5.      |  | OTHER INFORMATION                                                                     |  | 25  
|ITEM 6.      |  | EXHIBITS                                                                              |  | 25  
|            
|             |  | SIGNATURES                                                                            |  | 27  





2

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PART I     FINANCIAL INFORMATION

Item 1.  Financial Statements

ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Balance SheetSeptember 30, 2008 and December 31, 2007(in thousands, except share data)

|                                                                               |  |               |         |   |              |   |         |  
|------------------------------------------------------------------------------ |  | ------------- | ------- | - | ------------ | - | ------- | -
|                                                                               |  | (Unaudited)   |         |   |              |   |        
|                                                                               |  | September 30, |         |   | December 31, |  
|                                                                               |  | 2008          |         |   | 2007         |  
|Assets                                                                         |  |               |         |   |              |   |         |  
|                                                                              
|Cash and due from banks                                                        |  | $             | 7,214   |   |              | $ | 6,978   |  
|Federal funds sold and other short-term investments                            |  |               | 1,698   |   |              |   | 1,040   |  
|Total cash and cash equivalents                                                |  |               | 8,912   |   |              |   | 8,018   |  
|Securities available for sale, at fair value                                   |  |               | 3,855   |   |              |   | 2,674   |  
|Securities held to maturity (fair value of $1,516 and $1,195                   |  |               |         |   |              |   |         |  
|at September 30, 2008 and December 31, 2007, respectively)                     |  |               | 1,452   |   |              |   | 1,147   |  
|Federal Home Loan Bank Stock                                                   |  |               | 3,258   |   |              |   | 2,344   |  
|Loans                                                                          |  |               | 296,760 |   |              |   | 282,952 |  
|Less: Allowance for loan loss                                                  |  |               | (1,884  | ) |              |   | (1,910  | )
|Net loans                                                                      |  |               | 294,876 |   |              |   | 281,042 |  
|Premises and equipment, net                                                    |  |               | 6,483   |   |              |   | 6,568   |  
|Accrued interest receivable                                                    |  |               | 1,073   |   |              |   | 1,124   |  
|Bank-owned life insurance                                                      |  |               | 8,900   |   |              |   | 8,598   |  
|Other assets                                                                   |  |               | 7,073   |   |              |   | 6,616   |  
|Total assets                                                                   |  | $             | 335,882 |   |              | $ | 318,131 |  
|                                                                              
|Liabilities & Equity                                                           |  |               |         |   |              |   |         |  
|                                                                              
|Liabilities                                                                    |  |               |         |   |              |   |         |  
|Deposits:                                                                      |  |               |         |   |              |   |         |  
|Non-interest bearing                                                           |  | $             | 30,370  |   |              | $ | 29,509  |  
|Savings                                                                        |  |               | 80,123  |   |              |   | 79,750  |  
|Money market                                                                   |  |               | 11,326  |   |              |   | 7,406   |  
|Time                                                                           |  |               | 72,095  |   |              |   | 73,209  |  
|Other interest bearing                                                         |  |               | 13,807  |   |              |   | 13,158  |  
|Total deposits                                                                 |  |               | 207,721 |   |              |   | 203,032 |  
|Borrowings                                                                     |  |               | 59,731  |   |              |   | 40,333  |  
|Other liabilities                                                              |  |               | 5,581   |   |              |   | 5,729   |  
|Total liabilities                                                              |  |               | 273,033 |   |              |   | 249,094 |  
|                                                                              
|Shareholders' equity                                                           |  |               |         |   |              |   |         |  
|Common Stock, $0.01 par value; 30,000,000 shares authorized ; 9,893,716 shares |  |               |         |   |              |   |         |  
|issued, and 7,145,066 shares outstanding at September 30, 2008 and 9,891,515   |  |               |         |   |              |   |         |  
|shares issued and 7,788,415 shares outstanding at December 31, 2007            |  |               | 99      |   |              |   | 99      |  
|Additional paid-in capital                                                     |  |               | 62,311  |   |              |   | 61,884  |  
|Retained earnings                                                              |  |               | 36,710  |   |              |   | 36,179  |  
|Accumulated other comprehensive income (loss)                                  |  |               | (345    | ) |              |   | (376    | )
|Treasury stock: 2,748,650 shares at September 30, 2008 and 2,103,100 shares    |  |               |         |   |              |   |         |  
|at December 31, 2007                                                           |  |               | (33,829 | ) |              |   | (26,488 | )
|Unallocated shares of employee stock ownership plan (ESOP): 335,733            |  |               |         |   |              |   |         |  
|shares at September 30, 2008 and 370,206 shares at December 31, 2007           |  |               | (2,097  | ) |              |   | (2,261  | )
|Total shareholders' equity                                                     |  |               | 62,849  |   |              |   | 69,037  |  
|Total liabilities and shareholders' equity                                     |  | $             | 335,882 |   |              | $ | 318,131 |  

See accompanying notes to unaudited condensed consolidated financial

3

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ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statements of IncomeFor the Three and Nine Months Ended September 30, 2008 and 2007(in thousands, except share data)(unaudited)

|                                                    |  |                            |       |                           |   |       |  |      |        |  |   |       
|--------------------------------------------------- |  | -------------------------- | ----- | ------------------------- | - | ----- |  | ---- | ------ |  | - | ------
|                                                    |  | For the three months ended |       | For the nine months ended
|                                                    |  | September 30,              |       | September 30,            
|                                                    |  | 2008                       |       | 2007                      |   | 2008  |  | 2007
|                                                   
|Interest income:                                    |  |                            |       |                           |   |       |  |      |        |  |   |       
|Loans                                               |  | $                          | 4,397 |                           | $ | 4,427 |  | $    | 13,130 |  | $ | 13,012
|Securities                                          |  |                            | 96    |                           |   | 72    |  |      | 265    |  |   | 224   
|Other short-term investments                        |  |                            | 6     |                           |   | 13    |  |      | 21     |  |   | 40    
|Total interest income                               |  |                            | 4,499 |                           |   | 4,512 |  |      | 13,416 |  |   | 13,276
|                                                   
|Interest expense:                                   |  |                            |       |                           |   |       |  |      |        |  |   |       
|Deposits                                            |  |                            | 813   |                           |   | 920   |  |      | 2,566  |  |   | 2,561 
|Borrowings                                          |  |                            | 410   |                           |   | 339   |  |      | 1,131  |  |   | 886   
|Total interest expense                              |  |                            | 1,223 |                           |   | 1,259 |  |      | 3,697  |  |   | 3,447 
|                                                   
|Net interest income                                 |  |                            | 3,276 |                           |   | 3,253 |  |      | 9,719  |  |   | 9,829 
|                                                   
|Provision for loan losses                           |  |                            | 100   |                           |   | -     |  |      | 100    |  |   | -     
|Net interest income after provision for loan losses |  |                            | 3,176 |                           |   | 3,253 |  |      | 9,619  |  |   | 9,829 
|                                                   
|Non-interest income:                                |  |                            |       |                           |   |       |  |      |        |  |   |       
|Net gain on securities transactions                 |  |                            | -     |                           |   | -     |  |      | -      |  |   | 11    
|Other                                               |  |                            | 609   |                           |   | 547   |  |      | 1,700  |  |   | 1,617 
|Total non-interest income                           |  |                            | 609   |                           |   | 547   |  |      | 1,700  |  |   | 1,628 
|                                                   
|                                                   
|Non-interest expense:                               |  |                            |       |                           |   |       |  |      |        |  |   |       
|Salaries and employee benefits                      |  |                            | 1,442 |                           |   | 1,428 |  |      | 4,459  |  |   | 4,286 
|Building, occupancy and equipment                   |  |                            | 485   |                           |   | 468   |  |      | 1,451  |  |   | 1,398 
|Other                                               |  |                            | 615   |                           |   | 663   |  |      | 1,957  |  |   | 2,058 
|Total non-interest expense                          |  |                            | 2,542 |                           |   | 2,559 |  |      | 7,867  |  |   | 7,742 
|                                                   
|                                                   
|Income before income tax expense                    |  |                            | 1,243 |                           |   | 1,241 |  |      | 3,452  |  |   | 3,715 
|Income tax expense                                  |  |                            | 428   |                           |   | 438   |  |      | 1,157  |  |   | 1,328 
|Net income                                          |  | $                          | 815   |                           | $ | 803   |  | $    | 2,295  |  | $ | 2,387 
|                                                   
|Basic earnings per share                            |  | $                          | 0.12  |                           | $ | 0.11  |  | $    | 0.33   |  | $ | 0.31  
|Diluted earnings per share                          |  | $                          | 0.12  |                           | $ | 0.11  |  | $    | 0.33   |  | $ | 0.30  

See accompanying notes to unaudited condensed consolidated financial statements.



4

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ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statement of Shareholders'Equity and Comprehensive IncomeFor the Nine Months Ended September 30, 2008 and 2007(in thousands, except share and per share data) (unaudited)

|                                      |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   |        |  
|------------------------------------- |  | ------ | -- | ------- | ---------- | -------- |  | - | -------- | - |  | ----------------- | ------- | - | ------ | ----------- | ---- | ----------- |  | - | ------ | - |  | - | ------ | -
|                                      |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        | Accumulated |      |             |  |   |        |   |  |   |       
|                                      |  |        |    |         | Additional |          |  |   |          |   |  |                   |         |   | other  |             |      | Unallocated |  |   |        |   | 
|                                      |  | Common |    | Paid-in |            | Retained |  |   | Treasury |   |  | comprehensive     |         |   | ESOP   |             |      |             |  |  
|                                      |  | stock  |    | Capital |            | earnings |  |   | Stock    |   |  | Income
    (loss) |         |   | shares |             |      | Total       | 
|Balances at January 1, 2007           |  | $      | 97 |         | $          | 60,712   |  | $ | 35,643   |   |  | $                 | (16,307 | ) |        | $           | (633 | )           |  | $ | (2,481 | ) |  | $ | 77,031 |  
|Comprehensive income:                 |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   |        |  
|Net income                            |  |        | -  |         |            | -        |  |   | 2,387    |   |  |                   | -       |   |        |             | -    |             |  |   | -      |   |  |   | 2,387  |  
|Other comprehensive loss              |  |        | -  |         |            | -        |  |   |          |   |  |                   | -       |   |        |             | 12   |             |  |   | -      |   |  |   | 12     |  
|Total comprehensive income            |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   | 2,399  |  
|Purchase of 666,772 treasury shares   |  |        | -  |         |            | -        |  |   | -        |   |  |                   | (8,166  | ) |        |             | -    |             |  |   | -      |   |  |   | (8,166 | )
|Amortization of unearned compensation |  |        | -  |         |            | 194      |  |   | -        |   |  |                   | -       |   |        |             | -    |             |  |   | -      |   |  |   | 194    |  
|Dividends paid ($0.24 per share)      |  |        | -  |         |            | -        |  |   | (1,915   | ) |  |                   | -       |   |        |             | -    |             |  |   | -      |   |  |   | (1,915 | )
|Exercise of stock options             |  |        | 2  |         |            | 510      |  |   | -        |   |  |                   | -       |   |        |             | -    |             |  |   | -      |   |  |   | 512    |  
|ESOP shares released for              |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   |        |  
|allocation (34,473 shares)            |  |        | -  |         |            | 258      |  |   | -        |   |  |                   | -       |   |        |             | -    |             |  |   | 165    |   |  |   | 423    |  
|Balances at September 30, 2007        |  | $      | 99 |         | $          | 61,674   |  | $ | 36,115   |   |  | $                 | (24,473 | ) |        | $           | (621 | )           |  | $ | (2,316 | ) |  | $ | 70,478 |  
|                                     
|Balances at January 1, 2008           |  | $      | 99 |         | $          | 61,884   |  | $ | 36,179   |   |  | $                 | (26,488 | ) |        | $           | (376 | )           |  | $ | (2,261 | ) |  | $ | 69,037 |  
|Comprehensive income:                 |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   |        |  
|Net income                            |  |        | -  |         |            | -        |  |   | 2,295    |   |  |                   | -       |   |        |             | -    |             |  |   | -      |   |  |   | 2,295  |  
|Other comprehensive income            |  |        | -  |         |            | -        |  |   | -        |   |  |                   | -       |   |        |             | 31   |             |  |   | -      |   |  |   | 31     |  
|Total comprehensive income            |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   | 2,326  |  
|Purchase of 645,550 treasury shares   |  |        | -  |         |            | -        |  |   | -        |   |  |                   | (7,341  | ) |        |             | -    |             |  |   | -      |   |  |   | (7,341 | )
|Effect of changing pension plan       |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   |        |  
|measurement date pursuant to          |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   |        |  
|FAS No. 158                           |  |        | -  |         |            | -        |  |   | 48       |   |  |                   | -       |   |        |             | -    |             |  |   | -      |   |  |   | 48     |  
|Amortization of unearned compensation |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   |        |  
|and related tax benefit               |  |        | -  |         |            | 205      |  |   | -        |   |  |                   | -       |   |        |             | -    |             |  |   | -      |   |  |   | 205    |  
|Dividends paid ($0.255 per share)     |  |        | -  |         |            | -        |  |   | (1,812   | ) |  |                   | -       |   |        |             | -    |             |  |   | -      |   |  |   | (1,812 | )
|ESOP shares released for              |  |        |    |         |            |          |  |   |          |   |  |                   |         |   |        |             |      |             |  |   |        |   |  |   |        |  
|allocation (34,473 shares)            |  |        | -  |         |            | 222      |  |   | -        |   |  |                   | -       |   |        |             | -    |             |  |   | 164    |   |  |   | 386    |  
|Balances at September 30, 2008        |  | $      | 99 |         | $          | 62,311   |  | $ | 36,710   |   |  | $                 | (33,829 | ) |        | $           | (345 | )           |  | $ | (2,097 | ) |  | $ | 62,849 |  



See accompanying notes to unaudited condensed consolidated financial statements.



5

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ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statements of Cash FlowsFor the Nine Months Ended September 30, 2008
    and 2007(in thousands)(unaudited)

|                                                     |  |      |         |   |      |   |         |  
|---------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                     |  | 2008 |         |   | 2007 |  
|Cash flows from operating activities:                |  |      |         |   |      |   |         |  
|Net income                                           |  | $    | 2,295   |   |      | $ | 2,387   |  
|Adjustments to reconcile net income to net cash      |  |      |         |   |      |   |         |  
|Provided by operating activities:                    |  |      |         |   |      |   |         |  
|Depreciation and amortization                        |  |      | 432     |   |      |   | 338     |  
|Decrease (increase) in accrued interest receivable   |  |      | 51      |   |      |   | (96     | )
|Provision for loan losses                            |  |      | 100     |   |      |   | -       |  
|Net accretion on securities                          |  |      | 2       |   |      |   | (4      | )
|Net gain on securities sold                          |  |      | -       |   |      |   | (11     | )
|Proceeds from sales of loans                         |  |      | 861     |   |      |   | 1,509   |  
|Net gain on loans sold                               |  |      | (13     | ) |      |   | (18     | )
|Originations of loans held for sale                  |  |      | (848    | ) |      |   | (1,491  | )
|Loss on sale of other real estate                    |  |      | 3       |   |      |   | -       |  
|Decrease in other liabilities                        |  |      | (148    | ) |      |   | (137    | )
|Increase in cash surrender value of life insurance   |  |      | (302    | ) |      |   | (284    | )
|Increase in other assets                             |  |      | (228    | ) |      |   | (351    | )
|Allocation of ESOP shares                            |  |      | 386     |   |      |   | 423     |  
|Amortization of unearned compensation                |  |      | 205     |   |      |   | 194     |  
|Net cash provided by operating activities            |  |      | 2,796   |   |      |   | 2,459   |  
|                                                    
|Cash flows from investing activities:                |  |      |         |   |      |   |         |  
|Net increase in loans                                |  |      | (14,108 | ) |      |   | (14,075 | )
|Proceeds from sale of securities available for sale  |  |      | -       |   |      |   | 357     |  
|Proceeds from maturities and principal reductions of |  |      |         |   |      |   |         |  
|securities available for sale                        |  |      | 752     |   |      |   | 584     |  
|Purchases of securities available for sale           |  |      | (2,010  | ) |      |   | -       |  
|Purchases of Federal Home Loan Bank stock            |  |      | (914    | ) |      |   | (760    | )
|Purchases of securities held to maturity             |  |      | (326    | ) |      |   | -       |  
|Proceeds from maturities and principal reductions of |  |      |         |   |      |   |         |  
|securities held to maturity                          |  |      | 18      |   |      |   | 20      |  
|Proceeds from sale of real estate owned              |  |      | 94      |   |      |   | -       |  
|Additions to premises and equipment                  |  |      | (342    | ) |      |   | (860    | )
|Net cash used in investing activities                |  |      | (16,836 | ) |      |   | (14,734 | )
|                                                    
|Cash flows from financing activities:                |  |      |         |   |      |   |         |  
|(Decrease) increase in time deposits                 |  |      | (1,114  | ) |      |   | 6,058   |  
|Increase in other deposits                           |  |      | 5,803   |   |      |   | 700     |  
|Repayments of borrowings                             |  |      | (802    | ) |      |   | (1,676  | )
|Additional borrowings                                |  |      | 20,200  |   |      |   | 16,700  |  
|Purchase of treasury stock                           |  |      | (7,341  | ) |      |   | (8,166  | )
|Dividends paid                                       |  |      | (1,812  | ) |      |   | (1,915  | )
|Exercise of stock options                            |  |      | -       |   |      |   | 512     |  
|Net cash provided by financing activities            |  |      | 14,934  |   |      |   | 12,213  |  
|                                                    
|Net increase in cash and cash equivalents            |  |      | 894     |   |      |   | (62     | )
|Cash and cash equivalents at beginning of period     |  |      | 8,018   |   |      |   | 7,858   |  
|Cash and cash equivalents at end of period           |  | $    | 8,912   |   |      | $ | 7,796   |  

Condensed Consolidated Statements of Cash Flows continued on next page.

6

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ROME BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statements of Cash FlowsFor the Nine Months Ended September 30, 2008 and 2007(in thousands)(unaudited)

|                                                  |  |      |       |      |   |      
|------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                  |  | 2008 |       | 2007
|Supplemental disclosure of cash flow information: |  |      |       |      |   |      
|Non-cash investing activities:                    |  |      |       |      |   |      
|Transfers from loans to other real estate         |  | $    | 174   |      | $ | -    
|Cash paid during the period for:                  |  |      |       |      |   |      
|Interest                                          |  |      | 3,611 |      |   | 3,455
|                                                  |  |      |       |      |   |      
|Income taxes                                      |  |      | 1,100 |      |   | 907  

See accompanying notes to unaudited condensed consolidated financial statements.



7

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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, 2008 and December 31, 2007 and for the three and nine month periods ended September 30, 2008 and 2007. 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 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, 2007 was derived from the Company's 2007 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 2007 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.



8

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(2)      Earnings Per Share

The following summarizes the computation of earnings per share for the three and nine-month periods ended September 30, 2008 and 2007.

|                                            |  |                                                 |       |                   |   |       |  |      |       |  |   |       | 
|------------------------------------------- |  | ----------------------------------------------- | ----- | ----------------- | - | ----- |  | ---- | ----- |  | - | ----- | 
|                                            |  | Three months ended                              |       | Nine months ended
|                                            |  | September 30,                                   |       | September 30,    
|                                            |  | (in thousands, except share and per share data)
|                                           
|                                            |  | 2008                                            |       | 2007              |   | 2008  |  | 2007 |      
|Basic earnings per share:                   |  |                                                 |       |                   |   |       |  |      |       |  |   |       | 
|Income available to common shareholders     |  | $                                               | 815   |                   | $ | 803   |  | $    | 2,295 |  | $ | 2,387 | 
|Weighted average basic shares outstanding   |  |                                                 | 6,777 |                   |   | 7,598 |  |      | 6,954 |  |   | 7,792 | 
|                                           
|Basic earnings per share                    |  | $                                               | 0.12  |                   | $ | 0.11  |  | $    | 0.33  |  | $ | 0.31  | 
|                                           
|Diluted earnings per share:                 |  |                                                 |       |                   |   |       |  |      |       |  |   |       | 
|Income available to common shareholders     |  | $                                               | 815   |                   | $ | 803   |  | $    | 2,295 |  | $ | 2,387 | 
|Weighted average basic shares outstanding   |  |                                                 | 6,777 |                   |   | 7,598 |  |      | 6,954 |  |   | 7,792 | 
|Effect of dilutive securities:              |  |                                                 |       |                   |   |       |  |      |       |  |   |       | 
|Stock options                               |  |                                                 | 2     |                   |   | 2     |  |      | 3     |  |   | 23    | 
|Unearned compensation                       |  |                                                 | 64    |                   |   | 72    |  |      | 77    |  |   | 86    | 
|Weighted average diluted shares outstanding |  |                                                 | 6,843 |                   |   | 7,677 |  |      | 7,034 |  |   | 7,901 | 
|                                           
|Diluted earnings per share                  |  | $                                               | 0.12  |                   | $ | 0.11  |  | $    | 0.33  |  | $ | 0.30  | 

(3)      Other Comprehensive Income (Loss)

|                                                           |  |                    |     |                   |   |      |  |      |       |   |   |       |  
|---------------------------------------------------------- |  | ------------------ | --- | ----------------- | - | ---- |  | ---- | ----- | - | - | ----- | -
|                                                           |  | Three months ended |     | Nine months ended
|                                                           |  | September 30,      |     | September 30,    
|                                                           |  | (in thousands)    
|                                                           |  |                   
|                                                           |  | 2008               |     | 2007              |   | 2008 |  | 2007 |      
|Pension and postretirement adjustments                     |  | $                  | -   |                   | $ | 8    |  | $    | 130   |   | $ | 25    |  
|Net change in unrealized gain (loss) on available-for-sale |  |                    |     |                   |   |      |  |      |       |   |   |       |  
|securities arising during the period                       |  |                    | 20  |                   |   | 15   |  |      | (78   | ) |   | (16   | )
|Reclassification adjustment for net realized gain          |  |                    |     |                   |   |      |  |      |       |   |   |       |  
|included in net income                                     |  |                    | -   |                   |   | -    |  |      | -     |   |   | (11   | )
|Other comprehensive income, before tax                     |  |                    | 20  |                   |   | 23   |  |      | 52    |   |   | 20    |  
|Deferred tax expense                                       |  |                    | 8   |                   |   | 9    |  |      | 21    |   |   | 8     |  
|                                                          
|Other comprehensive income                                 |  |                    | 12  |                   |   | 14   |  |      | 31    |   |   | 12    |  
|Net income                                                 |  |                    | 815 |                   |   | 803  |  |      | 2,295 |   |   | 2,387 |  
|Total comprehensive income                                 |  | $                  | 827 |                   | $ | 817  |  | $    | 2,326 |   | $ | 2,399 |  



9

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(4)      Securities

Securities
are summarized as follows:

|                                |  |                    |       |                   |   |                |  |       |       |  |   |      
|------------------------------- |  | ------------------ | ----- | ----------------- | - | -------------- |  | ----- | ----- |  | - | -----
|                                |  | September 30, 2008 |       | December 31, 2007
|                               
|                                |  | Amortized          |       | Fair              |   | Amortized      |  | Fair 
|                                |  | Cost               |       | value             |   | cost           |  | value
|                                |  |                    |       |                   |   | (in thousands) |  |       |      
|Available-for-sale:             |  |                    |       |                   |   |                |  |       |       |  |   |      
|State and municipal obligations |  | $                  | 2,620 |                   | $ | 2,659          |  | $     | 1,255 |  | $ | 1,284
|Mortgage-backed securities      |  |                    |       |                   |   |                |  |       |       |  |   |      
|FNMA                            |  |                    | 29    |                   |   | 29             |  |       | 45    |  |   | 45   
|FHLMC                           |  |                    | 169   |                   |   | 170            |  |       | 259   |  |   | 261  
|                               
|Total debt securities           |  |                    | 2,818 |                   |   | 2,858          |  |       | 1,559 |  |   | 1,590
|                               
|Equity and other securities     |  |                    | 1,137 |                   |   | 997            |  |       | 1,137 |  |   | 1,084
|                               
|Total available for sale        |  | $                  | 3,955 |                   | $ | 3,855          |  | $     | 2,696 |  | $ | 2,674
|                               
|Held-to-maturity:               |  |                    |       |                   |   |                |  |       |       |  |   |      
|U.S. Government securities      |  | $                  | 1,324 |                   | $ | 1,387          |  | $     | 1,001 |  | $ | 1,048
|Mortgage-backed securities      |  |                    |       |                   |   |                |  |       |       |  |   |      
|GNMA                            |  |                    | 8     |                   |   | 9              |  |       | 14    |  |   | 15   
|FHLMC                           |  |                    | 1     |                   |   | 1              |  |       | 1     |  |   | 1    
|Other bonds                     |  |                    | 119   |                   |   | 119            |  |       | 131   |  |   | 131  
|                               
|Total held to maturity          |  | $                  | 1,452 |                   | $ | 1,516          |  | $     | 1,147 |  | $ | 1,195
|                               
|FHLB stock                      |  | $                  | 3,258 |                   | $ | 3,258          |  | $     | 2,344 |  | $ | 2,344

Securities pledged at September 30, 2008 and December 31, 2007 had a carrying amount of $1.3 million and $1.0 million, respectively. These securities collateralize state and Treasury department programs. As of these
dates,there were noholdings of securities of any one issuer in an amount greater than 10% of shareholders' equity.



10

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(5)     Loans

Loans are summarized as follows:

September 30,
	
	December 31,2008
	
	2007(in thousands)Mortgage loans:Residential (1-4 family)
	
	$
	165,491
	
	$
	149,702Commercial
	
	
	48,571
	
	
	49,795Construction and land
	
	
	5,213
	
	
	5,258Total Mortgage loans
	
	
	219,275
	
	
	204,755Other loans:Commercial
	
	
	29,417
	
	
	29,127Automobile loans
	
	
	13,903
	
	
	16,009Property improvementand equipment
	
	
	17,359
	
	
	15,829Other consumer
	
	
	16,806
	
	
	17,232Total Other loans
	
	
	77,485
	
	
	78,197Total Loans
	
	$
	296,760
	
	$
	282,952


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

Three months ended
	
	
	Nine months endedSeptember 30,
	
	
	September 30,(in thousands)2008
	
	
	2007
	
	
	2008
	
	
	2007Balance at beginning of period
	
	$
	1,918
	
	
	$
	1,958
	
	
	$
	1,910
	
	
	$
	1,965Provision charged to operations
	
	
	100
	
	
	
	-
	
	
	
	100
	
	
	
	-Loans charged off
	
	
	(150
	)
	
	
	(59
	)
	
	
	(187
	)
	
	
	(136
	)Recoveries
	
	
	16
	
	
	
	29
	
	
	
	61
	
	
	
	99Balance at end of period
	
	$
	1,884
	
	
	$
	1,928
	
	
	$
	1,884
	
	
	$
	1,928


The Company's recorded investment in loans that are considered impaired totaled $596,000 and $180,000 at September 30, 2008 and December 31, 2007, respectively.  These impaired loans carried
allowances of $232,000 and $45,000 at September 30, 2008 and December 31, 2007, respectively. The average recorded investment in impaired loans was $461,000 and $249,000 in the first nine months of 2008 and 2007, respectively. The
Company recognized no interest on impaired loans during the three and nine month periods ended September 30, 2008 and 2007.

11

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The principal balances of loans not accruing interest amounted to $1.7 million and $968,000 at September 30, 2008 and December 31, 2007, respectively. Loans 90 days past due and accruing
interest amounted to $42,000 and $35,000 at September 30, 2008 and December 31, 2007, respectively. The difference 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 during the nine months ended September 30, 2008 and 2007 was $69,800 and $67,900, 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 individualborrower.

(6) Stock-Based Compensation

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 or in certain cases upon retirement. The fair value of the options granted was estimated at the grant date using a Black-Scholes option pricing model based upon the following
assumptions: expected dividend yield 2.52%, expected stock price volatility 8.25%, risk free interest rate 4.60% and an expected option life of 6.5 years. At May 24, 2006, certain awardees met the retirement eligibility criteria and accordingly,
stock-based compensation expense of $350,000 related to their options was expensed immediately. As of September 30, 2008, unrecognized compensation cost related to these options was $133,000. 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 2008 year to date stock option activity:

|                                         |                                      |                |          |                |          |   |     
|---------------------------------------- | ------------------------------------ | -------------- | -------- | -------------- | -------- | - | ----
|                                         | Nine Months ended September 30, 2008
|                                         | (dollars in thousands)              
|                                         |                                      |                | Weighted |                | Weighted
|                                         |                                      |                | Average  |                | Average 
|                                         | Shares                               | Exercise Price |          | Fair
    Value
|Options outstanding, beginning of period | 359,446                              |                | $        | 12.68          |          | $ | 1.68
|Exercised                                | (2,720                               | )              |          | 2.19           |          |   | 0.94
|Granted                                  | -                                    |                |          | -              |          |   | -   
|Options outstanding at end of period     | 356,726                              |                | $        | 12.76          |          | $ | 1.69
|Options exercisable at end of period     | 144,326                              |                | $        | 12.64          |          | $ | 1.68

The aggregate intrinsic value of all options outstanding and exercisable at September 30, 2008 was $23,000. The intrinsic value of options exercised during the quarters ended September 30,
2008 and September 30, 2007 was $0 and $73,000, respectively. The intrinsic value of options exercised during the nine months ended September 30, 2008 and September 30, 2007 was $25,000 and $1.7 million, respectively. Anti-dilutive
options of 354,000 were not included in the computation of diluted earnings per share for the three and nine month periods ended September 30, 2008 and 2007.

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, or in certain cases upon retirement and the related unrecognized compensation cost related to this grant will be expensed over the same period. At May 24, 2006, certain awardees met the retirement eligibility criteria and accordingly,
stock-based compensation expense of $1.1 million related to their 2006 Recognition and Retention Plan awards was expensed immediately.At September 30, 2008, the unrecognized
compensation

12

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cost attributable to restricted stock awards was $475,000. One-fifth of the 2006 restricted stock grants, or 33,660 shares, vested in the quarter ended June 30, 2008. The aggregate intrinsic value of restricted stock that is
expected to vest in the future was $1.1 million at September 30, 2008.

Compensation cost for the Company's stock option plans in both the 2008 and 2007 third quarters was $12,000. In both of the nine months ended September 30, 2008 and 2007, compensation expense
related to the stock option plans was $37,000. For the three months ended September 30, 2008 and 2007, compensation cost related to the restricted stock plan was $44,000 and $52,000 respectively. For the nine months ended September 30,
2008 and 2007 compensation cost related to the restricted stock plan was $187,000 and $157,000 respectively.

(7) 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 |     
| | Components of net periodic pension
        cost: |  | 2008                                 |      |   |                             | 2007 |      |      | 2008 |   |      | 2007 | 
| | Service cost                                     |  | $                                    | -    |   |                             | $    | -    |      |      | $ | 5    |      |  | $   | 6   |  
| | Interest cost                                    |  |                                      | 88   |   |                             |      | 108  |      |      |   | 37   |      |  |     | 35  |  
| | Expected return on plan assets                   |  |                                      | (168 | ) |                             |      | (184 | )    |      |   | -    |      |  |     | -   |  
| | Partial settlement                               |  |                                      | -    |   |                             |      | -    |      |      |   | -    |      |  |     | -   |  
| | Amortization                                     |  |                                      | -    |   |                             |      | 10   |      |      |   | (2   | )    |  |     | (2  | )
|
| | Net periodic pension cost                        |  | $                                    | (80  | ) |                             | $    | (66  | )    |      | $ | 40   |      |  | $   | 39  |  
|
|
| |                                                  |  | Nine months ended
    September 30, 
| |                                                  |  | (in thousands)                      
| |                                                  |  | Pension
    benefits                 |      |   | Postretirement
    benefits |     
| | Components of net periodic pension
        cost: |  | 2008                                 |      |   | 2007                        |      |      | 2008 |      |   | 2007 |     
| | Service cost                                     |  | $                                    | -    |   |                             | $    | -    |      |      | $ | 15   |      |  | $   | 18  |  
| | Interest cost                                    |  |                                      | 264  |   |                             |      | 324  |      |      |   | 111  |      |  | 105 |    
| | Expected return on plan assets                   |  |                                      | (504 | ) |                             |      | (552 | )    |      |   | -    |      |  |     | -   |  
| | Partial settlement                               |  |                                      | 134  |   |                             |      | -    |      |      |   | -    |      |  |     | -   |  
| | Amortization                                     |  |                                      | -    |   |                             |      | 30   |      |      |   | (6   | )    |  |     | (6  | )
|
| | Net periodic pension cost                        |  | $                                    | (106 | ) |                             | $    | (198 | )    |      | $ | 120  |      |  | $   | 117 |  

In December of 2002, the Company's Board of Directors amended the defined benefit pension plan to cease the accrual of further benefits. During the quarter ended March 31, 2008, the Company recorded a
curtailment charge of $134,000 related to a partial settlement of the defined benefit plan. For the fiscal year ended December 31, 2008, the Company expects to make no contributions to the defined benefit pension plan.

(8)Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements (FAS 157). This Statement defines fair value,
establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the
effect of a restriction on the sale or use of an asset.  The standard is effective for fiscal years beginning after November 15, 2007. The impact of adoption was not material. In February 2008, FASB issued Staff Position (FSP) 157-2,
Effective Date of FASB Statement No. 157. This FSP delays the

13

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effective date of FAS 157 for all non-financial  assets and non-financial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November
15, 2008, and interim periods within those fiscal years. The impact of adoption is not material.

In February 2007, FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The standard provides companies with an option to report selected
financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.
The new standard became effective for the Company on January 1, 2008. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008.

In September 2006, FASB Emerging Issues Task Force finalized Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. This issue
requires that a liability be recorded during the service period when a split-dollar life insurance agreement continues after participants employment or retirement.  The required accrued liability will be based on either the post-employment
benefit cost for the continuing life insurance or based on the future death benefit depending on the contractual terms of the underlying agreement. This issue is effective for fiscal years beginning after December 15, 2007. The impact of adoption
was not material.

(9)Fair Value Measurement

The Company adopted FAS No. 157 Fair Value Measurements in the first quarter of 2008. The Companys available for sale investment portfolio is subject to FAS 157 disclosure for
interim reporting. The Companys year-end 2008 reporting will include FAS 107 prescribed fair value disclosure for all financial instruments. Fair value is the price that would be received upon sale of an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.

Level 1 - Quoted prices for identical instruments in active markets that the Company has the ability to access as of the measurement date.

Level
  2  Significant other observable inputs, such as quoted prices for similar
  instruments in active markets; quoted prices for identical or similar instruments
  in markets that are not active; and model-derived valuations in which all significant
  inputs are observable in active markets.

Level 3  Significant unobservable inputs that reflect the Companys
  own assumptions about the assumptions that market participants would use in
  pricing an instrument.

The Company is responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. The Company performs due diligence to understand the
inputs used or how the data was calculated or derived. The Company corroborates the reasonableness of external inputs in the valuation process.

14

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To estimate the market value of its available for sale security portfolio, the Company obtains current market pricing from quoted market sources or using pricing for similar securities. Assets
measured at fair value on a recurring basis are summarized below.

| |                                     |  |                |         |  |   |         |  |   |         |  |                 |       | 
| | ----------------------------------- |  | -------------- | ------- |  | - | ------- |  | - | ------- |  | --------------- | ----- | 
| |                                     |  | (in thousands)
| |                                     |  |                |         |  |   |         |  |   |         |  | Total          
| |                                     |  |                |         |  |   |         |  |   |         |  | Available for  
| |                                     |  |                |         |  |   |         |  |   |         |  | sale securities
| | September 30, 2008                  |  |                | Level 1 |  |   | Level 2 |  |   | Level 3 |  | at fair value  
|
| | Fixed maturity securities           |  | $              | 199     |  | $ | 2,659   |  | $ | -       |  | $               | 2,858 | 
| | Equity securities                   |  |                | 597     |  |   | 400     |  |   | -       |  |                 | 997   | 
| | Impaired loans                      |  |                | -       |  |   | -       |  |   | 364     |  |                 | 364   | 
| | Total available for sale securities |  | $              | 796     |  | $ | 3,059   |  | $ | 364     |  | $               | 4,219 | 

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. Rome Bancorp disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of
anticipated or unanticipated events.

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. Since 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

15

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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 in which it operates. 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 2008 was $815,000, an increase of $12,000 over the prior year's third quarter net income of $803,000. The significant factors and trends impacting the third quarter of 2008, which
are discussed in greater depth below, were as follows:

- Net interest income before loan loss provision increased by $23,000, or 0.7%, from the same quarter last year as a result of an decrease in interest expense.
- The Company recorded a $100,000 provision for loan losses in the third quarter of 2008 compared to no provision in the same period last year.
- Non-interest income increased by $62,000, or 11.5%, over the third quarter 2007 levels primarily due to increases in fee income.
- Non-interest expense decreased by $17,000 in the third quarter of 2008 from $2.6 million in the same quarter of 2007.
- Income tax expense decreased to $428,000 in the third quarter of 2008 from $438,000 in the same period last year due to a decrease in the Companys effective tax
rate.

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.

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, the Company
encourages the reader to review each of the policies included in Note 2 to the consolidated financial statements reported on the Company's 2007 Annual Report on Form 10-K to obtain a better understanding of how its financial performance is reported.

16

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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, 2008           |         | For
          the three months ended September 30, 2007
|                                                                          |  |                                                                   |         | Interest                                                |   | Average |   |         |   | Interest |   | Average
|                                                                          |  | Average                                                           |         | Income/                                                 |   | Yield/  |   | Average |   | Income/  |   | Yield/ 
|                                                                          |  | Balance                                                           |         | Expense                                                 |   | Cost    |   | Balance |   | Expense  |   | Cost   
|Assets:                                                                   |  | (Dollars
          in thousands)                                 
|Interest-earning
        assets:                                          |  |                                                                   |         |                                                         |   |         |   |         |   |          |   |         |  |   |       |   |      |  
|Loans                                                                     |  | $                                                                 | 290,576 |                                                         | $ | 4,397   |   | 6.02    | % |          | $ | 271,961 |  | $ | 4,427 |   | 6.46 | %
|Securities (1)                                                            |  |                                                                   | 8,172   |                                                         |   | 101     |   | 4.91    |   |          |   | 5,543   |  |   | 85    |   | 6.05 |  
|Federal funds sold and other                                              |  |                                                                   |         |                                                         |   |         |   |         |   |          |   |         |  |   |       |   |      |  
|interest
        bearing deposits                                         |  |                                                                   | 1,163   |                                                         |   | 6       |   | 1.94    |   |          |   | 1,120   |  |   | 13    |   | 4.38 |  
|Total
        interest-earnings assets                                    |  |                                                                   | 299,911 |                                                         |   | 4,504   |   | 5.97    |   |          |   | 278,624 |  |   | 4,525 |   | 6.44 |  
|Noninterest-earning assets                                                |  |                                                                   | 30,502  |                                                         |   |         |   |         |   |          |   | 29,130  |  |   |       |   |      |  
|Total
        assets                                                      |  | $                                                                 | 330,413 |                                                         |   |         |   |         |   |          | $ | 307,754 |  |   |       |   |      |  
|Liabilities and Shareholders'
          Equity:                           |  |                                                                   |         |                                                         |   |         |   |         |   |          |   |         |  |   |       |   |      |  
|Interest-bearing liabilities:                                             |  |                                                                   |         |                                                         |   |         |   |         |   |          |   |         |  |   |       |   |      |  
|Savings
        accounts                                                  |  | $                                                                 | 81,395  |                                                         | $ | 113     |   | 0.55    |   |          | $ | 81,800  |  | $ | 113   |   | 0.55 |  
|Time
        deposits                                                     |  |                                                                   | 72,227  |                                                         |   | 630     |   | 3.47    |   |          |   | 71,402  |  |   | 750   |   | 4.17 |  
|Money
        market accounts                                             |  |                                                                   | 10,208  |                                                         |   | 50      |   | 1.95    |   |          |   | 7,659   |  |   | 39    |   | 2.01 |  
|Other
        interest bearing deposits                                   |  |                                                                   | 14,299  |                                                         |   | 20      |   | 0.53    |   |          |   | 12,678  |  |   | 18    |   | 0.57 |  
|Total
        interest-bearing deposits                                   |  |                                                                   | 178,129 |                                                         |   | 813     |   | 1.81    |   |          |   | 173,539 |  |   | 920   |   | 2.10 |  
|Borrowings                                                                |  |                                                                   | 52,282  |                                                         |   | 410     |   | 3.13    |   |          |   | 27,890  |  |   | 339   |   | 4.82 |  
|Total
        interest-bearing liabilities                                |  |                                                                   | 230,411 |                                                         |   | 1,223   |   | 2.11    |   |          |   | 201,429 |  |   | 1,259 |   | 2.48 |  
|Noninterest-bearing deposits                                              |  |                                                                   | 30,512  |                                                         |   |         |   |         |   |          |   | 28,901  |  |   |       |   |      |  
|Other liabilities                                                         |  |                                                                   | 5,772   |                                                         |   |         |   |         |   |          |   | 4,904   |  |   |       |   |      |  
|Total
        liabilities                                                 |  |                                                                   | 266,695 |                                                         |   |         |   |         |   |          |   | 235,234 |  |   |       |   |      |  
|Shareholders' equity                                                      |  |                                                                   | 63,718  |                                                         |   |         |   |         |   |          |   | 72,520  |  |   |       |   |      |  
|Total
        liabilities and
		                     shareholders' equity |  | $                                                                 | 330,413 |                                                         |   |         |   |         |   |          | $ | 307,754 |  |   |       |   |      |  
|Net interest income                                                       |  |                                                                   |         |                                                         |   | 3,281   |   |         |   |          |   |         |  |   | 3,266 |   |      |  
|Tax equivalent adjustment on 
	     securities                            |  |                                                                   |         |                                                         |   | (5      | ) |         |   |          |   |         |  |   | (13   | ) |      |  
|Net interest income per
	     consolidated financial
	     statements     |  |                                                                   |         |                                                         | $ | 3,276   |   |         |   |          |   |         |  | $ | 3,253 |   |      |  
|                                                                         
|Net interest rate spread                                                  |  |                                                                   |         |                                                         |   |         |   | 3.86    | % |          |   |         |  |   |       |   | 3.96 | %
|Net interest margin                                                       |  |                                                                   |         |                                                         |   |         |   | 4.35    | % |          |   |         |  |   |       |   | 4.65 | %
|Ratio of interest-earning assets
        to                               |  |                                                                   |         |                                                         |   |         |   |         |   |          |   |         |  |   |       |   |      |  
|interest-bearing
        liabilities                                      |  |                                                                   |         |                                                         |   |         |   | 1.30    | x |          |   |         |  |   |       |   | 1.38 | 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, 2008            |         | For
          the nine months ended September 30, 2007
|                                                                    |  |                                                                   |         | Interest                                               |   | Average |   |         |   | Interest |   | Average
|                                                                    |  | Average                                                           |         | Income/                                                |   | Yield/  |   | Average |   | Income/  |   | Yield/ 
|                                                                    |  | Balance                                                           |         | Expense                                                |   | Cost    |   | Balance |   | Expense  |   | Cost   
|Assets:                                                             |  | (Dollars
          in thousands)                                 
|Interest-earning assets:                                            |  |                                                                   |         |                                                        |   |         |   |         |   |          |   |         |  |   |        |   |      |  
|Loans                                                               |  | $                                                                 | 285,648 |                                                        | $ | 13,130  |   | 6.14    | % |          | $ | 267,973 |  | $ | 13,012 |   | 6.49 | %
|Securities
        (1)                                              |  |                                                                   | 7,129   |                                                        |   | 286     |   | 5.36    |   |          |   | 6,451   |  |   | 264    |   | 5.47 |  
|Federal
        funds sold and other                                |  |                                                                   |         |                                                        |   |         |   |         |   |          |   |         |  |   |        |   |      |  
|interest
        bearing deposits                                   |  |                                                                   | 1,116   |                                                        |   | 21      |   | 2.48    |   |          |   | 1,114   |  |   | 40     |   | 4.77 |  
|Total
        interest-earnings assets                              |  |                                                                   | 293,893 |                                                        |   | 13,437  |   | 6.11    |   |          |   | 275,538 |  |   | 13,316 |   | 6.46 |  
|Noninterest-earning assets                                          |  |                                                                   | 29,902  |                                                        |   |         |   |         |   |          |   | 28,606  |  |   |        |   |      |  
|Total
        assets                                                |  | $                                                                 | 323,795 |                                                        |   |         |   |         |   |          | $ | 304,144 |  |   |        |   |      |  
|Liabilities and Shareholders'
          Equity:                     |  |                                                                   |         |                                                        |   |         |   |         |   |          |   |         |  |   |        |   |      |  
|Interest-bearing liabilities:                                       |  |                                                                   |         |                                                        |   |         |   |         |   |          |   |         |  |   |        |   |      |  
|Savings
        accounts                                            |  | $                                                                 | 81,401  |                                                        | $ | 336     |   | 0.55    |   |          | $ | 83,293  |  | $ | 343    |   | 0.55 |  
|Time
        deposits                                               |  |                                                                   | 72,567  |                                                        |   | 2,043   |   | 3.76    |   |          |   | 68,917  |  |   | 2,068  |   | 4.01 |  
|Money
        market accounts                                       |  |                                                                   | 9,177   |                                                        |   | 135     |   | 1.97    |   |          |   | 6,789   |  |   | 101    |   | 2.00 |  
|Other
        interest bearing deposits                             |  |                                                                   | 13,276  |                                                        |   | 52      |   | 0.52    |   |          |   | 11,575  |  |   | 49     |   | 0.57 |  
|Total
        interest-bearing deposits                             |  |                                                                   | 176,421 |                                                        |   | 2,566   |   | 1.94    |   |          |   | 170,574 |  |   | 2,561  |   | 2.01 |  
|Borrowings                                                          |  |                                                                   | 46,546  |                                                        |   | 1,131   |   | 3.25    |   |          |   | 24,682  |  |   | 886    |   | 4.80 |  
|Total
        interest-bearing liabilities                          |  |                                                                   | 222,967 |                                                        |   | 3,697   |   | 2.22    |   |          |   | 195,256 |  |   | 3,447  |   | 2.36 |  
|Noninterest-bearing deposits                                        |  |                                                                   | 29,317  |                                                        |   |         |   |         |   |          |   | 28,244  |  |   |        |   |      |  
|Other liabilities                                                   |  |                                                                   | 5,852   |                                                        |   |         |   |         |   |          |   | 5,533   |  |   |        |   |      |  
|Total
        liabilities                                           |  |                                                                   | 258,136 |                                                        |   |         |   |         |   |          |   | 229,033 |  |   |        |   |      |  
|Shareholders' equity                                                |  |                                                                   | 65,659  |                                                        |   |         |   |         |   |          |   | 75,111  |  |   |        |   |      |  
|Total
        liabilities and shareholders'
		               equity |  | $                                                                 | 323,795 |                                                        |   |         |   |         |   |          | $ | 304,144 |  |   |        |   |      |  
|Net interest income                                                 |  |                                                                   |         |                                                        |   | 9,740   |   |         |   |          |   |         |  |   | 9,869  |   |      |  
|Tax equivalent adjustment on securities                             |  |                                                                   |         |                                                        |   | (21     | ) |         |   |          |   |         |  |   | (40    | ) |      |  
|Net interest income per consolidated
		     financial statements    |  |                                                                   |         |                                                        | $ | 9,719   |   |         |   |          |   |         |  | $ | 9,829  |   |      |  
|                                                                   
|Net interest rate spread                                            |  |                                                                   |         |                                                        |   |         |   | 3.89    | % |          |   |         |  |   |        |   | 4.10 | %
|Net interest margin                                                 |  |                                                                   |         |                                                        |   |         |   | 4.43    | % |          |   |         |  |   |        |   | 4.79 | %
|Ratio of interest-earning assets
        to                         |  |                                                                   |         |                                                        |   |         |   |         |   |          |   |         |  |   |        |   |      |  
|interest-bearing
        liabilities                                |  |                                                                   |         |                                                        |   |         |   | 1.32    | x |          |   |         |  |   |        |   | 1.41 | 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.

|                                           |  |                                                 |                                                |        |   |     |  |      |      |        |   |      |   |   |     |   |   |       |  
|------------------------------------------ |  | ----------------------------------------------- | ---------------------------------------------- | ------ | - | --- |  | ---- | ---- | ------ | - | ---- | - | - | --- | - | - | ----- | -
|                                           |  | Three months ended
          September 30, 2008 | Nine months ended
          September 30, 2008 |       
|                                           |  | Compared to                                     | Compared to                                    |       
|                                           |  | Three months ended
          September 30, 2007 | Nine months ended
          September 30, 2007 |       
|                                          
|                                           |  | Increases (decreases)
          due to         
|                                           |  | Rate                                            |                                                | Volume |   | Net |  | Rate |      | Volume |   | Net  |  
|                                           |  | (in thousands)                                 
|Assets:                                    |  |                                                 |                                                |        |   |     |  |      |      |        |   |      |   |   |     |   |   |       |  
|Interest-earning assets:                   |  |                                                 |                                                |        |   |     |  |      |      |        |   |      |   |   |     |   |   |       |  
|Loans                                      |  | $                                               | (326                                           | )      | $ | 296 |  | $    | (30  | )      | $ | (776 | ) | $ | 894 |   | $ | 118   |  
|Securities
        (1)                     |  |                                                 | (9                                             | )      |   | 25  |  |      | 16   |        |   | (5   | ) |   | 27  |   |   | 22    |  
|Federal
        funds sold & other         |  |                                                 |                                                |        |   |     |  |      |      |        |   |      |   |   |     |   |   |       |  
|Interest
        bearing deposits          |  |                                                 | (7                                             | )      |   | -   |  |      | (7   | )      |   | (19  | ) |   | -   |   |   | (19   | )
|Total
        interest-earnings assets     |  |                                                 | (342                                           | )      |   | 321 |  |      | (21  | )      |   | (800 | ) |   | 921 |   |   | 121   |  
|                                          
|Interest-bearing liabilities:              |  |                                                 |                                                |        |   |     |  |      |      |        |   |      |   |   |     |   |   |       |  
|Savings
        accounts                   |  |                                                 | -                                              |        |   | -   |  |      | -    |        |   | -    |   |   | (7  | ) |   | (7    | )
|Time
        deposits                      |  |                                                 | (129                                           | )      |   | 9   |  |      | (120 | )      |   | (134 | ) |   | 109 |   |   | (25   | )
|Money
        market accounts              |  |                                                 | (1                                             | )      |   | 12  |  |      | 11   |        |   | (2   | ) |   | 36  |   |   | 34    |  
|Other
        interest bearing deposits    |  |                                                 | (1                                             | )      |   | 2   |  |      | 1    |        |   | (4   | ) |   | 7   |   |   | 3     |  
|Total
        interest-bearing deposits    |  |                                                 | (131                                           | )      |   | 23  |  |      | (108 | )      |   | (140 | ) |   | 145 |   |   | 5     |  
|Borrowings                                 |  |                                                 | (224                                           | )      |   | 296 |  |      | 72   |        |   | (539 | ) |   | 784 |   |   | 245   |  
|Total
        interest-bearing liabilities |  |                                                 | (355                                           | )      |   | 319 |  |      | (36  | )      |   | (679 | ) |   | 929 |   |   | 250   |  
|                                          
|Net change (1)                             |  | $                                               | 13                                             |        | $ | 2   |  | $    | 15   |        | $ | (122 | ) | $ | (8  | ) | $ | ( 129 | )

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

Comparison of Financial Condition at September 30, 2008 and December 31, 2007

Total assets at September 30, 2008 were $335.9 million, an increase of $17.8 million over assets of $318.1 million at December 31, 2007. The growth is primarily attributable to the Company's loan portfolio, which
increased by $13.9 million, or 4.9%, from $281.0 million at December 31, 2007 to $294.9 million at September 30, 2008. During the first nine months of 2008, the Company originated approximately $49.4 million of loans, compared to
approximately $47.7 million of loans originated in the same period of 2007. The majority of the loan originations for this year to date have been residential mortgage loans.

Total deposits increased to $207.7 million at September 30, 2008 from $203.0 million at December 31, 2007.  During the first nine months of 2008, savings deposits increased by $373,000, or
0.5%, and money market balances increased by $3.9 million, or 52.9% . Time deposits decreased by $1.1 million or 1.5% to $72.1 million at September 30, 2008 from $73.2 million at year end 2007. Balances of other interest bearing and
non-interest bearing deposits increased by $649,000, or 4.9%, and $861,000, or 2.9%, respectively, during the first three quarters of 2008. Management attributes the increase in deposit balances to perceived instability in alternative
investment markets.

Borrowings from the Federal Home Loan Bank of New York (FHLB) increased from $40.3 million at December 31, 2007 to $59.7 million at the end of the current quarter. The incremental borrowings were used to fund
loan growth, purchase investment securities and repurchase the Company's stock.

19

---



Comparison of Operating Results for the Three-Month Periods Ended September 30, 2008 and 2007

General

During the three months ended September 30, 2008, the Company recorded net income of $815,000, an increase of $12,000 over net income of $803,000 in the third quarter of 2007. The increase in net income is comprised
of an increase in net interest income before loan loss provision of $23,000, an increase in non-interest income of $62,000, decreases in non-interest expense and income tax expense of $17,000 and $10,000 respectively, partially
offset by an increase in the provision for loan losses of $100,000.

Diluted earnings per share increased to $0.12 per diluted share in the quarter ended September 30, 2008 from $0.11 per diluted share in the same quarter of 2007. Average diluted shares
decreased to 6,843,084 for the third quarter of 2008 from 7,624,293 in the same period of 2007 due to the Company's stock repurchases over the past four quarters.

Net Interest Income

Net interest income before loan loss provision for the quarter ended September 30, 2008 increased by $23,000, or 0.7%, compared to the same quarter of 2007. This increase is attributable to
lower interest expense from reductions in deposit and borrowing rates, partially offset by decreases in yields on average earning assets.

Interest Income

Interest income was $4.5 million in both the quarters ended September 30, 2008 and 2007. Average loan balances for the third quarter of 2008 were $290.6 million, an increase of $18.6
million over the average outstanding loans for the third quarter of 2007. The yield on the Company's loan portfolio for the quarter ended September 30, 2008 decreased to 6.02% from a yield of 6.46% for the same period last year, reflecting the
effect of decreases in the prime rate over the past year. Interest income on securities increased by $24,000 from $72,000 for the quarter ended September 30, 2007 to $96,000 for the quarter ended September 30, 2008. The average balance
of securities increased by $2.6 million, or 47.3%, from the third quarter of 2007 to $8.2 million for the current quarter while the yield on the Company's securities decreased from 6.05% to 4.91% . Finally, interest income on federal funds
sold and other interest bearing deposits decreased by $7,000 to $6,000 for the quarter ended September 30, 2008 from the same quarter in 2007.  Average balances of federal funds sold remained relatively stable during the third quarters of
both 2008 and 2007, while the rate earned on these deposits decreased to 1.94% in the quarter ended September 30, 2008 from 4.38% for the same period of 2007.

Interest Expense

Interest expense decreased to $1.2 million for the quarter ended September 30, 2008 from $1.3 million for the same quarter of 2007. Interest expense on deposits decreased to $812,000 for
the quarter ended September 30, 2008 from $920,000 for the quarter ended September 30, 2007, due to decreases in the rates paid on time deposits, partially offset by an increase in the average balances of interest bearing deposits. Interest
expense on borrowed funds increased to $410,000 for the quarter ended September 30, 2008 from $339,000 for the comparative quarter of 2007 due to an increase in the average balance of borrowings to $52.3 million in the current quarter
compared to $27.9 million in the third quarter of 2007. Partially offsetting the increase in outstanding debt, the rate paid on borrowings decreased to 3.13% for the quarter ended September 30, 2008 from 4.82% for the same period in 2007. The
increased debt level was used to finance growth in the loan portfolio and purchases of treasury stock.

20

---



Provision for Loan Losses

The Company recorded a $100,000 provision for loan losses in the third quarter of 2008 compared to no provision in the same quarter of 2007. During the current quarter, the Company recorded net loan charge-offs of
$134,000 principally related to one commercial customer. Asset quality declined slightly but remained favorable at September 30, 2008 with non-performing loans as a percent of loans of 0.58% and the allowance for loan losses as a percent of
non-performing loans of 108.7% at September 30, 2008, compared to 0.35% and 190.4%, respectively, at December 31, 2007. The allowance for loan losses as a percentage of loans was at 0.63% at September 30, 2008 compared to 0.68% at December 31, 2007.
While the Company has had an increase in the level of non-performing loans, these loans are deemed to be well collateralized and reserved for, requiring no current increase in the allowance for loan losses. The Company has not originated or acquired
any sub-prime loans and does not have any investments collateralized by sub-prime loans.

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 $62,000 to $609,000 in the third quarter of 2008 from $547,000 in the same period of 2007. The increase is principally due to increases in deposit product
revenues.

Non-interest expense decreased by $17,000 to $2.5 million in the current quarter compared to $2.6 million in the same period of 2007 due to cost containment efforts in several
areas.

Income tax expense was $428,000 in the third quarters of 2008 compared to $438,000 in the quarter ended September 30, 2007 due to an increase in favorable permanent tax benefits.

Comparison of Operating Results for the Nine-Month Periods Ended September 30, 2008 and 2007

General

During the nine months ended September 30, 2008, the Company recorded net income of $2.3 million compared to $2.4 million for the first three quarters of 2007. The decrease resulted from an increase in non-interest
expense of $125,000, a decrease in net-interest income before loan loss provision of $110,000 and an increase in the provision for loan losses of $100,000, partially offset by a $72,000 increase in non-interest income and a
$171,000 reduction in income tax expense.

Diluted earnings per share were $0.33 per diluted share for the nine months ended September 30, 2008 compared to $0.30 per diluted share for the same period of 2007.  The increase in earnings
per share is attributable to the decrease in average outstanding diluted shares from 7,901,601 to 7,034,587 due to ongoing treasury stock purchases.

Net Interest Income

Net interest income before loan loss provision for the nine months ended September 30, 2008 decreased by $110,000, or 1.1%, as compared to the same period of 2007. This decrease is
attributable to decreases in the yields on earning assets and an increase in the volume of interest bearing deposits and debt, partially offset by a reduction in the cost of these funds and growth in the average balances of earning assets.

21

---



Interest Income

Interest income increased to $13.4 million for the nine month period ended September 30, 2008 from $13.3 million for the same period of 2007. Average interest-earning assets for the first nine
months of 2008 increased to $293.9 million from $275.5 million in the same period of 2007. The yield on interest-earning assets decreased to 6.14% for the nine months ended September 30, 2008, from 6.46% for the first three quarters of 2007.
Average loan balances for the first nine months of 2008 were $285.6 million, an increase of $17.6 million over the average outstanding loans for the same period of 2007. The yield on the Company's loan portfolio for the nine months ended
September 30, 2008 was 6.10% compared to a yield of 6.49% for the same period last year, reflecting decreases in underlying interest rates. Interest income on securities increased $41,000 from $224,000 for the nine months ended September 30,
2007 to $265,000 for the nine months ended September 30, 2008. Finally, interest income on federal funds sold and other interest bearing deposits decreased by $19,000 to $21,000 for the first nine months of 2008 from the same period in
2007 due to decreases in market interest rates.

Interest Expense

Interest expense increased to $3.7 million for the nine months ended September 30, 2008 from $3.4 million for the nine months ended September 30, 2007. Interest expense on deposits remained
constant at $2.6 million for both the nine months ended September 30, 2008 and 2007. Average year to date balances of interest-bearing deposits increased to $176.4 million this year from $170.6 million during the first nine months of
2007; however, the cost of these deposits decreased to 1.94% from 2.01% over the same periods. Interest expense on borrowed funds increased to $1.1 million for the nine months ended September 30, 2008 from $886,000 for the comparative period
of 2007 primarily due to an increase in the average balance of borrowings to $46.5 million in the current year to date compared to $24.7 million in the nine months ended 2007. The increase in outstanding debt was partially offset by a
decrease in the rate paid on these borrowings from 4.80% for the nine months ended September 30, 2007 to 3.25% for the same period this year. The increased borrowings were used to fund the aforementioned investments in loans, securities and
purchases of treasury stock that have been made over the past year.

Provision for Loan Losses

The Company recorded a $100,000 provision for loan losses in the first three quarters of 2008 compared to no provision in the same period of 2007. This provision was deemed necessary to cover the 2008 growth in the loan
portfolio and to provide for year to date net charge-offs. While the Company has had an increase in the level of non-performing loans, these loans are deemed to be well collateralized and reserved for, requiring no current increase in the allowance
for loan losses. The Company has not originated or acquired any sub-prime loans and does not have any investments collateralized by sub-prime loans.

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 to $1.7 million for the first nine months of 2008 from $1.6 million in the same period of 2007. The Company recognized gains on securities sales of $11,000
during the first nine months of 2007, while no securities have been sold in fiscal year to date 2008. Other non-interest income for 2008 year to date increased by $83,000 over 2007 levels primarily due to increases in deposit product revenues.

Non-interest expense increased to $7.9 million in the first nine months of 2008 compared to $7.7 million in the same period of 2007, partially due to increases in employee benefit costs and,
most notably, the recording

22

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of a partial settlement of the Companys defined benefit plan in the amount of $134,000 during the first quarter of 2008.

Income tax expense for the first nine months of 2008 decreased to $1.2 million from $1.3 million in the same period of 2007, due to the decrease in pre-tax income, an increase in favorable
permanent tax benefits and revision of an estimate of taxes owed on a state tax audit based upon settlement.

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 FHLB that allows it to borrow up to $58.9 million. At September 30, 2008, the Bank had outstanding borrowings of $19.2 million on
this line of credit with remaining availability under these lines of $39.7 million. In addition, at September 30, 2008 the Company had outstanding advances and amortizing notes with the FHLB totaling $40.5 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, 2008, the Company
originated loans of approximately $49.4 million, compared to $47.7 of loans originated in the first nine months of 2007.

At September 30, 2008, the Company had loan commitments to borrowers of approximately $14.1 million, and available letters and lines of credit of approximately $18.5 million.

Time deposit accounts scheduled to mature within one year were $51.7 million at September 30, 2008. Based on the Companys deposit retention experience and current pricing strategy, the
Company anticipates that a significant portion of these time deposits will remain with the Company. The Company is committed to maintaining a strong liquidity position; therefore, the Company monitors its liquidity position on a daily basis. The
Company anticipates that the Company will have sufficient funds to meet the Companys current funding commitments.  The marginal cost of new funding however, whether from deposits or borrowings from the FHLB, will be carefully considered as the
Company monitors its liquidity needs.  Therefore, in order to minimize its cost of funds, the Company may consider additional borrowings from the FHLB in the future.

At September 30, 2008, the Bank exceeded each of the applicable regulatory capital requirements. The Bank's leverage (Tier 1) capital at September 30, 2008 was $57.2 million, or 17.05% 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 $16.8 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, 2008, the Bank had a total risk-based capital ratio of 24.10% .

On October 3, 2008, the Emergency Economic Stabilization Act of 2008, or EESA, was signed into law providing for, among other things, $700 billion in funding to the U.S. Treasury to purchase
troubled assets from financial institutions.  On October 14, 2008, the Treasury, the Board of Governors of the Federal Reserve System, or FRB, and the Federal Deposit Insurance Corporation, or FDIC, issued a joint statement announcing additional
steps aimed at stabilizing the financial markets, including a $250 billion voluntary Capital Purchase Program, or CPP, that allows qualifying financial institutions to sell preferred shares to the Treasury. Institutions that participate in the
CPP are restricted in their ability to make future stock repurchases and to increase dividend payments to shareholders for a period of three years. The Companys Board of Directors and

23

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management have evaluated the benefits and drawbacks of participation in the CPP, have reviewed these analyses with the Companys financial and legal advisors, and have determined not to apply for funds under the CPP, given
the Companys current and historical status as a well capitalized financial institution.

The Company paid cash dividends of $0.255 per share during the nine-month period ended September 30, 2008 totaling $1.8 million.

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.

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, 2007. 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 2007 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, 2007.

24

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|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 10b-18(a)(3) under the Securities Exchange Act of 1934) of the Company's
    common stock during the quarter ended September 30, 2008.
|                                                                                                                                                                                                                                                                                                                      |                                                                

COMPANY PURCHASES OF EQUITY SECURITIES

(d) MaximumNumber (orApproximateDollar Value) of(c) Total Number of
      Shares (or Units)Shares (or Units)
      that may yet be(a) Total Number
      (b) Average Price
      Purchased as Part of
      Purchased underof Shares (or
      Paid per Share
      Publicly Announced
      the Plans orUnits) Purchased
      (or Unit)
      Plans or Programs
      ProgramsPeriodJuly 1, 2008
      65,800
      $10.77
      65,800
      236,250through July 31,2008August 1, 2008
      98,400
      $10.86
      98,400
      137,850through August31, 2008September 1,
      24,400
      $10.74
      24,400
      113,4502008 throughSeptember 30,2008Total
      188,600
      $10.81
      188,600
      113,450


During the first nine months of 2008, the Company's Board of Directors authorized the repurchase of 759,000 of the Company's outstanding common shares over the following twelve-month period. Through
September 30, 2008, $7.3 million has been expended to repurchase 645,550 shares. There have been no sales by the Company of unregistered securities during the nine months ended September 30, 2008.

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

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|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)          
|             
|(2)          
|             
|(3)          
|             
|(4)          
|             
|(5)          
|             
|(6)          
|             
|(7)          
|             

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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.

|                     |  |                          |  |                 
|-------------------- |  | ------------------------ |  | ----------------
|ROMEBANCORP, INC.   
|                    
|                    
|Name                 |  | Title                    |  | Date            
|                    
|/s/Charles M. Sprock |  | Chairman of the Board,   |  | November 6, 2008
|Charles M. Sprock    |  | President and Chief      |  |                 
|                     |  | Executive Officer        |  |                 
|                     |  | (Principal Executive     |  |                 
|                     |  | Officer)                 |  |                 
|                    
|                    
|                    
|                    
|/s/David C. Nolan    |  | Executive Vice President |  | November 6, 2008
|David C. Nolan       |  | and Chief Financial      |  |                 
|                     |  | Officer (Principal       |  |                 
|                     |  | Financial Officer)       |  |                 

27

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