UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



FORM 10-Q



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



| | For the quarterly period ended September 30, 2005
| | -------------------------------------------------



Commission file number 000-27481



Rome Bancorp, Inc.

(Exact Name of Registrant as Specified in its Charter)



|Delaware                                                                                                                                                                                                           |  | 16-1573070                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------
|(State or other jurisdiction of
      incorporation or organization)                                                                                                                                               |  | (I.R.S. Employer
      Identification No.)
|                                                                                                                                                                                                                   |  |                                           
|100
        West Dominick Street, Rome, New York 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 past 12 months (or
  for such shorter period that the small business issuer was required to file
  such reports), and (2) has been subject to such filing requirements for the
  past 90 days.YesX No



Indicate
  by check mark whether the registrant is an accelerated filer (as defined in
  Rule 12b-2 of the Exchange Act.) Yes No X



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



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



|Class                              | Outstanding
        atNovember 10, 2005
|---------------------------------- | ---------------------------------------
|Common Stock,
      par value $.01 | 9,678,128                              











---



ROME BANCORP, INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2005





TABLE OF CONTENTS



|        |                       |                                                                                   | PAGE
|------- | --------------------- | --------------------------------------------------------------------------------- | ----
|        |                       |                                                                                   |     
|PART I  | FINANCIAL INFORMATION | 3                                                                                
|        |                       |                                                                                   |     
|        | 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                        | 25  
|        | ITEM 4.               | CONTROLS AND PROCEDURES                                                           | 25  
|        |                       |                                                                                   |     
|PART II | OTHER INFORMATION     |                                                                                  
|        |                       |                                                                                   |     
|        | ITEM 1.               | LEGAL PROCEEDINGS                                                                 | 25  
|        | 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                                                                 | 26  
|        | ITEM 6.               | EXHIBITS                                                                          | 26  
|        |                       |                                                                                   |     
|        |                       | SIGNATURES                                                                        | 26  





2



---







PART
  I FINANCIAL INFORMATION



Item
  1. Financial Statements

ROME BANCORP, INC. AND SUBSIDIARY

Condensed
  Consolidated Balance Sheet

September 30, 2005 and December 31, 2004

(in thousands, except share data)

|                                                                     | (unaudited)                                                                 |                                                                                                                                                  |                                                   
|-------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------
|                                                                     |                                                                             |                                                                                                                                                  |                                                   
|                                                                     |                                                                             |                                                                                                                                                  |                                                   
|Assets                                                               |                                                                             |                                                                                                                                                  |                                                   
|                                                                     |                                                                             |                                                                                                                                                  |                                                   
|Cash
        and due from banks                                      | $                                                                           | 7,447                                                                                                                                            |                                                   
|Federal
        funds sold and other short-term investments          | 27,133                                                                      |                                                                                                                                                  | 952                                               
|                                                                     | Total
        cash and cash equivalents                                     | 34,580                                                                                                                                           |                                                   
|Securities
        available for sale, at fair value                 | 13,460                                                                      |                                                                                                                                                  | 17,494                                            
|Securities
        held to maturity (fair value of $1,563 and $1,624 |                                                                             |                                                                                                                                                  |                                                   
|                                                                     | at
        September 30, 2005 and December 31, 2004, respectively)          | 1,576                                                                                                                                            |                                                   
|Loans                                                                |                                                                             |                                                                                                                                                  | 252,422                                           
|                                                                     | Less:
        Allowance for loan loss                                       | (2,238)                                                                                                                                          |                                                   
|                                                                     |                                                                             | Net
        loans                                                                                                                                | 250,184                                           
|Premises
        and equipment, net                                  | 4,582                                                                       |                                                                                                                                                  | 4,503                                             
|Accrued
        interest receivable                                  | 1,110                                                                       |                                                                                                                                                  | 1,002                                             
|Other
        assets                                                 | 4,959                                                                       |                                                                                                                                                  | 5,329                                             
|                                                                     |                                                                             | Total
        assets                                                                                                                             | $
        310,451                                 
|                                                                     |                                                                             |                                                                                                                                                  |                                                   
|Liabilities
        & Equity                                         |                                                                             |                                                                                                                                                  |                                                   
|                                                                     |                                                                             |                                                                                                                                                  |                                                   
|Liabilities                                                          |                                                                             |                                                                                                                                                  |                                                   
|                                                                     | Deposits:                                                                   |                                                                                                                                                  |                                                   
|                                                                     |                                                                             | Non-interest
        bearing                                                                                                                     | $                                                 
|                                                                     |                                                                             | Savings                                                                                                                                          | 91,484                                            
|                                                                     |                                                                             | Money
        market                                                                                                                             | 5,073                                             
|                                                                     |                                                                             | Time                                                                                                                                             | 67,057                                            
|                                                                     |                                                                             | Other
        interest bearing                                                                                                                   | 11,355                                            
|                                                                     |                                                                             |                                                                                                                                                  | Total
        deposits                            
|                                                                     | Borrowings                                                                  | 9,620                                                                                                                                            |                                                   
|                                                                     | Other
        liabilities                                                   | 4,356                                                                                                                                            |                                                   
|                                                                     |                                                                             |                                                                                                                                                  | Total
        liabilities                         
|                                                                     |                                                                             |                                                                                                                                                  |                                                   
|Shareholders'
        equity                                         |                                                                             |                                                                                                                                                  |                                                   
|                                                                     | Common
        Stock, $.01 par value; authorized: 30,000,000 shares;        |                                                                                                                                                  |                                                   
|                                                                     |                                                                             | issued:
        9,658,246 shares; outstanding: 9,658,246 shares at                                                                               |                                                   
|                                                                     |                                                                             | September
        30, 2005: authorized: 11,339,200 shares; issued: 11,339,200 
        shares outstanding: 9,591,934 shares at December 31, 2004 | 96                                                
|                                                                     | Additional
        paid-in capital                                          | 59,850                                                                                                                                           |                                                   
|                                                                     | Retained
        earnings                                                   | 35,808                                                                                                                                           |                                                   
|                                                                     | Treasury
        stock, at cost 0 shares at September 30, 2005 and          |                                                                                                                                                  |                                                   
|                                                                     |                                                                             | 1,747,266
        shares at December 31, 2004)                                                                                                   | -                                                 
|                                                                     | Accumulated
        other comprehensive income                              | 156                                                                                                                                              |                                                   
|                                                                     | Unallocated
        shares of employee stock ownership plan (ESOP); 477,559 |                                                                                                                                                  |                                                   
|                                                                     |                                                                             | shares
        at September 30, 2005 and 272,099 shares at December 31, 2004                                                                     | (2,794)                                           
|                                                                     | Unearned
        compensation                                               | -                                                                                                                                                |                                                   
|                                                                     |                                                                             |                                                                                                                                                  | Total
        shareholders' equity                
|                                                                     |                                                                             |                                                                                                                                                  | Total
        liabilities and shareholders' equity



See accompanying notes to unaudited condensed consolidated financial statements.







3



---







ROME BANCORP, INC. AND SUBSIDIARY

Condensed
  Consolidated Statements of Income

For the Three and Nine Months Ended September 30, 2005 and 2004

(in thousands, except  share data)

(unaudited)



|                                   |                                           |                                                             | For
        the three months ended |       | For
        the nine months ended
|---------------------------------- | ----------------------------------------- | ----------------------------------------------------------- | ---------------------------------- | ----- | ---------------------------------
|                                   |                                           |                                                             | September
        30,              |       | September
        30,            
|                                   |                                           |                                                             | 2005                               |       | 2004                             
|Interest
        income:           |                                           |                                                             |                                    |       |                                  
|                                   | Loans                                     | $                                                           | 3,815                              |       | $                                
|                                   | Securities                                | 164                                                         |                                    | 206   |                                  
|                                   | Other
        short-term investments      | 260                                                         |                                    | 5     |                                  
|                                   |                                           | Total
        interest income                               | 4,239                              |       | 3,603                            
|                                   |                                           |                                                             |                                    |       |                                  
|Interest
        expense:          |                                           |                                                             |                                    |       |                                  
|                                   | Deposits                                  | 679                                                         |                                    | 620   |                                  
|                                   | Borrowings                                | 85                                                          |                                    | 130   |                                  
|                                   |                                           | Total
        interest expense                              | 764                                |       | 750                              
|                                   |                                           |                                                             |                                    |       |                                  
|                                   |                                           | Net
        interest income                                 | 3,475                              |       | 2,853                            
|                                   |                                           |                                                             |                                    |       |                                  
|Provision
        for loan losses  | -                                         |                                                             | 200                                |       | -                                
|                                   |                                           | Net
        interest income after provision for loan losses | 3,475                              |       | 2,653                            
|                                   |                                           |                                                             |                                    |       |                                  
|Non-interest
        income:       |                                           |                                                             |                                    |       |                                  
|                                   |                                           | Net
        gain on securities transactions                 | -                                  |       | 28                               
|                                   |                                           | Other                                                       | 454                                |       | 425                              
|Total
        non-interest income  | 454                                       |                                                             | 453                                |       | 1,506                            
|                                   |                                           |                                                             |                                    |       |                                  
|                                   |                                           |                                                             |                                    |       |                                  
|Non-interest
        expense:      |                                           |                                                             |                                    |       |                                  
|                                   | Salaries
        and employee benefits    | 1,284                                                       |                                    | 1,250 |                                  
|                                   | Building,
        occupancy and equipment | 383                                                         |                                    | 413   |                                  
|                                   | Other                                     | 613                                                         |                                    | 611   |                                  
|                                   |                                           | Total
        non-interest expense                          | 2,280                              |       | 2,274                            
|                                   |                                           |                                                             |                                    |       |                                  
|                                   |                                           |                                                             |                                    |       |                                  
|                                   |                                           | Income
        before income tax expense                    | 1,649                              |       | 832                              
|Income
        tax expense         | 637                                       |                                                             | 293                                |       | 1,572                            
|                                   |                                           | Net
        income                                          | $                                  | 1,012 |                                  
|                                   |                                           |                                                             |                                    |       |                                  
|Basic
        earnings per share   | $                                         | 0.11                                                        |                                    | $     | 0.06                             
|Diluted
        earnings per share | $                                         | 0.11                                                        |                                    | $     | 0.06                             







See accompanying notes to unaudited condensed consolidated financial statements.



4



---







ROME
  BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statement of Shareholders'Equity and Comprehensive IncomeFor Nine Months Ended September 30, 2005 and 2004(in thousands, except share and per share data)(unaudited)



|                                                |                                                                                       |      |    |         |        |            |       |                   |   |          |       | Accumulated   |         |             |   |              |        |      
|----------------------------------------------- | ------------------------------------------------------------------------------------- | ---- | -- | ------- | ------ | ---------- | ----- | ----------------- | - | -------- | ----- | ------------- | ------- | ----------- | - | ------------ | ------ | -----
|                                                |                                                                                       |      |    |         |        | Additional |       |                   |   |          |       | other         |         | Unallocated |   |              |        |      
|                                                |                                                                                       |      |    | Common  |        | paid-in    |       | Retained          |   | Treasury |       | comprehensive |         | ESOP        |   | Unearned     |        |      
|                                                |                                                                                       |      |    | stock   |        | Capital    |       | earnings          |   | Stock    |       | income        |         | shares      |   | compensation |        | Total
|Balances
        at January 1, 2004             | $                                                                                     | 33   | $  | 10,250  | $      | 33,255     | $     | $
        (6,992) | $ | 793      | $     | (622)         | $       | (78)        | $ | 36,639      
|Comprehensive
        income:                   |                                                                                       |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |             
|                                                | Net
        Income                                                                    |      | -  |         | -      |            | 1,663 |                   | - |          | -     |               | -       |             | - |              | 1,663 
|                                                | Other
        comprehensive income                                                    |      | -  |         | -      |            |       |                   | - |          | (315) |               | -       |             | - |              | (315) 
|                                                | Total
        comprehensive income                                                    |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |              | 1,348 
|Purchase
        of 118,726 treasury shares     |                                                                                       | -    |    | -       |        | -          |       | (2,046)           |   | -        |       | -             |         | -           |   | (2,046)     
|Amortization
        of unearned compensation   |                                                                                       | -    |    | -       |        | -          |       | -                 |   | -        |       | -             |         | 39          |   | 39          
|Dividends
        paid ($0.165 per share)       |                                                                                       | -    |    | -       |        | (760)      |       | -                 |   | -        |       | -             |         | -           |   | (760)       
|Exercise
        of stock options               |                                                                                       | -    |    | 39      |        | (25)       |       | 46                |   |          |       |               |         |             |   | 60          
|ESOP
        shares released for                |                                                                                       |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |             
|                                                | allocation
        (15,117 shares)                                                    |      | -  |         | 261    |            | -     |                   | - |          | -     |               | 47      |             | - |              | 308   
|Balances
        at September 30, 2004          | $                                                                                     | 33   | $  | 10,550  | $      | 34,133     | $     | $
        (8,992) | $ | 478      | $     | (575)         | $       | (39)        | $ | 35,588      
|                                                |                                                                                       |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |             
|Balances
        at January 1, 2005             | $                                                                                     | 33   | $  | 10,756  | $      | 34,627     | $     | (8,963)           | $ | 391      | $     | (560)         | $       | (26)        | $ | 36,258      
|Comprehensive
        income:                   |                                                                                       |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |             
|                                                | Net
        Income                                                                    |      | -  |         | -      |            | 2,621 |                   | - |          | -     |               | -       |             | - |              | 2,621 
|                                                | Other
        comprehensive loss                                                      |      | -  |         | -      |            | -     |                   | - |          | (235) |               | -       |             | - |              | (235) 
|                                                | Total
        comprehensive income                                                    |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |              | 2,386 
|Proceeds
        of common stock                |                                                                                       |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |             
|                                                | offering
        and conversion 
        of existing shares, 
        net of expenses |      | 75 |         | 57,759 |            | -     |                   | - |          | -     |               | (2,360) |             | - |              | 55,474
|Retirement
        of 1,747,266 treasury shares |                                                                                       | (12) |    | (8,963) |        | -          |       | 8,963             |   | -        |       | -             |         | -           |   | (12)        
|Amortization
        of unearned compensation   |                                                                                       | -    |    | -       |        | -          |       | -                 |   | -        |       | -             |         | 26          |   | 26          
|Dividends
        paid ($0.199 per share)       |                                                                                       | -    |    | -       |        | (1,440)    |       | -                 |   | -        |       | -             |         | -           |   | (1,440)     
|Exercise
        of stock options               |                                                                                       | -    |    | 35      |        | -          |       | -                 |   | -        |       | -             |         | -           |   | 35          
|Tax
        benefit of vested RRP shares        |                                                                                       | -    |    | 73      |        | -          |       | -                 |   | -        |       | -             |         | -           |   | 73          
|ESOP
        shares released for                |                                                                                       |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |             
|                                                | allocation
        (30,540 shares)                                                    |      | -  |         | 190    |            | -     |                   | - |          | -     |               | 125     |             | - |              | 315   
|Balances
        at September 30, 2005          | $                                                                                     | 96   | $  | 59,850  | $      | 35,808     | $     | -                 | $ | 156      | $     | (2,795)       | $       | -           | $ | 93,116      
|                                                |                                                                                       |      |    |         |        |            |       |                   |   |          |       |               |         |             |   |              |        |      



See accompanying notes to unaudited condensed consolidated financial statements.



5



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ROME
  BANCORP, INC. AND SUBSIDIARYCondensed Consolidated Statements of Cash Flows
  For the Nine Months Ended September 30, 2005 and 2004
  (unaudited) (in thousands)



|                                                             |                                                              |                                           |                                                            |                                                   |                 |         |          | 2005    |  | 2004
|------------------------------------------------------------ | ------------------------------------------------------------ | ----------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------- | --------------- | ------- | -------- | ------- |  | ----
|Cash
        flows from operating activities:                |                                                              |                                           |                                                            |                                                   |                 |        
|                                                             | Net
        income                                           |                                           |                                                            | $                                                 | $
        2,621 | $       | 1,663   
|                                                             | Adjustments
        to reconcile net income to net cash      |                                           |                                                            |                                                   |                
|                                                             |                                                              | Provided
        by operating activities: |                                                            |                                                   |                 |         |         
|                                                             |                                                              |                                           | Depreciation
        and amortization                      |                                                   |                 | 378     |          | 373    
|                                                             |                                                              |                                           | Increase
        (decrease) in accrued interest receivable | (108)                                             |                 | 62     
|                                                             |                                                              |                                           | Net
        gain on securities sold                        | (46)                                              |                 | (126)  
|                                                             |                                                              |                                           | Provision
        for loan losses                          | -                                                 |                 | 325    
|                                                             |                                                              |                                           | Net
        (gain) loss on sales of real estate owned      | (15)                                              |                 | 42     
|                                                             |                                                              |                                           | Net
        accretion on securities                        |                                                   | 6               |         | 15      
|                                                             |                                                              |                                           | Proceeds
        from sales of loans                       |                                                   | 1,373           |         | -       
|                                                             |                                                              |                                           | Net
        gain on loans sold                             |                                                   | (16)            |         | -       
|                                                             |                                                              |                                           | Increase
        (decrease) in other liabilities           |                                                   | 92              |         | (52)    
|                                                             |                                                              |                                           | Decrease
        in other assets                           |                                                   |                 | 429     |          | 363    
|                                                             |                                                              |                                           | Allocation
        of ESOP shares                          |                                                   |                 | 315     |          | 308    
|                                                             |                                                              |                                           | Amortization
        of Unearned Compensation              |                                                   | 26              |         | 39      
|                                                             |                                                              |                                           |                                                            | Net
        cash provided by operating activities |                 | 5,055   |          | 3,012  
|                                                             |                                                              |                                           |                                                            |                                                   |                 |         |          |         |  |     
|Cash
        flows from investing activities:                |                                                              |                                           |                                                            |                                                   |                 |        
|                                                             | Net
        increase in loans                                |                                           |                                                            |                                                   | (20,186)        |         | (16,323)
|                                                             | Proceeds
        from sales of securities available for sale |                                           | 746                                                        |                                                   | 1,691          
|                                                             | Proceeds
        from maturities and principal reductions of |                                           |                                                            |                                                   |                
|                                                             |                                                              | securities
        available for sale     |                                                            |                                                   |                 | 3,104   |          | 5,680  
|                                                             | Purchases
        of securities available for sale           |                                           |                                                            | (1)                                               |                 | (3)    
|                                                             | Purchases
        of securities held to maturity             | -                                         |                                                            | (100)                                            
|                                                             | Redemption
        of Federal Home Loan Bank stock           | (175)                                     |                                                            | (198)                                            
|                                                             | Proceeds
        from maturities and principal reductions of |                                           |                                                            |                                                   |                
|                                                             |                                                              | securities
        held to maturity       |                                                            |                                                   |                 | 55      |          | 733    
|                                                             | Proceeds
        from sales of real estate owned             |                                           |                                                            | 98                                                |                 | 247    
|                                                             | Additions
        to premises and equipment                  |                                           |                                                            | (451)                                             |                 | (256)  
|                                                             |                                                              |                                           |                                                            | Net
        cash used in investing activities     | (16,810)        |         | (8,529) 
|                                                             |                                                              |                                           |                                                            |                                                   |                 |         |          |         |  |     
|Cash
        flows from financing activities:                |                                                              |                                           |                                                            |                                                   |                 |        
|                                                             | Decrease
        in time deposits                            |                                           |                                                            | (1,897)                                           |                 | (2,040)
|                                                             | (Decrease)
        increase in other deposits                |                                           |                                                            | (3,531)                                           |                 | 6,425  
|                                                             | Net
        proceeds of stock offering and conversion        |                                           |                                                            | 55,462                                            |                 | -      
|                                                             | Repayments
        of borrowings                             |                                           |                                                            |                                                   | (12,223)        |         | (5,010) 
|                                                             | Additional
        borrowings                                |                                           |                                                            |                                                   | 3,000           |         | 2,000   
|                                                             | Purchase
        of treasury stock                           |                                           |                                                            |                                                   | -               |         | (2,046) 
|                                                             | Dividends
        paid                                       |                                           |                                                            |                                                   | (1,440)         |         | (760)   
|                                                             | Exercise
        of stock options                            |                                           |                                                            |                                                   | 35              |         | 21      
|                                                             |                                                              |                                           |                                                            | Net
        cash provided by financing activities |                 | 39,406  |          | (1,410)
|                                                             |                                                              |                                           |                                                            |                                                   |                 |         |          |         |  |     
|Net
        (decrease) increase in cash and cash equivalents |                                                              | 27,651                                    |                                                            | (6,927)                                          
|Cash
        and cash equivalents at beginning of period     |                                                              |                                           | 6,929                                                      |                                                   | 14,055         
|                                                             |                                                              |                                           |                                                            |                                                   |                 |         |          |         |  |     
|Cash
        and cash equivalents at end of period           |                                                              | $                                         | 34,580                                                     | $                                                 | 7,128          



Condensed Consolidated Statements of Cash Flows continued on next page.



6



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ROME BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2005 and 2004

(unaudited) (in thousands)





|                                                          |                                                        |  |       |   |       |   |    | 2005 |  | 2004
|--------------------------------------------------------- | ------------------------------------------------------ |  | ----- | - | ----- | - | -- | ---- |  | ----
|Supplemental
        disclosure of cash flow information: |                                                        |  |       |   |      
|                                                          | Non-cash
      investing activities:                   |  |       |   |       |   |   
|                                                          | Transfer
        of loans to real estate owned         |  |       | $ | 83    | $ | 87
|                                                          | Change
        in securities purchased and not settled |  | -     |   | -    
|                                                          | Cash
      paid during the period for:                 |  |       |   |      
|                                                          | Interest                                               |  | 2,269 |   | 2,311
|                                                          |                                                        |  | 1,350 |   | 549  
|                                                          | Income
      taxes                                     |  |       |   |      



See accompanying notes to unaudited condensed consolidated financial statements.





7



---









ROME BANCORP, INC.

Notes
  to Unaudited Condensed Consolidated Financial Statements



| | (1) | Basis of Presentation
| | --- | ---------------------



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, 2005 and December 31, 2004 and for the three and nine month periods ended September 30, 2005 and 2004. All inter-company accounts and transactions have been eliminated in consolidation.  The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q.   Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  In the opinion of management, the unaudited condensed consolidated financial statements include all necessary adjustments, consisting of normal recurring accruals, necessary for a fair presentation for the periods presented.



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



The data in the condensed consolidated balance sheet for December 31, 2004 was derived from the Company's 2004 Annual Report on Form 10-KSB.  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 2004 consolidated financial statements, including the notes thereto included in the Company's Annual Report on Form 10- KSB.



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



(2) Stock Offering and Conversion



On March 30, 2005, the second-step conversion of Rome MHC into a stock holding company structure and the related stock offering of this new stock holding company was completed. As a result of the second-step conversion, New Rome Bancorp, Inc. became the holding company for the Bank and was immediately renamed "Rome Bancorp, Inc." Rome Bancorp issued 5,900,000 shares of common stock  at a price of $10.00 per share in the related stock offering and exchanged 1,650,254 shares of common stock of the now predecessor Rome Bancorp, Inc. into 3,742,246 shares of common stock of the newly formed Rome Bancorp, Inc. pursuant to an exchange ratio of 2.26784, cashing out fractional shares. The reorganization was accounted for as a change in corporate form with no resulting change in the historical basis of the Company's assets, liabilities and equity. Direct offering costs totaling $3.2 million were
deducted from the proceeds of the shares sold in the offering. As a result of the exchange and stock offering, as of March 30, 2005, the Company had 9,642,246 shares of common stock issued



8



---





and outstanding. Net proceeds of $53.5 million were raised in the stock offering, excluding $2.36 million which was loaned by the Company to a trust for the Employee Stock Ownership Plan (ESOP); enabling the trust to purchase 236,000 shares of common stock in the stock offering for allocation under the ESOP. In addition, as part of the conversion and dissolution of Rome MHC, the Bank received $1.9 million of cash previously held by Rome MHC.



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



(3)  Earnings Per Share



The following summarizes the computation of earnings per share for the three and nine month periods ended September 30, 2005 and 2004.









|                                                    | Three
        and nine months ended
        September 30
        (in thousands, except share and per share data)
|--------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------
|                                                    |                                                                                                                 
|                                                    | Three
        months ended                                                                                      
|                                                    |                                                                                                                 
|Basic
        earnings per share:                   |                                                                                                                 
|Income
        available to common shareholders     | $                                                                                                               
|Weighted
        average basic shares outstanding   |                                                                                                                 
|                                                    |                                                                                                                 
|Basic
        earnings per share                    | $                                                                                                               
|                                                    |                                                                                                                 
|Diluted
        earnings per share:                 |                                                                                                                 
|Income
        available to common shareholders     | $                                                                                                               
|Weighted
        average basic shares outstanding   |                                                                                                                 
|Effect
        of dilutive securities:              |                                                                                                                 
|Stock
        options                               |                                                                                                                 
|Unearned
        compensation                       |                                                                                                                 
|Weighted
        average diluted shares outstanding |                                                                                                                 
|                                                    |                                                                                                                 
|Diluted
        earnings per share                  | $                                                                                                               

















9



---









(4)  Other Comprehensive Income (Loss)

|                                                              | Three months endedSeptember 30, | Nine months endedSeptember 30,
|------------------------------------------------------------- | ------------------------------- | ------------------------------
|
|Net change
      in unrealized loss on                        |                                 |                               
|available-for-sale
      securities arising during the period |                                 |                               
|Reclassification
      adjustment for net realized gain       |                                 |                               
|included
      in net income                                  |                                 |                               
|Other comprehensive
      loss, before tax                    |                                 |                               
|Deferred
      tax benefit                                    |                                 |                               
|Other
      comprehensive loss                                |                                 |                               











|(5) | Securities                                                   |                                         |                                  |                               |        |        |        |        |                            |                           |       
|--- | ------------------------------------------------------------ | --------------------------------------- | -------------------------------- | ----------------------------- | ------ | ------ | ------ | ------ | -------------------------- | ------------------------- | ------
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    | Securities
        are summarized as follows (in thousands): |                                         |                                  |                               |        |       
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    |                                                              |                                         |                                  |                               |        |        |        |        | September
        30, 2005 | December
        31, 2004
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    |                                                              |                                         |                                  |                               |        |        |        |        | Amortized                  |                           | Fair  
|    |                                                              |                                         |                                  |                               |        |        |        |        | Cost                       |                           | value 
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    | Available-for-sale:                                          |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    |                                                              | U.S.
        Government agencies        | $                                | 1,145                         | $      | 1,190  | $      | 2,244  | $                          | 2,325                    
|    |                                                              | State
        and Municipal obligations |                                  | 5,787                         |        | 5,911  |        | 7,004  |                            | 7,266                    
|    |                                                              | Mortgage-backed
        securities      |                                  |                               |        |        |        |        |                            |                          
|    |                                                              | FNMA                                    |                                  | -                             |        | -      |        | 126    |                            | 129                      
|    |                                                              | FHLMC                                   |                                  | 686                           |        | 708    |        | 840    |                            | 883                      
|    |                                                              | Corporate
        bonds                 |                                  | 2,512                         |        | 2,532  |        | 3,024  |                            | 3,116                    
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    |                                                              |                                         |                                  | Total
        debt securities |        | 10,130 |        | 10,341 |                            | 13,238                    |       
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    |                                                              | FHLB
        stock                      |                                  |                               |        | 1,278  |        | 1,278  |                            | 1,103                     |       
|    |                                                              | Equity
        and other securities     |                                  | 1,793                         |        | 1,841  |        | 2,500  |                            | 2,672                    
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    |                                                              |                                         | Total
        available for sale | $                             | 13,201 | $      | 13,460 | $      | 16,841                     | $                         | 17,494
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    | Held-to-maturity:                                            |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    |                                                              | U.S.
        Government securities      | $                                | 1,311                         | $      | 1,294  | $      | 1,320  | $                          | 1,313                    
|    |                                                              | Mortgage-backed
        securities      |                                  |                               |        |        |        |        |                            |                          
|    |                                                              | GNMA                                    |                                  | 79                            |        | 83     |        | 100    |                            | 108                      
|    |                                                              | FHLMC                                   |                                  | 4                             |        | 4      |        | 6      |                            | 6                        
|    |                                                              | Other
        bonds                     |                                  |                               |        | 182    |        | 182    |                            | 197                       |       
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       
|    |                                                              |                                         | Total
        held to maturity   | $                             | 1,576  | $      | 1,563  | $      | 1,623                      | $                         | 1,624 
|    |                                                              |                                         |                                  |                               |        |        |        |        |                            |                           |       



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



Securities
  pledged at both September 30, 2005 and December 31, 2004 had a carrying amount
  of $1.2 million. These securities collateralize state and Treasury department
  programs. As of these





10



---



dates,
  there were no holdings of securities of any one issuer, other than the U.S.
  Government and its agencies, in an amount greater than 10% of shareholders'
  equity.



|(6) | Loans
|--- | -----



Loans are summarized as follows (in thousands):



|                |                          |                      | September 30,   | December 31, 
|--------------- | ------------------------ | -------------------- | --------------- | -------------
|                |                          |                      | 2005            | 2004         
|Mortgage loans: |                          |                     
|                | Residential (1-4 family) | $       122,515      | $       114,138
|                | Commercial               | 53,357               | 49,364         
|                | Construction and land    | 4,581                | 5,469          
|                |                          |                      |                 |              
|                |                          | Total Mortgage loans | 180,453         | 168,971      
|Other loans:    |                          |                     
|                | Commercial               | 24,988               | 21,507         
|                | Automobile loans         | 17,913               | 15,529         
|                | Property improvement     |                      |                
|                |                          | and equipment        | 14,807          | 12,766       
|                | Other consumer           | 14,261               | 14,499         
|                |                          |                      |                 |              
|                |                          | Total Other loans    | 71,969          | 64,301       
|                |                          |                      |                 |              
|                |                          | Total Loans          | $     252,422   | $     233,272





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



|                                        | Three
        months ended | Nine
        months ended
|--------------------------------------- | -------------------------- | -------------------------
|                                        | September
        30,      | September
        30,    
|                                        | 2005                       | 2004                     
|                                        |                            |                          
|Balance
        at beginning of period  | $
        2,295            | $
        1,814          
|Provision
        charged to operations | -                          | 200                      
|Loans
        charged off               | (88)                       | (154)                    
|Recoveries                              | 31                         | 51                       
|Balance
        at end of period        | $
        2,238            | $
        1,911          
|                                        |                            |                          





The Company's recorded investment in loans that are considered impaired totaled $243,000 and $268,000 at September 30, 2005 and December 31, 2004, respectively.  These impaired loans carried allowances of $85,000 at September 30, 2005 and $94,000 at December 31, 2004. The average recorded investment in impaired loans was $252,000 and $273,000 in the nine months ended September 2005 and 2004, respectively. The Company recognized no interest on impaired loans during the three and nine months ended September 30, 2005 and 2004.







11



---





The
  principal balances of loans not accruing interest amounted to $1.2 million and
  $743,000 at September 30, 2005 and December 31, 2004, respectively. Loans
  90 days past due and accruing interest amounted to $137,000 and $86,000 at September
  30, 2005 and December 31, 2004 and 2003, respectively. The differences between
  the amount of interest income that would have been recorded if non-accrual loans
  had been paid in accordance with their original terms and the amount of interest
  income that was recorded during the nine months ended September 30, 2005 and
  2004 was $45,200 and $46,400, respectively. There are no commitments to extend
  further credit on non-accruing loans.



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



| | (7) | Stock-Based Compensation
| | --- | ------------------------



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



The fair value of each option grant is estimated on the dates of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants made on September 28, 2000: dividend yield of 2.00%; expected volatility of 47.50%; risk free interest rate of 6.30%; and expected lives of five years.  The estimated weighted average fair value of the options granted on September 28, 2000 was $0.93 per option.



Pro forma disclosures for the Company for the periods ended September 30, 2005 and 2004 utilizing the estimated fair value of the options granted and an assumed 5% forfeiture rate are as follows:



|                                                                                                                                    | Three months ended September 30, |  | Nine months endedSeptember 30, |      
|----------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- |  | ------------------------------ | -----
|(in
        thousands, except per share data)                                                                                      
|
|Net
      income:                                                                                                                   |                                  |  |                                |      
|As reported                                                                                                                         |                                  |  | $                              | 1,012
|Add:
      Stock based compensation expense included in net                                                                         |                                  |  |                                |      
|income,
      net of related tax expense                                                                                            |                                  |  |                                | 8    
|                                                                                                                                    |                                  | 
|Deduct:
      Total stock based compensation expense
        determined under fair value method, net of related
        tax expense |                                  |  |                                | (17) 
|Pro forma                                                                                                                           |                                  |  | $                              | 1,003





12



---









|Basic
      earnings per share:   |  |  |  
|--------------------------------- |  |  | -
|As reported                       |  |  | $
|Pro forma                         |  |  | $
|Diluted
      earnings per share: |  | 
|As reported                       |  |  | $
|Pro forma                         |  |  | $





Because the Company's stock options have characteristics significantly different from those of traded options for which the Black-Scholes model was developed, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models, in management's opinion, do not necessarily provide a reliable single measure of the fair value of its stock options.  In addition, the effect on reported net income and earnings per share for the periods ended September 30, 2005 and 2004 may not be representative of the effects on reported net income or earnings per share for future periods.





| | (9) | 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)
|---------------------------------------------- | ------------------------------------------------------
|
|Components
      of net periodic pension cost: |                                                       
|Service
      cost                             |                                                       
|Interest
      cost                            |                                                       
|Expected
      return on plan assets           |                                                       
|Curtailment
      charge                       |                                                       
|Amortization                                   |                                                       
|Net
      periodic pension cost                |                                                       
|
|
|
|Components
      of net periodic pension cost: |                                                       
|Service
      cost                             |                                                       
|Interest
      cost                            |                                                       
|Expected
      return on plan assets           |                                                       
|Curtailment
      charge                       |                                                       
|Amortization                                   |                                                       
|Net
      periodic pension cost                |                                                       





In December of 2002, the Company's Board of Directors amended the defined benefit pension plan to cease the accrual of further benefits. In the third quarter of 2005, the Company made a contribution of $100,000 to the defined benefit plan.







13



---





|(10) | Borrowings
|---- | ----------



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



|                                                         |  | At September 30, |  | At December 31,    
|-------------------------------------------------------- |  | ---------------- |  | -------------------
|                                                         |  | 2005             |  | 2004               
|Bearing interest at 2.62% fixed, due 3/15/05             |  | -                |  | $
            4,500
|FHLB Overnight Line of Credit, bearing
interest at 2.38% |  | -                |  | 4,000              





The Company is indebted to the FHLB under the following amortizing notes (in thousands).  The Company has a blanket pledge on their one-to-four family mortgage loans as collateral for these borrowings.



|                                              |  | At September 30,    |  | At December 31,
|--------------------------------------------- |  | ------------------- |  | ---------------
|                                              |  | 2005                |  | 2004           
|Bearing interest at 3.67% fixed, due 7/3/15   |  | $
            2,569 |  | $    2,728     
|Bearing interest at 3.36% fixed, due 7/3/13   |  | 4,501               |  | 4,869          
|Bearing interest at 3.59% fixed, due 11/26/08 |  | 2,550               |  | 2,746          





The following table summarizes the combined aggregate amount of maturities for the above advances and notes for each of the five years after September 30, 2005, as well as remaining maturities beyond five years (in thousands):





|Due
        in one year              | $ | 994  
|------------------------------------ | - | -----
|Due
        one through two years    |   | 1,029
|Due
        two through three years  |   | 1,066
|Due
        three through four years |   | 2,511
|Due
        four through five years  |   | 831  
|Due
        past five years          |   | 3,189
|Total                                | $ | 9,620





At September 30, 2005, the Company had additional availability on its FHLB line of credit of $31.6 million. This line of credit is subject to periodic review and renewal.





(11)  Recent Accounting Pronouncements





14



---







In
  December 2003, the Medicare Prescription Drug, Improvement and Modernization
  Act of 2003 (the "Act") became law in the United States. The Act introduces
  a prescription drug benefit under Medicare as well as a federal subsidy to sponsors
  of retiree health care benefit plans that provide a benefit that is at least
  actuarially equivalent to the Medicare benefit. We maintain a postretirementbenefit plan that may be impacted by the Act. In May 2004,
  the Financial Accounting Standards Board ("FASB") issued FASB Staff Position
  ("FSP") No. FAS 106-2, "Accounting and Disclosure Requirements Related to the
  Medicare Prescription Drug, Improvement and Modernization Act of 2003." This
  FSP provides authoritative guidance on the accounting for the effects of the
  Act and supersedes FSP FAS 106-1. FSP No. 106-2 is effective for the first interim
  or annual period beginning after June 15, 2004 which, for the Company, is July
  1, 2004. However, if the effects of the Act are not a significant event as defined
  in FSP No. 106-2, or if benefits under the Company's plan are not actuarially
  equivalent to the Medicare benefit, then effects of the Act will be measured
  at the next measurement date for the plan. The next measurement date for the
  Company's postretirement benefit plan is December 31, 2005.

Net periodic benefit costs for postretirement benefits in Note 9 do not reflect any amount associated with the subsidy provided by the Act because the Company was unable to conclude whether the benefits provided by its plan are actuarially equivalent to Medicare Part D under the Act.

In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) establishes accounting standards for transactions in which a company exchanges its equity instruments for goods or services. In particular, this Statement will require companies to record compensation expense for all share-based payments, such as employee stock options, at fair market value. This Statement is effective as of the beginning of the first interim reporting period of 2006 (the Companys fiscal period beginning January 1, 2006). The Company is currently reviewing the effect of this Statement on its consolidated financial statements as it relates to future option grants.





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. with
  the Securities and Exchange Commission, in Rome Bancorp, Inc. press releases,
  and in oral statements made with the approval of an authorized executive officer,
  which are not historical or current facts, are "forward-looking statements"
  made pursuant to the safe harbor provisions of the Private Securities Litigation
  Reform Act of 1995, and are subject to certain risks and uncertainties that
  could cause actual results to differ materially from historical earnings and
  those presently anticipated or projected. Rome Bancorp, Inc. wishes to caution
  readers not to place undue reliance on such forward-looking statements, which
  speak only as of the date made. The following important factors, among others,
  in some cases have affected and in the future could affect Rome Bancorp, Inc.
  actual results, and could cause Rome Bancorp, Inc. actual financial performance
  to differ materially from that expressed in any forward-looking statement: (1)
  competitive pressures among depository and other financial institutions may
  increase significantly; (2) revenues may be lower than expected; (3) changes
  in the interest rate environment may reduce interest margins; (4) general economic
  conditions, either nationally or regionally, may be less favorable than expected,
  resulting in, among other things, a deterioration in credit quality and/or a
  reduced demand for credit; (5) legislative or regulatory changes, including
  changes in accounting standards, may adversely affect the business in which
  the Company is engaged;



15



---





(6)
  competitors may have greater financial resources and developed products that
  enable such competitors to compete more successfully than the Company; and (7)
  adverse changes may occur in the securities markets or with respect to inflation.
  The foregoing list should not be construed as exhaustive, and Rome Bancorp,
  Inc. disclaims any obligation to subsequently revise any forward-looking statements
  to reflect events or circumstances after the date of such statements, or to
  reflect the occurrence of anticipated or unanticipated events.



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, 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 federal charter on April 27, 2004, the Bank is regulated by the OTS as a federal savings bank.



Overview



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



Net income for the third quarter of 2005 was $1.0 million, an increase of 87.8% over the prior year's third quarter net income of $539,000. The significant factors and trends impacting the third quarter of 2005, which are discussed in greater detail below, were as follows:



| |  | 2005 third quarter net interest income increased by $622,000 or 21.8% from the same quarter last year as a result of an increase in interest earning assets of $45.5 million or 18.3%. This increase is attributable to the proceeds of the Company's stock offering which closed on March 30, 2005.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Non-interest expense of $2.3 million was recorded in both the third quarters of 2005 and 2004.
| | - | ----------------------------------------------------------------------------------------------

| |  | The Company recorded no provision for loan losses in the quarter ended September 2005, as compared to $200,000 in the prior year. The Company recorded a large recovery in the second quarter of 2005 which provided for any additional allowance needed in the current quarter.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









16



---



| |  | Non-interest
        income was constant for the third quarters of 2005 and 2004.
| | - | ---------------------------------------------------------------------------------

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.



Management also considers the accounting policy relating to the impairment of long lived assets to be a critical accounting policy due to the subjectivity and judgment involved and the material effect an impairment loss could have on the results of operations.A decline in the fair value of long lived asset below cost that is deemed to be other than temporary is charged to earnings, resulting in the establishment of a new cost basis for the asset.  Management regularly reviews the current value of its long lived assets for evidence of other than temporary impairment.



These critical policies and their application are reviewed periodically by the Audit Committee and the Board of Directors. All accounting policies are important, and as such, we encourage the reader to review each of the policies included in Note 2 to the consolidated financial statements reported on the Company's 2004 Form 10-KSB to obtain a better understanding of how our financial performance is reported.



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-earning 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.







17



---









|                                                                                                     | Average
      Balances, Interest and Average Yields 
      For the three months ended September 30,
|---------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------
|                                                                                                     |                                                                                                    
|                                                                                                     |                                                                                                    
|**Assets:**                                                                                          |                                                                                                    
|Interest-earning
      assets:                                                                       |                                                                                                    
|Loans                                                                                                |                                                                                                    
|Securities
      (1)                                                                                 |                                                                                                    
|Federal
      funds sold & other                                                                     |                                                                                                    
|Interest
      bearing deposits                                                                      |                                                                                                    
|Total
      interest-earnings assets                                                                 |                                                                                                    
|Noninterest-earning
      assets                                                                     |                                                                                                    
|Total
      assets                                                                                   |                                                                                                    
|**Liabilities
      and Shareholders' Equity:**                                                      |                                                                                                    
|Interest-bearing
      liabilities:                                                                  |                                                                                                    
|Savings
      accounts                                                                               |                                                                                                    
|Time
      deposits                                                                                  |                                                                                                    
|Money
      market accounts                                                                          |                                                                                                    
|Other
      interest bearing deposits                                                                |                                                                                                    
|Total
      interest-bearing deposits                                                                |                                                                                                    
|Borrowings                                                                                           |                                                                                                    
|Total
      interest-bearing liabilities                                                             |                                                                                                    
|Noninterest-bearing
      deposits                                                                   |                                                                                                    
|Other liabilities                                                                                    |                                                                                                    
|Total
      liabilities                                                                              |                                                                                                    
|Shareholders'
      equity                                                                           |                                                                                                    
|Total
      liabilities and shareholders' equity                                                     |                                                                                                    
|Net interest
      income                                                                            |                                                                                                    
|Tax equivalent
      adjustment on securities                                                        |                                                                                                    
|Net interest
      income per consolidated                                                           |                                                                                                    
|financial
      statements                                                                           |                                                                                                    
|Net interest
      rate spread                                                                       |                                                                                                    
|Net interest
      margin                                                                            |                                                                                                    
|Ratio of
      interest-earning assets to                                                            |                                                                                                    
|interest-bearing
      liabilities                                                                   |                                                                                                    
|(1)
      Includes tax equivalent adjustment for the Company's tax-exempt municipal
      securities









18



---









|                                                 |      |      | **Average
        Balances, Interest and Average Yields 
        For the nine months ended September 30,**
|------------------------------------------------ | ---- | ---- | ----------------------------------------------------------------------------------------------------------
|                                                 |      |      | **2005**                                                                                                  
|                                                 |      |      | **AverageBalance**                                                                                        
|**Assets:**                                      | **** | **** | **(Dollars in thousands)**                                                                                
|Interest-earning
      assets:                   |      |     
|Loans                                            |      |      | $                                                                                                         
|Securities
      (1)                             |      |      |                                                                                                           
|Federal
      funds sold & other                 |      |     
|Interest
      bearing deposits                  |      |      |                                                                                                           
|Total
      interest-earnings assets             |      |      |                                                                                                           
|Noninterest-earning
      assets                 |      |      |                                                                                                           
|Total
      assets                               |      |      | $                                                                                                         
|**Liabilities
      and Shareholders' Equity:**  |      |     
|Interest-bearing
      liabilities:              |      |     
|Savings
      accounts                           |      |      | $                                                                                                         
|Time
      deposits                              |      |      |                                                                                                           
|Money
      market accounts                      |      |      |                                                                                                           
|Other
      interest bearing deposits            |      |      |                                                                                                           
|Total
      interest-bearing deposits            |      |      |                                                                                                           
|Borrowings                                       |      |      |                                                                                                           
|Total
      interest-bearing liabilities         |      |      |                                                                                                           
|Noninterest-bearing
      deposits               |      |      |                                                                                                           
|Other liabilities                                |      |      |                                                                                                           
|Total
      liabilities                          |      |      |                                                                                                           
|Shareholders'
      equity                       |      |      |                                                                                                           
|Total
      liabilities and shareholders' equity |      |      | $                                                                                                         
|Net interest
      income                        |      |      |                                                                                                           
|Tax equivalent
      adjustment on securities    |      |      |                                                                                                           
|Net interest
      income per consolidated       |      |     
|financial
      statements                       |      |      |                                                                                                           
|Net interest
      rate spread                   |      |      |                                                                                                           
|Net interest
      margin                        |      |      |                                                                                                           
|Ratio of
      interest-earning assets to        |      |     
|interest-bearing
      liabilities               |      |      |                                                                                                           

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



Rate Volume Analysisanalyzes 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.





19



---









|                                         | Rate Volume Analysis
|---------------------------------------- | --------------------
|
|
|
|
|
|Assets:                                  |                     
|Interest-earning
      assets:           |                     
|Loans                                    |                     
|Securities
      (1)                     |                     
|Federal
      funds sold & other         |                     
|Interest
      bearing deposits          |                     
|Total
      interest-earnings assets     |                     
|                                         |                     
|Interest-bearing
      liabilities:      |                     
|Savings
      accounts                   |                     
|Time
      deposits                      |                     
|Money
      market accounts              |                     
|Other
      interest bearing deposits    |                     
|Total
      interest-bearing deposits    |                     
|Borrowings                               |                     
|Total
      interest-bearing liabilities |                     
|Net change
      in interest income (1)  |                     

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





Comparison of Financial Condition at September 30, 2005 and December 31, 2004:



Total assets at September 30, 2005 were $310.5 million, an increase of $42.3 million, or 15.8%, from $268.2 million at December 31, 2004.  Cash and federal funds increased by $27.7 million in the first nine months of 2005 from $6.9 million at December 31, 2004 to $34.6 million at September 30, 2005 due to receipt of  the proceeds of the Company's stock offering which closed on March 30, 2005. Securities decreased by $4.1 million, or 21.3%, from $19.1 million to $15.0 million over the same period.  The decrease in securities was attributable to the sale of shares in an equity mutual fund, as well as maturities in the investment portfolio. These decreases, as well as some of the proceeds of the stock offering were utilized to fund increases in the Company's loan portfolio.



The Company's loan portfolio increased by $19.1 million, or 8.2%, during the first nine months of 2005 from $233.3 million at December 31, 2004 to $252.4 million at September 30, 2005. During the first three quarters of 2005, the Company originated approximately $49.5 million of loans, as compared to approximately $53.0 million of loans originated in the same period of 2004. The majority of the growth in the loan portfolio this year to date has been in the residential and commercial mortgage area. This growth is attributable to the Company's emphasis on marketing these products as well as a lower volume of loan prepayments. Non-performing loans as a percentage of total loans increased to 0.55% at September 30, 2005 as compared to 0.36% at December 31, 2004. The allowance for loan losses as a percentage of total loans was 0.89% and 0.86% at September 30, 2005 and December 31, 2004,
respectively. In addition, the allowance for loan losses as a percent of non-performing loans was 161.7% at September 30, 2005, as compared to 241.3% at December 31, 2004.



Total
  deposits decreased from $208.8 million at year-end to $203.4 million at September
  30, 2005. The overall decrease in deposits of $5.4 million or 2.6%, is primarily
  attributable to the purchase



20



---





of
  stock in the second-step offering by depositors using funds on deposit. During
  the first nine months of 2005, savings deposits and time deposits decreased
  by $4.4 million, or 4.5%, and $1.9 million, or 2.8%, respectively. Money market
  accounts decreased over the same period by $2.3 million, or 31.4%. Non-interest
  bearing deposits grew by $2.0 million or 7.6% during the first three quarters
  of 2005. Other interest bearing deposits increased $1.2 million, or 11.3% over
  the same time period.



Comparison of Operating Results for the Three-Month Periods Ended September 30, 2005 and 2004



General



During the three months ended September 30, 2005, the Company recorded net income of $1.0 million an increase of $473,000, or 87.8%, over the third quarter of 2004.  The increase in net income is comprised of a $622,000 increase in net interest income before loan loss provision, a reduction of loan loss provision of $200,000 and a $344,000 increase in income tax expense.



Diluted earnings per share were $0.11 per diluted share for the three months ended September 30, 2005 in comparison to $0.06 per diluted share for the same quarter of 2004.  The increase in earnings per share is directly attributed to the above referenced increase in third quarter net income.



Net Interest Income



Net interest income before loan loss provision for the quarter ended September 30, 2005 increased by $622,000, or 21.8%, compared to the same quarter of 2004. This increase is attributable to growth in the Company's portfolio of earning assets as well as an increase in net interest margin.



Interest Income



Interest income increased $636,000 or 17.7%, to $4.2 million for the quarter ended September 30, 2005 from $3.6 million for the same quarter of 2004.  The increase in interest income was primarily attributable to the growth in the Company's average earning assets from $248 million for the third quarter of 2004 to $294 million in the current quarter. Average loan balances for the third quarter of 2005 were $246.8 million, an increase of $23.6 million over the average outstanding loans for the third quarter of 2004. The yield on the Company's loan portfolio for the quarter ended September 30, 2005 increased to 6.13% from 6.03% for the same period last year. Interest income on securities declined $42,000 from $206,000 for the quarter ended September 30, 2004 to $164,000 for the quarter ended September 30, 2005. Comparatively, the average balance of securities declined by $7.0 million, or
31.6%, from the third quarter of 2004 to $15.2 million for the current quarter and the yield on the Company's securities increased from 4.50% to 5.22% for the same periods, respectively. Finally, interest income on federal funds sold and other interest bearing deposits increased by $255,000 to $260,000 for the quarter ended September 30, 2005 from the same quarter in 2004 due to increased both increased average balances and yields.



Interest Expense



Interest
  expense increased $14,000, or 1.9%, to $764,000 in the quarter ended September
  30, 2004 from $750,000 for the same quarter of 2005. Interest expense on deposits
  increased to $679,000 for the quarter ended September 30, 2005 from $620,000
  for the quarter ended September 30, 2004, due to rising rates paid on time deposits
  consistent with current market rates. Interest expense on borrowed funds decreased
  to $85,000 for the quarter ended September 30, 2005 from $130,000 for the





21



---



same quarter of 2004 primarily due to a decrease in the average balance of borrowings to $9.7 million in the current quarter as compared to $16.2 million in the third quarter of 2004.



Provision for Loan Losses



The Company recorded no provision for loan losses in the third quarter of 2005 as compared to a provision of $200,000 in the same quarter of 2004. Asset quality was less favorable at September 30, 2005, than at year end 2004 with non-performing loans as a percent of loans of 0.55% and the allowance for loan losses as a percent of non-performing loans of 161.7% at September 30, 2005, as compared to 0.36% and 241.3%, respectively, at December 31, 2004. Accordingly, the allowance for loan losses as a percentage of loans has been increased to 0.89% at September 30, 2005 from 0.86% at the prior year end. At September 30, 2005, three quarters of the increase in non-performing loans over year end levels were attributable to three specific customers. The Company believes that these loans are adequately reserved for. During the second quarter of 2005, the Company received a large recovery on a
commercial loan that had been charged off in 2000. Receipt of this recovery increased the allowance to an appropriate level without the need for an additional provision.



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 for the third quarter of 2005 remained constant with the revenues generated
  in the third quarter of 2005. There were no gains on securities sales in the
  third quarter of 2005 compared to $28,000 in the same quarter of 2004, as no
  securities were sold. Offsetting this were gains on the sale of residential
  mortgage loans and other real estate in the amounts of $16,000 and $15,000,
  respectively.



Non-interest expense for the third quarter of 2005 remained basically unchanged from the level of expenditures in the same period last year. Wage and benefit costs for the third quarter of 2005 were $34,000, or 2.7% higher than the same quarter of 2004, reflecting normal inflationary costs. This increase was offset by savings in occupancy expenses. Income tax expense for the third quarter of 2005 increased to $637,000, or 117.4%, from $293,000 in the same period of 2004, directly due to the increase in pre-tax income.



Comparison of Operating Results for the Nine-Month Periods Ended September 30, 2005 and 2004



General



During the nine months ended September 30, 2005, the Company recorded net income of $2.6 million an increase of $958,000, or 57.6%, over the same period of 2004.  The increase in net income is comprised of a $1.4 million increase in net interest income before loan loss provision, a reduction of loan loss provision of $325,000 and an increase of $184,000 in non-interest income, which were partially offset by an increase in non-interest expense of $323,000 and a $646,000 increase in income tax expense.



22



---







Diluted
  earnings per share were $0.27 per diluted share for the nine months ended September
  30, 2005 in comparison to $0.17 per diluted share for the same period of 2004.
  The increase in earnings per share is directly attributed to the above referenced
  increase in year to date net income.



Net
  Interest Income





Net interest income before loan loss provision for the nine months ended September 30, 2005 increased by $1.4 million, or 16.8%, as compared to the same period of 2004. This increase is attributable to growth in the Company's portfolio of earning assets and an increase in net interest margin.



Interest Income



Interest income increased by $1.4 million, or 13.0%, to $12.1 million for the nine months ended September 30, 2005 from $10.7 million for the same period of 2004.  The increase in interest income was attributable to the growth in the Company's average earning assets from $245.8 million for the first three quarters of 2004 to $282.2 million in the current year to date. Average loan balances for the first nine months of 2005 were $239.8 million, an increase of $29.2 million over the average outstanding loans for the same period of 2004. The yield on the Company's loan portfolio for the nine months ended September 30, 2005 was 6.14% in comparison to a yield of 6.20% for the same period last year. Interest income on securities declined $129,000 from $696,000 for the nine months ended September 30, 2004 to $567,000 for the nine months ended September 30, 2005. Comparatively, the average
balance of securities declined by $10.0 million, or 37.8%, from the first nine months of 2004 to $16.4 million for the current year to date and the yield on the Company's securities increased from 4.51% to 5.04% for the same periods, respectively. Finally, interest income on federal funds sold and other interest bearing deposits increased by $469,000 to $505,000 for the first nine months of 2005 from the same period in 2004 due to increased both increased average balances and yields.



Interest Expense



Interest expense remained constant at $2.3 million for the nine months ended September 30, 2005 and 2004. Interest expense on deposits increased to $2.0 million for the nine months ended September 30, 2005 from $1.9 million for the nine months ended September 30, 2004, due to higher average outstanding balances as well as rising rates paid on time deposits consistent with current market rates. Interest expense on borrowed funds decreased to $310,000 for the nine months ended September 30, 2005 from $425,000 for the comparative period of 2004 primarily due to a decrease in the average balance of borrowings to $12.4 million in the current year to date as compared to $17.0 million in the nine months ended 2004.



Provision for Loan Losses



The
  Company recorded no provision for loan losses in the first three quarters of
  2005 as compared to a provision of $325,000 in the same period of 2004. Asset
  quality was less favorable at September 30, 2005, than at year end 2004 with
  non-performing loans as a percent of loans of 0.55% and the allowance for loan
  losses as a percent of non-performing loans of 161.7% at September 30, 2005,
  as compared to 0.36% and 241.3%, respectively at December 31, 2004. Accordingly,
  the allowance for loan losses as a percentage of loans has been increased to
  0.89% at September 30, 2005 from 0.86% at the prior year end. During the second
  quarter of 2005, the Company received a large recovery on a commercial loan
  that had been charged off in 2000. Receipt of this recovery increased the allowance
  to an appropriate level without the need for an additional provision. At September
  30,



23



---



2005, three quarters of
the increase in non-performing loans over year end levels were attributable to three specific customers. The Company believes that these loans are adequately reserved for.



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 grew by $184,000 to $1.5 million for the first nine months of 2005, a 13.9% increase over the same period of 2004. This increase is primarily attributable to the reimbursement in the second quarter of 2005 of prior year legal fees expended in relation to the above referenced loan loss recovery totaling $167,000 and a $97,000 year to date increase in other revenue, the majority of which was fee related. Partially offsetting these increases was a decrease in gains on securities sales of $80,000 as compared to the same period of 2004.

Non-interest expense increased to $7.2 million in the first nine months of 2005 compared to $6.8 million in the same period of 2004, primarily due to increased expenditures related to compliance with Sarbanes Oxley Act Section 404 and strategic planning initiatives, as well as higher wage and occupancy costs.



Income tax expense for the first nine months of 2005 increased to $1.6 million from $926,000 in the same period of 2004, directly due to the increase in pre-tax income.



Liquidity and Capital Resources



The Company's primary sources of funds consist of deposits, scheduled amortization and prepayments of loans and mortgage-backed securities, maturities of investments, interest bearing deposits at other financial institutions and funds provided from operations.  The Bank also has a written agreement with the Federal Home Loan Bank of New York that allows it to borrow up to $31.6 million.  At September 30, 2004, the Bank had no outstanding borrowings on this line of credit, but did have outstanding advances and amortizing notes totaling $9.6 million.



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



On March 30, 2005, the Company closed on its "second-step" conversion and stock offering. As a result of the stock offering, the Company received net proceeds of $53.5 million, excluding $2.36 million which was loaned by the Company to  a trust for the ESOP, enabling the ESOP to purchase 236,000 shares of common stock in the stock offering for future allocation under the ESOP. In addition, the Company received $1.9 million previously held by Rome MHC as part of the reorganization. Of the proceeds received, $11.5 million were utilized to pay down FHLB advances and overnight lines of credit.



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, 2005, the





24



---





Company
  originated loans of approximately $49.5 million, as compared to $53.0 of loans
  originated in the first nine months of 2004.



At
  September 30, 2005, the Company had loan commitments to borrowers of approximately
  $8.5 million, and available letters and lines of credit of approximately $13.1
  million.



Time deposit accounts scheduled to mature within one year were $43.6 million at September 30, 2005.  Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of these time deposits will remain with the Company.  We are committed to maintaining a strong liquidity position; therefore, we monitor our liquidity position on a daily basis.  The Company anticipates that it will have sufficient funds to meet its current funding commitments.  The marginal cost of new funding, whether from deposits or borrowings from the Federal Home Loan Bank, will be carefully considered as the Company monitors its liquidity needs.  Therefore, in order to minimize its cost of funds, the Company may consider additional borrowings from the Federal Home Loan Bank in the future.



At September 30, 2005, the Bank exceeded each of the applicable regulatory capital requirements.  The Bank's leverage (Tier 1) capital at September 30, 2005 was $57.5 million, or 18.52% of adjusted assets. In order to be classified as "well-capitalized" by the FDIC, the Bank is required to have leverage (Tier 1) capital of $15.5 million, or 5.0% of adjusted assets. To be classified as a well-capitalized bank by the FDIC, the Bank must also have a total risk-based capital ratio of 10.0%. At September 30, 2005, the Bank had a total risk-based capital ratio of 27.54%.



The Company paid cash dividends of $0.1986 per share during the nine-month period ended September 30, 2005 at a cost of $1.4 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.



Recent Accounting Pronouncements



In
  December 2003, the Medicare Prescription Drug, Improvement and Modernization
  Act of 2003 (the "Act") became law in the United States. The Act introduces
  a prescription drug benefit under Medicare as well as a federal subsidy to sponsors
  of retiree health care benefit plans that provide a benefit that is at least
  actuarially equivalent to the Medicare benefit. We maintain a postretirement
  benefit plan that may be impacted by the Act. In May 2004, the Financial Accounting
  Standards Board ("FASB") issued FASB Staff Position ("FSP") No. FAS 106-2, "Accounting
  and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
  and Modernization Act of 2003." This FSP provides authoritative guidance on
  the accounting for the effects of the Act and supersedes FSP FAS 106-1. FSP
  No. 106-2 is effective for the first interim or annual period beginning after
  June 15, 2004 which, for the Company, is July 1, 2004. However, if the effects
  of the Act are not a significant event as defined in FSP No. 106-2, or if benefits
  under the Company's plan are not actuarially equivalent to the Medicare benefit,
  then effects of the Act will be measured at the next



25



---





measurement
  date for the plan. The next measurement date for the Company's postretirement
  benefit plan is December 31, 2005.

Net
  periodic benefit costs for postretirement benefits in Note 9 do not reflect
  any amount associated with the subsidy provided by the Act because the Company
  was unable to conclude whether the benefits provided by its plan are actuarially
  equivalent to Medicare Part D under the Act.



In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) establishes accounting standards for transactions in which a company exchanges its equity instruments for goods or services. In particular, this Statement will require companies to record compensation expense for all share-based payments, such as employee stock options, at fair market value. This Statement is effective as of the beginning of the first interim reporting period of 2006 (the Companys fiscal period beginning January 1, 2006). The Company is currently reviewing the effect of this Statement on its consolidated financial statements as it relates to future option grants.



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, 2004. 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 2004 Form 10-KSB.



As a result of receipt of the proceeds of the Company's reorganization and stock offering on March 30, 2005, the Company had deposit balances with two financial institutions in the amounts of $13.7 million and $12.9 million at September 30, 2005. This asset concentration is temporary in nature and is diminishing as the stock offering proceeds are deployed into other earning assets.



Item
  4. Controls and Procedures



Management,
  including the Company's President and Chief Executive Officer and the Company's
  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 principal executive officer and principal
  accounting 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.





26



---







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



None.



|Item
        3. | Defaults
        Upon Senior Securities
|--------------- | ---------------------------------------



None.



|Item
        4. | Submission of Matters to a Vote of Security Holders
|--------------- | ---------------------------------------------------



None.



| | Item
        5. | Other Information
| | --------------- | -----------------



None.



|Item
        6. | Exhibits and Reports on Form 8-K
|--------------- | --------------------------------



| | (a) | Exhibits:
| | --- | ---------

|2.1*     | Amended Plan of Reorganization of The Rome Savings Bank.                                                                                                                                   
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.2**    | Amended and Restated Plan of Conversion and Agreement of Reorganization.                                                                                                                   
|3.1*     | Certificate of Incorporation of Rome Bancorp, Inc.                                                                                                                                         
|3.2*     | Bylaws of Rome Bancorp, Inc.                                                                                                                                                               
|4.3*     | Form of Stock Certificate of Rome Bancorp, Inc.                                                                                                                                            
|10.1*    | Form of Employee Stock Ownership Plan of Rome Bancorp, Inc.                                                                                                                                
|10.2*    | Form of Executive Employment Agreement, by and between Charles M. Sprock and Rome Bancorp, Inc.                                                                                            
|10.3*    | Form of Benefit Restoration Plan of Rome Bancorp, Inc.                                                                                                                                     
|10.4**** | Rome Bancorp, Inc. 2000 Stock Option Plan.                                                                                                                                                 
|10.5**** | Rome Bancorp, Inc. 2000 Recognition and Retention Plan.                                                                                                                                    
|14.1***  | Code of Conduct and Ethics.                                                                                                                                                                
|21.1*    | Subsidiaries of the Registrant.                                                                                                                                                            
|31.1     | Rule 13a-14a)/15d-14(a) Certifications                                                                                                                                                     
|32.1     | Section 1350 Certifications                                                                                                                                                                
|*        | Incorporated by reference to the Registration Statement on Form SB-2 (Registration No. 333-80487), filed with the Securities and Exchange Commission on June 11, 1999, as amended.         
|**       | Incorporated by reference to Amendment No. 2 of the Registration Statement on Form S-1 (Registration No. 333-121245) filed with the Securities and Exchange Commission on February 9, 2005.
|***      | Incorporated by reference to the Form 10-KSB for the year ended December 31, 2003 filed with the Securities and Exchange Commission on March 29, 2004.                                     
|****     | Incorporated by reference to the Companys 2000 Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 5, 2000.                                        















27



---







SIGNATURES



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



ROME BANCORP, INC.

|Name                                                         |  | Title                                                                                                                                       | Date                     
|------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------
|                                                             |  |                                                                                                                                             |                          
|/s/Charles
        M. Sprock
      Charles
        M. Sprock |  | Chairman
        of the Board, 
        President and Chief 
        Executive Officer
      (Principal
        Executive 
        Officer) | November
        10, 2005
|/s/David
        C. Nolan
      David
        C. Nolan       |  | Treasurer
        and Chief 
        Financial Officer 
        (Principal Financial 
        Officer)                                      | November
        10, 2005





28



---