UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, DC 20549

FORM 10-Q/A(Amendment No. 1)

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

For the quarterly period ended September 30, 2006

Commission file number 000-27481

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

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

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

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

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

|Large accelerated filer ___ | Accelerated filer Yes X | Non-accelerated filer ___
|--------------------------- | ----------------------- | -------------------------

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

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

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

The purpose of this amended Quarterly Report on Form
10-Q/A of Rome Bancorp, Inc. (the "Company") is to restate the Company's
consolidated condensed financial statements for the three and nine months ended
September 30,
2006 ("the financial statements") and to modify the related disclosures. See
Note 1 to the financial statements included in this amended Quarterly Report.

The restatement arose from the Company's
determination that an error had occurred in the amortization of stock options
and restricted share grants made in the second quarter of 2006. The restatement
is necessary in order
to recognize the effect of immediate full expensing of the awards of certain
stock-based compensation grants at the award date for those recipients who were
eligible for retirement at the award grant and to reduce subsequent monthly
amortization of
the awards. The Company had been expensing these grants over a five year service
vesting period. As a result of this error, the Company has determined that its
net income for the three and nine months ended September 30, 2006 was
understated and
overstated, respectively.

---



This amended Quarterly
Report does not update or discuss any other Company developments after the date
of the original filing. All information contained in this amended Quarterly
Report and the
original Quarterly Report is subject to updating and supplementing in the
periodic reports that the Company has filed and will file after the original
filing date with the Securities and Exchange Commission.

---



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

TABLE OF CONTENTS

|         |  |                                                             |  | PAGE
|-------- |  | ----------------------------------------------------------- |  | ----
|        
|PART I   |  | FINANCIAL INFORMATION                                       |  |     
|        
|ITEM 1.  |  | FINANCIAL STATEMENTS (unaudited) (restated):                |  |     
|         |  | CONDENSED CONSOLIDATED BALANCE SHEET                        |  | 4   
|         |  | CONDENSED CONSOLIDATED STATEMENTS OF INCOME                 |  | 5   
|         |  | CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS'
EQUITY    |  | 6   
|         |  | AND COMPREHENSIVE INCOME                                    |  |     
|         |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS             |  | 7   
|         |  | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL         |  | 9   
|         |  | STATEMENTS                                                  |  |     
|        
|ITEM 2.  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL           |  |     
|         |  | CONDITION AND RESULTS OF
OPERATIONS                         |  | 18  
|ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK  |  | 29  
|ITEM 4.  |  | CONTROLS AND PROCEDURES                                     |  | 29  
|        
|PART II  |  | OTHER INFORMATION                                           |  |     
|        
|ITEM 1.  |  | LEGAL PROCEEDINGS                                           |  | 29  
|ITEM 1A. |  | RISK FACTORS                                                |  | 29  
|ITEM 2.  |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS |  | 30  
|ITEM 3.  |  | DEFAULTS UPON SENIOR SECURITIES                             |  | 30  
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS         |  | 30  
|ITEM 5.  |  | OTHER INFORMATION                                           |  | 30  
|ITEM 6.  |  | EXHIBITS                                                    |  | 31  
|        
|         |  | SIGNATURES                                                  |  | 32  

---



PART I FINANCIAL INFORMATION

Item 1. Financial Statements

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

|                                                                                 |  |   | (Unaudited)   |   |  |   |              |  
|-------------------------------------------------------------------------------- |  | - | ------------- | - |  | - | ------------ | -
|                                                                                 |  |   | (Restated -   |   |  |   |              |  
|                                                                                 |  |   | See Note1)    |   |  |   |              |  
|                                                                                 |  |   | September 30, |   |  |   | December 31, |  
|                                                                                 |  |   | 2006          |   |  |   | 2005         |  
|Assets                                                                           |  |   |               |   |  |   |              |  
|                                                                                
|Cash and due from banks                                                          |  | $ | 6,657         |   |  | $ | 7,457        |  
|Federal funds sold and other short-term investments                              |  |   | 937           |   |  |   | 26,778       |  
|Total cash and cash
equivalents                                                  |  |   | 7,594         |   |  |   | 34,235       |  
|Securities available for sale, at fair value                                     |  |   | 5,109         |   |  |   | 9,666        |  
|Securities held to maturity (fair value of $1,182
and $1,428                     |  |   |               |   |  |   |              |  
|at September 30, 2006 and
December 31, 2005, respectively)                       |  |   | 1,183         |   |  |   | 1,440        |  
|Federal Home Loan Bank Stock                                                     |  |   | 955           |   |  |   | 776          |  
|Loans                                                                            |  |   | 263,321       |   |  |   | 253,878      |  
|Less: Allowance for loan
loss                                                    |  |   | (1,950        | ) |  |   | (1,960       | )
|Net loans                                                                        |  |   | 261,371       |   |  |   | 251,918      |  
|Premises and equipment, net                                                      |  |   | 4,940         |   |  |   | 4,503        |  
|Accrued interest receivable                                                      |  |   | 1,148         |   |  |   | 1,053        |  
|Other assets                                                                     |  |   | 14,209        |   |  |   | 5,262        |  
|Total assets                                                                     |  | $ | 296,509       |   |  | $ | 308,853      |  
|                                                                                
|Liabilities & Equity                                                             |  |   |               |   |  |   |              |  
|                                                                                
|Liabilities                                                                      |  |   |               |   |  |   |              |  
|Deposits:                                                                        |  |   |               |   |  |   |              |  
|Non-interest bearing                                                             |  | $ | 30,898        |   |  | $ | 30,039       |  
|Savings                                                                          |  |   | 86,241        |   |  |   | 89,138       |  
|Money market                                                                     |  |   | 5,271         |   |  |   | 4,929        |  
|Time                                                                             |  |   | 65,963        |   |  |   | 66,298       |  
|Other interest bearing                                                           |  |   | 11,064        |   |  |   | 11,064       |  
|Total deposits                                                                   |  |   | 199,437       |   |  |   | 201,468      |  
|Borrowings                                                                       |  |   | 11,526        |   |  |   | 9,374        |  
|Other liabilities                                                                |  |   | 4,515         |   |  |   | 4,533        |  
|Total liabilities                                                                |  |   | 215,478       |   |  |   | 215,375      |  
|                                                                                
|Shareholders' equity                                                             |  |   |               |   |  |   |              |  
|Common Stock, $.01 par
value; authorized: 30,000,000 shares;                     |  |   |               |   |  |   |              |  
|issued and outstanding 9,715,020 and 8,728,220 shares
at September 30,           |  |   |               |   |  |   |              |  
|2006 and 9,678,128 and 9,678,128 shares at December
31, 2005                     |  |   | 97            |   |  |   | 97           |  
|Additional paid-in capital                                                       |  |   | 60,508        |   |  |   | 60,013       |  
|Retained earnings                                                                |  |   | 35,622        |   |  |   | 35,983       |  
|Accumulated other
comprehensive income                                           |  |   | 69            |   |  |   | 85           |  
|Treasury stock; 986,800
shares at September 30, 2006                             |  |   | (12,730       | ) |  |   | -            |  
|Unallocated shares of
employee stock ownership plan (ESOP); 427,662              |  |   |               |   |  |   |              |  
|shares at September 30, 2006 and 462,135 shares at
December 31, 2005             |  |   | (2,535        | ) |  |   | (2,700       | )
|Total shareholders' equity                                                       |  |   | 81,031        |   |  |   | 93,478       |  
|Total liabilities and
shareholders' equity                                       |  | $ | 296,509       |   |  | $ | 308,853      |  
|                                                                                
|See accompanying notes to
unaudited condensed consolidated financial statements. |  |   |               |   |  |   |              |  

4

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

|                                                    |  | For the three months ended |             | For the nine months ended
|--------------------------------------------------- |  | -------------------------- | ----------- | -------------------------
|                                                    |  | September 30,              |             | September 30,            
|                                                    |  |                            | 2006        |                          
|                                                    |  |                            | (Restated  |                          
|                                                    |  |                            | See Note 1) |                          
|Interest income:                                    |  |                            |             |                          
|Loans                                               |  | $                          | 4,132       |                          
|Securities                                          |  |                            | 75          |                          
|Other short-term
investments                        |  |                            | 74          |                          
|Total interest
income                               |  |                            | 4,281       |                          
|                                                   
|Interest expense:                                   |  |                            |             |                          
|Deposits                                            |  |                            | 794         |                          
|Borrowings                                          |  |                            | 79          |                          
|Total interest
expense                              |  |                            | 873         |                          
|                                                   
|Net interest income                                 |  |                            | 3,408       |                          
|                                                   
|Provision for loan losses                           |  |                            | 25          |                          
|Net interest income
after provision for loan losses |  |                            | 3,383       |                          
|                                                   
|Non-interest income:                                |  |                            |             |                          
|Net gain on
securities transactions                 |  |                            | -           |                          
|Other                                               |  |                            | 503         |                          
|Total non-interest income                           |  |                            | 503         |                          
|                                                   
|                                                   
|Non-interest expense:                               |  |                            |             |                          
|Salaries and employee
benefits                      |  |                            | 1,331       |                          
|Building, occupancy and
equipment                   |  |                            | 451         |                          
|Other                                               |  |                            | 646         |                          
|Total non-interest
expense                          |  |                            | 2,428       |                          
|                                                   
|                                                   
|Income before
income tax expense                    |  |                            | 1,458       |                          
|Income tax expense                                  |  |                            | 538         |                          
|Net income                                          |  | $                          | 920         |                          
|                                                   
|Basic earnings per share                            |  | $                          | 0.11        |                          
|Diluted earnings per share                          |  | $                          | 0.11        |                          

See accompanying notes to unaudited condensed
consolidated financial statements.

5

---



ROMEBANCORP,INC. ANDSUBSIDIARYCondensedConsolidatedStatementofShareholders'Equity andComprehensiveIncomeFor the NineMonthsEndedSeptember30, 2006 and 2005
(inthousands,except share and per sharedata)
(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, 2005                                                      |  | $      | 33  |         |            | $      | 10,756   |  |  | $        | 34,627 |  |  | $             | (8,963  | ) |       | $           | 391 |  |             | $            | (560   | ) |  | $     | (26 | ) |  | $       | 36,258
|Comprehensive income:                                                            |  |        |     |         |            |        |          |  |  |          |        |  |  |               |         |   |       |             |     |  |             |              |        |   |  |       |     |   |  |         |       
|Net Income                                                                       |  |        | -   |         |            | -      |          |  |  | 2,621    |        |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | 2,621   |       
|Other
comprehensive loss                                                         |  |        | -   |         |            | -      |          |  |  |          |        |  |  | -             |         |   |       | (235        | )   |  |             | -            |        |   |  | -     |     |   |  | (235    | )     
|Total
comprehensive income                                                       |  |        |     |         |            |        |          |  |  |          |        |  |  |               |         |   |       |             |     |  |             |              |        |   |  |       |     |   |  | 2,386   |       
|Proceeds of common stock offering
and                                            |  |        |     |         |            |        |          |  |  |          |        |  |  |               |         |   |       |             |     |  |             |              |        |   |  |       |     |   |  |         |       
|conversion of
existing shares, net of tax                                        |  |        | 75  |         |            | 57,759 |          |  |  | -        |        |  |  |               |         |   |       | -           |     |  |             | (2,360       | )      |   |  | -     |     |   |  | 55,474  |       
|Retirement of 1,747,266 treasury
shares                                          |  |        | (12 | )       |            | (8,963 | )        |  |  | -        |        |  |  | 8,963         |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | (12     | )     
|Amortization of unearned
compensation                                            |  |        | -   |         |            | -      |          |  |  | -        |        |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | 26    |     |   |  | 26      |       
|Dividends paid ($0.199 per
share)                                                |  |        | -   |         |            | -      |          |  |  | (1,440   | )      |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | (1,440  | )     
|Exercise of stock options                                                        |  |        | -   |         |            | 35     |          |  |  | -        |        |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | 35      |       
|Tax benefit of vested RRP shares                                                 |  |        | -   |         |            | 73     |          |  |  | -        |        |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | 73      |       
|ESOP shares released for                                                         |  |        |     |         |            |        |          |  |  |          |        |  |  |               |         |   |       |             |     |  |             |              |        |   |  |       |     |   |  |         |       
|allocation
(30,450 shares)                                                       |  |        | -   |         |            | 190    |          |  |  | -        |        |  |  | -             |         |   |       | -           |     |  |             | 125          |        |   |  | -     |     |   |  | 315     |       
|Balances at September 30, 2005                                                   |  | $      | 96  |         |            | $      | 59,850   |  |  | $        | 35,808 |  |  | $             | -       |   |       | $           | 156 |  |             | $            | (2,795 | ) |  | $     | -   |   |  | $       | 93,116
|(Restated  See Note 1)                                                          |  |        |     |         |            |        |          |  |  |          |        |  |  |               |         |   |       |             |     |  |             |              |        |   |  |       |     |   |  |         |       
|Balances at January 1, 2006                                                      |  | $      | 97  |         |            | $      | 60,013   |  |  | $        | 35,983 |  |  | $             | -       |   |       | $           | 85  |  |             | $            | (2,700 | ) |  | $     | -   |   |  | $       | 93,478
|Comprehensive income:                                                            |  |        |     |         |            |        |          |  |  |          |        |  |  |               |         |   |       |             |     |  |             |              |        |   |  |       |     |   |  |         |       
|Net Income                                                                       |  |        | -   |         |            | -      |          |  |  | 1,650    |        |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | 1,650   |       
|Other
comprehensive loss                                                         |  |        | -   |         |            | -      |          |  |  | -        |        |  |  | -             |         |   |       | (16         | )   |  |             | -            |        |   |  | -     |     |   |  | (16     | )     
|Total
comprehensive income                                                       |  |        |     |         |            |        |          |  |  |          |        |  |  |               |         |   |       |             |     |  |             |              |        |   |  |       |     |   |  | 1,634   |       
|Purchases of 1,104,800 treasury
shares                                           |  |        | -   |         |            | -      |          |  |  | -        |        |  |  | (14,241       | )       |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | (14,241 | )     
|Transfer of 118,000 treasury shares
     to RRP plan                             |  |        | -   |         |            | (1,511 | )        |  |  | -        |        |  |  | 1,511         |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | -       |       
|Amortization of unearned
compensation                                            |  |        | -   |         |            | 1,563  |          |  |  | -        |        |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | 1,563   |       
|Dividends paid ($0.225 per
share)                                                |  |        | -   |         |            | -      |          |  |  | (2,011   | )      |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | (2,011  | )     
|Exercise of stock options                                                        |  |        | -   |         |            | 186    |          |  |  | -        |        |  |  | -             |         |   |       | -           |     |  |             | -            |        |   |  | -     |     |   |  | 186     |       
|ESOP shares released for                                                         |  |        |     |         |            |        |          |  |  |          |        |  |  |               |         |   |       |             |     |  |             |              |        |   |  |       |     |   |  |         |       
|allocation
(34,473 shares)                                                       |  |        | -   |         |            | 257    |          |  |  | -        |        |  |  | -             |         |   |       | -           |     |  |             | 165          |        |   |  | -     |     |   |  | 422     |       
|Balances at September 30, 2006                                                   |  | $      | 97  |         |            | $      | 60,508   |  |  | $        | 35,622 |  |  | $             | (12,730 | ) |       | $           | 69  |  |             | $            | (2,535 | ) |  | $     | -   |   |  | $       | 81,031
|                                                                                
|                                                                                
|See accompanying notes
to unaudited condensed consolidated financial statements. |  |        |     |        

7

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ROMEBANCORP,INC. ANDSUBSIDIARYCondensedConsolidatedStatementsof Cash Flows 
For the NineMonthsEndedSeptember30, 2006 and 2005(unaudited)(inthousands)

|                                                                        |  | 2006 |             |   | 2005 |  
|----------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Cash flows from operating activities:                                   |  |      | (Restated - |   |      |  
|                                                                        |  |      | See Note 1) |   |      |  
|                                                                       
|Net income                                                              |  | $    | 1,650       |   |      | $
|Adjustments to
reconcile net income to net cash                         |  |      |             |   |      |  
|Provided by operating activities:                                       |  |      |             |   |      |  
|Depreciation
and amortization                                           |  |      | 408         |   |      |  
|Increase in
accrued interest receivable                                 |  |      | (95         | ) |      |  
|Net gain on
securities sold                                             |  |      | (11         | ) |      |  
|Provision for
loan losses                                               |  |      | 140         |   |      |  
|Net loss
(gain) on sales of real estate owned                           |  |      | 13          |   |      |  
|Loss on
disposal of fixed asset                                         |  |      | 3           |   |      |  
|Net accretion
on securities                                             |  |      | (7          | ) |      |  
|Proceeds from
sales of loans                                            |  |      | 783         |   |      |  
|Net gain on
loans sold                                                  |  |      | (11         | ) |      |  
|Originations
of loans held for sale                                     |  |      | (772        | ) |      |  
|(Decrease)
increase in other liabilities                                |  |      | (38         | ) |      |  
|(Increase)
decrease in other assets                                     |  |      | (1,028      | ) |      |  
|Allocation of
ESOP shares                                               |  |      | 422         |   |      |  
|Amortization
of unearned compensation                                   |  |      | 1,563       |   |      |  
|Net cash provided by operating activities                               |  |      | 3,020       |   |      |  
|                                                                       
|Cash flows from investing activities:                                   |  |      |             |   |      |  
|Net increase in
loans                                                   |  |      | (9,539      | ) |      |  
|Purchase of bank
owned life insurance                                   |  |      | (8,000      | ) |      |  
|Proceeds from sales
of securities available for sale                    |  |      | 365         |   |      |  
|Proceeds from
maturities and principal reductions of                    |  |      |             |   |      |  
|securities available for sale                                           |  |      | 4,189       |   |      |  
|Purchases of
securities available for sale                              |  |      | -           |   |      |  
|Purchases of
Federal Home Loan Bank stock                               |  |      | (179        | ) |      |  
|Proceeds from
maturities and principal reductions of                    |  |      |             |   |      |  
|securities held to maturity                                             |  |      | 250         |   |      |  
|Proceeds of sales
of fixed assets                                       |  |      | 8           |   |      |  
|Proceeds of sales
of real estate owned                                  |  |      | 41          |   |      |  
|Additions to
premises and equipment                                     |  |      | (851        | ) |      |  
|Net cash used in investing activities                                   |  |      | (13,716     | ) |      |  
|Cash flows from financing
activities:                                   |  |      |             |   |      |  
|Decrease in time deposits                                               |  |      | (335        | ) |      |  
|Decrease in other deposits                                              |  |      | (1,696      | ) |      |  
|Net proceeds of stock offering and conversion                           |  |      | -           |   |      |  
|Repayments of borrowings                                                |  |      | (1,448      | ) |      |  
|Additional borrowings                                                   |  |      | 3,600       |   |      |  
|Purchase of treasury stock                                              |  |      | (14,241     | ) |      |  
|Dividends paid                                                          |  |      | (2,011      | ) |      |  
|Exercise of stock options                                               |  |      | 186         |   |      |  
|Net cash (used in) provided
by financing activities                     |  |      | (15,945     | ) |      |  
|                                                                       
|Net (decrease) increase in cash and
cash equivalents                    |  |      | (26,641     | ) |      |  
|Cash and cash equivalents at
beginning of period                        |  |      | 34,235      |   |      |  
|Cash and cash equivalents at end of
period                              |  | $    | 7,594       |   |      | $
|                                                                       
|Condensed Consolidated Statements
of Cash Flows continued on next page. |  |      |             |   |      |  

8

---



ROMEBANCORP,INC. ANDSUBSIDIARYCondensedConsolidatedStatementsof Cash Flows 
For the NineMonthsEndedSeptember30, 2006 and 2005(unaudited)(inthousands)

|                                                                                 | 2006        |       |  | 2005
|-------------------------------------------------------------------------------- | ----------- | ----- |  | ----
|                                                                                 | (Restated - |       |  |     
|Supplemental disclosure of cash flow information:                                | See Note 1) |       |  |     
|Non-cash investing
activities:                                                   |             |       |  |     
|Transfer
of loans to real estate owned                                           | $           | 54    |  |     
|Cash paid during the
period for:                                                 |             |       |  |     
|Interest                                                                         |             | 2,514 |  |     
|Income taxes                                                                     |             | 1,480 |  |     
|                                                                                
|See accompanying notes to unaudited condensed
consolidated financial statements. |             |       |  |     

10

---



ROMEBANCORP,INC.
Notes toUnauditedCondensed
Consolidated
FinancialStatements

(1)Restatement
ofFinancial
Statements

TheCompany
hasdetermined
that in the second quarter of 2006, an error was made inrecordingthe non-cashamortization
expenserelated to grants made
during that quarter under theCompany's2006 Stock Option
Plan andRecognitionandRetentionPlan. Under theprovisionsof
Statementof
Financial
AccountingStandard
("FAS")No.
123(R),which the
Companyadoptedin fiscal 2006, share-based grants that vest
toawardeesupon
retirement, regardlessof
requisiteservice
requirements,should be fullyexpensedwhen
retirement
eligibilityis
attained.As part of its year end
closingprocess,the
Companydeterminedthat certain of the
recipientsof the awards made under
these plans during the second quarter of 2006 were already eligible for
retirementor early
retirementunder theCompany'sdefined
benefitpensionplan andaccordingly,their grants
should have
beenexpensedupon
issuancerather than over the five
yearrequisiteservice
period. TheCompany's
previouslyissued
consolidated
condensed
financial
statementsfor the three and nine
months endedSeptember30,
2006
have beenrestatedto
reflect theaccurate
amortizationof this stock-basedcompensation.

Thefollowing
tablesummarizes
the effect of therestatementadjustments
on thefinancial
statements
as of and for the three and nine months ended
September30, 2006.

|                               | Three months ended September 30, 2006          
|------------------------------ | -----------------------------------------------
|                               | (Previously Reported)                          
|                               | (in thousands, except share and per share data)
|Salaries and employee benefits | $                                              
|Total non-interest expense     | 2,513                                          
|Income before income taxes     | 1,373                                          
|Income tax expense             | 518                                            
|Net income                     | 855                                            
|Basic net income per share     | $                                              
|Diluted net income per share   | $                                              

|                               | Nine months ended September 30, 2006           
|------------------------------ | -----------------------------------------------
|                               | (Previously Reported)                          
|                               | (in thousands, except share and per share data)
|Salaries and employee benefits | $                                              
|Total non-interest expense     | 7,753                                          
|Income before income taxes     | 4,064                                          
|Income tax expense             | 1,540                                          
|Net income                     | 2,524                                          
|Basic net income per share     | $                                              
|Diluted net income per share   | $                                              

|                                           | As of September 30, 2006                       
|------------------------------------------ | -----------------------------------------------
|                                           | (Previously Reported)                          
|                                           | (in thousands, except share and per share data)
|Other assets                               | $                                              
|Total assets                               | 296,013                                        
|Other liabilities                          | 4,495                                          
|Total liabilities                          | 215,458                                        
|Additional paid in capital                 | 59,158                                         
|Retained earnings                          | 36,496                                         
|Total shareholders' equity                 | 80,555                                         
|Total liabilities and shareholders' equity | 296,013                                        

11

---



Theadjustments
to thebalance
sheet and incomestatement
at and for the
three and six months ended June 30, 2006 had no impact on total cash flows fromoperating,
investingand
financing
activities.The
restatementof the
consolidated
financial
statementsalso
affectedfootnotes4, 5 and 8.

(2) Theaccompanying
unaudited
condensed
consolidated
financial
statements
include theaccounts
of RomeBancorp,Inc.("Rome
Bancorp"or the
"Company")and The Rome
SavingsBank (the
"Bank"),a wholly-owned
subsidiaryof theCompany,as of
September30, 2006 and
December31, 2005 and for the three
and nine month
periods endedSeptember30,
2006 and 2005. All inter-company
accountsandtransactionshave beeneliminatedin
consolidation.The
accompanying
unaudited
condensed
consolidated
financial
statementshave been
preparedin
accordancewithaccounting
principles generally
acceptedin the United States ofAmericafor interim
financial
informationand with the
instructionsto Form 10-Q.
Accordingly,they do not include
all of theinformationandfootnotes
requiredby
accounting
principles
generally
acc

eptedin the United States of
Americafor
completefinancial statements.Thepreparationoffinancialstatements
inconformity
withaccounting
principles
generally
acceptedin the United States ofAmerica
requires
managementto makeestimatesandassumptions
that affect thereported
amountsof assets andliabilitiesanddisclosuresof
contingentassets and
liabilitiesat the date of thefinancial
statementsand the
reportedamountsofrevenues
andexpenses
during the
reportingperiod. Actual results
could differ from thoseestimates.In theopinion
ofmanagement,
theunaudited
condensed
consolidated
financial
statements
include
allnecessary
adjustments,
consistingof normal
recurring
accruals,
necessaryfor a fair
presentationfor the periodspresented.

TheCompanybelieves
that thedisclosures
areadequateto make theinformation
presentednot
misleading;
however,the results of
operationsand other data
presentedfor the periods
presentedare not
necessarily
indicativeof results to be
expectedfor the entire fiscal
year.

The data in the
condensed
consolidated
balancesheet for
December31, 2005 was derived from
theCompany'
s 2005 Annual Report on Form 10-K. That
data, along with the interimfinancial
information
presented
in thecondensed
consolidated
balancesheet,statementsofincome,
statementof  shareholders
'equity and
comprehensiveincome and
statementsof
cash flows should be read inconjunction
with the 2005consolidated
financial statements,
includingthe notes theretoincludedin the
Company'sAnnual Report on Form 10-
K.

Amountsin the prior
period'sconsolidatedfinancialstatements
arereclassified
whennecessary
toconform
with the current period'spresentation.

(3) StockOfferingandConversion

Stock
Offeringand
Conversion

On March 30, 2005, the second step
conversionof Rome, MHC into a
stockholding
companystructureand the related stock
offeringof this new stock
holdingcompanywerecompleted.As a result of the second-step
conversion,New Rome
Bancorp,Inc.
becamethe
holdingcompanyfor the Bank
and wasimmediately
renamed"Rome
Bancorp,Inc." Rome
Bancorpissued
5,900,000shares of
commonstock at a price of
$10.00 per share in the related stockofferingand
exchanged
1,650,254shares of
commonstock of the now
predecessorRome
Bancorp,Inc. into
3,742,246shares ofcommonstock of the newly
formed RomeBancorp,Inc.pursuantto an
exchangeratio of
2.26784,cashingoutfractionalshares. Thereorganizationwasaccountedfor as a
change incorporateform
with noresultingchange in thehistoricalbasis of theCompany'sassets,
liabilitiesand equity. Directofferingcosts
totaling$3.1 million weredeductedfrom the
proceedsof the shares sold in theoffering.
As

12

---



a
result of theexchangeand
stockoffering,as of March
30, 2005, theCompanyhad9,642,246shares of
commonstock issued and
outstanding.Net
proceedsof $53.5 million were
raised in the stockoffering, excluding
$2.36 million which was loaned by the
companyto a trust for the
EmployeeStock
OwnershipPlan
(ESOP)enablingit to
purchase236,000shares ofcommonstock in the stockofferingforallocation
under such plan. Inaddition,as part of theconversionanddissolution
of Rome, MHC, the Bankreceived$1.9 million of cash
previouslyheld by Rome, MHC.

As a result of the second-stepconversion,all share and per share
amountshave been
restatedgiving
retroactive
recognitionto the second-stepconversionratio of
2.26784.Optionsgranted under theCompany's2000 Stock Option Plan and
commonshares held by the
Company'sESOP and
Recognitionand
RetentionPlan prior to theconversionwere alsoexchangedusing theconversionratio of
2.26784.

(4)Earnings
Per Share

Thefollowing
summarizes
thecomputation
ofearnings
per share for the three and nine month periods ended
September30, 2006 and 2005.

|                                                        |  | Three and nine months ended |                                                
|------------------------------------------------------- |  | --------------------------- | -----------------------------------------------
|                                                        |  | September 30               
|                                                        |  |                             | (in thousands, except share and per share
data)
|                                                       
|                                                        |  | Three months ended          |                                                
|                                                        |  | 2006                        |                                                
|Basic earnings per share:                               |  |                             |                                                
|Income available to common shareholders                 |  | $                           | 920                                            
|Weighted average basic shares outstanding               |  |                             | 8,174                                          
|Basic earnings per share                                |  | $                           | 0.11                                           
|                                                       
|Diluted earnings per share:                             |  |                             |                                                
|Income available to common
shareholders                 |  | $                           | 920                                            
|Weighted average basic shares
outstanding               |  |                             | 8,174                                          
|Effect of dilutive securities:                          |  |                             |                                                
|Stock options                                           |  |                             | 140                                            
|Unearned compensation                                   |  |                             | -                                              
|Weighted average diluted shares
outstanding             |  |                             | 8,314                                          
|                                                       
|Diluted earnings per share                              |  | $                           | 0.11                                           
|                                                       
|(5) Other Comprehensive Income (Loss)                  
|                                                        |  |                             |                                                
|                                                        |  | Three months ended          |                                                
|                                                        |  | September 30,               |                                                
|                                                       
|                                                        |  | 2006                        |                                                
|Net change in unrealized gain (loss)
on                 |  |                             |                                                
|available-for-sale securities arising during the period |  | $                           | 51                                             
|Reclassification adjustment for net
realized gain       |  |                             |                                                
|included
in net income                                  |  |                             | -                                              
|Other comprehensive income (loss),
before tax           |  |                             | 51                                             
|Deferred tax expense (benefit)                          |  |                             | 20                                             
|                                                       
|Other comprehensive income (loss)                       |  |                             | 31                                             
|Net income                                              |  |                             | 920                                            
|Total comprehensive income                              |  | $                           | 951                                            



13

---



|                                                     |  |                    |       |  |                   |   |       |           | 
|---------------------------------------------------- |  | ------------------ | ----- |  | ----------------- | - | ----- | --------- | 
|Securities are summarized as follows (in thousands): |  |                    |       |  |                   |   |       |           | 
|                                                    
|                                                     |  | September 30, 2006 |       |  | December 31, 2005
|                                                    
|                                                     |  | Amortized          |       |  | Fair              |   |       | Amortized | 
|                                                     |  | Cost               |       |  | value             |   |       | Cost      | 
|                                                    
|Available-for-sale:                                  |  |                    |       |  |                   |   |       |           | 
|U.S. Government agencies                             |  | $                  | 506   |  |                   | $ | 523   |           | 
|State and municipal obligations                      |  | 2,481              |       |  | 2,532             |   |       | 4,506     | 
|Mortgage-backed securities                           |  |                    |       |  |                   |   |       |           | 
|FHLMC                                                |  | 370                |       |  | 373               |   |       | 570       | 
|Corporate bonds                                      |  | 500                |       |  | 500               |   |       | 2,008     | 
|                                                    
|Total debt securities                                |  | 3,857              |       |  | 3,928             |   |       | 8,033     | 
|                                                    
|Equity and other securities                          |  | 1,137              |       |  | 1,181             |   |       | 1,491     | 
|                                                    
|Total available for sale                             |  | $                  | 4,994 |  |                   | $ | 5,109 |           | 
|                                                    
|Held-to-maturity:                                    |  |                    |       |  |                   |   |       |           | 
|U.S. Government securities                           |  | $                  | 1,001 |  |                   | $ | 998   |           | 
|Mortgage-backed securities                           |  |                    |       |  | -                 |   |       | -         | 
|GNMA                                                 |  | 30                 |       |  | 32                |   |       | 48        | 
|FHLMC                                                |  | 2                  |       |  | 2                 |   |       | 3         | 
|Other bonds                                          |  | 150                |       |  | 150               |   |       | 181       | 
|                                                    
|Total held to maturity                               |  | $                  | 1,183 |  |                   | $ | 1,182 |           | 
|                                                    
|FHLB stock                                           |  | $                  | 955   |  |                   | $ | 955   |           | 

FHLB stock iscarried
at cost since fair values are notreadilydeterminable.

Securities pledged at both
 September 30,
2006 and
 December  31,
2005 had a  carrying
 amount of $1.0 million and $1.1
million,
respectively.Thesesecurities collateralize
state andTreasurydepartmentprograms.As
of these
dates,there were no
holdingsof
securitiesof any one
issuer, other than the U.S.Government
and itsagencies,in an amount greater than 10% of
shareholders'
equity.

14

---



|(7) | Loans                                          
|--- | -----------------------------------------------
|   
|    | Loans are summarized as follows (in thousands):
|   

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

Changesin the
allowancefor loan losses aresummarizedas follows (inthousands):

|                                |  | Three months ended |       |   | Nine months ended
|------------------------------- |  | ------------------ | ----- | - | -----------------
|                                |  | September 30,      |       |   | September 30,    
|                                |  | 2006               |       |   | 2005             
|                               
|Balance at beginning of period  |  | $                  | 1,954 |   |                  
|Provision charged to operations |  |                    | 25    |   |                  
|Loans charged off               |  |                    | (59   | ) |                  
|Recoveries                      |  |                    | 30    |   |                  
|                               
|Balance at end of period        |  | $                  | 1,950 |   |                  

The
Company's
recordedinvestmentin loans that are
considered
impairedtotaled $318,000and $211,000at
September30, 2006 and
December31, 2005,
respectively.These
impairedloans carried
allowancesof $177,000at
September30, 2006 and $127,000
as of year-end 2005. Theaverage
recordedinvestment
inimpairedloans was $309,000and $252,000in the first nine months of
2006 and 2005,respectively.TheCompany
recognizedno interest on
impairedloans during the nine
month periods endedSeptember
30, 2006 and 2005.

The
principal
balancesof loans not
accruinginterest
amountedto $1.1 million and
$871,000at
September30, 2006 and
December31, 2005,
respectively.Loans 90 days past
due andaccruinginterestamountedto $55,000 and
$75,000 atSeptember30,
2006 andDecember31, 2005,respectively.Thedifferences
betweenthe amount of interest income that would have beenrecordedif n on-accrual loans had been paid inaccordancewith theiroriginalterms and the
amount of interest income that wasrecorded

15

---



during the three months endedSeptember30, 2006 and 2005 was $52,300 and
$45,200,respectively.There are nocommitmentsto
extend further credit on non-accruing
loans.

Asubstantialportion of theCompany'sloans aremortgageandconsumer
loans in OneidaCounty.
Accordingly,theultimatecollectibility
of asubstantial
portion of theCompany's
loanportfolio
issusceptible
tochanges
in marketconditions
in this area. Amajority
of the Company'sloanportfoliois
securedby real estate. Other than
generaleconomicrisks,managementis not aware of
anymaterial
concentrationsof credit risk to
anyindustryor
individual
borrower.

(8) Stock-BasedCompensation

Effective
January1, 2006, the
Companyadoptedthe fair value method ofaccounting
for share-basedcompensationarrangements
inaccordance
withStatement
ofFinancial
Accounting
StandardsNo. 123
(revised2004), Share-BasedPayment(FAS
123(R)),using the
modifiedprospectivemethod oftransition.Under theprovisionsof FAS123(R),theestimated
fair value of share-based
awards granted isrecognizedascompensation
expenseover the service period.
Using themodified
prospective
method,compensationexpenseis
recognized
beginningwith the
effectivedate of
adoptionof FAS 123(R) for all
share-basedpayments(i)
granted after theeffectivedate ofadoptionand (ii)
granted prior to theeffective
date ofadoption
and
that remainunvestedon the
date ofadoption.TheCompanyhad no
unvestedstock options
outstandingat the date of
adoption.

Prior toJanuary
1, 2006, theCompany
accounted
for share-basedemployee
compensationplans using theintrinsicvalue method ofaccountingin
accordancewith
Accounting
PrinciplesBoardOpinionNo. 25,Accountingfor Stock
Issued toEmployees(APB 25), and its
relatedinterpretations.Under theprovisionsof APB
25, nocompensation
expensewas
recognizedwhen stock options were
granted withexerciseprices
equal to or greater than
market value on the date of grant.

Prior to theadoption
of FAS123(R),
theCompany
presented
all taxbenefits
resulting
from share-basedcompensationas cash flows fromoperating activitiesin thecondensedconsolidatedstatementsof cash flows.
FAS 123(R)requirescash
flowsresultingfrom taxdeductionsin excess of the
grant-date fair value of share-based awards to beincludedin cash flows fromfinancingactivities.
This tax benefit of $106,000related to share-basedcompensationin the first nine months of 2006 has beenincludedin cash flows fromfinancing
activities.

Under themodified
prospective
method oftransition,
theCompany
is notrequired
to restate its prior periodfinancialstatements
to reflectdisclosures
of its net income andearningsper share for the prior year period. Thefollowingtable
illustratesthe effect on net
income andearningsper
share if the Companyhad applied the fair valuerecognition
provisionsof FAS 123 to
stock-basedemployee
compensationfor the three and nine
months endedSeptember30,
2005:

16

---



|                                                      |  | Three and nine months ended           |      
|----------------------------------------------------- |  | ------------------------------------- | -----
|                                                      |  | September 30, 2005                    |      
|                                                      |  | (in thousands, except per share data) |      
|                                                     
|Net income:                                           |  | Three Months                          |      
|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
|                                                     
|                                                     
|Basic earnings per share:                             |  |                                       |      
|As reported                                           |  | $                                     | 0.10 
|Pro forma                                             |  | $                                     | 0.10 
|                                                     
|Diluted earnings per share:                           |  |                                       |      
|As reported                                           |  | $                                     | 0.10 
|Pro forma                                             |  | $                                     | 0.10 

On May 24, 2006, the
Company'sBoard of
Directorsissued
354,000stock options to
directorsand key
employeeswith an
exerciseprice equal to the market
price of theCompany'sstock
on that day. These options have a ten year life and vest ratably over a five
year period, orimmediatelyupon arecipient'sdeath,disabilityor
retirement.The fair value of the
options granted isestimatedat grant date using a Black-Scholesoption pricing model based
upon thefollowing
assumptions:
expecteddividendyield 2.52%,expectedstock pricevolatility8.247%,
risk free interest rate4.599%and anexpected
option life of 6.5 years. At date of grant, certain of therecipientswere eligible forretirementor early
retirementunder theCompany's
defined benefit plan andaccordingly,their option grants were
immediately
expensed,
resultingin $
350,000of
amortizationbeing
recordedin the second quarter of
2006. As ofSeptember30,
2006,unrecognized
compensationcost related to theremainingoptions was $221,000.This
expenseis beingamortizedon a straight line basis over the
remainder of
the sixty month vesting period of the options.

Following is a summary of the Company's 2006 year to date
stock option activity:

|                                         |  | Nine Months ended September 30, 2006
|---------------------------------------- |  | ------------------------------------
|                                         |  | ( Dollars in thousands)             
|                                         |  |                                     
|                                         |  |                                     
|                                         |  | Shares                              
|Options outstanding, beginning of
period |  | 219,798                             
|Exercised                                |  | (36,892                             
|Granted                                  |  | 354,000                             
|Options outstanding at end of
period     |  | 536,906                             
|Options exercisable at end of
period     |  | 182,906                             

On May 24, 2006, the Company's Board of Directors awarded 168,300 shares of
  restricted stock to directors and certain key employees. These shares vest
  to the recipients ratably over a five year period,

17

---



or immediately upon a recipient's death, disability or retirement. The grants
awarded to individuals who were eligible for retirement or early retirement
under
the Company's defined benefit plan were expensed upon award, resulting in second
quarter 2006 amortization expense related to this plan of $1.1 million. At
September 30, 2006, the unrecognized compensation cost attributable to the
remaining
restricted stock awards was $977,000, which will be expensed over the
remaining
vesting period. The aggregate intrinsic value of restricted stock that is
expected
to vest in the future was $2.2 million at September 30, 2006.

Compensation cost for the Company's stock option and restricted stock plans
  in the 2006 and 2005 third quarters was $74,000 and $0, respectively.
  For the nine months ended September 30, 2006 and 2005 compensation cost
related
  to these plans was $1.6 million and $26,000, respectively.

|(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)                  
|                                         |  |      | Pension benefits                
|Components of net periodic pension cost: |  |      | 2006                            
|Service cost                             |  | $    | -                               
|Interest cost                            |  |      | 106                             
|Expected return on plan assets           |  |      | (177                            
|Curtailment charge                       |  |      | -                               
|Amortization                             |  |      | 17                              
|                                        
|Net periodic pension cost                |  | $    | (54                             
|                                        
|                                         |  |      | Nine months ended September 30, 
|                                         |  |      | (in thousands)                  
|                                         |  |      | Pension benefits                
|Components of net periodic pension cost: |  | 2006 |                                 
|Service cost                             |  | $    | -                               
|Interest cost                            |  |      | 318                             
|Expected return on plan assets           |  |      | (531                            
|Curtailment charge                       |  |      | -                               
|Amortization                             |  |      | 51                              
|Net periodic pension cost                |  | $    | (162                            

In December of 2002, the Company's Board of Directors amended the defined
benefit pension plan
to cease the accrual of further benefits. For the fiscal year ended December 31,
2006, the Company expects to make no contributions to the defined benefit
pension plan.

Item 2.Managements' DiscussionandAnalysisofFinancialConditionandResultsofOperations

Forward-LookingStatements

Statements included in this discussion and in future filings by Rome Bancorp,
Inc. ("Rome Bancorp" or the "Company") with the Securities and Exchange
Commission,
in Rome Bancorp press releases, and in oral statements made with the approval
of an authorized executive officer, which are not historical or current facts,
are "forward-looking statements" made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, and are subject to
certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. Rome
Bancorp
wishes

18

---



to caution readers not to place
unduereliance on such forward-looking statements, which speak only as of the
date made. The following important factors, among others, in some cases have
affected and
in the future could affect Rome Bancorp actual results, and could cause Rome
Bancorp actual financial performance to
differ materially from that expressed in any forward-looking statement: (1)
changes in
the real estate market or local economy, (2) changes in interest rates, (3)
changes in
laws and regulations to which we are subject, and (4) competition in our primary
market
area. Rome Bancorp disclaims any obligation to subsequently revise any
forward-looking statements to
reflect events or circumstances after the date of such statements, or to reflect
the
occurrence of anticipated or unanticipated events.

General

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

Overview

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

Net income for the third quarter of 2006 was $920,000, a decrease of 9.1%
from the prior year's third quarter net income of $1.0 million. The
significant factors
and trends impacting the third quarter of 2006, which are discussed in greater
depth below, were as follows:



- Net interest income decreased by $67,000, or 1.9%, from the same quarter
last year as a result of a decline in interest earning assets. The Company's
net interest margin increased from 4.74% in the third quarter of 2005 to 5.07%
in the same quarter of 2006.
- Non-interest expense increased to $2.4 million in the third quarter of 2006
from $2.3 million in the same quarter of the prior year, primarily due to
higher benefit costs and professional fees.
- Non-interest income increased by $49,000 from third quarter 2005 levels
primarily
due income from increases in the cash surrender value of bank owned life
insurance.
- The Company recorded a provision for loan losses of $25,000 in the third
quarter of 2006, while no provision was recorded in the same quarter of 2005.

19

---



CriticalAccountingPolicies

Thepreparation
ofconsolidated
financial
statements
requiresmanagementto make
estimatesandassumptions.
Changesin these
estimatesand
assumptionsaffect the
reportedamountsof certain assets,liabilities,revenue
andexpenses.
Different
amountscould be
reportedunder
different conditions,or if
different
assumptionswere used in theapplicationof these
accounting
policies.

It ismanagement's
opinionthataccounting
estimates
coveringcertain aspects of thebusinesshave more
significancethan others due to the
relativeimportanceof those
areas to overallperformance,
or the
level ofsubjectivityrequiredin making theseestimates.
Managementof the
Companyconsiderstheaccountingpolicyrelatingto theallowancefor loan losses to
be a criticalaccountingpolicy given theuncertaintyin
evaluatingthe level of the
allowance
requiredfor
probablecredit losses and thematerialeffect that suchjudgmentscan have on the
results ofoperations.Management's
quarterly
evaluationof theadequacyof theallowance
considers
theCompany's
historicalloan loss
experience,review of
specificloans, current
economic conditionsand such other
factorsconsidered
appropriateto
estimatelosses.
Managementuses
presently
available
informationto
estimateprobablelosses on loans;however,futureadditions
to theallowance
may benecessary
based onchanges
inestimates,
assumptions
oreconomic
conditions.
Significant
factors that could give rise tochangesin theseestimatesinclude,
but are not
limited to,changesineconomic
conditionsin the local area,concentrationsof risk anddeclinesof local
propertyvalues.

TheCompany's
criticalpolicies
and theirapplication
arereviewed
periodically
by the AuditCommittee
and the Board ofDirectors.
Allaccounting policies
areimportant,
and as such, weencourage
the reader to review each of thepoliciesincluded
in Note 2 to theconsolidatedfinancial
statements reported
on theCompany's
2005 Annual Report on Form 10-K to obtain a better
understandingof how our
financial
performanceis
reported.

20

---



Analysisof NetInterest
Income.

Average Balances, Interest and Average Yields
- The followingtable sets forth certaininformation
relatingto theCompany's
averagebalancesheets and reflects the
averageyield on interest-earningsassets and
averagecost of interest-bearingliabilities,interest earned
and interest paid for
the periodsindicated.Such
yields and costs are derived bydividing
income orexpense
by theaverage
balanceof interest-earning assets
or interest-bearingliabilities, respectively,
for
the periodspresented. Average
balancesare derived from dailybalances
over the periodsindicated.The
averagebalancesfor loans are net of
allowancefor loan losses, but
include non-accrual loans. Interest income onsecuritiesincludes
a taxequivalent
adjustmentfor bank
qualified municipals.

|                                                                                          |  | Average Balances, Interest and Average
Yields |        
|----------------------------------------------------------------------------------------- |  | --------------------------------------------- | -------
|                                                                                          |  | For the three months ended September 30,
2006 |        
|                                                                                          |  |                                               |        
|                                                                                          |  | Average                                       |        
|                                                                                          |  | Balance                                       |        
|Assets:                                                                                   |  |                                               |        
|Interest-earning assets:                                                                  |  |                                               |        
|Loans                                                                                     |  | $                                             | 255,331
|Securities (1)                                                                            |  |                                               | 6,373  
|Federal funds sold & other                                                                |  |                                               |        
|Interest bearing
deposits                                                                 |  |                                               | 6,144  
|Total
interest-earnings assets                                                            |  |                                               | 267,848
|Noninterest-earning assets                                                                |  |                                               | 25,150 
|Total assets                                                                              |  | $                                             | 292,998
|Liabilities and Shareholders' Equity:                                                     |  |                                               |        
|Interest-bearing liabilities:                                                             |  |                                               |        
|Savings accounts                                                                          |  | $                                             | 86,944 
|Time deposits                                                                             |  |                                               | 66,344 
|Money market accounts                                                                     |  |                                               | 5,593  
|Other interest bearing deposits                                                           |  |                                               | 11,602 
|Total
interest-bearing deposits                                                           |  |                                               | 170,483
|Borrowings                                                                                |  |                                               | 8,971  
|Total
interest-bearing liabilities                                                        |  |                                               | 179,454
|Noninterest-bearing deposits                                                              |  |                                               | 28,624 
|Other liabilities                                                                         |  |                                               | 3,841  
|Total liabilities                                                                         |  |                                               | 211,919
|Shareholders' equity                                                                      |  |                                               | 81,079 
|Total liabilities
and shareholders' equity                                                |  |                                               | 292,998
|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. |  |                                               |        

21

---



|                                                                                          |  | Average Balances, Interest and Average
Yields
|----------------------------------------------------------------------------------------- |  | ---------------------------------------------
|                                                                                          |  | For the nine months ended September 30,
2006 
|                                                                                          |  |                                              
|                                                                                          |  | Average                                      
|                                                                                          |  | Balance                                      
|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. |  |                                              

22

---



Rate Volume Analysis
Thefollowingtable
analyzesthe dollar amount ofchangesin interest income
and interestexpensefor
majorcomponentsof
interest-earning assets and interest-bearingliabilities.It shows the amount of the change in
interest income orexpensecaused by eitherchangesinoutstanding
balances(volume)orchangesin interest
rates. The effect of a change in volume ismeasuredbyapplying
theaverage
rate during the first period to the volume change
betweenthe two
periods.The effect of
changesin rate is
measuredby
applyingthe change in rate
betweenthe two periods to theaveragevolume during the
first period.Changes
attributableto both rate andvolume,which cannot besegregated,have beenallocated proportionatelyto
theabsolutevalue of the
change due to volume and the
change due to rate.

|                                                                                          |  | Rate Volume Analysis                             
|----------------------------------------------------------------------------------------- |  | -------------------------------------------------
|                                                                                          |  | Three months ended September 30, 2006            
|                                                                                          |  | Compared to Three months ended September
30, 2005
|                                                                                         
|                                                                                          |  | Increases (decreases) due to                     
|                                                                                          |  | Rate                                             
|                                                                                          |  |                                                  
|Assets:                                                                                   |  |                                                  
|Interest-earning assets:                                                                  |  |                                                  
|Loans                                                                                     |  | $                                                
|Securities (1)                                                                            |  | 7                                                
|Federal funds sold & other                                                                |  |                                                  
|Interest bearing
deposits                                                                 |  | 23                                               
|Total
interest-earnings assets                                                            |  | 224                                              
|                                                                                         
|Interest-bearing liabilities:                                                             |  |                                                  
|Savings accounts                                                                          |  | -                                                
|Time deposits                                                                             |  | 121                                              
|Money market accounts                                                                     |  | 12                                               
|Other interest bearing deposits                                                           |  | (5                                               
|Total
interest-bearing deposits                                                           |  | 128                                              
|Borrowings                                                                                |  | -                                                
|Total
interest-bearing liabilities                                                        |  | 128                                              
|                                                                                         
|Net change in interest income (1)                                                         |  | $                                                
|(1) Includes tax equivalent
adjustment for the Company's tax-exempt municipal securities. |  |                                                  

Comparisonof
FinancialConditionatSeptember30, 2006 andDecember31,
2005:

Total assets at
September30, 2006 were $296.5million,a
decreaseof
$12.4 million from $308.9 million atDecember31, 2005. Cash and federal funds
decreasedby $26.6 million in
the first nine months of
2006 from $34.2 million atDecember
31, 2005 to $7.6 million atSeptember30, 2006 due toinvestmentsintreasurystock and bank owned lifeinsuranceandfunding
of loanproduction.
Securities
decreased
by
$4.7 million from $11.9 million to $7.2 million over the same
period. Thedecreaseinsecuritieswas
attributableto the sale of shares
in an equity mutual fund, as well asmaturities
in theinvestment
portfolio.

The
Company'sloan
portfolio
increasedby $9.4
million,or 3.7%, during the first
nine months of 2006 from $253.9 million atDecember31, 2005 to $263.3 million at
September30, 2006. During the
first nine months of 2006, theCompany
originated
approximately
$37.3 million of loans, ascomparedtoapproximately$49.5 million of loanso
riginatedin the same period of 2005. The
majorityof the loan
originationsfor this year to date
have beenresidentialandcommercial
mortgageloans. Non-performingloans as a
percentageof total loans
increasedto 0.43% at
September30, 2006, as
comparedto 0.37% at
December31, 2005. The
allowancefor loan losses as apercentageof total loans was 0.74% and 0.77% atSeptember30, 2006 andDecember31, 2005,respectively.Inaddition,theallowance
for loan losses as a percent of non-performingloans was
173.3%at
September30, 2006,
comparedto
207.0%at
December31, 2005.



23

---



Totaldeposits
decreased
to $199.4 million atSeptember30, 2006 from $201.5 million at
December31, 2005, in part due to acompetitivemarket for
these funds. During the first nine months of 2006, savings
depositsdecreasedby $2.9million,or 3.3%.Balancesof non-interest bearingbalances increasedby $859,000,or 2.9%, and money marketdeposits
increased
by $342,000,
or 6.9%. Timedeposits
decreased
by $335,000,
or less than onepercent,
and the level of other interest bearing
depositsstayed
constant.

In June of 2006, theCompanyinvested
in bank owned lifeinsurancecoveringcertain key
employees.This $8.0 millioninvestmentis
classifiedas an other asset, and
is the reason for theincrease
in these assets from $5.3 million at
December31, 2005 to $13.7
million atSeptember30,
2006.

Comparisonof
OperatingResultsfor the Three-MonthPeriodsEndedSeptember30,
2006 and 2005

General

During the three months endedSeptember30, 2006, theCompany
recordednet income of $920,000,comparedto $1.0 million
for the third quarter of 2005. Thedecrease
in net income iscomprised
of adecrease
in net interest income before loan loss
provisionof $67,000, anincreasein the
provisionof loan losses of
$25,000 and anincreasein non-interestexpenseof
$148,000,which werepartiallyoffset by a
$49,000increasein
non-interest income and a $119,000
decreasein income taxexpense.

Diluted
earningsper share were $0.11
per diluted share for both thequarters
endedSeptember30, 2006 and 2005.Averagediluted sharesdecreasedto
8,313,604for the third quarter of
2006 from9,588,432in the
same period of 2005 due to theCompany's
stockbuyback
program.

NetInterest
Income

Net interest income before loan loss
provisionfor the quarter endedSeptember30, 2006decreasedby $67,000, or
1.9%, ascomparedto the
same quarter of 2005. Thisdecrease
isattributableto higher
deposit interestexpenseand
a loweraverage
balanceof earning assets,
partiallyoffset by
increasedyields on the
Company'searning assets.

InterestIncome

Interest income
increasedto $4.3 million for
the quarter endedSeptember30, 2006 from
$4.2 million for the same quarter of 2005.Averageloanbalances
for the third quarter of 2006 were $255.3
million,an
increaseof $8.5 million over
theaverage
outstandingloans for the third
quarter of 2005. The yield on theCompany's
loanportfolio
for the quarter
endedSeptember30, 2006 was
6.42% incomparisonto a
yield of 6.13% for the same period last year. Interest income on
securities
declined$89,000 from $164,000for the quarter
endedSeptember30, 2005 to
$75,000 for the quarter endedSeptember
30, 2006.Comparatively,
theaverage
balanceofsecurities
declinedby $8.8
million,or 57.9%, from the third quarter of 2005 to $6.4 million for the current
quarter and the yield on theCompany's
securities
increased
from 5.22% to 5.67% for the sameperiods,respectively.Finally,
interest income on federal funds sold and other interest
bearingdeposits
decreasedby $
186,000to $74,000 for the
quarter endedSeptember30,
2006 from the same quarter in 2005.Average
balancesof federal funds solddecreased
by $25.5million,
to $6.1 million atSeptember30, 2006 from $31.6 million at
September30, 2005, as the
Companyhas
continuedto invest the
proceedsof its March 30, 2005
stockoffering.

InterestExpense

Interestexpense
increasedto $
873,000in the quarter endedSeptember30, 2006 from
$764,000for the same
quarter of 2005. Interestexpense
ondeposits
increased
to $794,000
for the quarter endedSeptember30, 2006 from $679,000for the quarter endedSeptember30, 2005, due to rising rates paid on time
depositsconsistentwith current market rates. Interest
expenseon
borrowedfunds
decreasedto $79,000 for the
quarter

24

---



ended September30, 2006 from
$85,000 for thecomparative
quarter of 2005primarily
due to adecrease
in theaverage
balanceofborrowingsto $9.0
million in the current quartercompared
to $9.7 million in the third quarter of 2005.

Provisionfor Loan Losses

TheCompanyrecorded
a $25,000provision
for loan losses in either
the third quarter of 2006compared
to noprovision
in the third quarter of 2005. Theprovisionfor loan losses for the current three month
period wasnecessarytoreplenishthe loan loss
reserve for routine charge-offs andbecauseof growth in the
loanportfolio.Asset
quality was slightly lessfavorable
atSeptember30, 2006 than atDecember31, 2005 with non-performingloans as a
percent of loans
of 0.43% and theallowancefor loan losses as a percent of non-performing
loans of173.3%
atSeptember30, 2006,
comparedto 0.37% and
207.0%,respectively,atDecember31, 2005. Theallowancefor loan losses as apercentageof loans was at 0.74% at
September30, 2006
comparedto 0.77% at
December31, 2005.

Indeterminingtheappropriateprovision
for
loan losses,managementconsidersthe level of and
trend in non-performingloans, the level
of and trend in net loan charge-offs, the dollar amount and mix of the loanportfolio,as well as
generaleconomic
conditionsand real estate trends
in theCompany'smarket
area, which can impact theinherent
risk of loss
in theCompany'sloanportfolio.

Non-Interest
Incomeand Non-Interest
Expense

Non-interest income
increased$49,000 to $503,000in the third quarter
of 2006 from
$454,000in the same
period of 2005. Theincreaseisprimarily
attributableto
earningsrelated to
increasesin cash
surrendervalue of Bank-owned lifeinsurance.

Non-interest
expenseincreasedby $148,000to $2.4 million in the current quarter
comparedto $2.3 million in the
same period of 2005,primarily
due toincreased
benefit costs andprofessionalfeeexpenditures
related tocompliance
with Section 404 of theSarbanesOxley Act.

Income tax
expensefor the third quarter of
2006decreasedto $538,000from $
637,000in the same period of 2005,directlydue to the
decreasein pre-tax
income.

ComparisonofOperating
Resultsfor the
Nine-MonthPeriodsEndedSeptember
30, 2006 and 2005

General

During the
nine months endedSeptember30, 2006, theCompanyrecordednet income of
$1.7 millioncomparedto
$2.6 million for the first nine months of 2005. The
decreasein net income is
comprisedof a $
140,000increasein loan lossprovision,a $113,000decrease
in non-interest income and a $1.9 million
increase
in non-interestexpense,
partially
offset by anincrease
in net interest income before loan loss
provisionof $
708,000and a
decreaseof income tax
expenseof $
508,000.

Dilutedearningsper share were
$0.19 per diluted share for the nine months endedSeptember30, 2006comparedto $0.27 per diluted share for the same period of
2005. Thedecreaseinearningsper share isattributableto the
aforementioned
reductionin net
income,partiallyoffset by adecreaseinaverage

outstandingdiluted shares from9,571,413to
8,867,972.

NetInterestIncome

Net interest income before loan loss
provisionfor the nine months endedSeptember30, 2006
increasedby $
708,000,or 7.2%,
comparedto the same period of
2005. Thisincreaseisattributableto growth in
theCompany'snet interestmargin.

25

---



InterestIncome

Interest income
increasedto $13.1 million for
the nine months endedSeptember
30, 2006 from
$12.1 million for the same period of 2005. Theincreasein interest income was
attributablean
increasein overall yields to 6.24%
from 5.80% over the same period.Average
loanbalances
for the first nine months of 2006 were $253.5million,an
increaseof $13.7 million over
theaverage
outstandingloans for the same
period of 2005. The yield on theCompany's
loanportfolio
for the nine
months endedSeptember30,
2006 was 6.39%comparedto a
yield of 6.16% for the same period last year,reflecting
increasesin the current market interest rates.
Interest income onsecurities
declined$262,000from $567,000for the nine months
endedSeptember30, 2005 to
$305,000for the nine
months endedSeptember30,
2006.Comparatively,theaverage
balanceof
securities
declinedby $7.4million,or 45.1%, from the
first nine months of 2005 to $9.0 million for the current year to date and
the yield on theCompany'ssecurities
increasedfrom 5.05% to 5.44% for
the sameperiods,
respectively.
Finally,interest income on federal
funds sold and other interest bearingdeposits
increasedby $145,000to $
650,000for the first nine months
of 2006 from the same
period in 2005 due toincreased
yields which werepartially
offset by adecrease
inaverage
balances.

InterestExpense

Interest
expenseincreasedto $2.5 million for the first nine
months of 2006 from $2.3
million for the nine months endedSeptember
30, 2005. Interestexpense
ondeposits
increasedto $2.3
million for the nine months endedSeptember
30, 2006 from $2.0 million for the nine months endedSeptember30, 2005, due to
rising rates paid on timedeposits
consistent
with current market rates.
Interestexpenseon
borrowedfunds
decreasedto $238,000for the nine months endedSeptember30, 2006 from
$310,000for the
comparativeperiod of 2005
primarilydue to a
decreasein the
average
balanceofborrowings
to $9.0 million in the current nine months
comparedto $12.4 million in
the nine months
ended 2005.

Provisionfor Loan Losses

TheCompanyrecorded
aprovision
for loan losses of $140,000in the first nine months of 2006
comparedto no
provisionfor loan losses in the
first nine months
of 2005. During the second quarter of 2005, theCompanyrecorded
the receipt of a largerecoveryon acommercial
loan that had beencharged
off in 2000.Receipt
of thisrecovery
preventedthe need to record a loan
lossprovisionin the first
nine months of 2005.
Theprovision
recordedin the nine months endedSeptember,30, 2006 wasnecessaryto
replenishthe loan loss
reservesfor normal activity and toprovidefor growth of the
loanportfolio.

Indeterminingtheappropriateprovision
for
loan losses,managementconsidersthe level of and
trend in non-performingloans, the level
of and trend in net loan charge-offs, the dollar amount and mix of the loanportfolio,as well as
generaleconomic
conditionsand real estate trends
in theCompany'smarket
area, which can impact theinherent
risk of loss
in theCompany'sloanportfolio.

Non-Interest
Incomeand Non-Interest
Expense

Non-interest income
decreasedby $113,000to $1.4 million for the
first nine months of
2006comparedto $1.5
million in the same period of 2005. Thisdecreaseisprimarily
attributableto the
reimbursementof prior year legal
feesexpendedin
relationto the above
referencedloan loss
recovery totaling$167,000.In
addition,the
Companyrecognized$35,000 less gains onsecurities
sales in the first nine months of 2006
comparedto the same period of
2005, due to a lower level of salesactivity.
Partially
offsettingthese
decreaseswas an
increasein
customerfee
revenueover the level earned in
the same
period of 2005 andearningsonrecently
acquiredbank owned life
insurancein the amount of $122,000.

26

---



Non-interest
expenseincreasedto $9.1 million in the first nine months
of 2006 from
$7.2 million in the same period of 2005,primarilydue to higher benefit costs related to the
Company's2006 stock-based
compensationplans and
increased
expendituresrelated to
compliancewith Section 404 of theSarbanes-Oxley Act andstrategic
planninginitiatives.In the second quarter of 2006, theCompanygranted stock
options andrestrictedstock
awards
which are beingaccountedfor using the fair valuemethodology
of SFAS No. 123(R). Total 2006 year to date non-cash
amortization
expenserelated to these plans was
$1.6million,themajorityof which wasimmediate
expensingof options and stock
grants made toindividualseligible forretirementunder theprovisionsof theCompany'sdefined benefit
plan.

Income tax
expensefor the first nine months
of 2006decreasedto
$1.1 million from $1.6
million in the same period of 2005, due to thedecreasein pre-taxincome.

Liquidityand
CapitalResources

TheCompany'sprimary
sources of funds consist ofdeposits,scheduled
amortization
andprepayments
of
loans andmortgage-backedsecurities, maturitiesofinvestments,interest
bearingdepositsat other
financial
institutionsand funds
providedfrom
operations.The Bank also has a
writtenagreementwith the
Federal Home Loan Bank of New
York that allows it to borrow up to $67.7million.AtSeptember
30, 2006, the Bank hadoutstandingborrowings
of $2.9 million on this line of credit, as well asoutstanding
advancesand
amortizingnotes
totaling$8.6
million.

Loanrepaymentsandmaturinginvestment
securitiesare a
relatively
predictablesource of funds.However,deposit flows,
calls ofinvestment securities,
andprepayments
of loans andmortgage-backedsecurities
arestrongly
influenced
by
interest rates, general and localeconomic
conditions,
andcompetition
in themarketplace.
These factors reduce thepredictabilityof the timing of these sources of
funds.

TheCompany'sprimary
investing
activities
include theorigination
of loans and to a lesser extent the
purchaseof
investment
securities.For the nine months
endedSeptember30, 2006,
theCompany
originatedloans of
approximately$37.3
million,compared
to $49.5 of loansoriginatedin the first nine months of 2005.

AtSeptember30, 2006, theCompanyhad loancommitmentstoborrowers
ofapproximately
$16.1million,
andavailable
letters and lines of credit ofapproximately$16.8million.

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

Time deposit
accountsscheduledto mature within one year were $43.6
million atSeptember30,
2006. Based on our depositretention
experience
and current pricingstrategy,weanticipate
that asignificant
portion of these timedepositswill remain with us. We are
committedto
maintaininga strong
liquidity
position;
therefore,
theCompany
monitorsits
liquidity
positionon a daily basis. Weanticipatethat we will havesufficientfunds to meet our
currentfunding
commitments.The
marginalcost of new
fundinghowever,whetherfrom
depositsor
borrowingsfrom the Federal Home
Loan Bank, will becarefullyconsideredas we
monitorsour
liquidityneeds.Therefore,in order
tominimizeits cost of
funds, we mayconsideradditional
borrowingsfrom the Federal Home
Loan Bank in the future.

AtSeptember30, 2006, the Bank
exceededeach of the
applicable
regulatorycapital
requirements.The Bank's
leverage(Tier 1) capital atSeptember30, 2006 was
$62.4million,or21.16%ofadjustedassets. In order to
beclassifiedas "well-capitalized"by the OTS, the
Bank isrequiredto have
leverage(Tier 1) capital of
$14.7million,or 5.0%
ofadjustedassets. To beclassifiedas a well-capitalizedbank by the OTS, the
Bank must also have a total
risk-based capital ratio of 10.0% . AtSeptember30, 2006, the Bank had a total risk-based capital
ratio of 28.8%.

27

---



TheCompanypaid cashdividendsof $0.075 per share during the three-month period
endedSeptember30, 2006totaling$
626,000.

During the second quarter of
2006, theCompany'sBoard ofDirectors
authorizedthe
repurchaseof
1,383,000of the
Company's
outstanding commonshares over thefollowingtwelve month
period.ThroughSeptember30, 2006 $14.2
million wasexpendedtorepurchaseshares.

TheCompanydoes notanticipateanymaterial
capitalexpenditures,nor
does it have any balloon or otherpayments
due on any long-termobligationsor any off-balance
sheet items other than thecommitmentsand unused lines of credit noted above.

Off-BalanceSheetArrangements

TheCompanydoes not have any off-
balancesheet
arrangementsthat have or
arereasonablylikely to
have a current or future effect on the Company'sfinancial
condition,
revenuesorexpenses,results of
operations,
liquidity,capital
expendituresor capital
resourcesthat is
materialto
investors.

RecentAccountingPronouncements

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

In July 2006, the FASB
releasedInterpretationNo. 48,"AccountingforUncertaintyin Income Taxes." ThisInterpretationrevises therecognitiontests for taxpositionstaken in tax returns such that a tax benefit
isrecordedonly when it
is more likely than not that the taxposition
will beallowed
uponexamination
by taxingauthorities.The amount of
such a tax benefit to record is the largest amount that is more likely than not
to beallowed.Any
reductionin
deferredtax assets or
increasein tax
liabilitiesupon
adoptionwill
correspondinglyreduce
retainedearnings.TheCompany
has not yetdetermined
the effect ofadopting
thisInterpr

etation,which iseffectivefor it onJanuary
1, 2007.

InSeptember2006, theFinancialAccounting
StandardsBoard issuedStatementNo. 158,
"Employers'
Accountingfor
DefinedBenefit
Pensionand Other
PostretirementPlans, an
amendmentof FASB
StatementsNo. 87, 88, 106, and
132(R)." SFAS 158requiresemployersto
recognizethe funded status of a
defined benefitpostretirement
plan as an asset orliability
in itsstatement
offinancial
positionand torecognize
changesin that funded status incomprehensiveincome in the
year in which thechangesoccur. The funded status of a defined benefitpensionplan ismeasured
as thedifference
betweenplan assets at fair value and the
plan'sprojectedbenefitobligation.Under SFAS 158,employersare
requiredto
measureplan assets and benefitobligationsat the date of
their fiscal year-endstatement
offinancial
position.
SFAS 158 iseffective
for theCompanyat the end
of the 2006calendaryear.
Based on theprojectedbenefitobligationsof the Company's
defined benefit

28

---



plans anddeferred
compensationplan, which were lastmeasuredat
December31, 2005, the
aggregateexcess funded status of
theCompany'sdefined
benefitpostretirementplans
atDecember31, 2005 was
$677,000.If the
Companywere
requiredto adopt SFAS 158 based on
its funded status atDecember31, 2005, the
Companywould
continueto
recognizeas an asset this
overfunded
positionof the plan but would alsoderecognizean
intangibleasset for
unrecognizednet
actuariallosses of
approximately$1.5
million.The impact of this change
 would berecognizedas anadjustmentto other
comprehensiveloss of $900,000,which is net of a $600,000tax
benefit.Since the benefit
obligationswill not be
measureduntil
December31, 2006, the
Companycannot yet
quantifythe actual impact theadoptionof SFAS 158 will
have on itsconsolidatedfinancialstatements.
Managementis alsoevaluatingthe impact of
SFAS 158 on theCompany'sliabilityfor other postretirement benefits.Thisfinancial
statementimpact related to other
postretirement
benefitsis not
expectedto be
material.

InSeptember2006, theSecuritiesandExchangeCommission
("SEC")issued StaffAccountingBulletin("SAB")No. 108. This SABexpressesthe SEC's viewsregardingthe process ofquantifying
financial
statement
misstatements.SAB No. 108
providesguidanceon theconsiderationof the
effects ofprior yearmisstatementsfor thepurposeof amaterialityassessment.
SAB No. 108 iseffective
for fiscal yearsbeginning
afterNovember
15, 200.Management
is in the process ofevaluatingthe effect on theCompanysfinancialstatements
ofadoptionof SAB
No. 108.

Item 3.QuantitativeandQualitativeDisclosuresaboutMarketRisk

There has been no
materialchange in the
Company'sinterest rate risk
profile sinceDecember31,
2005. For a morecompletediscussionof the
Company'sasset and
liability
management
policiessee
"Management's
Discussionand
Analysisof
FinancialConditionand Results ofOperations"in the
Company's2005 Form 10-K.

Item 4.ControlsandProcedures

Management,
includingthe
Company's
Presidentand Chief
ExecutiveOfficer and the ChiefFinancial
Officer,has
evaluatedthe
effectivenessof the
Company's
disclosure
controlsand
procedures(as defined in
ExchangeAct Rules 13a-15(e) and
15d-15
(e)) as of the end of the periodcoveredby
this report. Based upon thatevaluation,thePresidentand ChiefExecutiveOfficer and the
ChiefFinancialOfficerconcludedthat the
disclosure
controlsand
procedureswere
effectiveto ensure that
information
requiredto be
disclosedin the reports theCompanyfiles and
under theExchange
Act is (i)recorded,
processed,
summarized
andreported
as and whenrequired
and (ii)accumulated
andcommunicated
to theCompany's
management,
including
theCompany's
President
and ChiefExecutive
Officer and the ChiefFinancialOfficer,
asappropriate
to allow timelydecisions
regarding
required disclosure.

There have been no
significant
changesin the
Company'sinternal
controlsoverfinancialreporting
identifiedin
connectionwith the
evaluationthat
occurredduring the
Company'slast fiscal quarter that
hasmateriallyaffected,or that is
reasonablylikely to
materiallyaffect, the
Company's
internalcontrol over
financial
reporting.

Part II -OTHERINFORMATION

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

29

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Item 2.UnregisteredSales of EquitySecuritiesand Use ofProceeds

Thefollowingtableprovidesinformation
with respect topurchasesmade by or on behalf of theCompany
or anyaffiliated
purchases
(as defined in rule 106-18 (a)(3) under the
Securities
ExchangeAct of 1934) of theCompany's
commonstock during the quarter
endedSeptember30, 2006.

COMPANYPURCHASESOFEQUITYSECURITIES





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

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

30

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

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

|   
|---
|(1)
|   
|(2)
|   
|(3)
|   
|(4)
|   
|(5)
|   
|(6)
|   
|(7)
|   

31

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SIGNATURES

Pursuant
to therequirement
of theSecurities
ExchangeAct of 1934, theregistranthas duly caused this report to be signed on its behalf by the
undersigned,
thereuntoduly
authorized.

|ROMEBANCORP,
INC.    |  |                          |  |                | 
|-------------------- |  | ------------------------ |  | -------------- | 
|                    
|                    
|Name                 |  | Title                    |  | Date           | 
|                    
|/s/Charles M. Sprock |  | Chairman of the Board,   |  | March 29, 2007 | 
|Charles M. Sprock    |  | President and Chief      |  |                | 
|                     |  | Executive Officer        |  |                | 
|                     |  | (Principal Executive     |  |                | 
|                     |  | Officer)                 |  |                | 
|                     |  |                          |  |                | 
|                     |  |                          |  |                | 
|/s/David C. Nolan    |  | Executive Vice President |  | March 29, 2007 | 
|David C. Nolan       |  | and Chief Financial      |  |                | 
|                     |  | Officer (Principal       |  |                | 
|                     |  | Financial Officer)       |  |                | 

32

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