10-K

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006
Commission File No.: 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 W. Dominick Street, Rome, New York 13440-5810
(Address of principal executive offices)
(315) 336-7300
(Registrant’s Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of exchange on which registered
Common Stock, par value $0.01 per share	The NASDAQ Stock Market, LLC

          Indicate by check mark of the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

          Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (Sect. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

          Based on the closing sales price on June 30, 2006, the aggregate market value of the voting stock held by non-affiliates of the registrant was $89,482,000.

Rome Bancorp had 8,471,983 shares of common stock outstanding as of March 9, 2007.

DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the definitive proxy statement pursuant to Regulation 14A to be issued by the Corporation in connection with the 2007 Annual Meeting and portions of the 2006 Annual Report to Shareholders for the fiscal year ended December 31, 2006 are incorporated by reference into Parts II and III of this report.

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TABLE OF CONTENTS

			Page
PART I
	ITEM 1.	BUSINESS	4
	ITEM 1A.	RISK FACTORS	32
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	35
	ITEM 2.	DESCRIPTION OF PROPERTY	35
	ITEM 3.	LEGAL PROCEEDINGS	35
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	35
PART II
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	36
	ITEM 6.	SELECTED FINANCIAL DATA	36
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	36
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	36
	ITEM 9A.	CONTROLS AND PROCEDURES	36
	ITEM 9B.	OTHER INFORMATION	37
PART III
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	37
	ITEM 11.	EXECUTIVE COMPENSATION	38
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	38
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	38
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	38
PART IV
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	38

Forward Looking Statements

          This Annual Report on Form 10-K contains “forward-looking statements” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition and results of operation and business that are subject to various factors which could cause actual results to differ materially from these estimates including, but not limited to, changes in the real estate market or local economy, changes in interest rates, changes in laws and regulations to which we are subject, and competition in our primary market area.

          Any or all of our forward-looking statements in this Annual Report on Form 10-K and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or unknown risks and uncertainties. Consequently, no forward-looking statements can be guaranteed. We disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.

PART I

ITEM 1. BUSINESS

General

          Rome Bancorp, Inc. (“Rome Bancorp” or the “Company”) is a Delaware corporation organized on June 9, 1999 as the stock holding company for The Rome Savings Bank (“Rome Savings” or the “Bank”), a federally chartered stock savings bank headquartered in Rome, New York. Rome Bancorp’s principal business is to hold the capital stock of Rome Savings.

          The Rome Savings Bank is a federal stock savings bank and the wholly-owned subsidiary of Rome Bancorp. Rome Savings was originally chartered in 1851 as a New York mutual savings bank. On October 6, 1999, Rome Savings reorganized into a mutual holding company structure and formed Rome Bancorp and Rome, MHC. On April 27, 2004, Rome, MHC, Rome Bancorp and Rome Savings completed their conversions from New York-chartered companies to federally-chartered companies regulated by the Office of Thrift Supervision (the “OTS”). On March 30, 2005, Rome, MHC completed its second-step conversion and related stock offering and ceased to exist.

          Rome Savings is a community and customer-oriented retail savings bank that offers traditional deposit products, residential real estate mortgage loans and consumer, commercial and commercial real estate loans. In addition, Rome Savings purchases securities issued by the U.S. Government and government agencies, municipal securities, mortgage-backed securities and other investments permitted by applicable laws and regulations. At December 31, 2006, Rome Bancorp had assets of $298.8 million, deposits of $196.0 million and stockholders’ equity of $77.0 million.

Business Strategy

          Our business will be and has been to hold Rome Savings. Our revenues are derived principally from interest on our loans and interest and dividends on our investment securities. Our primary sources of funds are deposits, payments of loan principal and mortgage-backed securities, maturities and calls of investment securities, and funds provided by operations.

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Market Area

          Operations are conducted out of our executive office in Rome, New York and three branch offices located in Oneida County, New York, two of which are located in Rome and one in New Hartford, New York. A new branch in the Town of Lee, Oneida County is anticipated to open in the spring of 2007. As of June 30, 2006, Rome Savings maintained a 5.63% share of all Oneida County, New York deposits, ranking 6th in size of deposits in Oneida County. Rome Savings also maintained a 43.77% market share of all reported funds on deposit in the City of Rome as of June 30, 2006, making it the largest depository institution in Rome.

          Our geographic market area for loans and deposits is principally Oneida County, New York. The local economy is not dependent on one key employer. The principal employment sectors are service-related (excluding financial industries), wholesale and retail trade, and manufacturing.

          Similar to national trends, most of the job growth currently realized in Oneida County has been in service related industries, and service jobs now account for the largest portion of the workforce. Our market area also includes a growing number of healthcare, engineering, software, and technical firms that have located in Oneida County in order to take advantage of its well-educated work force, including current and former military and defense industry personnel. Rome, New York is located 15 miles west of Utica and approximately 45 miles east of Syracuse. On occasion and depending on market conditions, we also originate loans in the greater New York City metropolitan area, typically through loan participations, and outside of New York State. At December 31, 2006, Rome Savings’ total loan portfolio consisted of $258.5 million in loans located in the State of New York, while $6.0 million of such loans consisted of loans made outside of New York.

          Our future growth opportunities will be influenced by growth and stability in the regional and statewide economies, other demographic trends and the competitive environment. We believe that Rome Savings has developed lending products and marketing strategies to address the credit-related needs of the residents in our local market area.

Competition

          Rome Savings faces intense competition both in making loans and attracting deposits. New York has a high concentration of financial institutions, many of which are branches of large money center and regional banks which have resulted from the consolidation of the banking industry in New York and surrounding states. Some of these competitors have greater resources than we do and may offer services that we do not provide. For example, Rome Savings does not provide trust or investment services, or credit cards. Customers who seek “one-stop shopping” may be drawn to these institutions.

          Competition for loans comes principally from commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, insurance companies, and brokerage and investment banking firms. The most direct competition for deposits has historically come from credit unions, commercial banks, savings banks, and savings and loan associations. Rome Savings faces additional competition for deposits from short-term money market funds, corporate and government securities funds, and from brokerage firms, mutual funds, and insurance companies.

Lending Activities

          General. Rome Savings has a long-standing commitment to originate commercial real estate, commercial and consumer loans, in addition to a traditional emphasis on residential lending. We currently retain substantially all of the loans that we originate. In the future, Rome Savings may sell longer term loans

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into the secondary market. At December 31, 2006, Rome Savings had total loans of $264.5 million, of which $137.2 million, or 51.87%, were one- to four-family residential mortgages and building loans. Of residential mortgage loans outstanding at that date, 25.50% were adjustable-rate mortgage loans and 74.50% were fixed-rate loans. The remainder of Rome Savings’ loans at December 31, 2006, amounting to $127.3 million, or 48.13% of total loans, consisted of commercial real estate, commercial loans, and consumer loans. Rome Savings originates commercial real estate and commercial business loans both within and outside of Oneida County, New York. As of December 31, 2006, 20.77% of Rome Savings’ loan portfolio was in commercial real estate loans and 9.14% was in commercial loans. In addition, as of December 31, 2006, 18.22% of Rome Savings’ loan portfolio was in consumer loans.

          Our loans are subject to federal and state laws and regulations. The interest rates we charge on loans are affected principally by the demand for loans, the supply of money available for lending purposes and the interest rates offered by our competitors. These factors are, in turn, affected by general and local economic conditions, monetary policies of the federal government, including the Federal Reserve Board, legislative tax policies and governmental budgetary matters.

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          Loan Portfolio. The following table sets forth the composition of our mortgage and other loan portfolios, by type of loan, in dollar amounts and in percentages at the dates indicated.

	2006					2005					2004					2003					2002
	Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total
Mortgage loans:
One- to four-family	$	135,078		51.06	%	$	126,422		49.79	%	$	114,138		48.93	%	$	96,217		45.94	%	$	71,687		39.11	%
Commercial real estate		54,493		20.60			52,748		20.78			49,364		21.16			50,239		23.98			53,530		29.20
Construction and land		2,562		0.97			3,317		1.31			5,469		2.34			4,197		2.00			1,520		0.83
Total mortgage loans		192,133		72.63			182,487		71.88			168,971		72.43			150,653		71.92			126,737		69.14
Commercial loans		24,189		9.14			23,832		9.39			21,507		9.22			19,171		9.15			16,752		9.14
Consumer loans:
Automobile		17,779		6.72			18,321		7.21			15,529		6.66			15,780		7.53			17,628		9.62
Property improvement		15,536		5.87			15,434		6.08			12,766		5.47			9,460		4.52			6,422		3.51
Education		—		—			—		—			—		—			—		—			1,451		0.79
Other		14,900		5.64			13,804		5.44			14,499		6.22			14,401		6.88			14,304		7.80
Total consumer loans		48,215		18.23			47,559		18.73			42,794		18.35			39,641		18.93			39,805		21.72
Total loans		264,537		100.00	%		253,878		100.00	%		233,272		100.00	%		209,465		100.00	%		183,294		100.00	%
Less: Allowance for loan losses		1,965					1,960					2,000					1,809					1,730
Loans, net	$	262,572				$	251,918				$	231,272				$	207,656				$	181,564

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          Loan Maturity. The following table presents the contractual maturity of our loan portfolio at December 31, 2006. The table does not include the effect of prepayments or scheduled principal amortization.

	At December 31, 2006
	Residential Mortgage Loans		Commercial Real Estate Loans		Consumer Loans		Commercial Loans
							(In thousands)
Amounts due:
Within one year	$	110	$	3,309	$	3,377	$	11,244
After one year:
One to three years		953		4,793		12,790		952
Three to five years		1,172		2,967		17,625		2,773
Five to ten years		12,141		7,870		9,998		4,820
Ten to twenty years		51,209		27,863		2,374		2,673
After twenty years		71,596		8,150		2,051		1,727
Total due after one year		137,071		51,643		44,838		12,945
Total loans	$	137,181	$	54,952	$	48,215	$	24,189

          The following table presents, as of December 31, 2006, the dollar amount of all loans, due after December 31, 2007, and whether these loans have fixed interest rates or adjustable interest rates.

	Due After December 31, 2007
	Fixed		Adjustable		Total
	(In thousands)
Residential mortgage loans	$	107,063	$	30,008	$	137,071
Commercial real estate loans		28,618		23,025		51,643
Consumer loans		32,488		12,350		44,838
Commercial loans		6,984		5,961		12,945
Total loans	$	175,153	$	71,344	$	246,497

          The following table presents Rome Savings’ loan originations, purchases, sales, and principal payments for the periods indicated.

	For the Year Ended December 31,
	2006		2005		2004
Total loans:
Balance outstanding at beginning of period	$	253,878	$	233,272	$	209,465
Originations:
Mortgage loans		40,043		41,872		44,073
Commercial and consumer loans		17,925		23,408		22,610
Total originations		57,968		65,280		66,683
Principal repayments:
Mortgage loans		29,180		26,560		25,717
Commercial and consumer loans		16,559		15,649		16,688
Total principal payments		45,739		42,209		42,405
Transfers to foreclosed real estate		99		83		87
Loan sales		1,099		1,695		—
Loans charged off		372		687		384
Balance outstanding at end of period	$	264,537	$	253,878	$	233,272

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          Residential Mortgage Lending. Rome Savings emphasizes the origination of mortgage loans secured by one- to four-family properties that serve as the primary residence of the owner. As of December 31, 2006, loans on one-to four-family residential properties accounted for $137.2 million, or 51.87%, of Rome Savings’ total loan portfolio. Of residential mortgage loans outstanding on that date, 25.50% were adjustable-rate mortgage loans and 74.50% were fixed rate loans. Rome Savings may seek to expand its residential lending activities primarily through the marketing and sale to the secondary market of longer term fixed-rate mortgage loans. Management of Rome Savings believes that the expansion of Rome Savings’ residential lending will enhance its reputation as a service-oriented institution that meets the needs of its local community.

          Most of Rome Savings’ loan originations are from existing or past customers, members of Rome Savings’ local communities or referrals from local real estate agents, attorneys, and builders. Management of Rome Savings believes that its branch offices could be a significant source of new loan generation.

          Rome Savings’ mortgage loan originations are generally for terms from 10 to 30 years, amortized on a monthly basis with interest and principal due each month. Residential real estate loans may remain outstanding for significantly shorter periods than their contractual terms as borrowers may refinance or prepay loans at their option without penalty. Conventional residential mortgage loans granted by Rome Savings customarily contain “due-on-sale” clauses that permit Rome Savings to accelerate the indebtedness of the loan upon transfer of ownership of the mortgage property.

          As of September 2002, Rome Savings’ Board of Directors approved a plan to have residential lending policies and procedures conform to secondary market guidelines. In the future, Rome Savings’ may sell qualifying fixed rate longer term loans into the secondary market, but expects to continue to retain fixed rate loans with maturities of shorter terms. Rome Savings allows residential mortgage loans with a loan to value ratio up to 103%. All mortgages originated with a loan-to-value ratio of 90% or greater have Private Mortgage Insurance (“PMI”) with 25% to 35% coverage. Mortgages between 80 and 90% loan to value ratio may require PMI based on credit scores and other financial attributes of the applicants. These loans are self insured with risk built into a pricing add-on. PMI insurance is not required on loans with an 80% or less loan to value ratio. Rome Savings at times may originate mortgages outside of secondary market guidelines, tailored to the needs of its customers. Commitments issued in these situations are reviewed with the board on a monthly basis. Rome Savings also offers residential construction loans to customers in its primary lending market.

          Generally, Rome Savings will make construction loans up to 80% loan to value ratio and up to 95% with PMI. The program allows for mortgagors to receive up to five advances during the construction phase. Rome Savings uses third party board approved inspectors to determine the advance amount and obtains a clear title report prior to making each advance. The loan converts to permanent financing at the end of six months from the initial closing whether the house is completed or not. The interest rate on the permanent financing is locked in at the time of application for the construction/permanent mortgage. Rome Savings receives at closing, in addition to standard fees and closing costs, up to ¾ of 1% of the loan amount as additional income.

          Rome Savings also offers adjustable-rate mortgage loans with a maximum term of 30 years. Adjustable-rate loans offered by Rome Savings include loans that provide for an interest rate based on the interest paid on U.S. Treasury securities of corresponding terms plus a margin of up to 2.75%. Rome Savings currently offers adjustable-rate loans with initial rates below those which would prevail under the foregoing computations, based upon a determination of market factors and competitive rates for adjustable-rate loans in its market area. For adjustable-rate loans, borrowers are qualified at the initial rate.

          Rome Savings’ adjustable-rate mortgages include limits on increase or decrease in the interest rate of the loan. The interest rate may increase or decrease by a maximum 2.0% per adjustment period with a ceiling rate of 11% over the life of the loan. The retention of adjustable-rate mortgage loans in our loan portfolio helps reduce exposure to changes in interest rates. However, there are unquantifiable credit risks resulting from potential increased costs to the borrower as a result of the pricing of adjustable-rate mortgage loans. During periods of rising interest rates, the risk of default on adjustable-rate mortgage loans may increase due to the upward adjustment of interest cost to the borrower.

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          During the year ended December 31, 2006, Rome Savings originated $8.0 million in adjustable-rate residential mortgage loans and $20.9 million in fixed-rate one- to four- family residential loans. Approximately 3.8% of all residential loan originations during fiscal 2006 were re-financings of loans already in Rome Savings’ portfolio. At December 31, 2006, Rome Savings’ loan portfolio included $35.0 million in adjustable-rate one- to four-family residential mortgage loans, or 13.23% of its total loan portfolio, and $102.2 million in fixed-rate one-to four- family residential mortgage loans, or 38.64% of its total loan portfolio.

          Commercial Real Estate Loans. We originate commercial real estate loans to finance the purchase of real property, which generally consists of developed real estate. In underwriting commercial real estate loans, consideration is given to the property’s historic cash flow, current and projected occupancy, location and physical condition. At December 31, 2006, our commercial real estate loan portfolio consisted of 178 loans, totaling $55.0 million, or 20.79%, of total loans. Most of the commercial real estate portfolio consists of loans which are collateralized by properties in our normal lending area. To a lesser extent, commercial real estate loans are secured by out of market properties. Our commercial real estate loan portfolio is diverse, and does not have any significant loan concentration by type of industry or borrower. We lend up to a maximum loan-to-value ratio of 75% on commercial properties and require a minimum debt coverage ratio of 1.25. Commercial real estate lending involves additional risks compared with one-to-four family residential lending. Because payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties, and/or the collateral value of the commercial real estate securing the loan, repayment of such loans may be subject, to a greater extent, to adverse conditions in the real estate market or the economy. Also, commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers. Rome Savings’ loan policies limit the amount of loans to a single borrower or group of borrowers to reduce this risk.

          Rome Savings commercial real estate loan portfolio includes $459,000 of construction loans. From time to time Rome Savings approves commercial construction mortgages. Recognizing the risks inherent to this type of lending, it is Rome Savings’ practice to minimize lending risk by carefully studying project feasibility, developing a detailed knowledge of the borrower/guarantor’s entire business operation, assessing both primary and secondary sources of repayment, and by structuring the credit in a manner appropriate to the project.

          Rome Savings will only consider construction lending where it holds a first position mortgage lien on the subject premises. No construction loan will be advanced without permanent financing approved by Rome Savings or another lender. Commitments from any source other than this bank must be reviewed for capacity and conditions. Rome Savings’ exposure cannot exceed 75% of the project cost. Rome Savings requires that up-front equity requirements be met in cash or free and clear value of the land directly associated with the project. The ratio of projected cash flow versus debt service coverage must equal or exceed 1.25. Construction loans may have interest only payments until completion of the project but not beyond 12 months. Personal guaranties are required of the principals of closely held entities. Funds are disbursed only after proper documentation of work completed. A 5% to 10% retainage is normally required.

          Commercial Loans. In addition to commercial real estate loans, we also engage in small business commercial lending, including business installment loans, lines of credit and other commercial loans. At December 31, 2006, our commercial loan portfolio consisted of 372 loans, totaling $24.2 million, or 9.14% of total loans. A portion of Rome Savings’ commercial loans are participation loans. Unless otherwise structured as a mortgage on commercial real estate, such loans generally are limited to terms of five years or less. Substantially all such commercial loans have variable interest rates tied to the prime rate. Whenever possible, Rome Savings collateralizes these loans with a lien on commercial real estate or, alternatively, with a lien on business assets and equipment and the personal guarantees from principals of the borrower. Interest rates on commercial loans generally have higher yields than residential mortgages.

          Rome Savings offers commercial services administered by Rome Savings’ commercial loan department that are designed to give business owners borrowing opportunities for modernization, inventory, equipment, construction, consolidation, real estate, working capital, vehicle purchases, and the refinancing of existing corporate debt.

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          Commercial loans are generally considered to involve a higher degree of risk than residential mortgage loans because the collateral may be in the form of intangible assets and/or inventory subject to market obsolescence. Commercial loans may also involve relatively large loan balances to single borrowers or groups of related borrowers, with the repayment of such loans typically dependent on the successful operation and income stream of the borrower. Such risks can be significantly affected by economic conditions. In addition, commercial business lending generally requires substantially greater oversight efforts compared to residential real estate lending. Rome Savings utilizes the services of an outside consultant to conduct on-site reviews of the commercial loan portfolio to ensure adherence to underwriting standards and policy requirements.

          Consumer Loans. Rome Savings offers a variety of consumer loans. At December 31, 2006, the consumer loan portfolio totaled $48.2 million or 18.23% of total loans. Consumer loans generally are offered for terms of up to five or 10 years, depending on the collateral, at fixed interest rates. Rome Savings’ consumer loan portfolio consists primarily of property improvement loans (i.e., home equity loans and home equity lines of credit) and used automobile loans. To a lesser extent, the consumer loan portfolio also includes:

• new automobile loans;

• recreational vehicles, boats, and conversion vans;

• motorcycles, ATVs, snowmobiles, and equipment loans;

• secured passbook loans;

• unsecured loans;

• education loans; and

• mobile or manufactured home loans.

          Rome Savings expects consumer lending to be an area of steady lending growth, with installment loans continuing to account for the major portion of our consumer lending volume. Automobile loans currently comprise the largest portion at 36.87% of the consumer loan portfolio, which consists primarily of loans for used cars. Rome Savings makes loans secured by deposit accounts up to 90.0% of the amount of the depositor’s savings account balance. Rome Savings also makes other consumer loans, which may or may not be secured. The terms of such loans vary depending on the collateral.

          Rome Savings provides home equity lines of credit for any purpose, using the applicant’s principal residence. The normal loan to value for these lines is 90%, with certain conditions allowing for up to 100%. This product has a ten-year interest-only draw period. During this period, principal reductions are at the applicant’s discretion. At the end of the ten-year period, any outstanding principal balance due is termed out over 15 years with payments to principal plus interest monthly. These lines have a variable interest at prime rate. Access to these lines are by customer checks. All closing costs are waived providing that the line remains open for at least three years. In addition, Rome Savings offers fixed rate amortizing installment home equity loans with terms of five to fifteen years.

          Rome Savings makes loans for automobiles, both new and used, directly to the borrowers. The term of automobile loans is generally limited to five years. The financial terms of the loans are determined by the age of the collateral. Rome Savings obtains a title lien on the vehicle and collision insurance policies are required on all these loans. Rome Savings pays a referral fee of no more than $200 to automobile dealers who refer it customers. There is no difference in interest rates and terms for customers who are referred and those who are not.

          Consumer loans are generally originated at higher interest rates than residential mortgage loans but also tend to have a higher credit risk than residential loans due to the loan being unsecured or secured by rapidly depreciable assets. Despite these risks, Rome Savings’ level of consumer loan delinquencies generally has been low. No assurance

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can be given, however, that Rome Savings’ delinquency rate on consumer loans will continue to remain low in the future, or that we will not incur future losses on these activities.

          Loan Approval Procedures and Authority. Rome Savings’ lending policies are established by its Board of Directors. The policies differ depending on the type of loan involved.

•	Residential Mortgage Loans: Once Rome Savings receives a completed application, each mortgage application is underwritten by Board approved and designated Bank employees and officers for approval. Loans over $417,000 must also be presented to the Executive Committee or the Lending Committee, which consists of the officers and directors of Rome Savings, for a second approval.
•	Commercial Loans and Commercial Mortgage Loans: The maximum commercial loan or commercial mortgage amount is dictated by Rome Savings’ portfolio management guidelines. The total of all credit extended to one borrower may not exceed $7.0 million. The maximum amount of any single loan, or combination of loans secured by the same collateral, is $3.0 million. The total of commercial mortgages and commercial loans by industry may not exceed 8.0% of assets. Rome Savings may not exceed the legal limits of lending to one borrower, currently 15% of unimpaired capital, not including accumulated other comprehensive income. See “Regulations – Regulation of Federal Savings Associations – Loans to One Borrower.” Per Rome Savings’ internal policies, loans to one borrower include group credit. A group credit is broadly defined as any credit, either direct, indirect, or contingent, including unused lines of credit and other commitments by Rome Savings to lend, extended either jointly or severally to individuals, joint ventures, partnerships, corporations, subsidiaries or affiliates, which are commonly controlled or where the credit reliance is similar. The minimum amount for a commercial loan is not specific in policy but loans under $5,000 are unusual. The minimum amount for a commercial mortgage is not specified in policy but mortgages under $25,000 are unusual.
	Two designated vice presidents of Rome Savings each have authority to approve commercial loans up to $400,000 which are secured by liquid collateral. For other commercial loans, each of these officers may approve loans up to $250,000. Rome Savings’ President and Chief Executive Office may approve commercial loans up to $650,000 which are secured by liquid collateral, and all other commercial loans up to $400,000. A combination of any two of these three officers may approve commercial loans up to $800,000 which are secured by liquid collateral. Any two may approve all other commercial loans up to $500,000. Any commercial loan request in excess of the approval authority outlined above must be presented to the bank’s Lending Committee, Executive Committee, or Board of Directors for approval.
	Two designated vice presidents of Rome Savings each have authority to approve commercial mortgages up to $300,000. Rome Savings’ President and Chief Executive Officer has authority to approve commercial mortgages up to $500,000. A combination of any two of these three officers may approve a commercial mortgage up to $700,000. Any commercial mortgage request in excess of the approval authorities outlined above must be presented to Rome Savings’ Lending Committee, Executive Committee, or Board of Directors for approval.
•	Consumer Loans: Rome Savings extends consumer loans in amounts starting at a minimum of $1,000, and with no upper limit, other than the portfolio management guidelines. Approvals begin at the interviewer level with various approval authorities ranging from $7,500 to $25,000. Loan requests above these amounts are then addressed up to $100,000 with the Vice President of Consumer Loans, up to $250,000 with the Senior Loan Officer, and up to $450,000 with the President and Chief Executive Officer. Requests above $450,000 are referred to the Lending Committee, Executive Committee, or the Board of Directors.
•	Home Equity Lines of Credit: Lines of credit against an applicant’s principal residence extend from $7,500 to $250,000. Approvals for these lines are handled as follows: up to $75,000 by the assistant

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to the head of the Consumer Lending Department; $150,000 by the Vice President of Consumer Lending or Mortgage Departments; and up to $250,000 by the Senior Loan Officer or Rome Savings’ President and Chief Executive Officer. Any exceptions to the normal parameters are approved by the Lending Committee, Executive Committee, or the Board of Directors.

          Current Lending Procedures. Upon receipt of a completed loan application from a prospective borrower, Rome Savings orders a credit report and verifies certain other information. If necessary, Rome Savings obtains additional financial or credit related information. Rome Savings requires an appraisal for all mortgage loans, including loans made to refinance existing mortgage loans. Appraisals are performed by licensed or certified third-party appraisal firms that have been approved by Rome Savings’ Board of Directors. Rome Savings requires title insurance on all secondary market mortgage loans and certain other loans. Rome Savings requires borrowers to obtain hazard insurance, and if applicable, Rome Savings may require borrowers to obtain flood insurance prior to closing. Available to borrowers is the option to advance funds on a monthly basis, together with each payment of principal and interest, to a mortgage escrow account from which Rome Savings makes disbursements for items such as real estate taxes, flood insurance, and private mortgage insurance premiums, if required.

Asset Quality

          One of Rome Savings’ key operating objectives has been and continues to be maintaining a high level of asset quality. Through a variety of strategies, including but not limited to borrower workout arrangements and aggressive marketing of foreclosed properties, Rome Savings has been proactive in addressing problem and non-performing assets. These strategies, as well as Rome Savings’ high proportion of one-to-four family mortgage loans, the maintenance of sound credit standards for new loan originations, and loan administration procedures, have resulted in historically low delinquency ratios and, in recent years, a reduction in non-performing assets. These factors have helped strengthen Rome Savings’ financial condition.

          Collection Procedures. When a borrower fails to make required payments on a loan, Rome Savings takes a number of steps to induce the borrower to cure the delinquency and restore the loan to a current status. In the case of mortgage loans, Rome Savings’ mortgage servicing department is responsible for collection procedures from the 15th day up to the 120th day of delinquency. A reminder letter requesting prompt payment is sent on the 25th day. A late charge notice is sent at 30 days. At 30 days, Rome Savings also attempts to establish telephone contact with the borrower. If no contact is established, progressively stronger collection letters are sent on the 45th and 55th days of delinquency. Late charge notices are sent on the 30th and 60th days of the delinquency. Between the 60th and 90th day of delinquency, if telephone contact has not been established or if there has been mail returned, the collector or his or her assistant makes a physical inspection of the property. When contact is made with the borrower at any time prior to foreclosure, Rome Savings attempts to obtain full payment of the amount delinquent or work out a repayment schedule with the borrower in order to avoid foreclosure. It has been Rome Savings’ experience that most loan delinquencies are cured within 105 days and no legal action is taken.

          Rome Savings sends the “right to cure” foreclosure notice when a loan is approximately 75 days delinquent. This contains a “right to cure” clause that gives the customer the terms that must be met within 30 days of the date the letter is sent in order to avoid foreclosure action. After this letter expires, Rome Savings sends the loan to committee for approval to foreclose. Rome Savings commences foreclosure if the loan is not brought current by the 120th day of delinquency unless specific limited circumstances warrant an exception. Rome Savings holds property foreclosed upon as other real estate owned. Rome Savings carries foreclosed real estate at its fair market value less estimated selling costs. If a foreclosure action is commenced and the loan is brought current, paid in full, or refinanced before the foreclosure sale, Rome Savings either sells the real property securing the loan at the foreclosure sale or sells the property as soon thereafter as practical. The collection procedures for Federal Housing Association (“FHA”) and Veterans’ Administration (“VA”) one-to-four family mortgage loans follow the collection guidelines outlined by those agencies.

          The collection procedures for consumer, commercial, and other loans, include the sending of periodic late notices and letters to a borrower once a loan is past due. Rome Savings attempts to make direct contact with a borrower once a loan is 15 days past due. Rome Savings follows the same collection procedure as mortgages in an

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attempt to reach individuals by telephone and sending them letters and notices. Supervisory personnel in Rome Savings’ lending area and in its collection area review loans 30 days or more delinquent on a regular basis. If collection activity is unsuccessful after 120 days, Rome Savings may charge off a loan and/or refer the matter to its legal counsel for further collection effort. Loans deemed uncollectible by the Collection Department are proposed for charge-off. All loan charge-offs, regardless of amount, are to be approved by both the senior loan officer and the President of Rome Savings. Regardless of amount, all charge-offs are reported to the Board of Directors of Rome Savings at its next scheduled meeting.

          Rome Savings’ policies require that management continuously monitor the status of the loan portfolio and report to the Board of Directors on a monthly basis. These reports include information on delinquent loans and foreclosed real estate and Rome Savings’ actions and plans to cure the delinquent status of the loans and to dispose of the real estate.

          Non-Performing Assets. Non-performing assets totaled $1.1 million and $947,000 at December 31, 2006 and December 31, 2005, respectively.

          The following table presents information regarding non-accrual mortgage and consumer and other loans, accruing loans delinquent 90 days or more, and foreclosed real estate as of the dates indicated.

	At December 31,
	2006			2005			2004			2003			2002
	(Dollars in thousands)
Nonaccruing loans:
Mortgage loans	$	575		$	539		$	362		$	689		$	531
Commercial loans		423			216			268			513			377
Consumer loans		98			117			113			138			148
Total		1,096			872			743			1,340			1,056
Accruing loans delinquent 90 days or more		8			75			86			66			460
Total non-performing loans		1,104			947			829			1,406			1,516
Foreclosed real estate, net		45			—			—			202			55
Total non-performing assets	$	1,149		$	947		$	829		$	1,608		$	1,571
Non-performing loans to total loans		0.42	%		0.37	%		0.36	%		0.67	%		0.83	%
Non-performing assets to total assets		0.38	%		0.31	%		0.31	%		0.61	%		0.63	%

          With the exception of first mortgage loans insured or guaranteed by the FHA or VA or for which the borrower has obtained private mortgage insurance, Rome Savings stops accruing income on loans when interest or principal payments are 90 days in arrears or earlier when the timely collectibility of such interest or principal is doubtful. Rome Savings designates loans on which it stops accruing income as non-accrual loans and it reverses outstanding interest that it previously credited. Rome Savings may recognize income in the period that it collects such income, when the ultimate collectibility of principal is no longer in doubt. Rome Savings returns a non-accrual loan to accrual status when factors indicating doubtful collection no longer exist. Rome Savings defines non-performing loans as loans that are both non-accruing and accruing loans whose payments are 90 days or more past due.

          We define the population for evaluation of impaired loans to be all non-accrual commercial real estate and commercial loans greater than $250,000. Impaired loans are individually assessed to determine whether a loan’s carrying value is not in excess of the fair value of the collateral or the present value of the loan’s cash flows. Smaller balance homogeneous loans that are collectively evaluated for impairment, such as residential mortgage loans and consumer loans, are specifically excluded from the impaired loan portfolio. The Company’s recorded investment in loans that are considered impaired totaled $299,000 and $211,000 at December 31, 2006 and 2005, respectively. If all non-accrual loans had been current in accordance with their terms during the year

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ended December 31, 2006, 2005 and 2004, interest income on such loans would have amounted to $75,800, $62,500 and $53,300, respectively. At December 31, 2006, Rome Savings had one loan, with a book balance of $138,000 included above which is considered a “troubled debt restructuring” as defined in SFAS No. 15.

          Allowance for Loan Losses. The following table sets forth activity in Rome Savings’ allowance for loan losses and other ratios at or for the dates indicated.

	At December 31,
	2006			2005			2004			2003			2002
	(Dollars in thousands)
Balance at beginning of year	$	1,960		$	2,000		$	1,809		$	1,730		$	1,597
Provision for loan losses		147			115			390			510			330
Charge-offs:
Mortgage loans		19			18			47			160			51
Commercial loans		50			174			31			85			32
Consumer loans		303			495			306			295			289
Total		372			687			384			540			372
Recoveries
Mortgage loans		10			4			12			—			1
Commercial loans		79			419			36			3			75
Consumer loans		141			109			137			106			99
Total		230			532			185			109			175
Net charge-offs		142			155			199			431			197
Balance at end of year	$	1,965		$	1,960		$	2,000		$	1,809		$	1,730
Ratio of net charge-offs to average loans outstanding during the period		0.06	%		0.06	%		0.09	%		0.22	%		0.11	%
Allowance for loan losses as a percent of loans		0.74	%		0.77	%		0.86	%		0.86	%		0.94	%
Allowance for loan losses as a percent of non-performing Loans		177.99	%		207.00	%		241.25	%		128.66	%		114.12	%

          The allowance for loan losses is a valuation account that reflects our evaluation of the losses inherent in our loan portfolio. We maintain the allowance through provisions for loan losses that we charge to income. We charge losses on loans against the allowance for loan losses when we believe the collection of loan principal is unlikely.

          Our evaluation of risk in maintaining the allowance for loan losses includes the review of all loans on which the collectibility of principal may not be reasonably assured. We consider the following factors as part of this evaluation: our historical loan loss experience, known and inherent risks in the loan portfolio, the estimated value of the underlying collateral and current economic and market trends. There may be other factors that may warrant our consideration in maintaining an allowance at a level sufficient to provide for probable losses. Although we believe that we have established and maintained the allowance for loan losses at adequate levels, future additions may be necessary if economic and other conditions in the future differ substantially from the current operating environment.

          In addition, various regulatory agencies, as an integral part of their examination process, periodically review our loan and foreclosed real estate portfolios and the related allowance for loan losses and valuation allowance for foreclosed real estate. These agencies, including the OTS, may require us to increase the allowance for loan losses or the valuation allowance for foreclosed real estate based on their judgments of information available to them at the time of their examination, thereby adversely affecting our results of operations.

          For the year ended December 31, 2006, we increased our allowance for loan losses through a $147,000 provision for loan losses based on our evaluation of the items discussed above. We believe that the allowance for loan

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losses accurately reflects the level of risk in the loan portfolio. In addition to the non-performing loans, management has identified, through normal internal credit review procedures, $5.2 million in “potential problem loans” at December 31, 2006. Payments are current on $4.2 million or 80.77% of these loans. These problem loans are defined as loans not included as non-performing loans, but about which management has developed information regarding possible credit problems, which may cause the borrowers future difficulties in complying with loan repayments. Rome Savings will continue to be aggressive in identifying, monitoring and resolving potential problem loans. See “Management’s Discussion and Analysis - Comparison of Results of Operations for the Years Ended December 31, 2006, 2005 and 2004 - Provision for Loan Losses.”

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          The following table presents our allocation of the allowance for loan losses by loan category and the percentage of loans in each category to total loans at the periods indicated.

	At December 31,
	2006					2005					2004					2003					2002
	Amount		Loans in Each Category to Total Loans			Amount		Loans in Each Category to Total Loans			Amount		Loans in Each Category to Total Loans			Amount		Loans in Each Category to Total Loans			Amount		Loans in Each Category to Total Loans
	(Dollars in thousands)
Mortgage loans:
One-to four-family	$	117		51.06	%	$	129		49.79	%	$	236		48.93	%	$	192		45.94	%	$	220		39.11	%
Commercial real estate		721		20.60			664		20.78			828		21.16			702		23.98			767		29.20
Construction & land		0		0.97			0		1.31			0		2.34			0		2.00			0		0.83
Total mortgage loans		838		72.63			793		71.88			1,064		72.43			894		71.92			987		69.14
Commercial loans		667		9.14			712		9.39			592		9.22			619		9.15			511		9.14
Consumer loans		460		18.23			455		18.73			344		18.35			296		18.93			232		21.72
Total allowance for loan losses	$	1,965		100.00	%	$	1,960		100.00	%	$	2,000		100.00	%	$	1,809		100.00	%	$	1,730		100.00	%

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Investment Activities

          General. The Board of Directors reviews and approves our investment policy on an annual basis. The Board of Directors has delegated primary responsibility for ensuring that the guidelines in the investment policy are followed to the Executive Vice President/Chief Financial Officer. The Executive Vice President/Chief Financial Officer reports to the Asset Liability Management Committee and to the Executive Committee monthly.

          Our investment policy is designed primarily to manage the interest rate sensitivity of our assets and liabilities, to generate a favorable return without incurring undue interest rate and credit risk, to complement our lending activities and to provide and maintain liquidity within established guidelines. In establishing our investment strategies, we consider our interest rate sensitivity, the types of securities to be held, liquidity and other factors. Federal chartered savings banks have authority to invest in various types of assets, including U.S. Government obligations, securities of various federal agencies, obligations of states and municipalities, mortgage-backed securities, certain time deposits of insured banks and savings institutions, certain bankers’ acceptances, repurchase agreements, loans of federal funds, and, subject to certain limits, corporate debt and commercial paper.

          Rome Savings classifies securities as held to maturity or available for sale at the date of purchase. Held to maturity securities are reported at cost, adjusted for amortization of premium and accretion of discount. Available for sale securities are reported at fair market value. Rome Savings classifies U.S. Government securities and U.S. Government agency securities, as available for sale. These securities predominately have maturities of less than five years although Rome Savings also invests in adjustable rate U.S. Government agency securities with maturities up to 15 years. Rome Savings’ mortgage-backed securities, all of which are directly or indirectly insured or guaranteed by the Federal Home Loan Mortgage Corporation (“FHLMC”), Government National Mortgage Association (“GNMA”) or Federal National Mortgage Association (“FNMA”), consist of both 30-year securities and seven-year balloon securities. The latter are so named because they mature (i.e., balloon) prior to completing their normal 30-year amortization. The 30 year mortgage-backed securities are classified as held to maturity while the seven-year balloon securities are classified as available for sale.

          Rome Savings also invests in privately insured state and municipal obligations with a maturity of fifteen years or less rated AAA by Moody’s, Standard & Poors, or Fitch. Rome Savings invests in these securities because of their favorable after tax yields in comparison to U.S. Government and U.S. Government Agency securities of comparable maturity. These securities are classified as available for sale. Rome Savings purchases A and AA rated corporate bonds, principally of financial institutions, as means of increasing yields on available for sale investments while minimizing risk. In the past three years, spreads to the comparable three to five year government agency securities, which Rome Savings had typically purchased, has been 15 - 97 basis points favoring these corporate bonds. Finally, Rome Savings and Rome Bancorp have investments in Federal Home Loan Bank (“FHLB”) stock and other equity securities, which are classified as available for sale.

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          The following table presents the composition of our securities portfolios in dollar amount and in percentage of each investment type at the dates indicated. It also presents the coupon type for the mortgage-backed securities portfolio.

	At December 31,
	2006				2005				2004
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Held to Maturity:
Mortgage-backed securities
GNMA	$	28	$	29	$	48	$	51	$	100	$	108
FHLMC		2		2		3		3		6		6
U.S. Government securities		1,001		997		1,208		1,193		1,320		1,313
Other bonds		147		147		181		181		197		197
Total held to maturity		1,178		1,175		1,440		1,428		1,623		1,624
Available for sale:
U.S. Government agencies		441		455		949		985		2,244		2,325
State and Municipal obligations		2,335		2,377		4,506		4,595		7,004		7,266
Mortgage-backed securities
FNMA		—		—		—		—		126		129
FHLMC		336		339		570		583		840		883
Corporate bonds		—		—		2,008		2,017		3,024		3,116
Total available for sale debt securities		3,112		3,171		8,033		8,180		13,238		13,719
Equity securities		1,137		1,148		1,491		1,486		2,500		2,672
Total available for sale		4,249		4,319		9,524		9,666		15,738		16,391
FHLB stock		1,344		1,344		776		776		1,103		1,103
Total investment securities	$	6,771	$	6,838	$	11,740	$	11,870	$	18,464	$	19,118

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          Carrying Values, Yields and Maturities. The following table sets forth the scheduled maturities, book value, market value and weighted average yields for Rome Savings’ debt securities at December 31, 2006.

	One Year or Less				More Than One Year less than Five Years				More Than Five Years less than Ten Years				More Than Ten Years				Total
	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
	(Dollars in thousands)
Available for sale securities:
U.S. Government agencies		—	—			—	—		$	397	6.32	%		—	—		$	397	6.32	%
State and Municipal obligations (1)	$	1,086	6.71	%		991	6.80	%		—	—		$	300	6.90	%		2,377	6.77	%
Mortgage-backed securities		—	—			397	5.87	%		—	—			—	—			397	5.87	%
Held to maturity securities:
U.S. Government securities		—	—			1,001	4.59	%		—	—			—	—			1,001	4.59	%
Mortgage-backed securities		—	—			30	10.92	%		—	—			—	—			30	10.92	%
Other		—	—			—	—			—	—			147	5.69	%		147	5.69	%
Total debt securities	$	1,086	6.71	%	$	2,419	5.78	%	$	397	6.32	%	$	447	6.50	%	$	4,349	6.14	%

(1) Yields are presented on a tax-equivalent basis.

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Deposit Activity and Other Sources of Funds

          General. Deposits, borrowings, scheduled amortization and prepayments of loan principal, maturities and calls of investments securities and funds provided by operations are our primary sources of funds for use in lending, investing and for other general purposes. See “Management’s Discussion and Analysis - Liquidity and Capital Resources.”

          Deposits. We offer a variety of deposit accounts having a range of interest rates and terms. We currently offer regular savings deposits (consisting of passbook and statement savings accounts), interest-bearing demand accounts, non-interest-bearing demand accounts, money market accounts and time deposits.

          Deposit flows are influenced significantly by general and local economic conditions, changes in prevailing interest rates, pricing of deposits and competition. Our deposits are primarily obtained from areas surrounding our offices and we rely primarily on paying competitive rates, service and long-standing relationships with customers to attract and retain these deposits. We do not use brokers to obtain deposits.

          When we determine our deposit rates, we consider local competition, U.S. Treasury securities offerings and the rates charged on other sources of funds. Core deposits (defined as savings deposits, money market accounts and demand accounts) represented 66.1% and 67.1% of total deposits on December 31, 2006 and 2005, respectively. At December 31, 2006 and 2005, time deposits with remaining terms to maturity of less than one year amounted to $43.9 million and $43.5 million, respectively. See “Management’s Discussion and Analysis - Analysis of Net Interest Income” for information relating to the average balances and costs of our deposit accounts for the years ended December 31, 2006, 2005 and 2004.

          At December 31, 2006, we had $13.1 million in time deposits with balances of $100,000 or more maturing as follows:

Maturity Period	Amount
	(In thousands)
Three months or less	$	3,073
Over three months through six months		2,069
Over six months through 12 months		2,930
Over 12 months		5,038
Total	$	13,110

          Borrowings. At December 31, 2006 the Company had outstanding borrowings of $20.2 million which were used to fund loan growth, purchase treasury stock and finance other investments. In the future, we expect to continue to utilize borrowings as a funding source and may borrow funds pursuant to repurchase agreements, whereby we sell an asset with an agreement to repurchase it at some future date. We are a member of the Federal Home Loan Bank of New York and have available a line of credit of $62.7 million, of which $50.9 million remained available at December 31, 2006.

Subsidiary Activities

          Rome Savings has four subsidiaries: 100 On the Mall Corporation, Clocktower Insurance Agency Incorporated, RSB Properties, Inc. and RSB Capital Inc. 100 On the Mall acts as a manager, and developer of real estate. Its only activity is ownership of Rome Savings’ main office building and premises. Clocktower Insurance owns real estate for future expansion, which is currently being leased to a Dunkin Donuts franchise adjacent to one of our branch offices. RSB Properties, Inc. is a real estate investment trust. RSB Capital, Inc. is currently inactive.

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Employees

          At December 31, 2006, Rome Savings had 99 full-time employees and 1 part-time employee. Rome Savings’ employees are not represented by a collective bargaining agreement, and Rome Savings considers its relationship with its employees to be good.

REGULATION AND SUPERVISION

          General. Rome Bancorp is regulated as a savings and loan holding company by the Office of Thrift Supervision (the “OTS”). Rome Bancorp is required to file reports with and otherwise comply with the rules and regulations of the OTS and the SEC under the federal securities laws. Rome Savings, as a federal savings bank, is subject to regulation, examination and supervision by the OTS as its chartering authority, and by the Federal Deposit Insurance Corporation (the “FDIC”) as its deposit insurer. Rome Savings must file reports with the OTS and the FDIC concerning its activities and financial condition.

          The following references to the laws and regulations under which Rome Bancorp and Rome Savings are regulated are brief summaries thereof, do not purport to be complete, and are qualified in their entirety by reference to such laws and regulations. The OTS and the FDIC have significant discretion in connection with their supervisory and enforcement activities and examination policies under the applicable laws and regulations. Any change in such laws, regulations or policies, whether by the OTS, the FDIC, the SEC or the Congress, could have a material adverse impact on Rome Bancorp and Rome Savings, and their operations and stockholders.

Regulation of Federal Savings Associations

          Business Activities. Rome Savings derives its lending and investment powers from the Home Owners’ Loan Act, as amended (the “HOLA”), and the regulations of the OTS. The HOLA and the OTS regulations also limit Rome Savings’ authority to invest in certain types of loans or other investments. Permissible investments include mortgage loans secured by residential and commercial real estate, commercial and consumer loans, certain types of debt securities, and certain other assets. Rome Savings may also establish service corporations that may engage in activities not otherwise permissible for Rome Savings, including certain real estate equity investments.

          Loans to One Borrower. Rome Savings is generally subject to the same limits on loans to one borrower as a national bank. With specified exceptions, Rome Savings’ total loans or extensions of credit to a single borrower cannot exceed 15% of Rome Savings’ unimpaired capital and surplus which does not include accumulated other comprehensive income. Rome Savings may lend additional amounts up to 10% of its unimpaired capital and surplus which does not include accumulated other comprehensive income, if the loans or extensions of credit are fully-secured by readily-marketable collateral. Rome Savings currently complies with applicable loans-to-one borrower limitations.

          QTL Test. Under the HOLA, Rome Savings must comply with the qualified thrift lender, or QTL, test. Under the QTL test, Rome Savings is required to maintain at least 65% of its “portfolio assets” in certain qualified thrift investments in at least nine months of the most recent 12-month period. Portfolio assets mean, in general, Rome Savings’ total assets less the sum of:

• specified liquid assets up to 20% of total assets;

• goodwill and other intangible assets; and

• the value of property used to conduct Rome Savings’ business.

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Rome Savings may also satisfy the QTL test by qualifying as a domestic building and loan association as defined in the Internal Revenue Code of 1986. If Rome Savings fails the QTL test, and is unable to correct that failure for a period of time, it must either operate under certain restrictions on its activities or convert to a bank charter.

          Rome Savings met the QTL test at December 31, 2006, and in each of the prior 12 months and, therefore is a “qualified thrift lender.”

          Capital Requirements. OTS regulations require savings associations to meet three minimum capital standards:

(1)	a tangible capital ratio requirement of 1.5% of total assets as adjusted under the OTS regulations;
(2)	a leverage ratio requirement of 3.0% of core capital to such adjusted total assets, if Rome Savings has been assigned the highest composite rating of 1 under the Uniform Financial Institutions Rating System; and
(3)	a risk-based capital ratio requirement of 8.0% of core and supplementary capital to total risk-based assets, provided that the amount of supplementary capital used to satisfy this requirement shall not exceed the amount of core capital.

          The minimum leverage capital ratio for any other depository institution that does not have a composite rating of 1 will be 4%, unless a higher leverage capital ratio is warranted by the particular circumstances or risk profile of the depository institution. In determining the amount of risk-weighted assets for purposes of the risk-based capital requirement, a savings association must compute its risk-based assets by multiplying its assets and certain off-balance sheet items by risk-weights, which range from 0% for cash and obligations issued by the United States Government or its agencies to 100% for consumer and commercial loans, as assigned by the OTS capital regulations based on the risks found by the OTS to be inherent in the type of asset.

          Tangible capital is defined, generally, as common stockholder’s equity (including retained earnings), certain noncumulative perpetual preferred stock and related earnings, minority interests in equity accounts of fully consolidated subsidiaries, less intangibles (other than certain mortgage servicing rights) and investments in and loans to subsidiaries engaged in activities not permissible for a national bank. Core capital (or Tier 1 capital) is defined similarly to tangible capital, but core capital also includes certain qualifying supervisory goodwill and certain purchased credit card relationships. Supplementary capital (or Tier 2 capital) includes cumulative and other preferred stock, mandatory convertible debt securities, subordinated debt and intermediate preferred stock and the allowance for loan and lease losses. In addition, up to 45% of unrealized gains on available-for-sale equity securities with a readily determinable fair value may be included in Tier 2 capital. The allowance for loan and lease losses includable in Tier 2 capital is limited to a maximum of 1.25% of risk-weighted assets.

          At December 31, 2006, Rome Savings met each of its capital requirements.

          Community Reinvestment Act. Under the Community Reinvestment Act (the “CRA”), as implemented by OTS regulations, a savings association has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the OTS, in connection with its examination of a savings association, to assess the savings association’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain

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applications by such savings association. The CRA also requires all institutions to make public disclosure of their CRA ratings.

          The CRA regulations establish an assessment system that bases a savings association’s rating on its actual performance in meeting community needs. In particular, the assessment system focuses on three tests:

• a lending test, to evaluate the institution’s record of making loans in its assessment areas;

• an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses in its assessment area or a broader area that includes its assessment area; and

• a service test, to evaluate the institution’s delivery of services through its retail banking channels and the extent and innovativeness of its community development services.

Rome Savings received a “Satisfactory” CRA rating in its most recent examination, dated January 16, 2007.

          Transactions with Affiliates. Rome Savings’ authority to engage in transactions with its Aaffiliates is limited by the OTS regulations, the Federal Reserve Board’s Regulation W and Sections 23A and 23B of the Federal Reserve Act (the “FRA”), as made applicable to federal savings associations by the HOLA and the OTS regulations. In general, these transactions must be on terms which are as favorable to Rome Savings as comparable transactions with non-affiliates. In addition, certain types of these transactions referred to as “covered transaction” are subject to quantitative limits based on a percentage of Rome Savings’ capital, thereby restricting the total dollar amount of transactions Rome Savings may engage in with each individual affiliate and with all affiliates in the aggregate. Affiliates must pledge qualifying collateral in amounts between 100% and 130% of the covered transaction in order to receive loans from Rome Savings. In addition, applicable regulations prohibit a savings association from lending to any of its affiliates that engage in activities that are not permissible for bank holding companies and from purchasing low-quality (i.e., non-performing) assets from an affiliate or purchasing the securities of any affiliate, other than a subsidiary.

          Loans to Insiders. Rome Savings’ authority to extend credit to its directors, executive officers and principal shareholders, as well as to entities controlled by such persons, is governed by the requirements of Sections 22(g) and 22(h) of the FRA and Regulation O of the Federal Reserve Board, as made applicable to federal savings associations by the HOLA and the OTS regulations. Among other things, these provisions require that extensions of credit to insiders:

• be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with non-insiders and that do not involve more that the normal risk of repayment or present other features that are unfavorable to Rome Savings; and

• not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Rome Savings’ capital.

In addition, extensions for credit to insiders in excess of certain limits must be approved by Rome Savings’ Board of Directors.

          Enforcement. The OTS has primary enforcement responsibility over savings associations, including Rome Savings. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist orders and to remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations as well as in response to unsafe or

24

unsound practices.

          Standards for Safety and Soundness. Pursuant to the Federal Deposit Insurance Act (the “FDIA”), the OTS has adopted a set of guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings standards, compensation, fees and benefits. In general, the guidelines require appropriate systems and practices to identify and mange the risks and exposures specified in the guidelines.

          In addition, the OTS adopted regulations that authorize, but do not require, the OTS to order a savings association that has been given notice that it is not satisfying these safety and soundness standards to submit a compliance plan. If, after being notified, a savings association fails to submit an acceptable plan or fails in any material respect to implement an accepted plan, the OTS must issue an order directing action to correct the deficiency. Further, the OTS may issue an order directing corrective actions and may issue an order directing other actions of the types to which an undercapitalized savings association is subject under the prompt corrective action provisions of the FDIA. If a savings association fails to comply with such an order, the OTS may seek to enforce such order in judicial proceedings and to impose civil money penalties.

          Limitations on Capital Distributions. The OTS imposes various restrictions or requirements on Rome Savings’ ability to make capital distributions, including the payment of cash dividends. A savings association that is the subsidiary of a savings and loan holding company must file a notice with the OTS at least 30 days before making a capital distribution. Rome Savings must file an application for prior approval if the total amount of its capital distributions for the applicable calendar year would exceed an amount equal to Rome Savings’ net income for that year plus Rome Savings’ retained net income for the previous two years.

          The OTS may disapprove a notice or application if:

• Rome Savings would be undercapitalized following the distribution;

• the proposed capital distribution raises safety and soundness concerns; or

• the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

          Rome Bancorp’s ability to pay dividends, service debt obligations and repurchase common stock is dependent upon receipt of dividend payments from Rome Savings.

          Liquidity. Rome Savings is required to maintain a sufficient amount of liquid assets to ensure its safe and sound operation.

          Prompt Corrective Action Regulations. Under the OTS prompt corrective action regulations, the OTS is required to take certain, and is authorized to take other, supervisory actions against undercapitalized savings associations. For this purpose, a savings association is placed in one of the following four categories based on the association’s capital:

• well capitalized;

• adequately capitalized;

• undercapitalized; or

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• critically undercapitalized.

When appropriate, the OTS can require corrective action by a savings association holding company under the prompt corrective action provision of the FDIA.

          At December 31, 2006, Rome Savings met the criteria for being considered well-capitalized.

          Insurance of Deposit Accounts. Rome Savings is a member of the Deposit Insurance Fund (the “DIF”), maintained by the FDIC, and Rome Savings pays its deposit insurance assessments to the DIF. The DIF was formed on March 31, 2006 following the merger of the Bank Insurance Fund and the Savings Association Insurance Fund in accordance with the Federal Deposit Insurance Reform Act of 2005 (the “DIF Act”). In addition to merging the insurance funds, the DIF Act established a statutory minimum and maximum designated reserve ratio for the Deposit Insurance Fund and granted the FDIC greater flexibility in establishing the required reserve ratio. In its regulations implementing the DIF Act, the FDIC has set the current annual designated reserve ratio for the DIF at 1.25%.

          In order to maintain the DIF, member institutions are assessed an insurance premium. The amount of each institution’s premium is currently based on the balance of insured deposits and the degree of risk the institution poses to the DIF. Under the assessment system, the FDIC assigns an institution to one of nine risk categories using a two-step process based first on capital ratios (the capital group assignment) and then on other relevant information (the supervisory subgroup assignment). Each risk category is assigned an assessment rate. Assessment rates currently range from 0% of deposits for an institution in the highest category (i.e., well-capitalized and financially sound, with no more than a few minor weaknesses) to 0.43% of deposits for an institution in the lowest category (i.e., undercapitalized and substantial supervisory concerns). The FDIC is authorized to raise the assessment rates as necessary to maintain the Deposit Insurance Fund. The Rome Savings’ assessment rate at December 31, 2006 was 0%. Any increase in insurance assessments could have an adverse effect on the earnings of insured institutions, including Rome Savings.

          In addition, all FDIC -insured institutions are required to pay a pro rata portion of the interest due on obligations issued by the Financing Corporation to fund the closing and disposal of failed thrift institutions by the Resolution Trust Corporation. At December 31, 2006, the FDIC assessed DIF-insured deposits 1.24 basis points per $100 of deposits to cover those obligations. The Financing Corporation rate is adjusted quarterly to reflect changes in assessment bases of the DIF. This obligation will continue until the Financing Corporation bonds mature in 2017.

          Federal Home Loan Bank System. Rome Savings is a member of the Federal Home Loan Bank (the “FHLB”) of New York, which is one of the regional FHLBs composing the FHLB System. Each FHLB provides a central credit facility primarily for its member institutions. Rome Savings, as a member of the FHLB of New York, is required to acquire and hold shares of capital stock in the FHLB of New York. While the required percentages of stock ownership are subject to change by the FHLB, Rome Savings was in compliance with this requirement with an investment in FHLB of New York stock at December 31, 2006 of $1.3 million. Any advances from a FHLB must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for residential housing finance.

          The FHLBs are required to provide funds for the resolution of insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the amount of earnings that the FHLBs can pay as dividends to their members and could also result in the FHLBs imposing a higher rate of interest on advances to their members. If dividends were reduced, or interest on future FHLB advances increased, Rome Savings’ net interest income would be affected.

          Federal Reserve System. Rome Savings is subject to provisions of the FRA and the Federal Reserve

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Board’s regulations pursuant to which depository institutions may be required to maintain non-interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts). The Federal Reserve Board regulations exempt $8.5 million of otherwise reservable balances from the reserve requirements. A 3.0% reserve is required for transaction account balances over $8.5 million and up to $45.8 million. Transaction account balances over $45.8 million are subject to a reserve requirement of $1,119,000 plus 10% of the amount over $45.8 million. Rome Savings is in compliance with these requirements. Because required reserves must be maintained in the form of either vault cash, a noninterest-bearing account at a Federal Reserve Bank or a pass-through account as defined by the Federal Reserve Board, the effect of this reserve requirement is to reduce Rome Savings’ interest-earning assets. The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements imposed by the OTS. FHLB System members are also authorized to borrow from the Federal Reserve discount window, but Federal Reserve Board regulations require such institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.

          Prohibitions Against Tying Arrangements. Federal savings associations are subject to prohibitions on certain tying arrangements. A federal savings association is prohibited, subject to some exceptions, from extending credit or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the savings association or its affiliates or not obtain credit or services of a competitor of the savings association.

          The Bank Secrecy Act. Rome Savings and Rome Bancorp are subject to the Bank Secrecy Act, as amended by the USA PATRIOT Act, which gives the federal government powers to address money laundering and terrorist threats through enhanced domestic security measures, expanded surveillance powers, and mandatory transaction reporting obligations. By way of example, the Bank Secrecy Act imposes an affirmative obligation on Rome Savings to report currency transactions that exceed certain thresholds and to report other transactions determined to be suspicious.

          Title III of the USA PATRIOT Act takes measures intended to encourage information sharing among financial institutions, bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act. Among other requirements, the USA PATRIOT Act imposes the following obligations on financial institutions:

• financial institutions must establish anti-money laundering programs that include, at minimum: (i) internal policies, procedures, and controls, (ii) specific designation of an anti-money laundering compliance officer, (iii) ongoing employee training programs, and (iv) an independent audit function to test the anti-money laundering program;

• financial institutions must establish and meet minimum standards for customer due diligence, identification and verification;

• financial institutions that establish, maintain, administer, or manage private banking accounts or correspondent accounts in the United States for non-United States persons or their representatives (including foreign individuals visiting the United States) must establish appropriate, specific, and, where necessary, enhanced due diligence policies, procedures, and controls designed to detect and report money laundering through those accounts;

• financial institutions are prohibited from establishing, maintaining, administering or managing correspondent accounts for foreign shell banks (foreign banks that do not have a physical presence in any country), and are subject to certain recordkeeping obligations with respect to

27

	correspondent accounts of foreign banks;
•	bank regulators are directed to consider a depository institution’s or holding company’s effectiveness in combating money laundering when ruling on FRA and Bank Merger Act applications.

          Office of Foreign Asset Control. Rome Savings and Rome Bancorp, like all United States companies and individuals, are prohibited from transacting business with certain individuals and entities named on the Office of Foreign Asset Control’s list of Specially Designated Nationals and Blocked Persons. Failure to comply may result in fines and other penalties. The Office of Foreign Asset Control has issued guidance directed at financial institutions in which it asserts that it may, in its discretion, examine institutions determined to be high-risk or to be lacking in their efforts to comply with these prohibitions.

Holding Company Regulation

          Rome Bancorp is a savings and loan holding company regulated by the OTS. As such, Rome Bancorp is registered with and subject to OTS examination and supervision, as well as certain reporting requirements. In addition, the OTS has enforcement authority over Rome Bancorp and any of its non-savings association subsidiaries. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of a subsidiary savings association. Unlike bank holding companies, federal savings and loan holding companies are not subject to regulatory capital requirements or to supervision by the Federal Reserve Board.

          HOLA prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring control (as defined under HOLA) of another savings association without prior OTS approval. In addition, a savings and loan holding company is prohibited from directly or indirectly acquiring control of any depository institution not insured by the FDIC (except through a merger with and into the holding company’s savings association subsidiary that is approved by the OTS).

          A savings and loan holding company may not acquire as a separate subsidiary a savings association that has a principal office outside of the state where the principal office of its subsidiary savings association in located, except, (i) in the case of certain emergency acquisitions approved by the FDIC; (ii) if the holding company controls a savings association subsidiary that operated a home or branch office in such additional state as of March 5, 1987; or (iii) if the laws of the home state of the savings association to be acquired specifically authorize a savings association chartered by that state to be acquired by a savings association chartered by the state where the acquiring savings association or savings and loan holding company is located or by a holding company that controls such a state chartered savings association.

          Under the Gramm Leach Bliley Act (the “GLB Act”) Rome Bancorp is prohibited from engaging in non-financial activities. As a result, Rome Bancorp’s activities are restricted to:

• furnishing or performing management services for its savings association subsidiary;

• conducting an insurance agency or escrow business;

• holding, managing or liquidating assets owned or acquired from its savings association subsidiary;

• holding or managing properties used or occupied by its savings association subsidiary;

• acting as trustee under a deed of trust;

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• any other activity (a) that the Federal Reserve Board, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956 (the “BHCA”), unless the Director of the OTS, by regulation, prohibits or limits any such activity for savings and loan holding companies, or (b) in which multiple savings and loan holding companies were authorized by regulation to directly engage on March 5, 1987;

• purchasing, holding or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock is approved by the Director of the OTS; and

• any activity permissible for financial holding companies under section 4(k) of the BHCA.

          Permissible activities which are deemed to be financial in nature or incidental thereto under section 4(k) of the BHCA include:

• lending, exchanging, transferring, investing for others or safeguarding money or securities;

• insurance activities or providing and issuing annuities, and acting as principal, agent or broker;

• financial, investment or economic advisory services;

• issuing or selling instruments representing interests in pools of assets that a bank is permitted to hold directly;

• underwriting, dealing in or making a market in securities;

• activities previously determined by the Federal Reserve Board to be closely related to banking;

• activities that bank holding companies are permitted to engage in outside of the U.S.; and

• portfolio investments made by an insurance company.

In addition, Rome Bancorp cannot acquire or be acquired by a company unless the company is engaged solely in financial activities.

          Transactions between the Rome Savings and Rome Bancorp and its other subsidiaries are subject to various conditions and limitations. See “Regulation of Federal Savings Associations - Transactions with Affiliates” and “Regulation of Federal Savings Associations - Limitation on Capital Distributions.”

          Federal Securities Laws. Rome Bancorp’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Rome Bancorp is subject to information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

          The Sarbanes-Oxley Act. As a public company, Rome Bancorp is subject to the Sarbanes-Oxley Act, which implements a broad range of corporate governance and accounting measures for public companies designed to promote honesty and transparency in corporate America and better protect investors from corporate wrongdoing. The Sarbanes-Oxley Act’s principal legislation and the derivative regulation and rule making promulgated by the SEC includes:

• the creation of an independent accounting oversight board;

• auditor independence provisions which restrict non-audit services that accountants may provide to

29

	their audit clients;
•	additional corporate governance and responsibility measures, including the requirement that the chief executive officer and chief financial officer certify financial statements;
•	a requirement that companies establish and maintain a system of internal control over financial reporting and that a company’s management provide an annual report regarding its assessment of the effectiveness of such internal control over financial reporting to the company’s independent accountants and that such accountants provide an attestation report with respect to management’s assessment of the effectiveness of the company’s internal control over financial reporting;
•	the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer’s securities by directors and senior officers in the twelve month period following initial publication of any financial statements that later require restatement;
•	an increase in the oversight of, and enhancement of certain requirements relating to audit committees of public companies and how they interact with the company’s independent auditors;
•	requirement that audit committee members must be independent and are absolutely barred from accepting consulting, advisory or other compensatory fees from the issuer;
•	requirement that companies disclose whether at least one member of the committee is a “financial expert” (as such term is defined by the Securities and Exchange Commission) and if not, why not;
•	expanded disclosure requirements for corporate insiders, including accelerated reporting of stock transactions by insiders and a prohibition on insider trading during pension blackout periods;
•	a prohibition on personal loans to directors and officers, except certain loans made by insured financial institutions;
•	disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code;
•	mandatory disclosure by analysts of potential conflicts of interest; and
•	a range of enhanced penalties for fraud and other violations.

          Section 402 of the Sarbanes-Oxley Act prohibits the extension of personal loans to directors and executive officers of issuers (as defined in Sarbanes-Oxley). The prohibition, however, does not apply to mortgages advanced by an insured depository institution, such as Rome Savings, that are subject to the insider lending restrictions of Section 22(h) of the FRA.

          Quotation on Nasdaq. Rome Bancorp’s common stock is quoted on The Nasdaq Stock Market. In order to maintain such quotation, Rome Bancorp is subject to certain corporate governance requirements, including:

• a majority of its board must be composed of independent directors;

• it is required to have an audit committee composed of at least three directors, each of whom is an independent director, as such term is defined by both the rules of the National Association of Securities Dealers (the “NASD”) and by the regulations promulgated under the Exchange Act;

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• the nominating committee and compensation committee must also be composed entirely of independent directors;

• each of the audit committee, and nominating committee must have a publicly available written charter.

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ITEM 1A. RISK FACTORS

          Our loan portfolio includes loans with a higher risk of loss. Rome Savings originates commercial mortgage loans, commercial loans, consumer loans and residential mortgage loans primarily within its market area, although a number of loans are in other states. Commercial mortgage, commercial, and consumer loans may expose a lender to greater credit risk than loans secured by residential real estate because the collateral securing these loans may not be sold as easily as residential real estate. These loans also have greater credit risk than residential real estate for the following reasons:

• Commercial Mortgage Loans. Repayment is dependent upon income being generated in amounts sufficient to cover operating expenses and debt service.

• Commercial Loans. Repayment is generally dependent upon the successful operation of the borrower’s business.

• Consumer Loans. Consumer loans (such as personal lines of credit) are collateralized, if at all, with assets that may not provide an adequate source of payment of the loan due to depreciation, damage, or loss.

          If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease. Our loan customers may not repay their loans according to the terms of the loans, and the collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. We therefore may experience significant loan losses, which could have a material adverse effect on our operating results.

          Material additions to our allowance also would materially decrease our net income, and the charge-off of loans may cause us to increase the allowance. We make various assumptions and judgments about the collectibility of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We rely on our loan quality reviews, our experience and our evaluation of economic conditions, among other factors, in determining the amount of the allowance for loan losses. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance.

          Our emphasis on a diverse loan portfolio has been one of the more significant factors we have taken into account in evaluating our allowance for loan losses and provision for loan losses. If we were to further increase the amount of loans in our portfolio other than traditional real estate loans, we may decide to make increased provisions for loan losses. In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs.

          Our return on equity is low compared to other companies. Net earnings divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. Our return on average equity amounted to 2.91% and 4.29% in 2006 and 2005 respectively. As a result of the second-step stock conversion and offering completed in March of 2005, we currently have capital proceeds to deploy into high-yielding earning assets. Our ability to leverage our new capital profitably will be significantly affected by industry competition for loans and deposits. Until the stock proceeds are fully invested in long-term interest earning assets, we expect our return on equity to be below our historical rations and the industry average, which may negatively impact the value of our stock.

          Because Rome Savings’ loans are concentrated in a small geographical area, downturns in its local economy may affect its profitability and future growth possibilities. In recent years, Oneida County has experienced a negative population growth rate. While the local economy has been improving in recent years, it has not enjoyed the rate of economic growth experienced in other parts of the United States. In the event of an economic downturn, we may have greater risk of loan defaults and experience deposit runoff in our primary market area, which could have an adverse impact on our profitability.

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          Low demand for real estate loans may lower our profitability. Making loans secured by real estate, including one-to-four family and commercial real estate, is our primary business and primary source of revenue. If customer demand for real estate loans decreases, our profits may decrease because our alternative investments, primarily securities, earn less income for us than real estate loans. Customer demand for loans secured by real estate could be reduced by a weaker economy, an increase in unemployment, a decrease in real estate values or an increase in interest rates.

          We depend on our executive officers and key personnel to implement our business strategy and could be harmed by the loss of their services. We believe that our growth and future success will depend in large part upon the skills of our management team, particularly Charles M. Sprock, our President and Chief Executive Officer. The competition for qualified personnel in the financial services industry is intense, and the loss of our key personnel or an inability to continue to attract, retain and motivate key personnel could adversely affect our business. We cannot assure you that we will be able to retain our existing key personnel or attract additional qualified personnel. Although we have an employment agreement with our President and Chief Executive Officer that contains a non-compete provision, the loss of the services of one or more of our executive officers could impair our ability to continue to develop our business strategy.

          If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. We devote significant attention to establishing and maintaining effective internal controls. We document, review and, if appropriate, improve our internal controls and procedures in connection with Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent auditors addressing these assessments. Both we and our independent auditors annually test our internal controls in connection with the Section 404 requirements and could identify areas for further attention or improvement. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors, officers and employees, entail substantial costs in order to modify our existing accounting systems, and take a significant period of time to complete. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Any such failure could also adversely affect our assessment of the effectiveness of our “internal control over financial reporting”. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the market price of our stock.

          We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations. We are subject to extensive regulation, supervision and examination by the OTS and by the Federal Deposit Insurance Corporation, as insurer of deposits. Such regulation and supervision governs the activities in which Rome Savings and we may engage and are intended primarily for the protection of the insurance fund and deposits of Rome Savings. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of Rome Savings, the classification of its assets and the adequacy of its allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, including changes in the regulations governing holding companies, could have a material impact on the combined operations of us and Rome Savings.

          Competition in our primary market area may reduce our ability to attract and retain deposits and obtain loans. We operate in a competitive market for both attracting deposits, which is our primary source of funds, and originating loans. Historically, our most direct competition for savings deposits has come from credit unions, community banks, large commercial banks and thrift institutions in our primary market area. Particularly in times of extremely low or extremely high interest rates, we have faced additional significant competition for investors’ funds from brokerage firms and other firms’ short-term money market securities and corporate and government securities. Our competition for loans comes principally from mortgage bankers,

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commercial banks, other thrift institutions, and insurance companies. Such competition for the origination of loans may limit our future growth and earnings prospects. Competition for loan originations and deposits may limit our future growth and earnings prospects.

          Changes in interest rates could adversely affect our results of operations and financial condition. Our results of operations and financial condition are significantly affected by changes in interest rates. Our results of operations depend substantially on our net interest income, which is the difference between the interest income earned on our interest-earning assets and the interest expense paid on our interest-bearing liabilities. Increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.

          We also are subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities.

          Our certificate of incorporation, bylaws and certain laws and regulations may prevent transactions you might favor, including a sale or merger of Rome Bancorp. Provisions of our Certificate of Incorporation and Bylaws, federal regulations and various other factors may make it more difficult for companies or persons to acquire control of us without the consent of our Board of Directors. It is possible, however, that you would want a takeover attempt to succeed because, for example, a potential buyer could offer a premium over the then-prevailing price of our common stock. The factors that may discourage takeover attempts or make them more difficult include:

• Office of Thrift Supervision regulations. OTS regulations prohibit, for three years following the completion of a mutual-to-stock conversion, the offer to acquire or the acquisition of more than 10% of any class of equity security of a converted institution without the prior approval of the OTS. In addition, the OTS has required, as a condition to approval of the conversion, that Rome Savings maintain a federal thrift charter for a period of three years.

• Certificate of Incorporation and statutory provisions. Provisions of our Certificate of Incorporation and Bylaws and of Delaware law may make it more difficult and expensive to pursue a takeover attempt that management opposes. These provisions also make more difficult the removal of our current directors or management, or the election of new directors. These provisions include:

• limitations on voting rights of the beneficial owners of more than 10% of our common stock;

• supermajority voting requirements for certain business combinations and changes to some provisions of the Certificate of Incorporation and Bylaws;

• the election of directors to staggered terms of three years; and

• provisions regarding the timing and content of stockholder proposals and nominations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

          None.

ITEM 2. DESCRIPTION OF PROPERTY

          We conduct our business through our executive office, operations center, which includes both the Mortgage Center and the Accounting Center listed below, and three banking offices. A fourth banking office in Lee, New York is under construction and expected to open in the early spring of 2007. In addition, the Company has purchased land in Oneida, New York for potential expansion into that market. At December 31, 2006, the net book value of the computer equipment and other furniture, fixtures and equipment of Rome Savings and Rome Bancorp at their offices totaled $6,072,000. For more information, see Note 5 of Notes to Consolidated Financial Statements, in the Company’s 2006 Annual Report to shareholders (the “Annual Report”), which is incorporated herein by reference.

Location	Leased or Owned	Original Date Acquired	Net Book Value December 31, 2006
			(In thousands)
Executive Office:
100 West Dominick St.
Rome, NY	Owned	1956		$	2,040
Branch Offices:
1629 Black River Boulevard
Rome, NY	Owned	1963			309
1300 Erie Boulevard
Rome, NY	Owned	1997			1,027
82 Seneca Turnpike
New Hartford, NY	Owned	1983			156
Rt. 26 and Elmer Hill Rd
Lee, NY	Owned	2006			1,239
Mortgage Center:
137 West Dominick Street
Rome, NY	Owned	2002			470
Accounting Center:
139 West Dominick Street
Rome, NY	Owned	1995			368
Undeveloped Land:
Oneida, NY	Owned	2006			463

ITEM 3. LEGAL PROCEEDINGS

          As of the date of this Form 10-K, we are not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. We believe that these routine legal proceedings, in the aggregate, are immaterial to our financial condition and results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

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PART II

ITEM 5. MARKET FOR ROME BANCORP’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

          The following information included in the Annual Report attached hereto as Exhibit 13.1 is incorporated herein by reference: “Market for the Company’s Common Stock.”

ITEM 6. SELECTED FINANCIAL DATA

          The following information included in Annual Report attached hereto as Exhibit 13.1 is incorporated herein by reference: “Selected Financial and Other Data.”

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          The following information included in the Annual Report attached hereto as Exhibit 13.1 is incorporated herein by reference: “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

          The following information included in the Annual Report attached hereto as Exhibit 13.1 is incorporated herein by reference: “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Management of Interest Rate Risk.”

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The following information included in the Annual Report attached hereto as Exhibit 13.1 is incorporated herein by reference: “Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting,” “Report of Independent Registered Public Accounting Firm,” “Consolidated Financial Statements” and “Notes to Consolidated Financial Statements.”

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

          None.

ITEM 9A. CONTROLS AND PROCEDURES

          Evaluation of Disclosure Controls and Procedures

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

36

accumulated and communicated to the Company’s management, including the President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

          Management’s annual report on internal control over financial reporting appears in the Company’s Annual Report to Shareholders for the year ended December 31, 2006, which is included as Exhibit 13.1 of this report, and is incorporated herein by reference.

          The attestation report of the Company’s registered public accounting firm on management’s assessment of the Company’s internal control over financial reporting appears in the Company’s Annual Report to Shareholders for the year ended December 31, 2006, which is included as Exhibit 13.1 of this report, and is incorporated herein by reference.

          There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the Company’s last fiscal quarter that has materially affected, or that is reasonably likely to materially affect, the Company’s internal control over financial reporting.

          On January 12, 2007, the Audit Committee of the Company determined, based on its review and consultation with the Company’s independent registered public accounting firm, that the Company should restate its financial statements for the quarterly periods ended June 30, 2006 and September 30, 2006, as filed on Form 10-Q. The restatement was necessary in order to immediately fully expense the award of certain stock-based compensation grants at the award date for those recipients who were eligible for retirement at the award grant date. The Company had been expensing these grants over a five year service vesting period. In light of the Company’s restatement of prior period financial statements, the Company has enhanced internal reviews of related financial reporting requirements.

ITEM 9B. OTHER INFORMATION

          None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

          The following information included in the Proxy Statement is incorporated herein by reference: “Proposal 1- Election of Directors” and the following subsections of the section entitled “Information About Our Board of Directors and Management:” “Board of Directors,” “Committees of the Board,” “Executive Officers Who Are Not Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance.”

Code of Ethics

          Rome Bancorp has adopted a Code of Conduct and Ethics, which applies to all employees, directors and officers of Rome Bancorp including the principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions. The Code of Conduct and Ethics meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K. The Code of Conduct and Ethics was filed as Exhibit 14.1 to the Form 10-KSB for the year ended December 31, 2003, and has not changed.

          You may obtain a copy of the Code of Conduct and Ethics, free of charge, by sending a request in writing to Crystal M. Seymore at the following address:

Crystal M. Seymore, Secretary
Rome Bancorp, Inc.
100 W. Dominick Street
Rome, New York 13440-5810

37

ITEM 11. EXECUTIVE COMPENSATION

          The information included in the Proxy Statement is incorporated herein by reference: “Compensation.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

          The following section included in the Proxy Statement is incorporated herein by reference: “Security Ownership of Certain Beneficial Owners and Management.”

          The following table sets forth the aggregate information of our equity compensation plans in effect as of December 31, 2006.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))1
	(a)		(b)			(c)
Equity compensation plans approved by security holders		524,889		$	9.37		490,061
Equity compensation plans not approved by security holders		—			—		—
Total		524,889		$	9.37		490,061

(1) The number of securities remaining for future issuance under equity compensation plans includes: 136,061 shares available for issuance under the 2000 Stock Option Plan, 236,000 shares available for issuance under the 2006 Stock Option Plan and 118,000 shares available for issuance under the 2006 Recognition and Retention Plan

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

          The following information included in the Proxy Statement is incorporated herein by reference: “Transactions with Certain Related Persons.”

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

          The following information included in the Proxy Statement is incorporated herein by reference: “Principal Accounting Fees and Services” and “Audit Committee Preapproval Policy.”

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS

(a) The following financial statements included in the Annual Report attached hereto as Exhibit 13.1 are incorporated herein by reference:

38

Report of Independent Registered Accounting Firm

Consolidated Balance Sheets - At December 31, 2006 and 2005;

Consolidated Statements of Income - Years Ended December 31, 2006, 2005 and 2004;

Consolidated Statements of Stockholders’ Equity and Comprehensive Income - Years Ended December 31, 2006, 2005 and 2004;

Consolidated Statements of Cash Flows - Years Ended December 31, 2006, 2005 and 2004; and

Notes to Consolidated Financial Statements - Years Ended December 31, 2006, 2005 and 2004

(b) The following exhibits are either filed as part of this report or are incorporated herein by reference:

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)
13.1	Annual Report to Shareholders for the Year Ended December 31, 2006.
14.1	Code of Conduct and Ethics. (7)
21.1	Subsidiaries of the Company. (1)
23.1	Consent of Crowe Chizek and Company LLC.
31.1	Rule 13a-14a/15d-14a Certification
31.2	Rule 13a-14a/15d-14a Certification
32.1	Section 1350 Certification
32.2	Section 1350 Certification

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

39

(7) Incorporated by reference to Rome Bancorp, Inc.’s Form S-8 filed with the commission on May 19, 2006, as amended.

40

SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ROME BANCORP, INC.
By:	/s/Charles M. Sprock
President, Chairman of the Board and
Chief Executive Officer

       Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/Charles M. Sprock	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)	March 15, 2007
Charles M. Sprock
/s/David C. Nolan	Executive Vice-President and Chief Financial Officer (Principal Financial Officer)	March 15, 2007
David C. Nolan
/s/Bruce R. Engelbert	Director	March 15, 2007
Bruce R. Engelbert
/s/David C. Grow	Director	March 15, 2007
David C. Grow
/s/Kirk B. Hinman	Director	March 15, 2007
Kirk B. Hinman
/s/Michael J. Valentine	Director	March 15, 2007
Michael J. Valentine
/s/Dale A. Laval	Director	March 15, 2007
Dale A. Laval
/s/John A. Reinhardt	Director	March 15, 2007
John A. Reinhardt

41

EX-13.1

Exhibit 13.1

The summary information presented below at or for each of the five years in the period ended December 31, 2006 is derived in part from and should be read in conjunction with the consolidated financial statements and notes thereto included with this Annual Report.

	SELECTED FINANCIAL AND OTHER DATA (in thousands)
	At December 31,
	2006		2005		2004		2003		2002
Selected Financial Condition Data:
Total assets	$	298,759	$	308,853	$	268,152	$	261,939	$	250,075
Loans, net		262,572		251,918		231,272		207,656		181,564
Securities		6,841		11,882		19,117		29,118		43,207
Total cash and cash equivalents		7,858		34,235		6,929		14,055		15,698
Total deposits		196,005		201,468		208,787		203,190		194,924
Borrowings		20,172		9,374		18,843		18,090		14,920
Total equity		77,031		93,478		36,258		36,639		36,193
Allowance for loan losses		1,965		1,960		2,000		1,809		1,730
Non-performing loans		1,104		947		829		1,406		1,516
Non-performing assets		1,149		947		829		1,608		1,571

	2006		2005		2004		2003			2002
Selected Operating Data:
Interest income	$	17,457	$	16,535	$	14,498	$	14,810		$	15,509
Interest expense		3,521		3,036		3,042		3,614			4,981
Net interest income		13,936		13,499		11,456		11,196			10,528
Provision for loan losses		147		115		390		510			330
Net interest income after provision for loan losses		13,789		13,384		11,066		10,686			10,198
Non-interest income:
Service charges and other income		1,885		1,921		1,596		1,165			1,130
Net gain (loss) on securities transactions		11		105		176		(693	)		132
Total non-interest income		1,896		2,026		1,772		472			1,262
Total non-interest expense		11,859		9,977		9,102		8,835			7,707
Income before income taxes		3,826		5,433		3,736		2,323			3,753
Income taxes		1,338		2,031		1,336		786			1,268
Net income	$	2,488	$	3,402	$	2,400	$	1,537		$	2,485

	At or for the Year Ended December 31,
	2006			2005			2004			2003			2002
Selected Financial Ratios and Other Data
Performance Ratios:
Basic earnings per share	$	0.29		$	0.37		$	0.26		$	0.16		$	0.27
Diluted earnings per share	$	0.29		$	0.36		$	0.25		$	0.16		$	0.26
Return on average assets		0.83	%		1.13	%		0.91	%		0.59	%		1.00	%
Return on average equity		2.91	%		4.29	%		6.67	%		4.16	%		6.86	%
Net interest rate spread (tax equivalent)		4.37	%		4.27	%		4.41	%		4.27	%		3.95	%
Net interest margin (tax equivalent)		5.04	%		4.80	%		4.73	%		4.70	%		4.56	%
Non-interest expense to average assets		3.94	%		3.31	%		3.45	%		3.42	%		3.09	%
Efficiency ratio (1)		74.59	%		64.09	%		68.72	%		70.22	%		64.85	%
Average interest earning assets to average interest-bearing liabilities		152.72	%		149.44	%		125.61	%		128.15	%		128.68	%
Capital Ratios:
Average equity to average assets		28.46	%		26.27	%		13.63	%		14.29	%		14.52	%
Equity to total assets at end of period		25.78	%		30.27	%		13.52	%		13.99	%		14.47	%
Book value per share	$	9.10		$	9.66		$	8.57		$	8.55		$	8.41
Regulatory Capital Ratios: (2)
Core capital (Tier 1 capital)		21.27	%		18.96	%		11.03	%		13.68	%		14.90	%
Total risk-based capital		28.90	%		28.04	%		15.36	%		19.19	%		21.24	%
Asset Quality Ratios:
Nonperforming loans as percent of loans		0.42	%		0.37	%		0.36	%		0.67	%		0.83	%
Nonperforming assets as percent of total assets		0.38	%		0.31	%		0.31	%		0.61	%		0.63	%
Allowance for loan losses as a percent of loans		0.74	%		0.77	%		0.86	%		0.86	%		0.94	%
Allowance for loan losses as a percent of non-performing loans		178.0	%		207.0	%		241.3	%		128.7	%		114.1	%
Other Data:
Number of:
Deposit accounts		34,881			34,864			35,136			34,443			32,776
Full service offices		4			4			4			4			4

Note:	All per share amounts have been adjusted to reflect Rome Bancorp, Inc.’s second step stock conversion effective March 30, 2005 as well as a three-for-two stock split effective June 16, 2003.
(1)	Non-interest expense divided by the sum of net interest income, the tax equivalent adjustment on tax-exempt municipal securities and other non-interest income.
(2)	The regulatory capital ratios for the year ended December 31, 2006, 2005 and 2004 are for Rome Savings Bank only; the regulatory capital ratios for all other periods are for Rome Savings Bank and Rome Bancorp, Inc. on a consolidated basis. Due to Rome Savings Bank’s conversion to a federal savings bank on April 27, 2004, Rome Bancorp, Inc. is no longer subject to formula based capital requirements at a holding company level.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Annual Report on Form 10-K contains “forward-looking statements” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition and results of operation and business that are subject to various factors which could cause actual results to differ materially from these estimates including, but not limited to, changes in the real estate market or local economy, changes in interest rates, changes in laws and regulations to which we are subject, and competition in our primary market area.

Any or all of our forward-looking statements in this Annual Report on Form 10-K and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or unknown risks and uncertainties. Consequently, no forward-looking statements can be guaranteed. We disclaim 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

Rome Bancorp, Inc. (the “Company”) commenced operations on October 6, 1999, when The Rome Savings Bank (the “Bank” or “Rome Savings” ) converted from a New York mutual savings bank to a New York mutual holding company structure whereby the Bank became a wholly-owned subsidiary of the Company, a majority owned subsidiary of Rome, MHC. In connection with the reorganization, the Company sold 2,397,548 shares of common stock to the public and issued 102,023 shares to The Rome Savings Bank Foundation and 2,601,594 shares to Rome, MHC, its mutual holding company parent.

On October 15, 2003, the Board of Directors of the Company and the Bank adopted a Plan of Charter Conversion pursuant to which the Bank converted from a New York-chartered savings bank regulated by the New York State Banking Department and the Federal Deposit Insurance Corporation to a federal savings bank regulated by the Office of Thrift Supervision (OTS). The Company remains a Delaware-chartered holding company but is now regulated as a savings and loan holding company by the OTS. The Charter Conversion was completed on April 27, 2004.

On March 30, 2005, Rome, MHC converted from mutual to stock form (the “Conversion”). In connection with the Conversion, the 61.5% of outstanding shares of Rome Bancorp common stock owned by Rome MHC were sold to depositors of the Bank and the public (the “Offering”). Completion of the Conversion and Offering resulted in the issuance of 9.6 million shares of common stock. A total of 5.9 million shares were sold in subscription, community and syndicated offerings, at $10.00 per share, and an additional 3.7 million shares were issued to the former public stockholders of the Company based upon an exchange ratio of 2.26784 new shares for each share of Rome Bancorp common stock held as of the close of business on March 30, 2005. Following the completion of the Conversion and Offering, the Company was succeeded by a new, fully public, Delaware corporation with the same name and Rome MHC ceased to exist.

The Company’s sole business is conducted by its wholly-owned subsidiary, the Bank. The Bank’s principal business is accepting deposits from the general public and using those deposits to make residential and commercial real estate loans, as well as commercial and consumer loans to individuals and small businesses primarily in Oneida County and also elsewhere in New York State. The Bank also invests in long and short-term marketable securities and other liquid investments.

2006 Highlights and Overview

The following discussion focuses on the factors affecting the consolidated financial condition of the Company as of the two years ended December 31, 2006 and 2005 and the Company’s results of operations for the three years ended December 31, 2006. The consolidated financial statements and related notes for the three years ended December 31, 2006 should be read in conjunction with this review.

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

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, and 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 2006 was $2.5 million compared to $3.4 million in the prior year. The significant factors and trends impacting 2006, which are discussed in greater depth below, were as follows:

• Net interest income before loan loss in 2006 increased by $437,000 or 3.2% to $13.9 million from $13.5 million for the prior year. This increase was principally due to an increase in the yields earned on average earning assets to 6.30% from 5.87% in 2005. The Company’s ratio of interest earning assets to interest bearing liabilities increased to 152.72% in 2006 from 149.44% in the prior year, while net interest margin increased to 5.04% in 2006 from 4.80% in 2005.

• The Company’s provision for loan losses was $147,000 in 2006, an increase of $32,000 from $115,000 in the prior year, primarily due to 2006 growth in the loan portfolio.

• Non-interest income decreased $130,000 in 2006 primarily due to the inclusion in 2005 of a large recovery of costs incurred that were related to a prior year loan charge off. Partially offsetting this was the 2006 increase in cash surrender value of Bank-owned life insurance in the amount of $215,000. Gains on securities sales were $11,000 in 2006, down from $105,000 in 2005, because the Company sold fewer securities.

• Non-interest expense was $11.9 million in 2006, up from $10.0 million in the prior year. The majority of this increase is related to the expensing of the Company’s 2006 stock-based compensation grants in accordance with the provisions of FASB No.123(R).

Critical Accounting Policies

It is management’s opinion that accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity required in making these estimates. Management of the Company considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the uncertainty in evaluating the level of the allowance required for probable credit losses and the material effect that such judgments can have on the results of operations. Management’s

quarterly evaluation of the adequacy of the allowance considers the Company’s historical loan loss experience, review of specific loans, current economic conditions and such other factors considered appropriate to estimate losses. Management uses presently available information to estimate probable losses on loans; however, future additions to the allowance may be necessary based on changes in estimates, assumptions or economic conditions. Significant factors that could give rise to changes in these estimates include, but are not limited to, changes in economic conditions in the local area, concentrations of risk and declines of local property values.

These critical policies and their application are reviewed periodically by the Audit Committee and the Board of Directors. All accounting policies are important, and as such, we encourage the reader to review each of the policies included in Note 2 to the Consolidated Financial Statements to obtain a better understanding of how our financial performance is reported.

Management of Interest Rate Risk

Interest rate risk is the most significant market risk affecting Rome Bancorp. Other types of market risk, such as movements in foreign currency exchange rates and commodity prices, do not arise in the normal course of Rome Bancorp’s business operations. Interest rate risk can be defined as an exposure to a movement in interest rates that could have an adverse effect on Rome Bancorp’s net interest income. Interest rate risk arises naturally from the imbalance in the repricing, maturity, and/or cash flow characteristics of assets and liabilities. In periods of falling interest rates, prepayments of loans typically increase, which would lead to reduced net interest income if such proceeds could not be reinvested at a comparable spread. Also in a falling rate environment, certain categories of deposits may reach a point where market forces prevent further reduction in the interest rate paid on those instruments. Generally, during extended periods when short-term and long-term interest rates are relatively close, a flat yield curve may lead to smaller net interest margins thereby reducing net interest income. The net effect of these circumstances is reduced interest income, offset only by a nominal decrease in interest expense, thereby narrowing the net interest margin.

Managing interest rate risk is of primary importance to Rome Bancorp. The responsibility for interest rate risk management is the function of Rome Bancorp’s Asset/Liability Committee (“ALCO”), which includes the President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Vice President and Controller, other members of Senior Management and certain members of Rome Bancorp’s Board of Directors. Rome Bancorp’s ALCO meets at least monthly to review Rome Bancorp’s asset/liability policies and identify and measure potential risks to earnings due to changes in interest rates. The primary goal of Rome Bancorp’s interest rate risk management is to minimize the potential loss in net interest income that could arise from changes in interest rates.

A simulation model is the primary tool used to assess the impact of changes in interest rates on net interest income. Key assumptions used in the model include prepayment speeds on loans and mortgage-backed securities, loan volumes and pricing and customer preferences, and sensitivity to changing rates. These assumptions are compared to actual results and revised as necessary. Rome Bancorp’s analysis compares net interest income under a scenario of no change from current interest rates with one of a 100, 200 and 300 basis point increase in interest rates and one of a 100 basis point decrease in rates. The change in interest rates is assumed to occur in the first twelve months following the current financial statement date. Net interest income is measured for each of the three twelve-month periods following the balance sheet date. Rome Bancorp’s policy is that net interest income should not vary by more than 20% for each of the three forecasted twelve-month periods. At December 31, 2006, based on simulation model results, Rome Bancorp was within these guidelines.

The following table sets forth at December 31, 2006 and 2005 the estimated percentage and dollar change in Rome Bancorp’s net interest income resulting from changes in interest rates over a one year period. Certain assumptions have been made in preparing the table below. Although management believes these assumptions to be reasonable, the interest rate sensitivity of assets and liabilities and the estimated effects of changes in interest rates on net interest income indicated in the

following table could vary substantially if different assumptions were used or if actual experience differs from such assumptions.

	2006 Annual Net Interest Income								2005 Annual Net Interest Income
Change in Interest Rates in Basis Points(1)	Dollar Amount		Dollar Change From Base				Percentage Change From Base		Dollar Amount		Dollar Change From Base				Percentage Change From Base
	(Dollars in thousands)
+300	$	13,390		$	22		0.16	%	$	16,114		$	1,691		11.72	%
+200		13,445			77		0.58			15,586			1,163		8.06
+100		13,429			61		0.46			15,033			610		4.23
Base		13,368			—		—			14,423			—		—
-100		13,327			(41	)	(0.31	)		13,844			(579	)	(4.01	)

(1) Assumes an instantaneous uniform change in interest rates. Basis point equals 0.01%

The above table reflects that as of December 31, 2006, Rome Bancorp had a lower risk of volatility in net interest income due to interest rate fluctuations than it had in the previous year. This can primarily be attributed to the large decrease in federal funds sold and increase in short-term borrowings as of December 31, 2006. Federal funds sold, which in 2005 included the short term investment of the proceeds of our stock conversion and offering, have yields that are modeled to move in direct proportion to changes in interest rates. Short-term borrowings represent overnight borrowings that are also modeled to reprice directly with changes in prevailing interest rates. Federal funds sold decreased to $1.1 million at December 31, 2006 from $26.8 million a year earlier, while short-term borrowings increased by $11.8 million over the same period.

Analysis of Net Interest Income.

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

	Average Balances, Interest and Average Yields for the years ended
	December 31, 2006								December 31, 2005								December 31, 2004
	Average Balance		Interest Income/ Expense			Average Yield/ Cost			Average Balance		Interest Income/ Expense			Average Yield/ Cost			Average Balance		Interest Income/ Expense			Average Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	255,201	$	16,330			6.40	%	$	242,464	$	14,993			6.18	%	$	217,622	$	13,437			6.17	%
Securities		8,447		541			6.40			15,712		864			5.50			23,747		1,212			5.10
Federal funds sold & other interest bearing deposits		14,546		664			4.57			26,182		826			3.15			5,117		43			0.85
Total interest-earnings assets		278,194		17,535			6.30			284,358		16,683			5.87			246,486		14,692			5.96
Noninterest-earning assets		22,474								17,396								17,464
Total assets	$	300,668							$	301,754							$	263,950
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Savings accounts	$	87,560	$	657			0.75		$	95,061	$	703			0.74		$	94,544	$	732			0.77
Time deposits		66,822		2,276			3.41			67,214		1,820			2.71			68,573		1,630			2.38
Money market accounts		5,382		88			1.62			6,145		55			0.90			8,827		74			0.84
Other interest bearing deposits		11,321		69			0.61			10,170		65			0.64			7,783		58			0.75
Total interest-bearing deposits		171,085		3,090			1.81			178,590		2,643			1.48			179,727		2,494			1.39
Borrowings		11,069		431			3.90			11,693		393			3.36			16,511		548			3.32
Total interest-bearing liabilities		182,154		3,521			1.93			190,283		3,036			1.60			196,238		3,042			1.55
Noninterest-bearing deposits		28,232								27,647								27,162
Other liabilities		4,712								4,558								4,582
Total liabilities		215,098								222,488								227,982
Shareholders’ equity		85,570								79,266								35,968
Total liabilities and shareholders’ equity	$	300,668							$	301,754							$	263,950
Net interest income				14,014								13,647								11,650
Tax equivalent adjustment on securities				(78	)							(148	)							(194	)
Net interest income per consolidated financial statements			$	13,936							$	13,499							$	11,456
Net interest rate spread							4.37	%							4.27	%							4.41	%
Net interest margin							5.04	%							4.80	%							4.73	%
Ratio of interest-earning assets to interest-bearing liabilities							1.53	x							1.49	x							1.26	x

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

	Rate Volume Analysis
	Year Ended December 31, 2006 Compared to Year Ended December 31, 2005									Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
	Increases (decreases) due to									Increases (decreases) due to
	Rate			Volume			Net			Rate			Volume			Net
	(thousands)
Assets:
Interest-earning assets:
Loans	$	573		$	764		$	1,337		$	52		$	1,504		$	1,556
Securities		76			(399	)		(323	)		62			(410	)		(348	)
Federal funds sold & other
Interest bearing deposits		205			(367	)		(162	)		602			181			783
Total interest-earnings assets		854			(2	)		852			716			1,275			1,991
Interest-bearing liabilities:
Savings accounts		10			(56	)		(46	)		(33	)		4			(29	)
Time deposits		467			(11	)		456			222			(32	)		190
Money market accounts		39			(6	)		33			4			(23	)		(19	)
Other interest bearing deposits		(3	)		7			4			(12	)		19			7
Total interest-bearing deposits		513			(66	)		447			181			(32	)		149
Borrowings		59			(21	)		38			5			(160	)		(155	)
Total interest-bearing liabilities		572			(87	)		485			186			(192	)		(6	)
Net change in interest income	$	282		$	85		$	367		$	530		$	1,467		$	1,997

Comparison of Financial Condition at December 31, 2006 and December 31, 2005

The Company’s total assets at December 31, 2006 were $298.8 million, a decrease of $10.1 million or 3.3% from $308.9 million at December 31, 2005. Cash and cash equivalents decreased to $7.9 million at December 31, 2006, from $34.2 million at December 31, 2005, primarily as a result of treasury stock repurchases and an investment in Bank-owned life insurance.

Securities available for sale were $4.3 million at December 31, 2006, a decrease of $5.3 million or 55.2% from $9.6 million at December 31, 2005. This decrease is due to maturities, principal reductions and securities sales. Throughout 2006, the proceeds from the maturities and sale of investment securities were used to fund growth in the Company’s loan portfolio, which currently is producing a higher yield than securities opportunities.

Total loans increased $10.6 million or 4.2% to $264.5 million at December 31, 2006 from $253.9 million at December 31, 2005. During the year ended December 31, 2006, Rome Bancorp originated approximately $51.7 million of loans. The majority of the loan growth was in the residential mortgage loan portfolio, which grew by $8.6 million, or 6.7%. Asset quality has

remained favorable over the same period as non-performing loans as a percentage of total loans were 0.42% at December 31, 2006 as compared to 0.37% at December 31, 2005. The allowance for loan losses as a percent of non-performing loans was 178.0% at December 31, 2006, as compared to 207.0% at December 31, 2005. These ratios are considered appropriate due to the growth in the Company’s residential mortgage portfolio in 2006. Due to stringent underwriting standards, the history of losses on this portfolio is significantly lower than on the remaining loans.

Total deposits decreased by $5.5 million or 2.7% from $201.5 million at December 31, 2005 to $196.0 million at December 31, 2006. The overall decrease in deposits is primarily attributable to decreases in savings and non-interest bearing deposit accounts partially offset by increases in other interest bearing deposits, money market accounts and time deposits. Savings deposits decreased $5.0 million or 5.6% from $89.1 million at December 31, 2005 to $84.1 million at December 31, 2006. Non-interest bearing deposit balances decreased by $2.0 million or 6.7% over the past year. The decline in these deposit categories is attributed to customers seeking higher returns in other investment vehicles, consistent with trends among financial institutions. Other interest bearing deposits increased $1.3 million or 11.6% during 2006. Money market deposits and time deposits increased slightly by $194,000, or 3.9%, and $103,000 or 0.2%, respectively, during the year ended December 31, 2006.

Comparison of Results of Operations for the Years Ended December 31, 2006 and December 31, 2005

General. Net income for the year ended December 31, 2006 was $2.5 million, a decrease of $914,000 from $3.4 million for the year ended December 31, 2005. The decrease in net income was attributable to increases in non-interest expense of $1.9 million, a decrease in gains on securities sales of $94,000, a decrease in non-interest income of $36,000 and an increase in loan loss provision of $32,000, partially offset by an increase in net interest income before loan loss provision of $437,000 and a decrease in income tax expense of $693,000.

Net Interest Income. Net interest income was $13.9 million in 2006, an increase of $437,000 or 3.2% from $13.5 million in 2005. This increase is principally due to an increase in interest income, resulting in net interest margin on a tax equivalent basis of 5.04% in 2006 compared to 4.80% for the year ended 2005.

Interest Income. Interest income increased by $922,000 for the year ended December 31, 2006, from $16.5 million for the year ended December 31, 2005. Interest income earned on the loan portfolio increased to $16.3 million in 2006 from $15.0 million in 2005. Average loan balances increased to $255.2 million in 2006 from $242.5 million in 2005, primarily due to growth in the residential mortgage portfolio. The yield on loans in 2006 was 6.40% compared to 6.18% in 2005, due to increases in underlying market rates over the past two years. Interest and dividend income on securities decreased in 2006 primarily due to a decline in volume. As securities matured and were sold, management utilized the proceeds to fund the aforementioned growth in the loan portfolio, thereby enhancing the yield on those available funds. Average securities decreased to $8.4 million in 2006 from $15.7 million in 2005 while their yields increased to 6.40% from 5.50% over the same period. Interest income of other short-term investments, including federal funds sold, dropped from $826,000 in 2005 to $664,000 in 2006, as a result of a decrease in average federal funds sold from $26.2 million in 2005 to $14.5 million in 2006. Partially offsetting the average balance decrease was an increase in the yields on these federal funds to 4.57% from 3.15% over the same period.

Interest Expense. Interest expense increased to $3.5 million in 2006 from $3.0 million in 2005 primarily due to an increase in the rate paid on deposit accounts, consistent with current market trends. The average rate paid on interest bearing deposits in 2006 was 1.81% compared to 1.48% in 2005. The average balance of these deposits decreased to $171.1 million in 2006 from $178.6 million in the prior year. Interest expense on borrowings increased from $393,000 in 2005 to $431,000 in 2006 due to an increase in the average rate paid on this debt from 3.36% in 2005 to 3.90% in 2006.

Provision for Loan Losses. The provision for loan losses was $147,000 in 2006 compared to $115,000 in 2005. The 2005 provision for loan losses was lower than normal as the Company received a large recovery on a commercial loan that had been charged off in fiscal 2000. The allowance for loan losses was $2.0 million or 0.74% of total loans at December 31, 2006 compared to $2.0 million and 0.77% of total loans at December 31, 2005. The allowance for loan losses as a percent of non-performing loans was 178% at December 31, 2005 compared to 207% at December 31, 2005. Non-performing loans, consisting of non-accrual loans and loans 90 days past due and still accruing, was $1.1 million or 0.42% of total loans at December 31, 2006 compared to $947,000 or 0.37% at December 31, 2005. These ratios are considered appropriate due to the net growth in the Company’s residential mortgage portfolio of $8.6 million in 2006. Due to stringent underwriting standards, the history of losses on the residential mortgage loan portfolio is significantly lower than on the other types of loans. Despite strong asset quality, management determined that the current year’s provision was necessary due to the continued growth of the loan portfolio and to cover routine charge-offs of non-performing loans.

In determining the level of the provision for loan losses necessary to absorb probable incurred credit losses, management considers the level of and trend in non-performing loans, the level of and trend in net loan charge-offs, the dollar amount and mix of the loan portfolio, as well as general economic conditions and real estate trends in Rome Bancorp’s market area, which can impact the inherent risk of loss in Rome Bancorp’s loan portfolio. As a result of these factors, management determined that a provision of $147,000 was necessary in 2006.

Non Interest Income. The following table summarizes changes in the major components of non-interest income:

	2006		2005		$ Change			% Change
Gain on securities sold	$	11	$	105	$	(94	)		(89.52	)%
Gain on sale of loans		15		20		(5	)		(25.00	)%
Service charges		1,559		1,585		(26	)		(1.64	)%
Other income		311		316		(5	)		(1.58	)%
Total non-interest income	$	1,896	$	2,026	$	(130	)		(6.42	)%

Non-interest income decreased by $130,000 to $1.9 million in 2006 as compared to $2.0 million in 2005, principally due to lower gains on securities sales. The Company recorded net securities sales gains of $11,000 in 2006 versus $105,000 in 2005, due to a lower volume of sales activity.

In mid-2006, the Company made an $8.0 million investment in Bank-owned life insurance policies on key officers, resulting in $215,000 of increased cash surrender value being recognized through the balance of 2006. During 2005, the Company recovered $167,000 in costs related to the aforementioned fiscal 2000 loan write-off.

Non Interest Expense. Non-interest expense was $11.9 million for the year ended December 31, 2006 compared to $10.0 million for the year ended December 31, 2005. The following table summarizes changes in the major components of non-interest expense:

	2006		2005		$ Change			% Change
Salaries and employee benefits	$	6,986	$	5,359	$	1,627			30.36	%
Occupancy and equipment expense		1,824		1,670		154			9.22	%
Marketing expense		247		312		(65	)		(20.83	)%
Outside consulting and professional fees		792		640		152			23.75	%
Other expense		2,010		1,996		14			0.70	%
Total non-interest expense	$	11,859	$	9,977	$	1,882			18.86	%

The increase in salaries and employee benefits is related to the 2006 adoption of SFAS No. 123(R), Share-based Payments, and its requirement to record stock-based compensation cost using the fair value method. For 2006, adopting this standard resulted in additional non-cash compensation expense of $1.6 million. Under the provisions of SFAS No. 123(R), in addition to expensing the fair

value of options and restricted share awards over the underlying requisite service period of those awards, grants made to individuals eligible for retirement or early retirement as defined in the Company’s defined benefit pension plan were required to be expensed at the point when the individuals met the retirement eligibility criteria. This resulted in accelerating $1.3 million of stock-Based compensation amortization expense into 2006 that otherwise would have been recorded in subsequent years. Increases in occupancy costs and professional fees are primarily attributable to additional costs related to information technology infrastructure and continued Sarbanes-Oxley Act compliance activities.

Income Tax Expense. Income tax expense was $1.3 million for 2006, a decrease of $693,000 from 2005 income tax expense of $2.0 million. The decrease is directly attributable to lower pre-tax earnings and an increase in permanent tax benefits.

Comparison of Results of Operations for the Years Ended December 31, 2005 and December 31, 2004

General. Net income for the year ended December 31, 2005 was $3.4 million, an increase of $1.0 million from $2.4 million for the year ended December 31, 2004. The increase in net income was attributable to an increase in net interest income before loan loss provision of $2.0 million, a decrease in loan loss provision of $275,000, and an increase in non-interest income of $325,000, partially offset by a decrease in gains on securities sales of $71,000, increases in non-interest expense of $876,000 and income tax expense of $695,000.

Net Interest Income. Net interest income was $13.5 million in 2005, an increase of $2.0 million or 17.8% from $11.5 million in 2004. This increase is principally due to the increase in the average balance of interest earning assets to $284 million in 2005, from $246 million in 2004. The growth in earning assets is directly related to receipt of the proceeds of the Company’s stock offering and conversion in March of 2005. Those proceeds were also utilized to pay down outstanding borrowings, bringing the average balances of these interest bearing liabilities to $11.7 million in 2005 versus $16.5 million in 2004. The Company’s ratio of interest earning assets to interest bearing liabilities increased to 149.44% in 2005 from 125.61% in 2004, while net interest margin increased to 4.80% in 2005 from 4.73% in 2004.

Interest Income. Interest income increased by $2.0 million for the year ended December 31, 2005, to $16.5 million as compared to $14.5 million in the year ended December 31, 2004. Interest income earned on the loan portfolio increased to $14.9 million in 2005 from $13.4 million in 2004. The average loan balances increased to $242.5 million in 2005 from $217.6 million in 2004, primarily due to growth in residential lending. The yield on loans in 2005 increased slightly to 6.18% from 6.17% in 2004, due to the effect of prime rate increases throughout 2005 on certain variable rate instruments. Interest and dividend income on securities decreased in 2005 primarily due to a decline in volume. As securities matured, management utilized the proceeds to fund the aforementioned growth in the loan portfolio, thereby enhancing the yield on those available funds. Average securities decreased to $15.7 million in 2005 from $23.7 million in 2004 while their yields increased to 5.50% from 5.10% over the same period. Interest income of other short-term investments, including federal funds sold, increased to $826,000 in 2005 from $44,000 in 2004, primarily as a result of an increase in volume as well as an increase in the yield of these funds to 3.15% in 2005 from 0.85% in 2004. Average federal funds sold increased to $26.2 million in 2005 from $5.1 million in 2004, as the Company held a portion of the stock offering proceeds in these deposits until more long term investments were analyzed.

Interest Expense. Interest expense for the year 2005 remained basically constant compared to interest expense for 2004. Interest expense on deposit accounts increased by $149,000 to $2.6 million in 2005 due to increases in the average rate paid on interest bearing deposits increasing to 1.48% in 2005 compared to 1.39% in 2004. Interest expense on borrowings decreased from $548,000 in 2004 to $393,000 in 2005 primarily due to a decrease in the average balance of outstanding borrowings from $16.5 million in 2004 to $ 11.7 million in 2005. The Company utilized

$9.0 million of the proceeds of the March 2005 stock offering and conversion to pay down FHLB borrowings.

Provision for Loan Losses. The provision for loan losses was $115,000 in 2005 compared to $390,000 in 2004. During 2005, the Company received a large recovery on a commercial loan that had been charged off in fiscal 2000. Because of this recovery and the continued stable asset quality of the loan portfolio, a lower provision was deemed necessary in 2005. The allowance for loan losses was $2.0 million or 0.77% of total loans at December 31, 2005 compared to $2.0 million and 0.86% of total loans at December 31, 2004. The allowance for loan losses as a percent of non-performing loans was 207% at December 31, 2005 compared to 241% at December 31, 2004. These ratios are considered appropriate due to the growth in the Company’s residential mortgage portfolio of $12.3 million in 2005. Due to stringent underwriting standards, the history of losses on the residential mortgage loan portfolio is significantly lower than on the other types of loans. Non-performing loans, consisting of non-accrual loans and loans 90 days past due and still accruing, increased slightly to $947,000 or 0.37% of total loans at December 31, 2005 compared to $829,000 or 0.36% at December 31, 2004.

In determining the level of the provision for loan losses necessary to absorb probable incurred credit losses, management considers the level of and trend in non-performing loans, the level of and trend in net loan charge-offs, the dollar amount and mix of the loan portfolio, as well as general economic conditions and real estate trends in Rome Bancorp’s market area, which can impact the inherent risk of loss in Rome Bancorp’s loan portfolio. As a result of these factors, management determined that a provision of $115,000 was necessary in 2005.

Non Interest Income. Non-interest income increased to $2.0 million in 2005 as compared to $1.8 million in 2004. The following table summarizes changes in the major components of non-interest income:

	2005		2004		$ Change			% Change
Gain on securities sold	$	105	$	176	$	(71	)		(40.34	)%
Gain on sale of loans		20		—		20			—
Service charges		1,585		1,451		134			9.24	%
Other income		316		145		171			117.93	%
Total non-interest income	$	2,026	$	1,772	$	254			14.33	%

The Company recorded net securities sales gains of $105,000 in 2005 versus gains of $176,000 in 2004. Gains on securities decreased due to a less securities being sold in 2005. In 2005, the Company began selling residential mortgages, resulting in a gain of $20,000. Service fee income increased by 9.24% over 2004 levels, due to increased transaction volume. During 2005, the Company recovered $167,000 in costs related to the aforementioned fiscal 2000 loan write-off. This recovery comprises the majority of the increase in other income over 2004 levels.

Non Interest Expense. Non-interest expense was $10.0 million for the year ended December 31, 2005 compared to $9.1 million for the year ended December 31, 2004. The following table summarizes changes in the major components of non-interest expense:

	2005		2004		$ Change		% Change
Salaries and employee benefits	$	5,359	$	5,137	$	222		4.32	%
Occupancy and equipment expense		1,670		1,568		102		6.51	%
Marketing expense		312		311		1		0.32	%
Outside consulting and professional fees		640		341		299		87.68	%
Other expense		1,996		1,745		251		14.38	%
Total non-interest expense	$	9,977	$	9,102	$	875		9.61	%

In 2005, the Company spent approximately $279,000 on expenses, primarily in the consulting and professional service area, necessitated by Sarbanes-Oxley Act compliance activities. Salaries and

benefits increased over 2004 levels due to an increase in ESOP expense of $78,000 and normal inflationary increases. The majority of the increase in 2005 occupancy expense is attributable to higher equipment operating costs and depreciation.

Income Tax Expense. Income tax expense increased to $2.0 million in 2005, compared to $1.3 million in 2004. The increase is directly attributable to higher pre-tax earnings and an increase in permanent tax differences.

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise during the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. The Company’s primary sources of funds consist of deposits, scheduled amortization and prepayments of loans and mortgage-backed securities, maturities and sales of investments, interest bearing deposits at other financial institutions and funds provided from operations. The Bank also has a written agreement with the Federal Home Loan Bank of New York that allows it to borrow up to $62.7 million on a line of credit. At December 31, 2006, the Bank had outstanding borrowings of $11.8 million against this line of credit, in addition to amortizing notes totaling $8.4 million.

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

The Company’s primary investing activities include the origination of loans and to a lesser extent the purchase of investment securities. In 2006, the Company originated approximately $51.7 million in loans compared to approximately $65.3 million in 2005. Purchases of investment securities were $1.6 million in 2006 and $55,000 in 2005. During the second quarter of 2006, the Company invested in life insurance policies on certain key officers and employees totaling $8.0 million. At December 31, 2006, the Company had loan commitments to borrowers of approximately $12.1 million, and customer available letters and lines of credit of approximately $17.2 million.

Total deposits were $196.0 million at December 31, 2006, a decrease of 2.7% from $201.5 million at December 31, 2005. Time deposit accounts scheduled to mature within one year were $43.9 million at December 31, 2006. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of these time deposits will remain with the Company. We are committed to maintaining a strong liquidity position, therefore, the Company monitors its liquidity position on a daily basis. The Company anticipates that it will have sufficient funds to meet its current funding commitments. The marginal cost of new funding however, whether from deposits or from borrowings from the Federal Home Loan Bank, will be carefully considered as the Company monitors its liquidity needs. Therefore, in order to minimize its cost of funds, the Company may consider additional borrowings from the Federal Home Loan Bank in the future.

During 2006, the Company repurchased 1,383,000 outstanding shares of its common stock at a total cost of $17.8 million. The Company paid cash dividends of $0.30 per share in 2006, requiring a cash outlay of $2.6 million.

At December 31, 2006 and 2005, the Bank exceeded each of the applicable regulatory capital requirements. The Bank’s leverage (Tier 1) capital at December 31, 2006 and 2005 was $63.2 million and $58.6 million or 21.27% and 18.96% of adjusted assets, respectively. In order to be classified as “well-capitalized” by the Office of Thrift Supervision (“OTS”) and the Federal Deposit Insurance Corporation (“FDIC”), at December 31, 2006 and 2005, the Bank is required to have leverage (Tier 1) capital of $14.9 million and $15.5 million, respectively, or 5.0% of adjusted assets, respectively. To be classified as a “well-capitalized” bank by the OTS and FDIC, the Bank must also

have a risk-based total capital ratio of 10.0%. At December 31, 2006 and 2005, the Bank had a risk-based total capital ratio of 28.9% and 28.2%, respectively.

On March 30, 2005, the Company reorganized from the two-tier mutual holding company structure to the stock holding company structure (the “Conversion”). The Conversion was accounted for as a change in corporate form with no resulting change in the historical basis of the Company’s assets, liabilities and equity. Costs related to the offering that was conducted in connection with the Conversion were $3.1 million and accordingly, net proceeds were $55.9 million. In addition, the Bank received $1.9 million of cash previously held by Rome MHC, the Company’s former mutual holding company.

The Company does not anticipate any material capital expenditures, nor does it have any balloon or other payments due on any long-term obligations or any off-balance sheet items other than debt as described in Note 7 of Notes to the Consolidated Financial Statements and the commitments and unused lines and letters of credit noted above.

The Company is contractually obligated to make payments as follows:

	Payments due by Period:
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Time deposits	$	66,401	$	43,856	$	15,934	$	6,611		—
Federal Home Loan Bank borrowings		20,172		12,838		3,518		1,705	$	2,111
Software maintenance contracts		341		258		83		—		—
Total contractual obligations	$	86,914	$	56,952	$	19,535	$	8,316	$	2,111

Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-based Payment. See the discussion above under “Comparison of Results of Operations for the Years Ended December 31, 2006 and December 31, 2005 - Non-Interest Expense,” for further discussion of the effect of adopting this standard.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R). This Statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its balance sheet, beginning with year end 2006, and to recognize changes in the funded status in the year in which the changes occur through comprehensive income beginning in 2007. Additionally, defined benefit plan assets and obligations are to be measured as of the date of the employer’s fiscal year-end, starting in 2008. Adoption had the following effect on individual line items in the 2006 balance sheet (in thousands of dollars):

	Before Application of SFAS No. 158		Adjustments			After Application of SFAS No. 158
	(in thousands of dollars)
Prepaid pension benefits	$	2,345	$	(1,211	)	$	1,134
Deferred income taxes		1,459		450			1,909
Total assets		299,520		(761	)		298,759
Postretirement benefit liability		2,439		(85	)		2,354
Total liabilities		221,813		(85	)		221,728
Accumulated other comprehensive income (loss)		43		(676	)		(633	)
Total stockholders’ equity		77,707		(676	)		77,031

In September 2006, the Securities and Exchange Commission (the “SEC”) released Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”),which is effective for fiscal years ending on or after November 15, 2006. SAB 108 provides guidance on how the effects of prior-year uncorrected financial statement misstatements should be considered in quantifying a current year misstatement. SAB 108 requires public companies to quantify misstatements using both an income statement (rollover) and balance sheet (iron curtain) approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial now are considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. Adjustments considered immaterial in prior years under the method previously used, but now considered material under the dual approach required by SAB 108, are to be recorded upon initial adoption of SAB 108. The amount so recorded is shown as a cumulative effect adjustment and is recorded in opening retained earnings as of January 1, 2006. The Company recorded a cumulative effect adjustment that decreased retained earnings in the amount of $206,000, which was comprised of a reduction of reserves for income and franchise taxes in the amount of $204,000, offset by corrections to increase prior year payroll and benefit accruals in the amount of $410,000, net of taxes.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”), which prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company has determined that the adoption of FIN 48 will not have a material effect on the financial statements.

Other new accounting standards have been issued that the Company does not expect will have a material effect on the financial statements when adopted in future years or for which the Company has not yet completed its evaluation of the potential effect upon adoption. In general, these standards revise the accounting for derivatives embedded in other financial instruments for 2007, revise the recognition and accounting for servicing of financial assets for 2007, establish a hierarchy about the assumptions used to measure fair value for 2008, revise the accrual of post-retirement benefits associated with providing life insurance for 2008, and revise the accounting for cash surrender value for 2007.

Additionally, a new accounting standard will require the company to record servicing assets at fair value instead of at allocated cost, and thereafter will allow the Company to carry new and existing classes of servicing assets at either fair value or amortized original basis, beginning in 2007. Adoption of this standard may increase servicing assets to the extent the Company elects to apply it

to existing classes of servicing assets and to the extent fair value of servicing exceeds amortized cost.

MARKET FOR THE COMPANY’S COMMON STOCK

The Company’s common stock is traded on the Nasdaq Global Market under the symbol “ROME”.

The Company’s common stock began trading on October 6, 1999, the date of the reorganization and initial public offering. At December 31, 2006, the last trading date in the Company’s fiscal year, the common stock of the Company closed at $12.75 per share. At March 2, 2006, there were 8,531,983 shares of the Company’s common stock outstanding, which were held of record by approximately 2,692 registered shareholders.

The table below shows the high and low sales price of the Company’s common stock during the periods indicated. The Company paid cash dividends of $0.30 per share in 2006. The Company also paid a quarterly cash dividend of $0.08 per share to shareholders of record as of February 5, 2007. Our ability to pay dividends depends on a number of factors including:

• investment opportunities available to the Bank or the Company;

• the Bank’s capital requirements;

• federal laws and regulations;

• our financial results;

• tax considerations; and

• general economic conditions.

We do not guarantee that we will pay dividends, or that we will not reduce or eliminate dividends in the future.

	Price Range
Date	High		Low		Dividends
Year ended December 31, 2006
Quarter ended March 31, 2006	$	12.10	$	10.75	$	0.075
Quarter ended June 30, 2006		12.95		11.71		0.075
Quarter ended September 30, 2006		13.00		12.11		0.075
Quarter ended December 31, 2006		12.96		12.46		0.075
Year ended December 31, 2005
Quarter ended March 31, 2005	$	13.14	$	9.48	$	0.066
Quarter ended June 30, 2005		10.28		9.27		0.066
Quarter ended September 30, 2005		10.87		9.92		0.066
Quarter ended December 31, 2005		11.14		10.00		0.066

All per share amounts are adjusted to reflect the Company’s stock offering and conversion which occurred on March 30, 2005.

Performance Graph. The graph below compares the Company’s total cumulative shareholder return, including reinvestment of dividends and adjusted for stock splits, by an investor who invested $100.00 on December 31, 2001, to December 31, 2006, to the total return by an investor who invested $100.00 in each of the Nasdaq Composite Index (U.S. Companies) and the Nasdaq Bank Composite Index (banks and bank holding companies, over 99% of which are based in the United States).

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Rome Bancorp, The NASDAQ Composite Index
And The NASDAQ Bank Index

	12/01	12/02	12/03	12/04	12/05	12/06
Rome Bancorp	100.00	150.18	282.63	268.56	233.33	281.19
NASDAQ Composite	100.00	71.97	107.18	117.07	120.50	137.02
NASDAQ Bank	100.00	59.14	89.11	103.85	130.57	166.05

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Rome Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Rome Bancorp, Inc.’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Rome Bancorp, Inc.’s internal control over financial reporting includes those policies and procedures that : (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of Rome Bancorp, Inc. (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Rome Bancorp, Inc. are being made only in accordance with authorizations of management and directors of Rome Bancorp, Inc. and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Rome Bancorp, Inc.’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of Rome Bancorp, Inc.’s internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee for Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, management concluded that Rome Bancorp, Inc. maintained effective internal control over financial reporting as of December 31, 2006.

Rome Bancorp, Inc.’s independent registered public accounting firm has issued their report on management’s assessment of Rome Bancorp, Inc.’s internal control over financial reporting. That report follows under the heading, Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.

/s/ Charles M. Sprock

Charles M. Sprock

Chairman of the Board, President and Chief Executive Officer

/s/ David C. Nolan

David C. Nolan

Executive Vice President and Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors
Rome Bancorp, Inc.
Rome, New York

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Rome Bancorp, Inc. maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Rome Bancorp, Inc.’s management is responsible for maintaining effective control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly represent the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Rome Bancorp, Inc. maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also, in our opinion, Rome Bancorp, Inc. maintained, in all material respects, effective control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Oversight Board (United States), the consolidated balance sheets of Rome Bancorp Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for the years ended December 31, 2006, 2005 and 2004 and our report dated March 12, 2007 expressed an unqualified opinion on those consolidated financial statements.

/s/ Crowe Chizek and Company LLC

Crowe Chizek and Company LLC
Cleveland, Ohio

March 12, 2007

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Rome Bancorp, Inc.
Rome, New York

We have audited the accompanying consolidated balance sheets of Rome Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005 and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for the three years in the period ended December 31, 2006. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rome Bancorp, Inc. and subsidiary at December 31, 2006 and 2005 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company changed its accounting for defined benefit pension and other postretirement plans to comply with newly issued accounting standards.

As discussed in Note 2 to the consolidated financial statements, the Company adopted Staff Accounting Bulletin 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatement in the Current Year Financial Statements” and accordingly, adjusted assets and liabilities at the beginning of 2006 with off-setting adjustment to the opening balance of retained earnings.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Rome Bancorp, Inc.’s internal control over financial reporting as of December 31, 2006, based on criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 12, 2007 expressed an unqualified opinion thereon.

/s/ Crowe Chizek and Company LLC

Crowe Chizek and Company LLC
Cleveland, Ohio
March 12, 2007

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

December 31, 2006 and 2005

(in thousands, except share data)
	2006			2005
Assets
Cash and due from banks	$	6,769		$	7,457
Federal funds sold and other short-term investments		1,089			26,778
Total cash and cash equivalents		7,858			34,235
Securities available for sale, at fair value		4,319			9,666
Securities held to maturity (fair value of $1,175 and $1,428 at December 31, 2006 and 2005, respectively)		1,178			1,440
Federal Home Loan Bank stock		1,344			776
Loans		264,537			253,878
Less: Allowance for loan losses		(1,965	)		(1,960	)
Net loans		262,572			251,918
Premises and equipment, net		6,072			4,503
Accrued interest receivable		1,094			1,053
Bank-owned life insurance		8,215			—
Other assets		6,107			5,262
Total assets	$	298,759		$	308,853
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	28,042		$	30,039
Savings		84,089			89,138
Money market		5,123			4,929
Time		66,401			66,298
Other interest bearing		12,350			11,064
Total deposits		196,005			201,468
Borrowings		20,172			9,374
Other liabilities		5,551			4,533
Total liabilities		221,728			215,375
Commitments and contingencies (Note 14)		—			—
Shareholders’ equity:
Common stock, $.01 par value; authorized: 30,000,000 shares; issued: 9,726,572 shares; outstanding: 8,461,572 shares at December 31, 2006; authorized: 30,000,000; issued 9,678,128: outstanding 9,678,128 shares at December 31, 2005		97			97
Additional paid-in capital		60,712			60,013
Retained earnings		35,643			35,983
Treasury stock, at cost; 1,265,000 shares at December 31, 2006 and 0 shares at December 31, 2005		(16,307	)		—
Accumulated other comprehensive income (loss)		(633	)		85
Unallocated shares of employee stock ownership plan (ESOP) 416,171 shares at December 31, 2006; 462,135 shares at December 31, 2005		(2,481	)		(2,700	)
Total shareholders’ equity		77,031			93,478
Total liabilities and shareholders’ equity	$	298,759		$	308,853

See accompanying notes to consolidated financial statements.

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Income

Years ended December 31, 2006, 2005 and 2004

(in thousands, except share data)

		2006		2005		2004
Interest income:
Loans	$	16,330	$	14,993	$	13,437
Securities		463		716		1,018
Other short-term investments		664		826		43
Total interest income		17,457		16,535		14,498
Interest expense:
Deposits		3,090		2,643		2,494
Borrowings		431		393		548
Total interest expense		3,521		3,036		3,042
Net interest income		13,936		13,499		11,456
Provision for loan losses		147		115		390
Net interest income after provision for loan losses		13,789		13,384		11,066
Non-interest income:
Service charges		1,559		1,585		1,451
Net gain on securities		11		105		176
Other income		326		336		145
Total non-interest income		1,896		2,026		1,772
Non-interest expense:
Salaries and employee benefits		6,986		5,359		5,137
Building, occupancy and equipment		1,824		1,670		1,568
Directors’ fees		219		228		214
Marketing		247		312		311
Outside consulting and professional fees		792		640		341
ATM service fees		210		251		186
Supplies		172		160		155
Other		1,409		1,357		1,190
Total non-interest expense		11,859		9,977		9,102
Income before income tax expense		3,826		5,433		3,736
Income tax expense		1,338		2,031		1,336
Net income	$	2,488	$	3,402	$	2,400
Basic earnings per share	$	0.29	$	0.37	$	0.26
Diluted earnings per share	$	0.29	$	0.36	$	0.25

See accompanying notes to consolidated financial statements.

ROME BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Shareholders’ Equity and Comprehensive Income
Years ended December 31, 2006, 2005 and 2004

(in thousands, except share data)

	Common stock		Additional paid-in capital			Retained earnings			Treasury Stock			Accumulated other comprehensive Income			Unallocated ESOP shares			Unearned compensation			Total
Balances at December 31, 2003	$	33	$	10,250		$	33,255		$	(6,992	)	$	793		$	(622	)	$	(78	)	$	36,639
Comprehensive income:
Net income		—		—			2,400			—			—			—			—			2,400
Other comprehensive loss		—		—			—						(402	)		—			—			(402	)
Total comprehensive income																						1,998
Purchase of treasury stock (141,404 shares)		—		—			—			(2,045	)		—			—			—			(2,045	)
Exercise of stock options and related tax benefit (14,877 shares, net)		—		59			(41	)		74			—			—			—			92
Amortization and tax benefits of unearned compensation		—		107			—			—			—			—			52			159
Dividends paid ($0.229 per share)		—		—			(987	)		—			—			—			—			(987	)
ESOP shares released for allocation (30,230 shares)		—		340			—			—			—			62			—			402
Balances at December 31, 2004		33		10,756			34,627			(8,963	)		391			(560	)		(26	)		36,258
Comprehensive income:
Net income		—		—			3,402			—			—			—			—			3,402
Other comprehensive loss		—		—			—			—			(306	)		—			—			(306	)
Total comprehensive income																						3,096
Proceeds of common stock offering and conversion of existing shares, net of expenses		64		57,758			—			—			—			(2,360	)		—			55,462
Retirement of 1,747,266 treasury shares		—		(8,963	)		—			8,963			—			—			—			—
Exercise of stock options and related tax benefit (35,882 shares, net)		—		130			—			—			—			—			—			130
Amortization and tax benefits of unearned compensation		—		73			—			—			—			—			26			99
Dividends paid ($0.265 per share)		—		—			(2,046	)		—			—			—			—			(2,046	)
ESOP shares released for allocation (45,965 shares)		—		259			—			—			—			220			—			479
Balances at December 31, 2005		97		60,013			35,983			—			85			(2,700	)		—			93,478
Comprehensive income:
Net income							2,488															2,488
Other comprehensive loss													(42	)								(42	)
Total comprehensive income																						2,446
Adjustment to initially apply SFAS No. 158, net of tax (Note 1)													(676	)								(676	)
Purchase of 1,383,000 treasury shares										(17,818	)											(17,818	)
Exercise of stock options and related tax benefit (48,444 shares, net)				245																		245
Grant of restricted shares				(1,511	)					1,511												—
Amortization of stock option and restricted share grants				1,616																		1,616
Dividends paid ($0.30 per share)							(2,622	)														(2,622	)
ESOP shares released for allocation (45,965 shares)				349												219						568
Adjustment to initially apply SAB No. 108 (Note 1)							(206	)														(206	)
Balances at December 31, 2006	$	97	$	60,712		$	35,643		$	(16,307	)	$	(633	)	$	(2,481	)	$	—		$	77,031

See accompanying notes to consolidated financial statements.

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years ended December 31, 2006, 2005 and 2004

(in thousands)

	2006			2005			2004
Cash flows from operating activities:
Net income	$	2,488		$	3,402		$	2,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		548			515			496
(Increase) decrease in accrued interest receivable		(41	)		(51	)		203
Provision for loan losses		147			115			390
Net gain on securities transactions		(11	)		(105	)		(176	)
Gain on sales of loans		(15	)		(20	)		—
Proceeds from sale of loans		1,114			1,715			—
Origination of loans for sale		(1,099	)		(1,695	)		—
Net premium amortization on securities		(9	)		(7	)		11
Increase in cash surrender value of Bank-owned life insurance		(215	)		—			—
(Gain) loss on sale of other real estate		13			(15	)		42
Loss (gain) on sale of fixed assets		3			—			(16	)
Increase in other liabilities		436			269			244
Deferred income tax (benefit) expense		(762	)		282			29
(Increase) decrease in other assets		(512	)		(112	)		13
Allocation of ESOP shares		568			479			402
Amortization of stock-based compensation		1,616			26			52
Net cash provided by operating activities		4,269			4,798			4,090
Cash flows from investing activities:
Net increase in loans		(10,702	)		(20,678	)		(24,093	)
Proceeds from sales of securities available for sale		365			1,754			2,093
Purchase of bank-owned life insurance		(8,000	)		—			—
Proceeds from maturities and principal reductions of securities available for sale		4,938			4,967			6,451
Purchases of securities available for sale		(568	)		(55	)		(198	)
Purchases of securities held to maturity		(1,000	)		—			(100	)
Proceeds from maturities and principal reductions of securities held to maturity		1,254			171			1,250
Proceeds from sale of real estate owned		41			98			247
Purchases of premises and equipment, net		(2,114	)		(507	)		(276	)
Net cash used in investing activities		(15,786	)		(14,250	)		(14,626	)
Cash flows from financing activities:
Increase (decrease) in time deposits		103			(2,656	)		(3,408	)
(Decrease) increase in other deposits		(5,566	)		(4,663	)		9,005
Stock offering and conversion		—			55,462			—
Repayments of borrowings		(2,402	)		(12,469	)		(9,247	)
Advances on borrowings		13,200			3,000			10,000
Purchase of treasury stock		(17,818	)		—			(2,045	)
Dividends		(2,622	)		(2,046	)		(987	)
Exercise of stock options and related tax benefits		245			130			92
Net cash provided by financing activities		(14,860	)		36,758			3,410
Net (decrease) increase in cash and cash equivalents		(26,377	)		27,306			(7,126	)
Cash and cash equivalents at beginning of year		34,235			6,929			14,055
Cash and cash equivalents at end of year	$	7,858		$	34,235		$	6,929

See accompanying notes to consolidated financial statements.

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows (continued)

Years ended December 31, 2006, 2005 and 2004

(in thousands)

	2006		2005		2004
Other non-cash activities:
Retirement of 1,747,266 treasury shares	$	—	$	8,963	$	—
Transfers from loans to real estate owned		99		83		87
Cash paid during the period for:
Interest		3,517		3,044		3,070
Income taxes		1,940		1,850		549

See accompanying notes to consolidated financial statements.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(1)	Business
	Rome Bancorp, Inc. (the “Company”) is a registered bank holding company, organized under the laws of Delaware and is the parent company of The Rome Savings Bank and subsidiaries (the “Bank”). The Company provides traditional community banking services for individuals and small-to medium-sized businesses, through the Bank’s four branches in Oneida County of New York State.
(2)	Summary of Significant Accounting Policies
	(a)	Basis of Presentation
		The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Amounts in the prior year’s consolidated financial statements are reclassified when necessary to conform with the current year’s presentation. A description of the significant accounting policies is presented below. To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, (U.S. generally accepted accounting principles) management makes estimates and assumptions based on the available information. Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and disclosures of contingent assets and liabilities and the reported amounts of revenues and expenses for the period. Significant estimates include the allowance for loan losses, valuation of securities, deferred tax assets and employee benefit obligations. Actual results could differ from those estimates.
		The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant inter-company accounts and transactions are eliminated in consolidation.
	(b)	Securities
		The Company classifies its debt securities as either available-for-sale or held-to-maturity as the Company does not hold any securities considered to be trading. Held-to-maturity securities are those debt securities the Company has the ability and intent to hold until maturity. All other debt securities are classified as available for sale.
		Held-to-maturity securities are recorded at amortized cost. Available-for-sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and reported as accumulated other comprehensive income, a component of shareholders’ equity, until realized.
		A decline in the fair value of an available-for-sale or held-to-maturity security below cost that is deemed to be other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security.
		Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the interest method. Dividend and interest income are recognized when earned. Purchases and sales are recorded on a trade date basis with settlement occurring shortly thereafter. Realized gains and losses on securities sold are derived using the specific identification method for determining the cost of securities sold.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(c)	Federal Home loan Bank (FHLB) Stock
	The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.
(d)	Loans
	Loans are reported at the principal amount outstanding. Origination fees and certain direct origination costs related to lending activities are deferred and amortized over the life of the related loans. The Company has the ability and intent to hold its loans for the foreseeable future or until maturity or payoff.
	Interest on loans is accrued and included in income at contractual rates applied to principal outstanding. The accrual of interest on loans (including impaired loans) is generally discontinued, and previously accrued interest is reversed, when loan payments are 90 days or more past due, or when, by the judgment of management, collectibility becomes uncertain. Subsequent recognition of income occurs only to the extent that payment is received. Loans are generally returned to an accrual status when both principal and interest become current and the loan is determined to be performing in accordance with the applicable loan terms. When the future collectibility of the recorded loan balance is expected, interest income may be recognized on a cash basis.
(e)	Allowance for Loan Losses
	The allowance for loan losses is a valuation allowance for probable incurred credit losses. The allowance for loan losses is increased by the provision for loan losses charged to operations and is decreased by the charge-off of loans, net of recoveries. Loans are charged off when management determines that ultimate success of the loan’s collectibility is remote.
	Management’s evaluation of the adequacy of the allowance considers the Company’s historical loan loss experience, review of specific loans, current economic conditions and such other factors considered appropriate to estimate losses. Management uses presently available information to estimate probable losses on loans; however, future additions to the allowance may be necessary based on changes in estimates, assumptions or economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgment of information available to them at the time of their examination.
	The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.
	The allowance for loan losses is evaluated on a quarterly basis by management in order to maintain the allowance at a level sufficient to absorb probable incurred loan losses based upon known and inherent risks in the loan portfolio.
	The Company estimates losses on impaired loans based on the present value of expected future cash flows (discounted at the loan’s effective interest rate) or the fair value of the underlying collateral if the loan is collateral dependent. An impairment loss exists if the recorded investment in a loan exceeds the value of the loan as measured by the

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

	aforementioned methods. Impairment losses are included as a component of the allowance for loan losses. A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Generally, all commercial mortgage loans and commercial loans greater than $250,000 in a non-accrual status are considered impaired. Commercial mortgage loans and commercial loans less than $250,000 and all residential mortgage loans, consumer loans and education loans are evaluated collectively by portfolio since they are homogeneous and generally carry smaller individual balances. The Company recognizes interest income on impaired loans using the cash basis of income recognition. Cash receipts on impaired loans are generally applied according to the terms of the loan agreement, or as a reduction of principal, based upon management’s judgement and the related factors discussed above.
(f)	Real Estate Owned
	Real estate acquired through foreclosure or deed in lieu of foreclosure is recorded at the lower of the unpaid loan balance on the property at the date of transfer, or fair value less estimated costs to sell. Write-downs from cost to fair value which are required at the time of foreclosure are charged to the allowance for loan losses. Adjustments to the carrying value of such properties that result from subsequent declines in value are charged to operations in the period in which the declines occur. Operating costs associated with the properties are charged to expense as incurred.
(g)	Premises and Equipment
	Land is carried at cost and buildings and improvements and furniture and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives of the assets (7 to 40 years for buildings and 3 to 10 years for furniture and equipment).
(h)	Employee Benefit Plans
	The Company maintains a non-contributory defined benefit pension plan that covers approximately 60% of all current full time employees. The Company’s Board of Directors amended the plan in December of 2002 to cease the accrual of any further benefits. The benefits under the pension plan are based on the employee’s years of service and compensation. Pension expense is the net of service cost and interest cost, return on plan assets and amortization of gains and loses not immediately recognized. The Company’s funding policy is to contribute annually at least the minimum required to meet the funding standards set forth under provisions of the Employee Retirement Income Security Act of 1974.
	The Company provides health care and life insurance benefits to certain retired full time employees. The estimated costs of providing benefits are accrued over the years the employees render services necessary to earn those benefits.
	The Company has a defined contribution 401(k) Savings Plan for all employees. Employees are permitted to contribute up to 75% of base pay to the Savings Plan, subject to certain limitations. The Company matches 50% of each employee’s contributions up to a limit of 3% of the employee’s base pay.
	The Company also sponsors a non-contributory Employee Stock Ownership Plan (ESOP) covering substantially all full time employees. The number of shares allocable to Plan participants is determined by the Board of Directors. Allocations to individual participant accounts are based on participant compensation. As shares are committed to be released

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

	to participants, the Company reports compensation expense equal to the current market price of the shares and the shares become outstanding for earnings per share computations. Dividends on allocated shares reduce retained earnings; dividends on unallocated ESOP shares reduce debt and accrued interest.
(i)	Income Taxes
	The Company and its subsidiary file a consolidated tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.
(j)	Stock Option Plan
	Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment, using the modified prospective transition method. Accordingly, the Company has recorded stock-based compensation cost using the fair value method starting in 2006. For 2006, adopting this standard resulted in a reduction of income before income taxes of $379,000, a reduction in net income of $283,000 and a reduction in both basic and diluted earnings per share of $0.03 per share.
	Prior to January 1, 2006, employee compensation expense under stock options was reported using the intrinsic value method; therefore no stock-based compensation cost is reflected in net income for the years ended December 31, 2005 and 2004, as all options granted had an exercise price equal to or greater than the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based compensation for the years ending December 31.

	2005			2004
	(in thousands, except per share data)
Net income:
As reported	$	3,402		$	2,400
Add: Stock based compensation expense included in net income, net of related tax expense		17			35
Deduct: Total stock based compensation expense determined under fair value method, net of related tax expense		(35	)		(69	)
Pro forma	$	3,384		$	2,366
Basic earnings per share:
As reported	$	0.37		$	0.26
Pro forma	$	0.37		$	0.26
Diluted earnings per share:
As reported	$	0.36		$	0.25
Pro forma	$	0.36		$	0.25

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(k)	Cash and Cash Equivalents
	For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold which represents short-term highly liquid investments. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and federal funds purchased agreements.
(l)	Financial Instruments With Off-Balance Sheet Risk
	The Company’s off-balance sheet financial instruments are limited to commitments to extend credit and standby letters of credit. The Company’s policy is to record such instruments when funded.
(m)	Earnings Per Share
	Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the year. Unallocated shares held by the Company’s ESOP and unvested RRP shares are not included in the weighted average number of shares outstanding. Stock options and unvested stock grants are regarded as common stock equivalents and are considered in earnings per share calculations if dilutive using the treasury stock method.
(n)	Segment Reporting
	The Company’s operations are solely in the financial services industry providing traditional community banking services in the geographical region of Oneida County and surrounding areas in New York State. The Company has determined that it has no reportable segments as defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information.
(o)	Bank Owned Life Insurance
	The Company has purchased life insurance policies on certain key officers and employees. Bank-owned life insurance is recorded at its cash surrender value (or the amount that can be realized.)
(p)	Recently Adopted Accounting Pronouncements
	Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment. See the discussion above under Non-Interest Expense for further discussion of the effect of adopting this standard.
	In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R). This Statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its balance sheet, beginning with year end 2006, and to recognize changes in the funded status in the year in which the changes occur through comprehensive income beginning in 2007. Additionally, defined benefit plan assets and obligations are to be measured as of the date of the employer’s fiscal year-end, starting in 2008. Adoption had the following effect on individual line items in the 2006 balance sheet:

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

	Before Application of SFAS No. 158			Adjustments				After Application of SFAS No. 158
	(in thousands of dollars)
Prepaid pension benefits		$	2,345		$	(1,211	)		$	1,134
Deferred income taxes			1,459			450				1,909
Total assets			299,520			(761	)			298,759
Postretirement benefit liability			2,439			(85	)			2,354
Total liabilities			221,813			(85	)			221,728
Accumulated other comprehensive income(loss)			43			(676	)			(633	)
Total stockholders’ equity			77,707			(676	)			77,031

	In September 2006, the Securities and Exchange Commission (SEC) released Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108),which is effective for fiscal years ending on or after November 15, 2006. SAB 108 provides guidance on how the effects of prior-year uncorrected financial statement misstatements should be considered in quantifying a current year misstatement. SAB 108 requires public companies to quantify misstatements using both an income statement (rollover) and balance sheet (iron curtain) approach and evaluate whether either approach results in a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. If prior year errors that had been previously considered immaterial now are considered material based on either approach, no restatement is required so long as management properly applied its previous approach and all relevant facts and circumstances were considered. Adjustments considered immaterial in prior years under the method previously used, but now considered material under the dual approach required by SAB 108, are to be recorded upon initial adoption of SAB 108. The amount so recorded is shown as a cumulative effect adjustment and is recorded in opening retained earnings as of January 1, 2006. The Company recorded a cumulative effect adjustment that decreased retained earnings in the amount of $206,000, which was comprised of a reduction of reserves for income and franchise taxes in the amount of $204,000, offset by corrections to increase payroll and benefit accruals in the amount of $410,000, net of taxes.
(q)	Newly Issued But Not Yet Effective Accounting Pronouncements
	In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (FIN 48), which prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company has determined that the adoption of FIN 48 will not have a material effect on the financial statements.
	Other new accounting standards have been issued that the Company does not expect will have a material effect on the financial statements when adopted in future years or for which the Company has not yet completed its evaluation of the potential effect upon adoption. In general, these standards revise the accounting for derivatives embedded in other financial instruments for 2007, revise the recognition and accounting for servicing of financial assets for 2007, establish a hierarchy about the assumptions used to measure fair value for 2008, revise the accrual of post-retirement benefits associated with providing life insurance for 2008, and revise the accounting for cash surrender value for 2007.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

		Additionally, a new accounting standard will require the company to record servicing assets at fair value instead of at allocated cost, and thereafter will allow the Company to carry new and existing classes of servicing assets at either fair value or amortized original basis, beginning in 2007. Adoption of this standard may increase servicing assets to the extent the Company elects to apply it to existing classes of servicing assets and to the extent fair value of servicing exceeds amortized cost.
(3)	Securities
	Securities are summarized as follows (in thousands):

	December 31, 2006
	Amortized Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Available-for-sale:
U.S. Government agencies	$	441	$	14	$	—	$	455
State and municipal obligations		2,335		42		—		2,377
Mortgage-backed securities
FHLMC		336		3		—		339
Total debt securities		3,112		59		—		3,171
Equity and other securities		1,137		11		—		1,148
	$	4,249	$	70	$	—	$	4,319
Held-to-maturity:
U.S. Government securities	$	1,001	$	—	$	4	$	997
Mortgage-backed securities
GNMA		28		1		—		29
FHLMC		2		—		—		2
Other bonds		147		—		—		147
	$	1,178	$	1	$	4	$	1,175

	December 31, 2005
	Amortized Cost		Gross unrealized gains		Gross Unrealized Losses		Fair value
Available-for-sale:
U.S. Government agencies	$	949	$	36	$	—	$	985
State and municipal obligations		4,506		89		—		4,595
Mortgage-backed securities
FHLMC		570		13		—		583
Corporate bonds		2,008		9		—		2,017
Total debt securities		8,033		147		—		8,180
Equity and other securities		1,491		6		11		1,486
	$	9,524	$	153	$	11	$	9,666
Held-to-maturity:
U.S. Government securities	$	1,208	$	—	$	15	$	1,193
Mortgage-backed securities
GNMA		48		3		—		51
FHLMC		3		—		—		3
Other bonds		181		—		—		181
	$	1,440	$	3	$	15	$	1,428

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

At December 31, 2006, one agency investment had an unrealized loss of $4,000. This investment was in an unrealized loss position for two consecutive months at December 31, 2006. The unrealized loss represents aggregate depreciation of 0.4% of the Company’s amortized cost basis in the security. The unrealized loss on this bond has not been recognized into income because the bond is of high credit quality, management has the intent and ability to hold for the foreseeable future, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bond reaches maturity.

At December 31, 2005, three agency investments had a combined unrealized loss of $15,000. These investments were in an unrealized loss position for sixteen consecutive months at December 31, 2005. The unrealized loss represented aggregate depreciation of 1.3% of the Company’s amortized cost basis in these securities at that date. In addition, at December 31, 2005, one of the Company’s equity investments had an unrealized loss position of $11,000. This investment was in an unrealized loss position for one month at December 31, 2005. The unrealized loss represented aggregate depreciation of 0.7% of the Company’s cost basis in this security at year end 2005.

The following table presents the amortized cost and fair value of debt securities based on the contractual maturity date (in thousands). Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.

	December 31, 2006
	Amortized cost		Fair Value
Available-for-sale:
Due within one year	$	1,080	$	1,086
Due after one year through five years		1,363		1,388
Due after five years through ten years		383		397
Due after ten years		286		300
	$	3,112	$	3,171
Held-to-maturity:
Due within one year	$	—	$	—
Due after one year through five years		1,031		1,028
Due after five years through ten years		—		—
Due after ten years		147		147
	$	1,178	$	1,175

Gross gains of $11,000, $105,000 and $176,000 were realized on sales of securities in 2006, 2005 and 2004, respectively.

Securities pledged at year end 2006 and 2005 had a carrying amount of $1.0 million and $1.1 million, respectively. These securities collateralize state and Treasury department programs. At year end 2006 and 2005, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(4)	Loans
	Loans are summarized as follows (in thousands) at December 31:

	2006		2005
Mortgage loans:
Residential (1-4 family)	$	135,078	$	126,422
Commercial		54,493		52,748
Construction and land		2,562		3,317
Total Mortgage loans		192,133		182,487
Other loans:
Commercial		24,189		23,832
Automobile loans		17,779		18,321
Property improvement and equipment		15,536		15,434
Other consumer		14,900		13,804
Total Other loans		72,404		71,391
Total Loans	$	264,537	$	253,878

The Company serviced loans for third parties totaling $4,830,000 and $3,922,000 at December 31, 2006 and 2005 respectively.

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

	Years ended December 31,
	2006			2005			2004
Balance at beginning of period	$	1,960		$	2,000		$	1,809
Provision charged to operations		147			115			390
Loans charged off		(372	)		(687	)		(384	)
Recoveries		230			532			185
Balance at end of period	$	1,965		$	1,960		$	2,000

The Company’s recorded investment in loans that are considered impaired totaled $318,000 and $211,000 at December 31, 2006 and 2005, respectively. These impaired loans carried allowances of $177,000 and $127,000, at December 31, 2006 and 2005, respectively. The average recorded investment in impaired loans was $228,000, $247,000 and $272,000 in 2006, 2005 and 2004, respectively. The Company recognized no interest on impaired loans during the three years ended December 31, 2006.

The principal balances of loans not accruing interest amounted to $1.1 million and $871,000 at December 31, 2006 and 2005, respectively. Loans 90 days past due and accruing interest amounted to $8,000 and $75,000 at December 31, 2006 and 2005, respectively. The differences between the amount of interest income that would have been recorded if non-accrual loans had been paid in accordance with their original terms and the amount of interest income that was

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

	recorded during the years ended December 31, 2006, 2005 and 2004 was $75,800, $62,500 and $53,300, respectively. There are no commitments to extend further credit on non-accruing loans.
	A substantial portion of the Company’s loans are mortgage and consumer loans in Oneida County. Accordingly, the ultimate collectibility of a substantial portion of the Company’s loan portfolio is susceptible to changes in market conditions in this area. A majority of the Company’s loan portfolio is secured by real estate. Other than general economic risks, management is not aware of any material concentrations of credit risk to any industry or individual borrower.
(5)	Premises and Equipment
	Premises and equipment at December 31 are summarized as follows (in thousands):

	2006		2005
Land	$	2,547	$	1,404
Buildings and improvements		5,713		5,133
Furniture and equipment		7,324		7,030
		15,584		13,567
Less accumulated depreciation and amortization		9,512		9,064
	$	6,072	$	4,503

	Depreciation and amortization expense included in building, occupancy and equipment expense amounted to $548,000, $515,000 and $496,000 during the years ended December 31, 2006, 2005 and 2004, respectively.
(6)	Deposits
	Contractual maturities of time deposits at December 31 are summarized as follows (in thousands):

	2006
Within one year	$	43,856
One through two years		9,932
Two through three years		6,002
Three through four years		4,222
Four through five years		2,389
Total time deposits	$	66,401

At December 31, 2006 and 2005, time deposits with balances of $100,000 or more totaled approximately $13,110,000 and $11,624,000, respectively.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

Interest expense on deposits for the years ended December 31 is summarized as follows (in thousands):

	2006		2005		2004
Savings	$	657	$	703	$	732
Money market		88		55		74
Time		2,276		1,820		1,630
Other interest bearing		69		65		58
	$	3,090	$	2,643	$	2,494

(7)

Borrowings

The Company is a member of the Federal Home Loan Bank of New York (FHLB). As a member, the Company is required to own capital stock in the FHLB and is authorized to apply for advances from the FHLB. The Company has a blanket pledge on their one-to-four family mortgage loans as collateral for these borrowings. The following is a summary of advances and amortizing notes from the FHLB at December 31 (in thousands):

	2006		2005
Bearing interest at 3.67% fixed, due 7/3/15	$	2,294	$	2,515
Bearing interest at 3.36% fixed, due 7/3/13		3,868		4,376
Bearing interest at 3.59% fixed, due 11/26/08		2,210		2,483
FHLB Overnight Line of Credit, bearing interest at 5.41%		11,800		—
	$	20,172	$	9,374

The following table summarizes the combined aggregate amount of maturities for the above advances and notes for each of the five years after December 31, 2006, as well as remaining maturities beyond five years:

Due in one year	$	12,838
Due one through two years		2,709
Due two through three years		809
Due three through four years		838
Due four through five years		867
Due past five years		2,111
Total	$	20,172

At December 31, 2006, the Company had additional availability on its FHLB line of credit of $50.9 million. This line of credit is subject to periodic review and renewal.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(8)	Income Taxes
	The components of income tax expense (benefit) attributable to income from operations for the years ended December 31 consist of (in thousands):

	2006			2005		2004
Current:
Federal	$	1,959		$	1,661	$	1,141
State		141			88		166
		2,100			1,749		1,307
Deferred:
Federal		(598	)		155		72
State		(164	)		127		(43	)
		(762	)		282		29
Total income tax expense	$	1,338		$	2,031	$	1,336

Actual tax expense differs from “expected” tax expense, computed by applying the U.S. Federal statutory tax rate of 34% to income before income taxes for the years ended December 31, as follows (in thousands):

	2006			2005			2004
Computed “expected” tax expense	$	1,301		$	1,847		$	1,270
Increases (decreases) in income taxes resulting from:
State taxes, net of Federal tax benefit		(16	)		126			82
Tax exempt interest		(47	)		(98	)		(138	)
Tax exempt increase in cash surrender value of life insurance		(73	)		—			—
Non-deductible ESOP expense		119			87			116
Non-deductible stock option expense		45			—			—
Other, net		9			69			6
	$	1,338		$	2,031		$	1,336
Effective tax rate		35.0	%		37.4	%		35.8	%

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities for December 31 are (in thousands):

	2006		2005
Deferred tax assets:
Allowance for loan losses	$	671	$	577
Accrued postretirement benefits		920		901
Deferred compensation		704		423
Stock-based compensation and benefits		642		—
Other		39		31
Total gross deferred tax assets		2,976		1,932
Deferred tax liabilities:
Depreciation		202		203
Prepaid pension cost		429		826
Undistributed income of subsidiary		69		54
Unrealized gains on available-for-sale securities		28		57
Deferred loan costs		72		97
Other		14		—
Total gross deferred tax liabilities		814		1,237
Net deferred tax assets	$	2,162	$	695

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the carryback period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income and projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Management believes that no valuation allowance is necessary.

In accordance with SFAS No. 109, the Company has not recognized deferred tax liabilities with respect to the Bank’s Federal and state base-year reserves of approximately $3.4 million at December 31, 2006, since the Company does not expect that these amounts will become taxable in the foreseeable future. Under the tax laws, as amended, events that would result in taxation of these reserves include redemptions of the Bank’s stock or certain excess distributions to the Holding Company. The unrecognized deferred tax liability at December 31, 2006 with respect to the base-year reserve was approximately $1.3 million.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(9)	Pension and Postretirement Benefits
	The following table sets forth the changes in the Company’s pension and postretirement plans’ accumulated benefit obligations, fair value of assets and funded status and amounts recognized in the consolidated balance sheets at December 31, 2006 and 2005:

	Pension benefits						Postretirement benefits
(in thousands)	2006			2005			2006			2005
Change in benefit obligation:
Benefit obligation at beginning of year	$	7,381		$	6,974		$	2,353		$	2,490
Service cost		—			—			25			31
Interest cost		424			417			135			148
Amendments and settlements		(38	)		(24	)		—			(76	)
Actuarial(gain)/ loss		(239	)		353			(134	)		(126	)
Benefits paid		(336	)		(339	)		(70	)		(190	)
Participant contributions		—			—			45			76
Benefit obligation at end of year		7,192			7,381			2,354			2,353
Change in plan assets:
Fair value of plan assets at beginning of year		8,058			7,451			—			—
Actual return on plan assets		642			871			—			—
Employer contributions		—			100			25			114
Settlements		(38	)		(25	)		—			—
Participant contributions		—			—			45			76
Benefits paid		(336	)		(339	)		(70	)		(190	)
Fair value of plan assets at end of year		8,326			8,058			—			—
Funded status		1,134			677			(2,354	)		(2,353	)
Unrecognized net actuarial loss		—			1,451			—			102
Unrecognized prior service cost		—			—			—			(63	)
Net amount recognized	$	1,134		$	2,128		$	(2,354	)	$	(2,314	)
Unrecognized net actuarial loss in accumulated other comprehensive income (net of tax)	$	(728	)		N/A		$	52			N/A
Assumptions as of measurement dates: Pension September 30;
Postretirement December 31:
Discount rate		6.125	%		5.875	%		6.125	%		5.875	%
Expected return on plan assets		9.00	%		9.00	%		—			—
Rate of compensation increase		N/A			N/A			—			—

Prior to adoption of SFAS No. 158, amounts recognized on the balance sheet at December 31, 2005 consist of (in thousands):

	Pension Benefits		Postretirement Benefits
Prepaid benefit cost	$	2,128	$	—
Accrued benefit cost		—		(2,314	)
Net amount recognized	$	2,128	$	(2,314	)

The long term rate of return on plan assets assumption was set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

applied to the plan’s target allocation of asset classes. Equities and fixed income securities were assumed to earn real rates of return in the ranges of 5-9% and 2-6%, respectively. The long term inflation rate was estimated to be 3%. When these overall return expectations are applied to the plan’s target allocation, the expected rate of return is determined to be 9%, which is roughly the midpoint of the range of expected return.

The Company’s pension plan weighted average allocations at September 30, 2006 and 2005, by asset category are summarized in the following table:

	Plan assets at September 30,
Asset Category	2006			2005
Equity Securities		73	%		72	%
Debt Securities		27	%		28	%
Total		100	%		100	%

The Company’s long-term investment objective is to be invested 65% in equity securities and 35% in debt securities. Plan assets are invested in six diversified investment funds of the RSI Retirement Trust (the “Trust”), a no load series open-ended mutual fund. The Trust has been given discretion by the Plan Sponsor to determine the appropriate strategic asset allocation versus plan liabilities as governed by the Trust’s Statement of Investment Objectives and Guidelines (the “Guidelines”). If the plan is underfunded under the Guidelines, the bond fund will be temporarily increased to 50% in order to lessen asset volatility. When the plan is no longer underfunded, the bond fund portion will be decreased back to 35%. Asset rebalancing is performed at least annually, with interim adjustments made when the investment mix varies more than 5% from the target.

This investment goal is to achieve investment results that will contribute to the proper funding of the pension plan by exceeding the rate of inflation over the long term. In addition, investment managers for the Trust are expected to provide above average performance when compared to their peer managers. Performance volatility is also monitored. Risk volatility is further managed by the distinct investment objectives of each of the Trust funds and the diversification within each fund.

For the fiscal year ended December 31, 2007, the Company expects to make no contributions to the pension plan. The following estimated future benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

Asset Category	Pension Benefits			Postretirement Benefits
Fiscal 2007		$	454		$	125
Fiscal 2008			461			132
Fiscal 2009			472			139
Fiscal 2010			479			144
Fiscal 2011			491			149
Fiscal 2012-2016			2,628			805

          The components of net periodic benefit cost include the following:

	Pension benefits									Postretirement benefits
(in thousands)	2006			2005			2004			2006			2005			2004
Service cost	$	—		$	—		$	—		$	25		$	31		$	33
Interest cost		424			417			432			135			148			142
Expected return on assets		(710	)		(655	)		(642	)		—			—			—
Amortization		69			66			80			(8	)		(1	)		(1	)
Net periodic (benefit) cost	$	(217	)	$	(172	)	$	(130	)	$	152		$	178		$	174

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

	In December of 2002, the Company’s Board of Directors amended the defined benefit pension plan to cease the accrual of further benefits. There is no assumed increase in the per capita cost of current health care benefits since the employer contributions are fixed with the retiree paying for any cost increases.
(10)	Stock Option Plan
	On May 3, 2000, the Company’s shareholders approved the Rome Bancorp, Inc. 2000 Stock Option Plan (the “2000 Stock Option Plan”). The primary objective of the 2000 Stock Option Plan is to provide officers and directors with a proprietary interest in the Company and an incentive to encourage such persons to remain with the Company.
	Under the 2000 Stock Option Plan, 517,952 shares of authorized but unissued common stock are reserved for issuance upon option exercises. The Company also has the alternative to fund the 2000 Stock Option Plan with treasury stock. Options under the plan may be either non-qualified stock options or incentive stock options. Each option entitles the holder to purchase one share of common stock at an exercise price equal to the fair market value on the date of grant. On June 28, 2000, 382,357 options were awarded at an exercise price of $2.19 per share. These options have a ten-year term and vested at a rate of 20% per year from the grant date. At December 31, 2006 and 2005 the remaining contractual life of these options was 3.5 years and 4.5 years, respectively.
	On May 3, 2006, the Company’s shareholders approved the Rome Bancorp, Inc. 2006 Stock Option Plan (the “2006 Stock Option Plan”), which also has the primary objective of providing officers and directors with a proprietary interest in the Company and an incentive to encourage such persons to remain with the Company. Under the 2006 Stock Option Plan, 590,000 shares of authorized but unissued common stock are reserved for issuance upon option exercises. The Company also has the alternative to fund the 2006 Stock Option Plan with treasury stock. Options under the plan may be either non-qualified stock options or incentive stock options. Each option entitles the holder to purchase one share of common stock at an exercise price equal to the fair market value on the date of grant. On May 24, 2006, 354,000 options were awarded at an exercise price of $12.84 per share. These options have a ten-year term and vest at a rate of 20% per year from the grant date. The fair value of the 2006 options awarded was estimated on the date of grant using a closed form option valuation (Black-Scholes) model and the following assumptions: risk free interest rate 4.60%, an expected term of 6.5 years, expected stock price volatility of 8.25% and a dividend yield of 2.52%. At December 31, 2006 the remaining contractual life of these options was 9.4 years.
	Under the provisions of FASB No. 123(R), stock-based compensation expense of $1.69 per option granted under the 2006 Stock Option Plan is being recorded over the sooner of the vesting period of the options, or upon the date at which a recipient becomes eligible for normal or early retirement under the Company’s defined benefit plan. At May 24, 2006, certain awardees met the retirement eligibility criteria and accordingly, stock-based compensation expense of $350,000 related to their options was expensed immediately. Total compensation cost related to the Company’s stock option plans was $379,000, $0 and $0 for 2006, 2005 and 2004, respectively.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

          Information related to the stock option plans during each year follows:

	2006		2005		2004
Intrinsic value of options exercised	$	487,000	$	293,000	$	151,000
Cash received from option exercises		101,000		73,000		33,000
Tax benefit realized from option exercises		144,000		57,000		59,000
Weighted average fair value of options granted		1.69		0		0

As of December 31, 2006, there was $220,000 of total unrecognized compensation cost related to nonvested stock options granted under the Plan. The cost is expected to be recognized over a weighted-average period of 4.42 years. At December 31, 2006, the intrinsic value of both all outstanding options and exercisable options was $1.8 million.

The following table presents the stock option activity for the years ended December 31, 2006, 2005 and 2004 (in thousands):

	2006					2005					2004
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		219,799		$	2.19		256,253		$	2.19		271,130		$	2.19
Exercised		(48,910	)		2.19		(36,455	)		2.19		(14,877	)		2.19
Granted		354,000			12.84		—			—		—			—
Outstanding at end of year		524,889		$	9.37		219,799		$	2.19		256,253		$	2.19
Exercisable at end of year		170,889		$	2.19		219,799		$	2.19		179,789		$	2.19

(11)	Recognition and Retention Plan
	The Company’s shareholders approved the Rome Bancorp, Inc. 2000 Recognition and Retention Plan (“2000 RRP”) on May 3, 2000. The purpose of the plan is to promote the long-term interests of the Company and its shareholders by providing a stock-based compensation program to attract and retain officers and directors. During 2000, 119,742 shares were awarded under the 2000 RRP. The shares vested at a rate of 20% per year from the grant date. The fair market value of the shares awarded under the plan was $262,000 at the grant date, and was amortized to compensation expense on a straight-line basis over the vesting periods of the underlying shares.
	The Company’s shareholders approved the Rome Bancorp, Inc. 2006 Recognition and Retention Plan (“2006 RRP”) on May 3, 2006 in order to further promote the long-term interests of the Company and its shareholders by providing a stock-based compensation program to attract and retain officers and directors.
	On May 24, 2006, 168,300 shares were awarded under the 2006 RRP. These shares vest at a rate of 20% per year from the grant date. The fair market value of the shares awarded under the plan was $2.2 million at the grant date, and is being amortized over the sooner of the vesting period of the options, or upon the date at which a recipient becomes eligible for normal or early retirement under the Company’s defined benefit plan. At May 24, 2006, certain awardees met the retirement eligibility criteria and accordingly, stock-based compensation expense of $1.1 million related to their 2006 RRP awards was expensed immediately. Stock-based compensation expense of $1.2 million, $26,000 and $52,000 related to RRP awards was recorded in 2006, 2005 and 2004, respectively. The remaining unearned compensation cost has been shown as a reduction of shareholders’ equity. The shares awarded under the RRP were

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

transferred from treasury stock at cost with the difference between the fair market value on the grant date and the cost of the shares recorded as additional paid-in capital.

A summary of changes in the Company’s nonvested shares for the year follows:

	Shares		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2006		—		—
Granted		168,300	$	12.84
Vested		—		—
Forfeited		—		—
Nonvested at December 31, 2006		168,300	$	12.84

	As of December 31, 2006, there was $925,000 of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 4.4 years. The total fair value of shares vested during the years ended December 31, 2006, 2005 and 2004 was $0, $241,000 and $327,000.
(12)	Other Employee Benefits
	The Company has a defined contribution 401(k) Savings Plan for all full time salaried employees. Employees are permitted to contribute up to 75% of base pay to the Savings Plan, subject to certain limitations. The Company matches 50% of each employee’s contributions up to a limit of 3% of the employee’s base pay.
	Contributions to the defined contribution 401(k) Savings Plan were $80,000, $78,000 and $72,000 during the years ended December 31, 2006, 2005 and 2004, respectively.
	In connection with establishing an ESOP in 1999, the ESOP borrowed $933,000 from the Company to purchase 453,488 shares of the Company’s common stock. The loan bears interest at 8% and is payable in fifteen annual installments. At December 31, 2006, 241,851 of the original ESOP shares had been released or committed to be released and 211,637 remained as unallocated shares.
	On March 30, 2005, in connection with the Company’s second-step conversion and stock offering, the ESOP borrowed $2,360,000 from the Company to purchase an additional 236,000 shares of the Company’s common stock. The loan bears interest at 5% and is payable in fifteen annual installments. At December 31, 2006, 31,466 of these shares had been released or committed to be released and 204,534 remained as unallocated shares.
	The fair value of the unallocated shares on December 31, 2006 was $5,306,000. The Company recognized compensation expense of $568,000, $478,000 and $403,000 in 2006, 2005 and 2004, respectively in connection with the ESOP.
	The Company has also adopted a Benefit Restoration Plan for the Company’s CEO. This plan provides the beneficiary with the benefits that would otherwise be due to him as a participant in the 401(k) plan and the employee stock ownership plan if such benefits were not limited by certain provisions of the Internal Revenue Code. In addition, in the event the beneficiary retires prior to the end of the ESOP loan term, the plan will provide him a benefit equal to the value of the shares of Rome Bancorp that would have been allocated to his account under the ESOP had he remained employed through the end of the ESOP loan term. The liability associated with this plan was $683,000 at December 31, 2006.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(13)	Comprehensive Income (Loss)
	Comprehensive income represents net income and other comprehensive income (loss) which is the net change in the unrealized gains or losses on securities available-for-sale net of taxes. The following summarizes the components of other comprehensive income (loss) (in thousands):

	Years ended December 31,
	2006			2005			2004
Unrealized holding losses arising during the period	$	(59	)	$	(405	)	$	(494	)
Reclassification adjustment for net realized gain included in net income		(11	)		(105	)		(176	)
Other comprehensive loss, before tax		(70	)		(510	)		(670	)
Deferred tax benefit		(28	)		(204	)		(268	)
Other comprehensive loss, net of tax	$	(42	)	$	(306	)	$	(402	)

(14)	Commitments and Contingencies
	The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and involve, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts recognized in the consolidated balance sheet. Credit risk represents the accounting loss that would be recognized at the reporting date if obligated counterparties failed completely to perform as contracted. Market risk represents risk that future changes in market prices make financial instruments less valuable.
	Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s evaluation of the customer’s financial position. Collateral held varies, but may include real estate, accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. Substantially all commitments to extend credit, if exercised, will represent loans secured by real estate.
	At December 31, 2006 and 2005 the Company was committed to originate mortgage and other loans of approximately $12.1 million and $10.4 million, respectively. At December 31, 2006 and December 31, 2005, the Company’s fixed rate loan commitments totaled $7.1 million and $1.6 million, respectively. The range of interest rates on these fixed rate commitments was 5.875% to 6.8% at December 31, 2006 and 4.875% to 6.79% at December 31, 2005.
	Commitments under unused lines of credit and letters of credit were approximately $17.2 million and $13.0 million at December 31, 2006 and 2005, respectively.
	The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments is represented by the contractual or notional amount of these instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments. The Company controls its credit risk through credit approvals, limits, and monitoring procedures.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

	In the normal course of business, there are various outstanding legal proceedings. In the opinion of management, the aggregate amount involved in such proceedings is not material to the financial condition or results of operations of the Company.
(15)	Earnings Per Share
	The following summarizes the computation of earnings per share for the years ended December 31 (in thousands except per share data):

	2006		2005		2004
Basic earnings per share:
Net Income available to common shareholders	$	2,488	$	3,402	$	2,400
Weighted average basic shares outstanding		8,527		9,205		9,283
Basic earnings per share	$	0.29	$	0.37	$	0.26
Diluted earnings per share:
Net Income available to common shareholders	$	2,488	$	3,402	$	2,400
Weighted average basic shares outstanding		8,527		9,205		9,283
Effect of dilutive securities:
Stock options		142		195		221
Unearned RRP shares		55		6		18
Weighted average diluted shares outstanding		8,724		9,406		9,522
Diluted earnings per share	$	0.29	$	0.36	$	0.25

(16)	Shareholders’ Equity and Regulatory Matters
	The Bank is required to maintain certain reserves of vault cash and/or deposits with the Federal Reserve Bank of New York. The amount of this reserve requirement, included in cash on hand, is $1.6 million at December 31, 2006.
	The Company’s ability to pay dividends is primarily dependent upon the ability of its subsidiary bank to pay dividends to the Company. The payment of dividends by the Bank is subject to continued compliance with minimum regulatory capital requirements. In addition, regulatory approval is generally required prior to the Bank declaring dividends in an amount in excess of net income for that year plus net income retained in the preceding two years. Further, under the OTS’ conversion regulations, the Company may not return any capital, other than ordinary dividends, to its stockholders during the three years following the conversion and offering completed in March of 2005.
	The Company and the Bank are subject to various regulatory requirements administered by the federal banking agencies and the Bank is a federal savings bank regulated by the Office of Thrift Supervision (OTS). The Company is a Delaware corporation and is regulated as a savings and loan holding company by the OTS.
	Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Failure to meet minimum capital requirements can initiate certain

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s financial statements.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), established capital levels for which insured institutions are categorized as well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, or critically undercapitalized.

As of October 16, 2006, the most recent notification from the OTS categorized the Bank as well capitalized under the regulatory framework for prompt corrective actions. To be categorized as well capitalized, the Bank must meet the minimum ratios as set forth in the table. There have been no conditions or events since that notification that management believes have changed the Bank’s category. Management believes, as of December 31, 2006, that the Company and Bank meet all capital adequacy requirements to which they are subject.

The following is a summary of the Bank’s actual capital amounts and ratios compared to the regulatory minimum capital adequacy requirements and the OTS and FDIC requirements for classification as a well capitalized institution under prompt corrective action provisions (dollars in thousands):

	Actual					Minimum capital adequacy requirements				To be classified as well-capitalized under prompt corrective action provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio
As of December 31, 2006:
Total capital (to risk weighted assets):	$	64,834		28.9	%	$	17,957		>=8%	$	22,447		>=10%
Tier 1 Capital (to risk weighted assets):		63,201		28.16	%		8,979		>=4%		13,468		>=6%
Tier 1 Capital (to adjusted assets):		63,201		21.27	%		8,915		>=3%		14,858		>=5%
As of December 31, 2005:
Total capital (to risk weighted assets):	$	59,174		28.2	%	$	16,789		>=8%	$	20,986		>=10%
Tier 1 Capital (to risk weighted assets):		58,643		27.9	%		8,394		>=4%		12,592		>=6%
Tier 1 Capital (to adjusted assets):		58,643		18.96	%		9,280		>=3%		15,467		>=5%

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

Following is a reconciliation of the Bank’s GAAP shareholders’ equity to regulatory Tier 1 capital at December 31, 2006 and 2005.

		December 31, 2006			December 31, 2005
GAAP Shareholders’ Equity		$	62,514		$	58,674
Plus:	Minority interest in consolidated subsidiary and other comprehensive loss related to SFAS No. 158		745			71
Less:	Disallowed assets and unrealized gains on available-for - sale securities, net of tax		(58	)		(102	)
Tier 1 Capital			63,201			58,643
Plus:	Allowance for loan losses		1,965			1,960
	Allowed unrealized gain on available-for-sale securities		—			—
Less:	Real estate held for investment		(332	)		(338	)
	Other investments required to be deducted		—			(1,091	)
Total Regulatory Capital		$	64,834		$	59,174

(17) Fair Value of Financial Instruments

The following methods and assumptions were used by the Bank in estimating fair values of financial instruments:
	Cash and cash equivalents: For these short-term instruments that generally mature in ninety days or less. The carrying value approximates fair value.
	Securities: Fair values of securities are based on exchange quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of similar instruments.
	Loans: The fair values for all loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit rating. The carrying amount of accrued interest receivable approximates its fair value.
	Deposits: The fair values of demand deposits (interest and non-interest checking) savings accounts and money market accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposits, are estimated using a discounted cash flow calculation that applies interest rates currently being offered on these products to a schedule of aggregated expected monthly maturities on time deposits.
	Borrowings: Fair values of long-term borrowings are estimated using a discounted cash flow approach, based on current market rates for similar borrowings. The fair value of accrued interest approximates carrying value.
	Off-balance-sheet instruments: Fair values for the Company’s off-balance-sheet instruments (lines of credit and commitments to fund loans) are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these financial instruments is immaterial and has therefore been excluded from the table below.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

The estimated carrying values and fair values of the Company’s financial instruments for December 31 are as follows (in thousands):

	2006				2005
	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets:
Cash and cash equivalents	$	7,858	$	7,858	$	34,235	$	34,235
Securities available for sale		4,319		4,319		9,666		9,666
Securities held to maturity		1,178		1,175		1,440		1,428
Loans, net		262,572		259,388		251,918		248,073
Federal Home Loan Bank Stock		1,344		1,344		776		776
Accrued interest receivable		1,094		1,094		1,053		1,053
Financial liabilities:
Non-interest bearing deposits		28,042		28,042		30,039		30,039
Interest bearing deposits		167,963		167,749		171,429		171,045
Borrowings		20,172		19,778		9,374		8,918
Accrued interest payable		33		33		29		29

	Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
(18)	Parent Company Only Financial Statements
	Presented below is the condensed balance sheet of the Parent Company as of December 31, 2006 and 2005 and statement of income and statement of cash flows for the years ended December 31, 2006, 2005 and 2004 (in thousands):

Condensed Balance Sheet	2006		2005
Assets:
Cash and due from banks	$	10,097	$	31,588
Investment in subsidiary bank		62,514		58,673
Loan receivable from ESOP		2,646		2,815
Other assets		1,916		1,308
Total assets	$	77,173	$	94,384
Total liabilities	$	142	$	906
Total shareholders’ equity		77,031		93,478
Total liabilities and shareholders’ equity	$	77,173	$	94,384

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

Condensed Statement of Income	2006			2005		2004
Interest and investment income	$	497		$	466	$	94
Dividends from subsidiary bank		—			—		6,000
Total operating income		497			466		6,094
Other operating expenses		2,072			369		269
Income (loss) before income taxes and dividends in excess of net income/(equity in undistributed income) of subsidiary bank		(1,575	)		97		5,825
Equity in undistributed income/ (Dividends in excess of net income)of subsidiary bank		4,063			3,305		(3,425	)
Net income	$	2,488		$	3,402	$	2,400

Condensed Statement of Cash Flows	2006			2005			2004
Operating activities:
Net income	$	2,488		$	3,402		$	2,400
Adjustments to reconcile net income to cash provided by operating activities:
(Equity in undistributed earnings of)/dividends in excess of net income of subsidiary bank		(4,063	)		(3,305	)		3,425
Amortization of stock-based compensation		1,616
(Increase) decrease in other assets		(742	)		483			(449	)
(Decrease) increase in other liabilities		(764	)		859			(244	)
Tax benefit from exercise of stock options		144			57			59
Net cash (used in) provided by operating activities		(1,321	)		1,496			5,191
Investing activities:
Investment in subsidiary bank		—			(25,653	)		—
Decrease (increase) in loan to ESOP		169			(2,172	)		47
Net cash provided by (used in) investing activities		169			(27,825	)		47
Financing activities:
Net proceeds of common stock offering and conversion		—			55,462			—
Purchase of treasury stock		(17,818	)		—			(2,045	)
Dividends		(2,622	)		(2,046	)		(987	)
Exercise of stock options		101			73			33
Net cash (used in) provided by financing activities		(20,339	)		53,489			(2,999	)
Net (decrease) increase in cash and cash equivalents		(21,491	)		27,160			2,239
Cash and cash equivalents at beginning of year		31,588			4,428			2,189
Cash and cash equivalents at end of year	$	10,097		$	31,588		$	4,428

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(19) Plan of Conversion and Reorganization

On November 11, 2004, the Boards of Directors of Rome, MHC (the “Mutual Holding Company”), the Company and The Rome Savings Bank (the “Bank”) (collectively, “Rome”) unanimously adopted a Plan of Conversion and Agreement and Plan of Reorganization (the “Plan of Conversion”), under the terms of which Rome undertook a “second-step” conversion (the “Conversion”), and the Bank reorganized from the two-tier mutual holding company structure to the stock holding company structure. The Conversion was consummated on March 30, 2005. Prior to the completion of the Conversion, the MHC owned approximately 61.5% of the common stock of the Company.

In connection with the Conversion, the outstanding shares of Rome Bancorp owned by the MHC were sold to the depositors of Rome Savings Bank and other public investors (the “Offering”). Completion of the Conversion and Offering resulted in the issuance of 9.6 million shares of common stock. A total of 5.9 million shares were sold in the subscription, community and syndicated offerings, at $10.00 per share. An additional 3.7 million shares were issued to the former public stockholders of the Company based upon an exchange ratio of 2.26784 new shares for each share of Rome Bancorp common stock held at the close of business on March 30, 2005. Options granted under the Company’s 2000 Stock Option Plan and common shares held by the Company’s ESOP and Recognition and Retention Plan prior to the conversion were also exchanged using the conversion ratio of 2.26784.

The Conversion was accounted for as a change in corporate form with no resulting change in the historical basis of the Company’s assets, liabilities and equity. Costs related to the Offering, primarily marketing fees paid to the company’s investment banking firm, professional fees, registration fees, printing and mailing costs were $3.1 million and accordingly, net proceeds were $55.9 million. In addition, as part of the conversion and dissolution of the MHC, the Bank received $1.9 million of cash previously held by the MHC. As a result of the Conversion and Offering, Rome Bancorp was succeeded by a new, fully public, Delaware corporation with the same name and the MHC ceased to exist.

Also pursuant to the Plan of Conversion, the Bank terminated the liquidation account it established in connection with its mutual holding company reorganization and minority stock issuance and such account was replaced by a new liquidation account created by the Bank as of March 30, 2005. The new “liquidation account” will be for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders (as those terms are defined in the plan of conversion) in an amount equal to the greater of (i) Rome, MHC ownership interest in the retained earnings of the Company as of the date of its latest balance sheet contained in the Conversion, or (ii) the retained earnings of the Bank at the time that the Bank reorganized into the Mutual Holding Company in 1999. Each Eligible Account Holder and Supplemental Eligible Account Holder that continues to maintain his or her deposit account at the Bank would be entitled, in the event of a complete liquidation of the Bank after the conversion, to a pro rata interest in the liquidation account prior to any payment to the stockholders of the new holding company. The liquidation account will be reduced annually on December 31 to the extent that Eligible Account Holders and Supplemental Eligible Account Holders have reduced their qualifying deposits as of each anniversary date. Subsequent increases in deposits will not restore such account holder’s interest in the liquidation account. Subsequent to the Conversion, the Bank may not pay cash dividends or make other capital distributions if the effect thereof would be to reduce its stockholders’ equity below the amount of the liquidation account.

Rome Bancorp, Inc and Subsidiary
Notes to Consolidated Financial Statements
Years ended December 31, 2006, 2005 and 2004

(20) Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial data for 2006 and 2005 are as follows:

	2006 Quarter Ending
	March 31,		June 30,			September 30,			December 31,
	(In thousands, except per share amounts)
Net interest income	$	3,622	$	3,534			$	3,408		$	3,372
Net interest income after provision for loan losses		3,507		3,534				3,383			3,365
Net income (loss) (1)		808		(77	)			919			838
Earnings (loss) per common share:
Basic:	$	0.09	$	(0.01	)		$	0.11		$	0.11
Diluted		0.09		(0.01	)			0.11			0.10

	2005 Quarter Ending
	March 31,		June 30,		September 30,			December 31,
	(In thousands, except per share amounts)
Net interest income	$	3,002	$	3,379		$	3,475		$	3,643
Net interest income after provision for loan losses		3,002		3,379			3,475			3,528
Net income		639		970			1,012			781
Earnings per common share:
Basic:	$	0.07	$	0.10		$	0.11		$	0.09
Diluted		0.07		0.10			0.11			0.08

(1) Stock-based compensation of $972,000 net of tax, was recognized in the second quarter of 2006.

Directors of Rome Bancorp, Inc. & The Rome Savings Bank

Charles M. Sprock

Chairman of the Board, President and Chief Executive Officer

Bruce R. Engelbert

Retired, Former Owner and President, Engelbert’s Jewelers, Inc.

David C. Grow

Partner, law firm of McMahon & Grow

Kirk B. Hinman

President, Rome Strip Steel Company, Inc.

Dale A. Laval

Chairman, Independent Audit Associates, Inc.

T. Richard Leidig

Business Consultant

Michael J. Valentine

President, Mele Manufacturing Company, Inc.

Executive Officers of The Rome Savings Bank

Charles M. Sprock

President and Chief Executive Officer

David C. Nolan

Executive Vice President and Chief Financial Officer

D. Bruce Fraser

Vice President, Human Resources, Security, Compliance

Mary Faith Messenger

Vice President and Controller

Sandra L. Reader

Vice President, Consumer Loans

Crystal M. Seymore

Corporate Secretary

James F. Sullivan

Vice President, Senior Loan Officer

Francis C. Thalmann

Vice President, Operations and Branch Administration

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-36282 and No. 333-134275 on Form S-8 of our reports dated March 12, 2007 with respect to the consolidated financial statements of Rome Bancorp, Inc. and management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which reports appear in the Annual Report on Form 10-K of Rome Bancorp, Inc. for the year ended December 31, 2006.

/s/ Crowe Chizek and Company, LLC

Crowe Chizek and Company LLC

Cleveland, Ohio
March 14, 2007

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Charles M. Sprock, certify that:
1.	I have reviewed this Annual Report on Form 10-K of Rome Bancorp, Inc. (the “Company”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report.
4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date:	March 15, 2007	/s/ Charles M. Sprock
		Charles M. Sprock
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, David C. Nolan, certify that:
1.	I have reviewed this annual report on Form 10-K of Rome Bancorp, Inc. (the “Company”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report.
6.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
4.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date:	March 15, 2007	/s/ David C. Nolan
		David C. Nolan
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

          The undersigned, Charles M. Sprock, is the President and Chief Executive Officer of Rome Bancorp, Inc. (the “Company”). This statement is being furnished in connection with the filing by the Company of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 (the “Report”).

          By execution of this statement, I certify that:

A)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and
B)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

          This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.

          A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: March 15, 2007	/s/ Charles M. Sprock
	Charles M. Sprock
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

          The undersigned, David C. Nolan, is the Executive Vice President and Chief Financial Officer of Rome Bancorp, Inc. (the “Company”). This statement is being furnished in connection with the filing by the Company of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 (the “Report”).

          By execution of this statement, I certify that:

A)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and
B)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

          This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.

          A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request

Date: March 15, 2007	/s/ David C. Nolan
	David C. Nolan
	Executive Vice President and Chief
	Financial Officer