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, 2005
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 under Section 12(g) of the Act:

Title of Class
Common Stock, par value $0.01 per share

          Indicate by check mark of the registrant is a well-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   x   No  o

          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.   x

          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 o                          Non-accelerated filer x

          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, 2005, the aggregate market value of the voting stock held by non-affiliates of the registrant was $79,084,000

Rome Bancorp had 9,688,128 shares of common stock outstanding as of March 10, 2006.

DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the definitive proxy statement pursuant to Regulation 14A to be issued by the Corporation in connection with the 2006 Annual Meeting and portions of the 2005 Annual Report to Shareholders for the fiscal year ended December 31, 2005 are incorporated by reference into Parts II and III of this report.

TABLE OF CONTENTS

			Page
PART I
	ITEM 1.	DESCRIPTION OF THE BUSINESS	4
	ITEM 1A.	RISK FACTORS	32
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	36
	ITEM 2.	DESCRIPTION OF PROPERTY	36
	ITEM 3.	LEGAL PROCEEDINGS	36
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	36
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	37
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
		FINANCIAL STATEMENTS	37
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	37
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	37
	ITEM 9A.	CONTROLS AND PROCEDURES	37
	ITEM 9B.	OTHER INFORMATION	38
PART III
	ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	38
	ITEM 11.	EXECUTIVE COMPENSATION	38
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	39
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	39
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	39
PART IV
	ITEM 15.	EXHIBITS	39

Forward looking Statements

          Statements included in this Form 10-K and in future filings by Rome Bancorp, Inc. with the Securities and Exchange Commission, in Rome Bancorp, Inc. press releases, and in oral statements made with the approval of an authorized executive officer, which are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Rome Bancorp, Inc. wishes to caution readers not to place undue reliance on such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect Rome Bancorp, Inc.’s actual results, and could cause Rome Bancorp, Inc.’s actual financial performance to differ materially from that expressed in any forward-looking statement: (1) competitive pressures among depository and other financial institutions may increase significantly; (2) revenues may be lower than expected; (3) changes in the interest rate environment may reduce interest margins; (4) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit; (5) legislative or regulatory changes, including changes in accounting standards, may adversely affect the business in which the Company is engaged; (6) competitors may have greater financial resources and developed products that enable such competitors to compete more successfully than the Company; and (7) adverse changes may occur in the securities markets or with respect to inflation. The foregoing list should not be construed as exhaustive, and Rome Bancorp, Inc. disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.

PART I

ITEM 1. DESCRIPTION OF THE 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”), 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.

          On October 15, 2003, the Board of Trustees of Rome, MHC, a New York-chartered mutual holding company and the majority stockholder of Rome Bancorp, and the Boards of Directors of Rome Savings and Rome Bancorp adopted a Plan of Charter Conversion. Pursuant to the Plan of Charter Conversion, Rome MHC established a federal mutual holding company (the “Federal MHC”). Rome MHC was merged with and into the Federal MHC, with the Federal MHC as the surviving entity. Concurrently, Rome Savings exchanged its New York stock savings bank charter for a federal stock savings bank charter (the “Federal Savings Bank”). As a result of the charter conversion, which was completed on April 27, 2004, Rome, MHC and Rome Bancorp became savings and loan holding companies regulated by the Office of Thrift Supervision (the “OTS”) and Rome Savings became a federal savings bank regulated by the OTS.

          On November 11, 2004, the Boards of Directors of Rome, MHC, Rome Bancorp and Rome Savings

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adopted a Plan of Conversion and Agreement and Plan of Reorganization pursuant to which Rome, MHC would convert to a stock form holding company and its ownership interest in Rome Bancorp would be offered to the public (the “Second-Step Conversion”). On December 7, 2004, Rome Savings formed New Rome Bancorp, Inc., as a Delaware corporation, with the intent that this stock corporation would, as a result of effectuating the steps of the Second Step Conversion, become the new Rome Bancorp, Inc. and parent corporation of Rome Savings. The Plan of Conversion was amended and restated on December 7, 2004, adding New Rome Bancorp as a party. On February 11, 2005 the OTS approved the conversion and stock offering. New Rome Bancorp conducted a subscription and community offering from February 18, 2005 to March 15, 2005 and commenced a syndicated community offering on March 17, 2005. On March 22, 2005, the members of Rome, MHC and the stockholders of Rome Bancorp approved the Amended and Restated Plan of Conversion.

          On March 30, 2005, the Second-Step Conversion and Offering were completed, resulting in the issuance of 9.6 million shares of common stock. A total of 5.9 million shares were sold, 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.

          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, 2005, Rome Bancorp had assets of $308.9 million, deposits of $201.5 million and stockholders’ equity of $93.5 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.

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. As part of our business strategy, the Company is pursuing new branch locations in Madison County, New York and the Oneida County Town of Lee, New York. As of June 30, 2005, Rome Savings maintained a 6.22% share of all Oneida County, New York deposits, ranking 6th in size of deposits in Oneida County. Rome Savings also maintained a 47.31% market share of all reported funds on deposit in the City of Rome as of June 30, 2005, 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), 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

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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, 2005, Rome Savings’ total loan portfolio consisted of $244.8 million in loans located in the State of New York, while $9.1 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 into the secondary market. At December 31, 2005, Rome Savings had total loans of $253.9 million, of which $128.7 million, or 50.69%, were one-to-four family residential mortgages and building loans. Of residential mortgage loans outstanding at that date, 20.51% were adjustable-rate mortgage (“ARM”) loans and 79.49% were fixed-rate loans. The remainder of Rome Savings’ loans at December 31, 2005, amounting to $125.2 million, or 49.31% 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, 2005, 21.19% of Rome Savings’ loan portfolio was in commercial real estate loans and 9.39% was in commercial loans. In addition, as of December 31, 2005, 18.74% of Rome Savings’ loan portfolio was in consumer loans. Rome Savings also originates guaranteed student 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.

	At December 31,
	2005					2004					2003					2002					2001
	Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total
	(Dollars in thousands)
Mortgage loans:
One to four family	$	126,422		49.79	%	$	114,138		48.93	%	$	96,217		45.94	%	$	71,687		39.11	%	$	62,099		36.70	%
Commercial real estate		52,748		20.78			49,364		21.16			50,239		23.98			53,530		29.20			49,266		29.12
Construction and land		3,317		1.31			5,469		2.34			4,197		2.00			1,520		.83			2,165		1.28
Total mortgage loans		182,487		71.88			168,971		72.43			150,653		71.92			126,737		69.14			113,530		67.10
Commercial loans		23,832		9.39			21,507		9.22			19,171		9.15			16,752		9.14			15,440		9.13
Consumer loans:
Automobile		18,321		7.21			15,529		6.66			15,780		7.53			17,628		9.62			20,085		11.87
Property improvement		15,434		6.08			12,766		5.47			9,460		4.52			6,422		3.51			3,018		1.78
Education		—		—			—		—			—		—			1,451		.79			4,523		2.67
Other		13,804		5.44			14,499		6.22			14,401		6.88			14,304		7.80			12,608		7.45
Total consumer loans		47,559		18.73			42,794		18.35			39,641		18.93			39,805		21.72			40,234		23.77
Total loans		253,878		100.00	%		233,272		100.00	%		209,465		100.00	%		183,294		100.00	%		169,204		100.00	%
Less: Allowance for loan losses		1,960					2,000					1,809					1,730					1,597
Loans, net	$	251,918				$	231,272				$	207,656				$	181,564				$	167,607

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          Loan Maturity. The following table presents the contractual maturity of our loan portfolio at December 31, 2005. The table does not include the effect of prepayments or scheduled principal amortization.

	At December 31, 2005
	Residential Mortgage Loans		Commercial Real Estate Loans		Consumer Loans		Commercial Loans
							(In thousands)
Amounts due:
Within one year	$	45	$	5,430	$	3,164	$	11,585
After one year:
One to three years		988		5,356		14,204		1,047
Three to five years		1,379		682		20,321		2,826
Five to ten years		11,372		8,921		7,911		5,010
Ten to twenty years		52,760		27,285		698		2,274
After twenty years		62,163		6,106		1,261		1,090
Total due after one year		128,662		48,350		44,395		12,247
Total loans	$	128,707	$	53,780	$	47,559	$	23,832

          The following table presents, as of December 31, 2005, the dollar amount of all loans, due after December 31, 2006, and whether these loans have fixed interest rates or adjustable interest rates.

	Due After December 31, 2006
	Fixed		Adjustable		Total
	(In thousands)
Residential mortgage loans	$	104,620	$	24,042	$	128,662
Commercial real estate loans		25,880		22,470		48,350
Consumer loans		30,450		13,945		44,395
Commercial loans		7,146		5,101		12,247
Total loans	$	168,096	$	65,558	$	233,654

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

	For the Year Ended December 31,
	2005		2004		2003
Total loans:
Balance outstanding at beginning of period	$	233,272	$	209,465	$	183,294
Originations:
Mortgage loans		41,872		44,073		54,161
Commercial and consumer loans		23,408		22,610		22,397
Total originations		65,280		66,683		76,558
Principal repayments:
Mortgage loans		26,560		25,717		30,284
Commercial and consumer loans		15,649		16,688		18,095
Total principal payments		42,209		42,405		48,379
Transfers to foreclosed real estate		83		87		202
Loan sales		1,695		—		1,266
Loans charged off		687		384		540
Balance outstanding at end of period	$	253,878	$	233,272	$	209,465

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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, 2005, loans on one- to four-family residential properties accounted for $128.7 million, or 50.69%, of Rome Savings’ total loan portfolio. Of residential mortgage loans outstanding on that date, 20.51% were ARM loans and 79.49% were fixed rate loans. Rome Savings may seek to expand its residential lending activities with the proceeds received in the offering 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 100%. All mortgages originated with a loan-to-value ratio of 90% or greater have Private Mortgage Insurance (“PMI”) with 25% coverage. Mortgages between 80 and 90% loan to value ratio may require PMI based on credit scores and other financial attributes of the applicants. 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 base. 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 90% 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 the closing of the construction 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.

          During the year ended December 31, 2005, 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 5.2% of all

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residential loan originations during fiscal 2005 were re-financings of loans already in Rome Savings’ portfolio. At December 31, 2005, Rome Savings’ loan portfolio included $26.4 million in adjustable-rate one-to-four family residential mortgage loans, or 10.40% of its total loan portfolio, and $102.3 million in fixed-rate one-to-four family residential mortgage loans, or 40.29% 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, 2005, our commercial real estate loan portfolio consisted of 177 loans, totaling $53.8 million, or 21.19%, 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 $1.0 million 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, 2005, our commercial loan portfolio consisted of 388 loans, totaling $23.8 million, or 9.39% 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.

          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.

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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, 2005, the consumer loan portfolio totaled $47.6 million or 18.74% 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 38.52% 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 with 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.

          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 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.

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          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 presented to the Residential Mortgage Committee (which consists of bank officers) for approval. Loans over $359,000 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 $5.0 million. The maximum amount of any single loan, or combination of loans secured by the same collateral, is $2.0 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 to the head of the Consumer Lending Department; $100,000 by the Vice President of Consumer Lending or Mortgage Departments; and up to $250,000 by the Senior Loan Officer or Rome Savings’

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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 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

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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 the senior loan officer or the President of Rome Savings. Those charge-offs in excess of $2,500 must be approved by a second senior officer and reported to the Executive Committee or the Lending Committee 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 $947,000 and $829,000 at December 31, 2005 and December 31, 2004, 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,
	2005			2004			2003			2002			2001
	(Dollars in thousands)
Nonaccruing loans:
Mortgage loans	$	539		$	362		$	689		$	531		$	51
Commercial loans		216			268			513			377			420
Consumer loans		117			113			138			148			103
Total		872			743			1,340			1,056			574
Accruing loans delinquent 90 days or more		75			86			66			460			181
Total non-performing loans		947			829			1,406			1,516			755
Foreclosed real estate, net		—			—			202			55			—
Total non-performing assets	$	947		$	829		$	1,608		$	1,571		$	755
Non-performing loans to total loans		0.37	%		0.36	%		0.67	%		0.83	%		0.45	%
Non-performing assets to total assets		0.31	%		0.31	%		0.61	%		0.63	%		0.31	%

          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 $211,000 and $268,000 at December 31, 2005 and 2004, respectively. If all non-accrual loans had been current in accordance with their terms during the year ended December 31, 2005, 2004 and 2003, interest income on such loans would have amounted to $62,500,

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$53,300 and $83,800, respectively. At December 31, 2005, Rome Savings did not have any loans not included above which are “troubled debt restructurings” 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,
	2005			2004			2003			2002			2001
	(Dollars in thousands)
Balance at beginning of year	$	2,000		$	1,809		$	1,730		$	1,597		$	1,688
Provision for loan losses		115			390			510			330			325
Charge-offs:
Mortgage loans		18			47			160			51			37
Commercial loans		174			31			85			32			341
Consumer loans		495			306			295			289			213
Total		687			384			540			372			591
Recoveries
Mortgage loans		4			12			—			1			1
Commercial loans		419			36			3			75			110
Consumer loans		109			137			106			99			64
Total		532			185			109			175			175
Net charge-offs		155			199			431			197			416
Balance at end of year	$	1,960		$	2,000		$	1,809		$	1,730		$	1,597
Ratio of net charge-offs to average loans outstanding during the period		0.06	%		0.09	%		0.22	%		0.11	%		0.25	%
Allowance for loan losses as a percent of loans		0.77	%		0.86	%		0.86	%		0.94	%		0.94	%
Allowance for loan losses as a percent of non-performing Loans		207.00	%		241.25	%		128.66	%		114.12	%		211.52	%

          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.

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          For the year ended December 31, 2005, we increased our allowance for loan losses through a $115,000 provision for loan losses based on our evaluation of the items discussed above. We believe that the allowance for loan 15 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, $8.8 million in “potential problem loans” at December 31, 2005. Payments are current on $7.7 million or 87.5% 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, 2005, 2004 and 2003 - 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,
	2005				2004				2003				2002				2001
	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
Mortgage loans:
One-to-four family	$	129	49.79	%	$	236	48.93	%	$	192	45.94	%	$	220	39.11	%	$	222	36.70	%
Commercial real estate		664	20.78			828	21.16			702	23.98			767	29.20			762	29.12
Construction & land		0	1.31			0	2.34			0	2.00			0	0.83			0	1.28
Total mortgage loans		793	71.88			1,064	72 43			894	71.92			987	69.14			984	67.10
Commercial loans		712	9.39			592	9.22			619	9.15			511	9.14			391	9.13
Consumer loans		455	18.73			344	18.35			296	18.93			232	21.72			222	23.77
Total allowance for loan losses	$	1,960	100.00	%	$	2,000	100.00	%	$	1,809	100.00	%	$	1,730	100.00	%	$	1,597	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 by the Executive Vice President/Chief Financial Officer. The 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 Freddie Mac, Government National Mortgage Association (“GNMA”) or Fannie Mae, 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 has investments in FHLB stock and other equity securities, which are classified as available for sale. As a result of converting to a federal charter Rome Savings is required to liquidate its equity securities, other than the FHLB stock, over a two-year period.

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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,
	2005				2004				2003
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Held to Maturity:
Mortgage-backed securities
GNMA	$	48	$	51	$	100	$	108	$	151	$	164
FHLMC		3		3		6		6		1,025		1,037
U.S. Government securities		1,208		1,193		1,320		1,313		1,463		1,492
Other bonds		181		181		197		197		151		151
Total held to maturity		1,440		1,428		1,623		1,624		2,790		2,844
Available for sale:
U.S. Government agencies		949		985		2,244		2,325		3,457		3,593
State and Municipal obligations		4,506		4,595		7,004		7,266		8,654		9,155
Mortgage-backed securities
FNMA		—		—		126		129		252		244
FHLMC		570		583		840		883		1,447		1,524
Corporate bonds		2,008		2,017		3,024		3,116		6,499		6,798
Total available for sale debt securities		8,033		8,180		13,238		13,719		20,309		21,314
Equity securities		1,491		1,486		2,500		2,672		3,792		4,109
Total available for sale		9,524		9,666		15,738		16,391		24,101		25,423
FHLB stock		776		776		1,103		1,103		905		905
Total investment securities	$	11,740	$	11,870	$	18,464	$	19,118	$	27,796	$	29,172

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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, 2005.

	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		—	—		$	311	4.62	%	$	674	4.62	%		—	—		$	985	4.62	%
State and Municipal obligations (1)	$	2,177	6.35	%		2,111	6.65	%		—	—		$	307	6.77	%		4,595	6.51	%
Mortgage-backed securities		37	4.71	%		546	5.66	%		—	—			—	—			583	5.60	%
Corporate bonds		2,017	6.03	%		—	—			—	—			—	—			2,017	6.03	%
Held to maturity securities:
U.S. Government securities		1,207	2.62	%		—	—			—	—			—	—			1,207	2.62	%
Mortgage-backed securities		2	8.00	%		50	10.57	%		—	—			—	—			52	10.49	%
Other		—	—			—	—			—	—			181	5.94	%		181	5.94	%
Total debt securities	$	5,440	5.39	%	$	3,018	6.32	%	$	674	4.62	%	$	488	6.46	%	$	9,620	5.68	%

(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 67.1% and 67.0% of total deposits on December 31, 2005 and 2004, respectively. At December 31, 2005 and 2004, time deposits with remaining terms to maturity of less than one year amounted to $43.5 million and $45.9 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, 2005, 2004 and 2003.

          At December 31, 2005, we had $11.6 million in time deposits with balances of $100,000 or more maturing as follows:

Maturity Period	Amount
	(In thousands)
Three months or less	$	3,560
Over three months through six months		1,561
Over six months through 12 months		3,050
Over 12 months		3,453
Total	$	11,624

          Borrowings. At December 31, 2004 the Company had outstanding borrowings of $9.4 million which were used to fund loan growth. 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 $31.6 million, none of which was drawn at December 31, 2005.

Subsidiary Activities

          Rome Savings has four subsidiaries, 100 On the Mall Corporation, Clocktower Insurance Agency Incorporated, Clocktower Financial Corporation 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. Clocktower Financial Corporation and RSB Capital, Inc. are currently inactive.

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Employees

          At December 31, 2005, Rome Savings had 96 full-time and 10 part-time employees. 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 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 and is subject to the examination and supervision of the Federal Deposit Insurance Corporation (“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. Under these laws and regulations, Rome Savings may invest in 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. Rome Savings’ authority to invest in certain types of loans or other investments is limited by federal law and regulation.

          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 federal law, 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 means, 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

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

          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. Rome Savings met the QTL test at December 31, 2005, and in each of the prior 12 months and, therefore is a “qualified thrift lender.” 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.

          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; the minimum leverage capital ration 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; 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.

          Community Reinvestment Act. Under the Community Reinvestment Act (“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 association’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such

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association. The CRA also requires all institutions to make public disclosure of their CRA ratings. Rome Savings received a “Satisfactory” CRA rating in its most recent examination, dated November 15, 2004.

          The CRA regulations establish an assessment system that bases an 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.

          Transactions with Affiliates. Rome Savings’ authority to engage in transactions with its affiliates 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). 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. 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.

          The regulations allow small discounts on fees on residential mortgages for directors, officers and employees. 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 and to unsafe or unsound practices.

          Standards for Safety and Soundness. Under federal law, the OTS has adopted a set of guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to internal

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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 an institution that has been given notice that it is not satisfying these safety and soundness standards to submit a compliance plan. If, after being notified, an institution 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 association is subject under the prompt corrective action provisions of federal law. If an institution 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 cash dividends. A savings institution 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, including the proposed distribution, 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

• critically undercapitalized.

          At December 31, 2005, Rome Savings met the criteria for being considered well-capitalized.. When

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

          Insurance of Deposit Accounts. Rome Savings is a member of the Bank Insurance Fund (the “BIF”), maintained by the FDIC, and Rome Savings pays its deposit insurance assessments to the BIF. The FDIC also maintains another insurance fund, the Savings Association Insurance Fund, which ordinarily insures the deposits of federal savings associations. Rome Savings is a member of the BIF, rather than the SAIF, because it paid to BIF prior to its conversion from a New York bank on April 24, 2004, and continues to do so under Section 10(0) of HOLA.

          Under federal law, the FDIC established a risk based assessment system for determining the deposit insurance assessments to be paid by insured depositary institutions. Under the assessment system, the FDIC assigns an institution to one of three capital categories based on the institution’s history and its financial information as of the quarter ending three months before the beginning of the assessment period. An institution’s assessment rate depends on the length of time the institution has been operating and the capital category and supervisory sub-category to which it is assigned. Under the regulation, there are nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates are applied. Assessment rates currently range from 0.0% 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 0.27% of deposits for an institution in the lowest category (i.e., undercapitalized and substantial supervisory concern). The FDIC is authorized to raise the assessment rates as necessary to maintain the required reserve ratio of 1.25%.

          In addition, all FDIC insured institutions are required to pay assessments to the FDIC at an annual rate of approximately 0.0142% of insured deposits to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize the predecessor to the SAIF. These assessments will continue until the Financing Corporation bonds mature in 2017.

          On February 15, 2006, President Bush signed into law legislation designed, in part, to increase insurance limits for certain accounts, including individual retirement accounts, merge the BIF and SAIF funds and grant the FDIC additional flexibility in establishing reserves in the fund. Pending rulemaking by the FDIC, the legislation is not yet effective.

          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, 2005 of $776,300. 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 FRB’s regulations pursuant to which depositary institutions may be required to maintain non-interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts). The amount of transaction

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accounts exempt from a reserve requirement is $7.0 million. A 3% reserve is required for transaction accounts from $7.0 million to $40.6 million. Transaction accounts over $40.6 million are subject to a 10% reserve requirement. 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 FRB, 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 FRB 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 FRB regulations require such institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.

          Prohibitions Against Tying Arrangements. Federal savings banks are subject to prohibitions on certain tying arrangements. A depository institution 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 institution or its affiliates or not obtain credit or services of a competitor of the institution.

          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 correspondent accounts of foreign banks;

• bank regulators are directed to consider a bank’s or holding company’s effectiveness in combating

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               money laundering when ruling on Federal Reserve Act 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. Recently, the Office of Foreign Asset Control issued guidance directed at financial institutions in which it asserted 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 institution 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 institution. Unlike bank holding companies, federal savings and loan holding companies are not subject to regulatory capital requirements or to supervision by the FRB.

          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 institution 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 institution subsidiary that is approved by the OTS).

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

          Because Rome Bancorp was organized after May 4, 1999, under the Gramm Leach Bliley Act of 1999 (the “GLB Act”) it is prohibited from engaging in non-financial activities. Unitary savings and loan holding companies that existed before this date and that have not undergone certain reorganization or restructuring transactions are “grandfathered” under the GLB Act and generally have no restrictions on their business activities. Rome Bancorp’s activities, however, are restricted to:

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

• conducting an insurance agency or escrow business;

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

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

• acting as trustee under a deed of trust;

• any other activity (a) that the FRB, by regulation, has determined to be permissible for bank holding

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	companies under Section 4(c) of the Bank Holding Company Act of 1956 (“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 FRB 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.
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.”
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 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

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	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 of 2002 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 Federal Reserve Act.
Although Rome Bancorp anticipates that it will incur additional expense in complying with the provisions of the Sarbanes-Oxley Act and the resulting regulations, management does not expect that such compliance will have a material impact on its results of operations or financial condition.
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 (“NASD”) and by the Securities Exchange Act of 1934, as amended, regulations promulgated thereunder;
•	the nominating committee and compensation committee must also be composed entirely of independent directors;

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

          Federal Securities Laws. Rome Bancorp’s common stock is registered with the SEC under Section 12(g) 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.

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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 4.29% and 6.67% in 2005 and 2004 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

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runoff in our primary market area, which could have an adverse impact on our profitability.

          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.

          The Implementation Of Stock-Based Benefits Will Increase Our Future Compensation Expense And Reduce Our Earnings, And May Dilute Your Ownership Interest In New Rome Bancorp. We intend to adopt a new stock option plan that will provide for grants to eligible officers and directors of options to purchase common stock of up to 6.64% of the common stock sold in the stock offering. We also intend to adopt a new management recognition plan that will provide for awards of common stock to eligible officers and directors of up to 3.62% of the common stock sold in the stock offering. We will fund these plans through either open market purchases, if permitted, or from the issuance of authorized but unissued shares. These plans will increase our future costs of compensating our officers and directors, thereby reducing our earnings. In addition, stockholders will experience a reduction in ownership interest in the event newly-issued shares are used to fund stock options and restricted stock awards.

          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

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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, 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:

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§	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.

35

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. At December 31, 2005, the net book value of the computer equipment and other furniture, fixtures and equipment of Rome Savings and Rome Bancorp at their offices totaled $4,503,000. For more information, see Note 5 of Notes to Consolidated Financial Statements, in the Company’s 2005 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, 2004
			(In thousands)
Executive Office:
100 West Dominick St.
Rome, NY	Owned	1956	$	1,143
Branch Offices:
1629 Black River Boulevard
Rome, NY	Owned	1963		255
1300 Erie Boulevard
Rome, NY	Owned	1997		1,007
82 Seneca Turnpike
New Hartford, NY	Owned	1983		115
Mortgage Center:
137 West Dominick Street
Rome, NY	Owned	2002		357
Accounting Center:
139 West Dominick Street
Rome, NY	Owned	1995		457

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.

PART II

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

36

          The following information included in the Annual Report is incorporated herein by reference: “Market for Rome Bancorp’s Common Stock.”

ITEM 6. SELECTED FINANCIAL DATA

          The following information included in Annual Report is incorporated herein by reference: “Selected Financial Data.”

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

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

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

          The following information included in the Annual Report is incorporated herein by reference: “Management of Interest Rate Risk.”

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The following information included in the Annual Report is incorporated herein by reference: “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) 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 on page 31 of the Company’s Annual Report to Shareholders for the year ended December 31, 2005, which is included as Exhibit 13.1 of this report, and is incorporated herein by reference.

37

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 on page 32 Annual Report to Shareholders for the year ended December 31, 2005, 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

ITEM 9B. OTHER INFORMATION

          None.

PART III

ITEM 10. DIRECTORS AND PRINCIPAL OFFICERS OF ROME BANCORP

          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 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

ITEM 11. EXECUTIVE COMPENSATION

          The information set forth in the following subsections of the section entitled “Information About Board of Directors and Management” of the Proxy Statement are incorporated herein by reference: “Directors’ Compensation,” “Executive Compensation” (including the Summary Compensation Table), “Benefit Plans” and “Transactions with Certain Related Persons.”

38

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

          The following subsections of the section entitled “Security Ownership of Certain Beneficial Owners and Management” included in the Proxy Statement are incorporated herein by reference: “Principal Stockholders of Rome Bancorp” and “Security Ownership of Management.”

          The following table sets forth the aggregate information of our equity compensation plans in effect as of December 31, 2005.

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		219,798		$	2.19		234,821
Equity compensation plans not approved by security holders		—			—		—
Total		219,798		$	2.19		234,821

(1) The number of securities remaining for future issuance under equity compensation plans includes Recognition and 50,316 shares available for issuance under the 2000 Recognition and Retention Plan and 184,505 shares available for issuance under the 2000 Stock Option Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          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.”

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS

(a) The following financial statements included in the 2005 Annual Report are incorporated herein by reference:

Consolidated Balance Sheets - At December 31, 2005 and 2004;
Consolidated Statements of Income - Years Ended December 31, 2005, 2004 and 2003;
Consolidated Statements of Stockholders’ Equity and Comprehensive Income - Years Ended December 31, 2005, 2004 and 2003;
Consolidated Statements of Cash Flows - Years Ended December 31, 2005, 2004 and 2003; and
Notes to Consolidated Financial Statements - Years Ended December 31, 2005, 2004 and 2003

39

(b) Exhibits. 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)
13.1	Annual Report to Shareholders for the Year Ended December 31, 2005.
14.1	Code of Conduct and Ethics. (7)
21.1	Subsidiaries of the Company. (1)
23.1	Consent of Crowe Chizek and Company LLC.
23.2	Consent of KPMG LLP.
31.1	Rule 13a-14a/15d-14a Certifications
31.2	Rule 13a-14a/15d-14a Certifications
32.1	Section 1350 Certifications
32.2	Section 1350 Certifications

(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.

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,		March 24, 2006
		President and Chief
Charles M. Sprock		Executive Officer
		(Principal Executive Officer)
/s/David C. Nolan		Executive Vice-President		March 24, 2006
		and Chief Financial Officer
David C. Nolan		(Principal Financial Officer)
/s/Bruce R. Engelbert		Director		March 24, 2006
Bruce R. Engelbert
/s/David C. Grow		Director		March 24, 2006
David C. Grow
/s/Kirk B. Hinman		Director		March 24, 2006
Kirk B. Hinman
/s/T. Richard Leidig		Director		March 24, 2006
T. Richard Leidig
/s/Michael J. Valentine		Director		March 24, 2006
Michael J. Valentine
/s/Dale A. Laval		Director		March 24, 2006
Dale A. Laval

41

EX-13

EXHIBIT 13.1

The summary information presented below at or for each of the five years in the period ended December 31, 2005 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,
	2005		2004		2003		2002		2001
Selected Financial Condition Data:
Total assets	$	308,853	$	268,152	$	261,939	$	250,075	$	247,437
Loans, net		251,918		231,272		207,656		181,564		167,607
Securities		11,882		19,117		29,118		43,207		46,969
Total cash and cash equivalents		34,235		6,929		14,055		15,698		23,922
Total deposits		201,468		208,787		203,190		194,924		189,216
Borrowings		9,374		18,843		18,090		14,920		16,857
Total equity		93,478		36,258		36,639		36,193		36,364
Allowance for loan losses		1,960		2,000		1,809		1,730		1,597
Non-performing loans		947		829		1,406		1,516		755
Non-performing assets		947		829		1,608		1,571		755

	2005		2004		2003			2002		2001
Selected Operating Data:
Interest income	$	16,535	$	14,498	$	14,810		$	15,509	$	17,006
Interest expense		3,036		3,042		3,614			4,981		7,201
Net interest income		13,499		11,456		11,196			10,528		9,805
Provision for loan losses		115		390		510			330		325
Net interest income after provision for loan losses		13,384		11,066		10,686			10,198		9,480
Non-interest income:
Service charges and other income		1,921		1,596		1,165			1,130		1,039
Net gain (loss) on securities transactions		105		176		(693	)		132		47
Total non-interest income		2,026		1,772		472			1,262		1,086
Total non-interest expense		9,977		9,102		8,835			7,707		7,201
Income before income taxes		5,433		3,736		2,323			3,753		3,365
Income taxes		2,031		1,336		786			1,268		1,058
Net income	$	3,402	$	2,400	$	1,537		$	2,485	$	2,307

	At or for the Year Ended December 31,
	2005			2004			2003			2002			2001
Selected Financial Ratios and Other Data
Performance Ratios:
Basic earnings per share	$	0.37		$	0.26		$	0.16		$	0.27		$	0.23
Diluted earnings per share	$	0.36		$	0.25		$	0.16		$	0.26		$	0.23
Return on average assets		1.13	%		0.91	%		0.59	%		1.00	%		0.94	%
Return on average equity		4.29	%		6.67	%		4.16	%		6.86	%		6.09	%
Net interest rate spread (tax equivalent)		4.27	%		4.41	%		4.27	%		3.95	%		3.42	%
Net interest margin (tax equivalent)		4.80	%		4.73	%		4.70	%		4.56	%		4.31	%
Non-interest expense to average assets		3.31	%		3.45	%		3.42	%		3.09	%		2.93	%
Efficiency Ratio (1)		64.09	%		68.72	%		70.22	%		64.85	%		65.05	%
Average interest earning assets to average interest-bearing liabilities		149.44	%		125.61	%		128.15	%		128.68	%		129.02	%
Capital Ratios:
Average equity to average assets		26.27	%		13.63	%		14.29	%		14.52	%		15.40	%
Equity to total assets at end of period		30.27	%		13.52	%		13.99	%		14.47	%		14.70	%
Book value per share	$	9.66		$	8.57		$	8.55		$	8.41		$	8.22
Regulatory Capital Ratios: (2)
Core capital (Tier 1 capital)		18.96	%		11.03	%		13.68	%		14.90	%		14.54	%
Total Risk-based capital		28.04	%		15.36	%		19.19	%		21.24	%		21.75	%
Asset Quality Ratios:
Nonperforming loans as percent of loans		0.37	%		0.36	%		0.67	%		0.83	%		0.45	%
Nonperforming assets as percent of total assets		0.31	%		0.31	%		0.61	%		0.63	%		0.31	%
Allowance for loan losses as a percent of loans		0.77	%		0.86	%		0.86	%		0.94	%		0.94	%
Allowance for loan losses as a percent of non-performing loans		207.0	%		241.3	%		128.7	%		114.1	%		211.5	%
Other Data:
Number of:
Deposit accounts		34,864			35,136			34,443			32,776			32.446
Full service offices		4			4			4			4			4

Note: All per share amounts have been adjusted to reflect the Company’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, 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

Forward-Looking Statements

Statements included in this discussion and in future filings by Rome Bancorp, Inc. with the Securities and Exchange Commission, in Rome Bancorp, Inc. press releases, and in oral statements made with the approval of an authorized executive officer, which are not historical or current facts, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Rome Bancorp, Inc. wishes to caution readers not to place undue reliance on such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect Rome Bancorp, Inc.’s actual results, and could cause Rome Bancorp, Inc.’s actual financial performance to differ materially from that expressed in any forward-looking statement: (1) competitive pressures among depository and other financial institutions may increase significantly; (2) revenues may be lower than expected; (3) changes in the interest rate environment may reduce interest margins; (4) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and/or a reduced demand for credit; (5) legislative or regulatory changes, including changes in accounting standards, may adversely affect the business in which the Company is engaged; (6) competitors may have greater financial resources and developed products that enable such competitors to compete more successfully than the Company; and (7) adverse changes may occur in the securities markets or with respect to inflation. The foregoing list should not be construed as exhaustive, and Rome Bancorp, Inc. disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.

General

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.

2005 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, 2005 and 2004 and the Company’s results of operations for the three years ended December 31, 2005. The consolidated financial statements and related notes for the three years ended December 31, 2005 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, 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 2005 was $3.4 million as compared to $2.4 million in the prior year. The significant factors and trends impacting 2005, which are discussed in greater depth below, were as follows:

• 2005 net interest income before loan loss increased by $2.0 million or 17.8% over the prior year. This improvement is principally due to an increase in average earning assets of $38 million, or 15.4%, that was the result of the Company’s stock conversion and offering in March of 2005. The Company’s ratio of interest earning assets to interest bearing liabilities increased to 149.44% in 2005 from 125.61% in the prior year, while net interest margin increased to 4.80% in 2005 from 4.73% in 2004.

• The Company’s provision for loan losses was $115,000 in 2005, a decrease of $275,000 from $390,000 in the prior year, primarily due to a large recovery on a prior year charge off and continued improvement in the Company’s asset quality.

• Non-interest income increased $254,000 in 2005 primarily due to the recovery of costs incurred that were related to the above mentioned prior year charge off, as well as increases in fee revenue. Gains on securities sales were $105,000 in 2005, down from $176,000 in 2004, as the Company sold fewer securities.

• Non-interest expense was $10.0 million in 2005, up from $9.1 million in the prior year. Much of this increase is attributable to administrative costs incurred related to professional services, wages and higher equipment maintenance costs.

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, respectively, 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, 2005, based on simulation model results, Rome Bancorp was within these guidelines.

The following table sets forth at December 31, 2005 and 2004 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.

		2005							2004
		Annual Net Interest Income							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	$	16,114	$	1,691		11.72	%	$	11,857	$	214	1.84	%
	+200		15,586		1,163		8.06			11,808		165	1.42
	+100		15,033		610		4.23			11,756		113	0.97
	Base		14,423		—		—			11,643		—	—
	-100		13,844		(579	)	(4.01	)		11,524		119	(1.02	)
(1)	Assumes an instantaneous uniform change in interest rates. Basis point equals 0.01%

The above table reflects that as of December 31, 2005 Rome Bancorp had a higher 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 increase in federal funds sold and decrease in federal funds purchased as of December 31, 2005. Federal funds sold, which include 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. Federal funds purchased represent overnight borrowings that are also modeled to reprice directly with changes in prevailing interest rates. Federal funds sold increased to $26.8 million at December 31, 2005 from $1.0 million a year earlier, while Federal funds purchased decreased by $4.0 million over the same period. Federal funds held are expected to decline with further long-term investment of the stock proceeds.

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, 2005								December 31, 2004								December 31, 2003
	Average		Interest Income/			Average Yield/			Average		Interest Income/			Average Yield/			Average		Interest Income/			Average Yield/
	Balance		Expense			Cost			Balance		Expense			Cost			Balance		Expense			Cost
									(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	242,464	$	14,993			6.18	%	$	217,622	$	13,437			6.17	%	$	193,240	$	13,092			6.78	%
Securities		15,712		864			5.50			23,747		1,212			5.10			38,497		1,828			4.75
Federal funds sold & other interest bearing deposits		26,182		826			3.15			5,117		43			0.85			11,343		111			0.98
Total interest-earnings assets		284,358		16,683			5.87			246,486		14,692			5.96			243,080		15,031			6.18
Noninterest-earning assets		17,396								17,464								15,399
Total assets	$	301,754							$	263,950							$	258,479
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Savings accounts	$	95,061	$	703			0.74		$	94,544	$	732			0.77		$	89,927	$	911			1.01
Time deposits		67,214		1,820			2.71			68,573		1,630			2.38			72,187		2,001			2.77
Money market accounts		6,145		55			0.90			8,827		74			0.84			8,164		89			1.09
Other interest bearing deposits		10,170		65			0.64			7,783		58			0.75			2,684		36			1.36
Total interest-bearing deposits		178,590		2,643			1.48			179,727		2,494			1.39			172,962		3,037			1.76
Borrowings		11,693		393			3.36			16,511		548			3.32			16,717		577			3.45
Total interest-bearing liabilities		190,283		3,036			1.60					3,042			1.55			189,679		3,614			1.91
Noninterest-bearing deposits		27,647								27,162								27,503
Other liabilities		4,558								4,582								4,361
Total liabilities		222,488								227,982								221,543
Shareholders’ equity		79,266								35,968								36,936
Total liabilities and shareholders’ equity	$	301,754							$	263,950							$	258,479
Net interest income				13,647								11,650								11,417
Tax equivalent adjustment on securities				(148	)							(194	)							(221	)
Net interest income per consolidated financial statements			$	13,499							$	11,456							$	11,196
Net interest rate spread							4.27	%							4.41	%							4.27	%
Net interest margin							4.80	%							4.73	%							4.70	%
Ratio of interest-earning assets to interest-bearing liabilities							1.49	x							1.26	x							1.28	x

Rate Volume Analysis 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, 2005									Year Ended December 31, 2004
	Compared to Year Ended December 31, 2004									Compared to Year Ended December 31, 2003
	Increases (decreases) due to									Increases (decreases) due to
	Rate			Volume			Net			Rate			Volume			Net
	(thousands)
Assets:
Interest-earning assets:
Loans	$	52		$	1,504		$	1,556		$	(1,178	)	$	1,523		$	345
Securities		62			(410	)		(348	)		84			(701	)		(617	)
Federal funds sold & other Interest bearing deposits		602			181			783			(6	)		(61	)		(67	)
Total interest-earnings assets		716			1,275			1,991			(1,100	)		761			(339	)
Interest-bearing liabilities:
Savings accounts		(33	)		4			(29	)		(226	)		47			(179	)
Time deposits		222			(32	)		190			(271	)		(100	)		(371	)
Money market accounts		4			(23	)		(19	)		(22	)		7			(15	)
Other interest bearing deposits		(12	)		19			7			(47	)		69			22
Total interest-bearing deposits		181			(32	)		149			(566	)		23			(543	)
Borrowings		5			(160	)		(155	)		(22	)		(7	)		(29	)
Total interest-bearing liabilities		186			(192	)		(6	)		(588	)		16			(572	)
Net change in interest income	$	530		$	1,467		$	1,997		$	(512	)	$	745		$	233

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

The Company’s total assets at December 31, 2005 were $308.9 million, an increase of $40.7 million or 15.2% from $268.2 million at December 31, 2004. The growth in assets during 2005 is primarily attributable to the Company’s successful stock offering and conversion in March of 2005. Cash and cash equivalents increased to $34.2 million at December 31, 2005, from $6.9 million at December 31, 2004, representing stock proceeds that have not yet been deployed to pay down debt or invest in other assets.

Securities available for sale were $10.4 million at December 31, 2005, a decrease of $7.1 million or 40.6% from $17.5 million at December 31, 2004.This decrease is due to maturities, principal

reductions and securities sales. 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.

Total loans increased $20.6 million or 8.8% to $253.9 million at December 31, 2005 from $233.3 million at December 31, 2004. During the year ended December 31, 2004, Rome Bancorp originated approximately $65.3 million of loans. The majority of the loan growth was in the residential mortgage loan portfolio, which grew by $12.3 million, or 10.8%. Asset quality has remained favorable over the same period as non-performing loans as a percentage of total loans increased slightly from 0.36% at December 31, 2004 from 0.37% at December 31, 2005. The allowance for loan losses as a percent of non-performing loans was 207.0% at December 31, 2005, as compared to 241.3% at December 31, 2004. These ratios are considered appropriate due to the growth in the Company’s residential mortgage portfolio in 2005. Due to stringent underwriting standards, the history of losses on this portfolio is significantly lower than on the remaining loans.

Total deposits decreased by $7.3 million or 3.5% from $208.8 million at the 2004 year-end to $201.5 million at December 31, 2005. The overall decrease in deposits is primarily attributable to decreases in savings, money market and time deposit accounts partially offset by increases in other interest bearing and non interest-bearing deposits. Savings deposits decreased $6.7 million or 7.0% from $95.8 million at December 31, 2004 to $89.1 million at December 31, 2005. Money market account balances decreased by $2.5 million or 33.8% during the past year. Time deposits decreased $2.7 million or 3.9% during 2005. The decline in these deposit categories is attributed to customers seeking higher returns in other investment vehicles as well as an outflow of these deposits to fund purchases of Company stock in the March 2005 stock offering. Non-interest bearing deposits and other interest-bearing deposits increased by $3.6 million, or 13.6%, and $866,000, or 8.5%, respectively, during the year ended December 31, 2005. Growth in these deposits is primarily due to continued growth in consumer checking accounts and the introduction of new business checking products and services in 2005.

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 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 the prior year, while net interest margin increased to 4.80% in 2005 from 4.73% in 2004.

Interest Income.

Interest income increased by $2 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 has held a portion of the stock offering proceeds in these deposits until more long term investments are analyzed.

Interest Expense.

Interest expense for the year 2005 remained basically constant with 2004 expense. 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 to1.48% 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 section 404 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, as compared to $1.3 million in 2004. The increase is directly attributable to higher pre-tax earnings and an increase in permanent tax differences.

Comparison of Results of Operations for the Years Ended December 31, 2004 and December 31, 2003:

General.

Net income for the year ended December 31, 2004 was $2.4 million, an increase of $863,000 from $1.5 million for the year ended December 31, 2003. The increase in net income was attributable to increases in non-interest income of $431,000, the absence of securities write-downs in 2004, which negatively impacted pre-tax 2003 income by $1.0 million, an increase in net interest income before loan loss provision of $260,000 and a decrease in loan loss provision of $120,000, partially offset by a decrease in gains on securities sales of $172,000, increases in non-interest expense of $267,000 and income tax expense of $550,000.

Net Interest Income.

Net interest income was $11.5 million in 2004, an increase of $260,000 or 2.3% from $11.2 million in 2003. This increase is principally due to a decrease in interest expense, resulting in net interest margin on a tax equivalent basis of 4.73% in 2004 versus 4.70% for the year ended 2003.

Interest Income.

Interest income decreased by $312,000 for the year ended December 31, 2004, from $14.8 million for the year ended December 31, 2003. Interest income earned on the loan portfolio increased to $13.4 million in 2004 from $13.1 million in 2003. The average loan balances increased to $217.6 million in 2004 from $193.2 million in 2003, primarily due to growth in residential lending. The yield on loans in 2004 was 6.17% compared to 6.78% in 2003, due to the influx of new loans at lower prevailing market rates over the past two years. Interest and dividend income on securities

decreased in 2004 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 $23.7 million in 2004 from $38.5 million in 2003 while their yields increased to 5.10% from 4.75% over the same period. Interest income of other short-term investments, including federal funds sold, dropped from $111,000 in 2003 to $44,000 in 2004, as a result of a decrease in average federal funds sold from $11.3 million in 2003 to $5.1 million in 2004, as the yields on these federal funds dropped from 0.98% to 0.85% over the same period.

Interest Expense.

Interest expense declined in 2004 primarily due to a decrease in the rate paid on deposit accounts, consistent with current market trends. The average rate paid on interest bearing deposits in 2004 was 1.39% compared to 1.76% in 2003. The average balance of these deposits increased to $179.7 million in 2004 from $173.0 million in the prior year. Interest expense on borrowings decreased from $577,000 in 2003 to $548,000 in 2004 primarily due to a decrease in the average rate paid on this debt from 3.45% in 2003 to 3.32% in 2004.

Provision for Loan Losses

The provision for loan losses was $390,000 in 2004 compared to $510,000 in 2003. The allowance for loan losses was $2.0 million or 0.86% of total loans at December 31, 2004 compared to $1.8 million and 0.86% of total loans at December 31, 2003. The allowance for loan losses as a percent of non-performing loans was 241% at December 31, 2004 compared to 129% at December 31, 2003. Non-performing loans, consisting of non-accrual loans and loans 90 days past due and still accruing, decreased to $829,000 or 0.36% of total loans at December 31, 2004 compared to $1.4 million or 0.67% at December 31, 2003. 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 $390,000 was necessary in 2004.

Non-interest Income

The following table summarizes changes in the major components of non-interest income:

	2004		2003			$ Change			% Change
Securities impairment charge	$	—	$	(1,041	)	$	1,041			—
Gain on securities sold		176		348			(172	)		(49.43	)%
Gain on sale of loans		—		39			(39	)		—
Service charges		1,451		927			524			56.53	%
Other income		145		199			(54	)		(27.14	)%
Total non-interest income	$	1,772	$	472		$	1,300			275.42	%

Non-interest income increased by $1.3 million to $1.8 million in 2004 as compared to $472,000 in 2003, primarily due to the investment impairment charge of $1.0 million taken in the third quarter of 2003. Rome Bancorp recorded net securities sales gains of $176,000 in 2004 versus a net loss on securities of $693,000 in 2003. The remaining increase in other non-interest income is principally due to an increase in customer fee income, much of which was the result of a high performance checking program initiated in the fourth quarter of 2003.

Non-interest Expense

Non-interest expense was $9.1 million for the year ended December 31, 2004 compared to $8.8 million for the year ended December 31, 2003. The following table summarizes changes in the major components of non-interest expense:

	2004		2003		$ Change			% Change
Salaries and employee benefits	$	5,137	$	5,044	$	93			1.84	%
Occupancy and equipment expense		1,568		1,409		159			11.28	%
Marketing expense		311		279		32			11.47	%
Outside consulting and professional fees		341		513		(172	)		(33.53	)%
Other expense		1,745		1,590		155			9.75	%
Total non-interest expense	$	9,102	$	8,835	$	267			3.02	%

The increase in non-interest expense was primarily the result of operating costs related to the mid-2003 systems conversion and expenses related to our new product offerings.

Income Tax Expense

Income tax expense was $1.3 million for 2004, an increase of $550,000 from 2003 income tax expense of $786,000. 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 $31.6 million on a line of credit. At December 31, 2005, the Bank had no outstanding borrowings against this line of credit, but did have amortizing notes totaling $9.4 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 2005 the Company originated approximately $65.3 million in loans compared to approximately $66.5 million in 2004. Purchases of investment securities were minimal, totaling $55,000 in 2005 and $298,000 in 2004.

At December 31, 2005, the Company had loan commitments to borrowers of approximately $10.4 million, and customer available letters and lines of credit of approximately $13.0 million. Total deposits were $201.5 million at December 31, 2005, a decrease of 3.5% from $208.8 million at December 31, 2004.

Time deposit accounts scheduled to mature within one year were $43.5 million at December 31, 2005. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of these time deposits will remain with the Company. We are committed to maintaining a strong liquidity position, therefore, 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 borrowings from the Federal Home Loan Bank, will be carefully considered as the Company monitors its

liquidity needs. Therefore, in order to minimize its cost of funds, the Company may consider additional borrowings from the Federal Home Loan Bank in the future.

At December 31, 2005 and 2004, the Bank exceeded each of the applicable regulatory capital requirements. The Company converted to a savings and loan holding company from a bank holding company on April 27, 2004, at which time it was no longer subject to formula based capital requirements at the holding company level. The Bank’s leverage (Tier 1) capital at December 31, 2005 and 2004 was $58.6 million and $29.5 million or 19.0% and 11.0% of adjusted assets, respectively. In order to be classified as “well-capitalized” by the OTS and FDIC, at December 31, 2005 and 2004, the Bank is required to have leverage (Tier 1) capital of $15.5 million and $13.4 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, 2005 and 2004, the Bank had a risk-based total capital ratio of 28.2% and 15.4%, respectively.

On March 30, 2005, the Company completed a “second-step” conversion (the “Conversion”), and reorganized from the two-tier mutual holding company structure to the stock holding company structure. Prior to the completion of the Conversion, Rome MHC had owned approximately 61.5% of the common stock of the Company. In connection with the Conversion, the outstanding shares of Rome Bancorp owned by Rome 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.

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 were $3.1 million and accordingly, net proceeds were $55.9 million. In addition, as part of the conversion and dissolution of Rome MHC, the Bank received $1.9 million of cash previously held by Rome MHC.

The Company paid cash dividends of $0.265 per share in 2005, requiring a cash outlay of $2.0 million.

The Company does not anticipate any material capital expenditures, nor does it have any balloon or other payments due on any long-term obligations or any off-balance sheet items other than 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:
			Less than						More than
	Total		1 year		1-3 years		3-5 years		5 years
Time Deposits	$	66,298	$	43,492	$	15,060	$	7,746		—
Federal Home Loan Bank Borrowings		9,374		1,003		3,747		1,647	$	2,977
Software Maintenance Contracts		535		233		302		—		—
Total Contractual Obligations	$	76,207	$	44,728	$	19,109	$	9,393	$	2,977

Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

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

In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) requires companies to record compensation cost for stock options provided to employees in return for employment service. The cost is measured at the fair value of the options when granted, and this cost is expensed over the employment service period, which is normally the vesting period of the options. This will apply to awards granted or modified in fiscal years beginning in 2006. Compensation cost will also be recorded for prior option grants that vest after the date of adoption. As of December 31, 2005, the Company had no unvested stock options. The effect on results of operations will depend on the level of future option grants and the calculation of the fair value of the options granted at such future date, as well as the vesting periods provided, and so cannot be currently predicted.

MARKET FOR THE COMPANY’S COMMON STOCK

The Company’s common stock is traded on the Nasdaq National 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, 2005, the last trading date in the Company’s fiscal year, the common stock of the Company closed at $10.84 per share. At March 4, 2006, there were 9,688,128 shares of the Company’s common stock outstanding, which were held of record by approximately 3,070 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 $0.265 per share in 2005. The Company also paid a quarterly cash dividend of $0.075 per share to shareholders of record as of February 6, 2006. 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, 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
Year ended December 31, 2004
Quarter ended March 31, 2004	$	15.87	$	12.13	$	0.032
Quarter ended June 30, 2004		15.43		12.57		0.066
Quarter ended September 30, 2004		13.67		12.08		0.066
Quarter ended December 31, 2004		15.09		11.09		0.066

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

CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

          Effective February 25, 2004, the Audit Committee of the Board of Directors of the Company terminated the engagement of its principal accountant, KPMG LLP (“KPMG”) as the Company’s independent accountant, effective upon the completion of KPMG’s audit of the Company’s consolidated financial statements for the year ended December 31, 2003.

          The audit reports of KPMG on the consolidated financial statements of the Company as of and for the years ended December 31, 2002 and 2001 did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles.

          During 2002 and 2001 and any subsequent interim periods through February 25, 2004, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to KPMG’s satisfaction, would have caused it to make reference in connection with its report to the subject matter of the disagreement.

          On February 25, 2004, the Audit Committee of the Board of Directors of the Company recommended, approved and appointed Crowe Chizek and Company LLC as the Company’s independent accountant to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2004. Effective as of that date, the Audit Committee formally engaged Crowe Chizek and Company LLC as the Company’s independent accountant for the fiscal year ending December 31, 2004.

          The Company had not consulted the newly engaged accountant regarding either the application of accounting principles to a specified transaction either completed or proposed, the type of audit opinion that might be rendered on the Company’s financial statements or any matter that was either the subject of a disagreement or a reportable event as described in Item 304(a)(1) of Regulation S-K.

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, 2005. 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, 2005.

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, 2005 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, 2005, 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, 2005, 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, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for the years ended December 31, 2005 and 2004 and our report dated March 3, 2006 expressed an unqualified opinion on those consolidated financial statements.

/s/ Crowe Chizek and Company LLC

Crowe Chizek and Company LLC

Cleveland, Ohio

March 3, 2006

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, 2005 and December 31, 2004 and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for the years then ended. 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. The financial statements of Rome Bancorp, Inc. as of December 31, 2003 and for the year then ended were audited by other auditors whose report dated February 17, 2004 expressed an unqualified opinion on those statements.

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, 2005 and December 31, 2004 and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Oversight Board (United States), the effectiveness of Rome Bancorp, Inc.’s internal control over financial reporting as of December 31, 2005, 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 3, 2006 expressed an unqualified opinion thereon.

/s/ Crowe Chizek and Company LLC

Crowe Chizek and Company LLC

Cleveland, Ohio

March 3, 2006

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

December 31, 2005 and 2004

(in thousands, except share data)

	2005			2004
Assets
Cash and due from banks	$	7,457		$	5,977
Federal funds sold and other short-term investments		26,778			952
Total cash and cash equivalents		34,235			6,929
Securities available for sale, at fair value		9,666			16,391
Securities held to maturity (fair value of $1,428 and $1,624 at December 31, 2005 and 2004, respectively)		1,440			1,623
Federal Home Loan Bank Stock		776			1,103
Loans		253,878			233,272
Less: Allowance for loan losses		(1,960	)		(2,000	)
Net loans		251,918			231,272
Premises and equipment, net		4,503			4,503
Accrued interest receivable		1,053			1,002
Other assets		5,262			5,329
Total assets	$	308,853		$	268,152
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Non-interest bearing	$	30,039		$	26,390
Savings		89,138			95,848
Money market		4,929			7,397
Time		66,298			68,954
Other interest bearing		11,064			10,198
Total deposits		201,468			208,787
Borrowings		9,374			18,843
Other liabilities		4,533			4,264
Total liabilities		215,375			231,894
Commitments and contingencies (Note 14)		—			—
Shareholders’ equity:
Common stock, $.01 par value; authorized: 30,000,000 shares; issued: 9,678,128 shares;
outstanding: 9,678,128 shares at December 31, 2005;
authorized: 11,339,200; issued 11,339,200: outstanding 9,591,934 shares at December 31, 2004		97			33
Additional paid-in capital		60,013			10,756
Retained earnings		35,983			34,627
Treasury stock, at cost; 0 shares at December 31, 2005 and 1,747,266 shares at December 31, 2004		—			(8,963	)
Accumulated other comprehensive income		85			391
Unallocated shares of employee stock ownership plan (ESOP) 462,135 shares at December 31, 2005; 272,100 shares at December 31, 2004		(2,700	)		(560	)
Unearned compensation		—			(26	)
Total shareholders’ equity		93,478			36,258
Total liabilities and shareholders’ equity	$	308,853		$	268,152
See accompanying notes to consolidated financial statements.

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Income

Years ended December 31, 2005, 2004 and 2003

(in thousands, except share data)

	2005		2004		2003
Interest income:
Loans	$	14,993	$	13,437	$	13,092
Securities		716		1,018		1,607
Other short-term investments		826		43		111
Total interest income		16,535		14,498		14,810
Interest expense:
Deposits		2,643		2,494		3,037
Borrowings		393		548		577
Total interest expense		3,036		3,042		3,614
Net interest income		13,499		11,456		11,196
Provision for loan losses		115		390		510
Net interest income after provision for loan losses		13,384		11,066		10,686
Non-interest income:
Service charges		1,585		1,451		927
Net gain (loss) on securities		105		176		(693	)
Other income		336		145		238
Total non-interest income		2,026		1,772		472
Non-interest expense:
Salaries and employee benefits		5,359		5,137		5,044
Building, occupancy and equipment		1,670		1,568		1,409
Directors’ fees		228		214		230
Marketing		312		311		279
Outside consulting and professional fees		640		341		513
ATM service fees		251		186		153
Supplies		160		155		152
Other		1,357		1,190		1,055
Total non-interest expense		9,977		9,102		8,835
Income before income tax expense		5,433		3,736		2,323
Income tax expense		2,031		1,336		786
Net income	$	3,402	$	2,400	$	1,537
Basic earnings per share	$	0.37	$	0.26	$	0.16
Diluted earnings per share	$	0.36	$	0.25	$	0.16

See accompanying notes to consolidated financial statements.

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Shareholders’ Equity and Comprehensive Income

Years ended December 31, 2005, 2004 and 2003

(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, 2002	$	34		$	10,493		$	33,288		$	(7,101	)		294		$	(684	)	$	(131	)	$	36,193
Comprehensive income:
Net income		—			—			1,537			—			—			—			—			1,537
Other comprehensive income		—			—			—			—			499			—			—			499
Total comprehensive income																							2,036
Retirement of 229,424 treasury shares		(1	)		(671	)		(253	)		925												—
Purchase of treasury stock (99,213 shares)		—			—			—			(1,028	)		—			—			—			(1,028	)
Exercise of stock options and related tax benefit (52,129 shares, net)		—			116			(91	)		212			—			—			—			237
Amortization and tax benefits of unearned compensation		—			74			—			—			—			—			53			127
Dividends paid ($0.128 per share)		—			—			(1,226	)		—			—			—			—			(1,226	)
ESOP shares released for allocation (30,230 shares)					238			—			—			—			62			—			300
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
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
	$	97		$	60,013		$	35,983		$	—		$	85		$	(2,700	)	$	—		$	93,478

See accompanying notes to consolidated financial statements.

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years ended December 31, 2005, 2004 and 2003

(in thousands)

	2005			2004			2003
Cash flows from operating activities:
Net income	$	3,402		$	2,400		$	1,537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		515			496			435
(Increase) decrease in accrued interest receivable		(51	)		203			193
Provision for loan losses		115			390			510
Securities impairment charge		—			—			1,041
Net gain on securities transactions		(105	)		(176	)		(348	)
Gain on sales of loans		(20	)		—			(39	)
Proceeds from sale of loans		1,715			—			—
Net premium amortization on securities		(7	)		11			30
(Gain) loss on sale of other real estate		(15	)		42			(6	)
Gain on sale of fixed assets		—			(16	)
Increase (decrease) in other liabilities		269			244			(18	)
Deferred income tax expense		282			29			212
(Increase) decrease in other assets		(112	)		13			(1,170	)
Allocation of ESOP shares		479			402			300
Amortization of unearned compensation		26			52			53
Tax benefit from exercise of stock options		57			59			116
Net cash provided by operating activities		6,550			4,149			2,846
Cash flows from investing activities:
Net increase in loans		(22,373	)		(24,093	)		(28,070	)
Proceeds from sale of education loans		—			—			1,305
Proceeds from sales of securities available for sale		1,754			2,093			6,697
Proceeds from maturities and principal reductions of securities available for sale		4,967			51			7,657
Purchases of securities available for sale		(55	)		(198	)		(91	)
Purchases of securities held to maturity		—			(100	)		(284	)
Proceeds from maturities and principal reductions of securities held to maturity		171			1,250			219
Proceeds from sale of real estate owned		98			247			61
Purchases of premises and equipment, net		(507	)		(276	)		(1,286	)
Net cash used in investing activities		(15,945	)		(14,626	)		(13,792	)
Cash flows from financing activities:
Decrease in time deposits		(2,656	)		(3,408	)		(1,563	)
(Decrease) increase in other deposits		(4,663	)		9,005			9,829
Stock offering and conversion		55,462			—			—
Repayments of borrowings		(12,469	)		(9,247	)		(8,330	)
Advances on borrowings		3,000			10,000			11,500
Purchase of treasury stock		—			(2,045	)		(1,028	)
Dividends		(2,046	)		(987	)		(1,226	)
Exercise of stock options		73			33			121
Net cash provided by financing activities		36,701			3,351			9,303
Net increase (decrease) in cash and cash equivalents		27,306			(7,126	)		(1,643	)
Cash and cash equivalents at beginning of year		6,929			14,055			15,698
Cash and cash equivalents at end of year	$	34,235		$	6,929		$	14,055

ROME BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows (continued)

Years ended December 31, 2005, 2004 and 2003

(in thousands)

	2005		2004		2003
Non-cash investing activities:
Retirement of 1,747,266 treasury shares	$	8,963		—		—
Transfers from loans to real estate owned		83	$	87	$	202
Cash paid during the period for:
Interest		3,044		3,070		3,598
Income taxes		1,850		549		785

See accompanying notes to consolidated financial statements.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

(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.
	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.
(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

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	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.
(c)	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 to 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.
(d)	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.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	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 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.
(e)	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.
(f)	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).
(g)	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

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	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 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.
	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 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.
(h)	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.
(i)	Stock Option Plan
	The Company applies APB Opinion No. 25 and related Interpretations in accounting for its Stock Option Plan. Accordingly, compensation expense is recognized only if the exercise price of the option is less than the fair value of the underlying stock at the grant date. Statement of Financial Accounting Standards (SFAS) No. 123 requires companies not using a fair value based method of accounting for stock options or similar plans, to provide pro forma disclosure of net income and earnings per share as if that method of accounting had been applied.
	Pro forma disclosures for the Company for the years ended December 31, 2005, 2004 and 2003 utilizing the estimated fair value of the options granted and an assumed 5% forfeiture rate are as follows:

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	2005			2004			2003
	(in thousands, except per share data)
Net income:
As reported	$	3,402		$	2,400		$	1,537
Add: Stock based compensation expense included in net income, net of related tax expense		17			35			35
Deduct: Total stock based compensation expense determined under fair value method, net of related tax expense		(35	)		(69	)		(69	)
Pro forma	$	3,384		$	2,366		$	1,503
Basic earnings per share:
As reported	$	0.37		$	0.26		$	0.16
Pro forma	$	0.37		$	0.26		$	0.16
Diluted earnings per share:
As reported	$	0.36		$	0.25		$	0.16
Pro forma	$	0.36		$	0.25		$	0.15

	The effect on reported net income and earnings per share for the years ended December 31, 2005, 2004 and 2003 may not be representative of the effects on reported net income or earnings per share for future years.
(j)	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.
(k)	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.
(l)	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.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

(m)	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.
(n)	Recent Accounting Pronouncements
	FASB Staff Position on FAS No. 115-1 and FAS No. 124-1 (“the FSP”), “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” was issued in November 2005 and addresses the determination of when an investment is considered impaired; whether the impairment is other-than-temporary; and how to measure an impairment loss. The FSP also addresses accounting considerations subsequent to the recognition of an other-than-temporary impairment on a debt security, and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The FSP replaces the impairment guidance on Emerging issues Task Force (EITF) Issue No. 03-1 with references to existing authoritative literature concerning other-than-temporary determinations. Under the FSP, losses arising from impairment deemed to be other-than-temporary, must be recognized in earnings at an amount equal to the entire difference between the securities cost and its fair value at the financial statement date, without considering partial recoveries subsequent to that date. The FSP also required that an investor recognize an other-than-temporary impairment loss when a decision to sell a security has been made and the investor does not expect the fair value of the security to fully recover prior to the expected time of sale. The FSP is effective for reporting periods beginning after December 15, 2005. The initial adoption of this statement is not expected to have a material impact on the Company’s consolidated financial statements.
	In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) requires companies to record compensation cost for stock options provided to employees in return for employment service. The cost is measured at the fair value of the options when granted, and this cost is expensed over the employment service period, which is normally the vesting period of the options. This will apply to awards granted or modified in fiscal years beginning in 2006. Compensation cost will also be recorded for prior option grants that vest after the date of adoption. As of December 31, 2005, the Company had no unvested stock options. The effect on results of operations will depend on the level of future option grants and the calculation of the fair value of the options granted at such future date, as well as the vesting periods provided, and so cannot be currently predicted.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

(3)	Securities
	Securities are summarized as follows (in thousands):

	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

	December 31, 2004
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Available-for-sale:
U.S. Government agencies	$	2,244	$	81	$	—	$	2,325
State and Municipal obligations		7,004		262		—		7,266
Mortgage-backed securities
FNMA		126		3		—		129
FHLMC		840		43		—		883
Corporate bonds		3,024		92		—		3,116
Total debt securities		13,238		481		—		13,719
Equity and other securities		2,500		172		—		2,672
	$	15,738	$	653	$	—	$	16,391
Held-to-maturity:
U.S. Government securities	$	1,320	$	—	$	7	$	1,313
Mortgage-backed securities		—		—
GNMA		100		8		—		108
FHLMC		6		—		—		6
Other bonds		197		—		—		197
	$	1,623	$	8	$	7	$	1,624

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

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

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 represents aggregate depreciation of 1.3% of the Company’s amortized cost basis in these securities. Unrealized losses on bonds have not been recognized into income because the bonds are of high credit quality, management has the intent and ability to hold to 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 bonds reach maturity. 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 represents aggregate depreciation of 0.7% of the Company’s cost basis in this security.

At December 31, 2004, four agency investments had a combined unrealized loss of $7,000. These investments were in an unrealized loss position for four consecutive months at December 31, 2004. The unrealized loss represents aggregate depreciation of 0.5% of the Company’s amortized cost basis in these securities.

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, 2005
	Amortized cost		Fair Value
Available-for-sale:
Due within one year	$	4,211	$	4,231
Due after one year through five years		2,890		2,968
Due after five years through ten years		646		674
Due after ten years		286		307
	$	8,033	$	8,180
Held-to-maturity:
Due within one year	$	1,209	$	1,194
Due after one year through five years		50		53
Due after five years through ten years		—		—
Due after ten years		181		181
	$	1,440	$	1,428

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	Gross gains of $105,000, $176,000 and $348,000 were realized on sales of securities in 2005, 2004 and 2003, respectively.
	The majority of the Company’s equity holding represent investments in a mutual fund which purchases blue chip common stocks. The downturn in the equity markets during 2002 and 2003 caused a decrease in the market value of the fund. During the third quarter of 2003, in connection with its ongoing review of long term asset values, the Company determined that this investment had been other than temporarily impaired, as defined by generally accepted accounting principles. Accordingly, an impairment charge of $1.0 million (pre-tax) was recorded to lower the carrying value of this security to the current fair market value of $5.1 million. This charge reduced 2003 net earnings by $636,000, or $0.07 per diluted share. As this investment is classified as an available for sale security, stockholders equity had already been reduced by the amount of the unrealized loss, net of taxes. The “other than temporary” write-down does not necessarily mean that the value has been permanently lost. The fair market value of the security may increase or decrease on a going forward basis. During the fourth quarter of 2003, the Company sold approximately one-third of its investment in this fund, realizing book gains of $101,000 over the revised carrying value of the shares sold. Throughout 2005 and 2004, the Company sold approximately twenty and thirty percent of the original investment, realizing book gains of $65,000 and $167,000, respectively. As a condition of the approval of the Company’s Charter Conversion on April 27, 2004, the OTS has required that the Company liquidate its holdings in this mutual fund within two years of that date.
	Securities pledged at year end 2005 and 2004 had a carrying amount of $1.1 million and $1.2 million. These securities collateralize state and Treasury department programs. At year end 2005 and 2004, 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.
(4)	Loans
	Loans are summarized as follows (in thousands) at December 31:

	2005		2004
Mortgage loans:
Residential (1-4 family)	$	126,422	$	114,138
Commercial		52,748		49,364
Construction and land		3,317		5,469
Total Mortgage loans		182,487		168,971
Other loans:
Commercial		23,832		21,507
Automobile loans		18,321		15,529
Property improvement and equipment		15,434		12,766
Other consumer		13,804		14,499
Total Other loans		71,391		64,301
Total Loans	$	253,878	$	233,272

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

The Company serviced loans for third parties totaling $3,922,000 and $3,977,000 at December 31, 2005 and 2004 respectively.

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

	Years ended December 31,
	2005			2004			2003
Balance at beginning of period	$	2,000		$	1,809		$	1,730
Provision charged to operations		115			390			510
Loans charged off		(687	)		(384	)		(540	)
Recoveries		532			185			109
Balance at end of period	$	1,960		$	2,000		$	1,809

The Company’s recorded investment in loans that are considered impaired totaled $211,000 and $268,000 at December 31, 2005 and 2004, respectively. These impaired loans carried allowances of $127,000 and $94,000, at December 31, 2005 and 2004, respectively. The average recorded investment in impaired loans was $247,000, $272,000 and $320,000 in 2005, 2004 and 2003, respectively. The Company recognized no interest on impaired loans during the three years ended December 31, 2005.

The principal balances of loans not accruing interest amounted to $871,000 and $743,000 at December 31, 2005 and 2004, respectively. Loans 90 days past due and accruing interest amounted to $75,000 and $86,000 at December 31, 2005 and 2004, respectively. The differences between the amount of interest income that would have been recorded if non-accrual loans had been paid in accordance with their original terms and the amount of interest income that was recorded during the years ended December 31, 2005, 2004 and 2003 was $62,500, $53,300 and $83,800, 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.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

(5)	Premises and Equipment
	Premises and equipment at December 31 are summarized as follows (in thousands):

	2005		2004
Land	$	1,404	$	1,404
Buildings and improvements		5,133		5,119
Furniture and equipment		7,030		6,537
		13,567		13,060
Less accumulated depreciation and amortization		9,064		8,557
	$	4,503	$	4,503

	Depreciation and amortization expense included in building, occupancy and equipment expense amounted to $515,000, $496,000 and $435,000 during the years ended December 31, 2005, 2004 and 2003, respectively.
(6)	Deposits
	Contractual maturities of time deposits at December 31 are summarized as follows (in thousands):

	2005
Within one year	$	43,492
One through two years		10,907
Two through three years		4,153
Three through four years		3,704
Four through five years		4,042
Total time deposits	$	66,298

At December 31, 2005 and 2004, time deposits with balances of $100,000 or more totaled approximately $11,624,000 and $10,995,000, respectively.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

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

	2005		2004		2003
Savings	$	703	$	732	$	911
Money market		55		74		89
Time		1,820		1,630		2,001
Other interest bearing		65		58		36
	$	2,643	$	2,494	$	3,037

(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):

	2005		2004
Bearing interest at 2.62% fixed, due 3/15/05		—	$	4,500
FHLB Overnight Line of Credit, bearing interest at 2.38%		—		4,000
Bearing interest at 3.67% fixed, due 7/3/15	$	2,515		2,728
Bearing interest at 3.36% fixed, due 7/3/13		4,376		4,869
Bearing interest at 3.59% fixed, due 11/26/08		2,483		2,746
	$	9,374	$	18,843

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, 2005, as well as remaining maturities beyond five years:

Due in one year	$	1,003
Due one through two years		1,038
Due two through three years		2,709
Due three through four years		809
Due four through five years		838
Due past five years		2,977
Total	$	9,374

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	At December 31, 2005, the Company had additional availability on its FHLB line of credit of $31.6 million. This line of credit is subject to periodic review and renewal.
(8)	Income Taxes
	The components of income tax expense attributable to income from operations for the years ended December 31 consist of (in thousands):

	2005		2004			2003
Current:
Federal	$	1,661	$	1,141		$	479
State		88		166			95
		1,749		1,307			574
Deferred:
Federal		155		72			270
State		127		(43	)		(58	)
		282		29			212
	$	2,031	$	1,336		$	786

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):

	2005			2004			2003
Computed “expected” tax expense	$	1,847		$	1,270		$	790
Increases (decreases) in income taxes
resulting from:
State taxes, net of Federal tax benefit		126			82			25
Tax exempt interest		(98	)		(138	)		(131	)
Non-deductible ESOP expense		87			116			81
Other, net		69			6			21
	$	2,031		$	1,336		$	786
		37.4	%		35.8	%		33.8	%

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

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):

	2005		2004
Deferred tax assets:
Allowance for loan losses	$	577	$	670
Accrued postretirement benefits		901		875
Deferred compensation		423		378
Capital loss carry-forward		11		66
State tax credit carry-forward		3		61
Other		17		96
Total gross deferred tax assets		1,932		2,146
Deferred tax liabilities:
Depreciation		203		226
Prepaid pension cost		826		721
Undistributed income of subsidiary		54		57
Unrealized gains on available-
for sale securities		57		261
Deferred loan costs		97		108
Total gross deferred tax liabilities		1,237		1,373
Net deferred tax assets	$	695	$	773

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, 2005, 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, 2005 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, 2005, 2004 and 2003

(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, 2005 and 2004:

	Pension benefits						Postretirement benefits
(in thousands)	2005			2004			2005			2004
Change in benefit obligation:
Benefit obligation at beginning of year	$	6,974		$	7,072		$	2,490		$	2,323
Service cost		—			—			31			33
Interest cost		417			432			148			142
Amendments and settlements		(24	)		(198	)		(76	)		—
Actuarial(gain)/ loss		353			6			(126	)		102
Benefits paid		(339	)		(338	)		(190	)		(176	)
Participant contributions		—			—			76			66
Benefit obligation at end of year		7,381			6,974			2,353			2,490
Change in plan assets:
Fair value of plan assets at beginning of year		7,451			7,293			—			—
Actual return on plan assets		871			693			—			—
Employer contributions		100			—			114			110
Settlements		(25	)		(197	)		—			—
Participant contributions		—			—			76			66
Benefits paid		(339	)		(338	)		(190	)		(176	)
Fair value of plan assets at end of year		8,058			7,451			—			—
Funded status		677			477			(2,353	)		(2,490	)
Unrecognized net actuarial loss		1,451			1,378			102			229
Unrecognized prior service cost		—			—			(63	)		12
Prepaid (accrued) benefit cost	$	2,128		$	1,855		$	(2,314	)	$	(2,249	)
Assumptions as of measurement dates: Pension
September 30; Postretirement December 31:
Discount rate		5.875	%		6.125	%		5.875	%		6.25	%
Expected return on plan assets		9.00	%		9.00	%		—			—
Rate of compensation increase		N/A			N/A			—			—

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 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

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

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, 2005 and 2004, by asset category are summarized in the following table:

	Plan assets at September 30,
Asset Category	2005			2004
Equity Securities		72	%		69	%
Debt Securities		28	%		31	%
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, 2006, 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):

	Pension		Postretirement
Asset Category	Benefits		Benefits
Fiscal 2006	$	452	$	113
Fiscal 2007		455		119
Fiscal 2008		460		126
Fiscal 2009		469		132
Fiscal 2010		476		138
Fiscal 2011-2014		2,556		786

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

          The components of net periodic benefit cost include the following:

	Pension benefits									Postretirement benefits
(in thousands)	2005			2004			2003			2005			2004			2003
Service cost	$	—		$	—		$	49		$	31		$	33		$	26
Interest cost		417			432			446			148			142			136
Expected return on assets		(655	)		(642	)		(581	)		—			—			—
Curtailment charge		—			—			31			—			—			—
Amortization		66			80			109			(1	)		(1	)		(1	)
Net periodic (benefit) cost	$	(172	)	$	(130	)	$	54		$	178		$	174		$	161

	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 “Stock Option Plan”). The primary objective of the 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 Stock Option Plan, 566,862 shares of authorized but unissued common stock are reserved for issuance upon option exercises. The Company also has the alternative to fund the 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, 2005 and 2004 the remaining contractual life of these options was 4.5 years and 5.5 years, respectively.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

The following table presents the stock option activity for the years ended December 31, 2005, 2004 and 2003 (in thousands):

	2005					2004					2003
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		256,253		$	2.19		271,130		$	2.19		323,630		$	2.19
Exercised		(36,455	)		2.19		(14,877	)		2.19		(52,500	)		2.19
Outstanding at end of year		219,799			2.19		256,253			2.19		271,130			2.19
Exercisable at end of year		219,799		$	2.19		179,789		$	2.19		118,199		$	2.19

(11)	Recognition and Retention Plan
	The Company’s shareholders approved the Rome Bancorp, Inc. 2000 Recognition and Retention Plan (“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 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 has been amortized to compensation expense on a straight-line basis over the vesting periods of the underlying shares. Compensation expense of $26,000, $52,000 and $52,000 was recorded in 2005, 2004 and 2003, respectively. The remaining unearned compensation cost has been shown as a reduction of shareholders’ equity. The shares awarded under the RRP were 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.
(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 $78,000, $72,000 and $63,000 during the years ended December 31, 2005, 2004 and 2003, respectively.
	In connection with establishing the 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, 2005, 211,620 of the original ESOP shares had been released or committed to be released and 241,868 remained as unallocated shares.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	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, 2005, 15,733 of these shares had been released or committed to be released and 220,267 remained as unallocated shares. The fair value of the unallocated shares on December 31, 2005 was $5,010,000. The Company recognized compensation expense of $478,000, $403,000 and $300,000 in 2005, 2004 and 2003, respectively in connection with the ESOP.
(13)	Comprehensive Income (Loss)
	Comprehensive income represents net income and other comprehensive income 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,
	2005			2004			2003
Unrealized holding gains (losses) arising during the period	$	(405	)	$	(494	)	$	139
Other than temporary write-down of securities					—			1,041
Reclassification adjustment for net realized gain included in net income		(105	)		(176	)		(348	)
Other comprehensive income (loss), before tax		(510	)		(670	)		832
Deferred tax expense (benefit)		(204	)		(268	)		333
Other comprehensive income (loss), net of tax	$	(306	)	$	(402	)	$	499

(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

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	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, 2005 and 2004 the Company was committed to originate mortgage and other loans of approximately $10,409,000 and $7,254,000, respectively. At December 31, 2005 and December 31, 2004, the Company’s fixed rate loan commitments totaled $1,621,000 and $1,611,000, respectively. The range of interest rates on these fixed rate commitments was 4.875% to 6.79% at December 31, 2005 and 5.0% to 7.75% at December 31, 2004. Commitments under unused lines of credit and letters of credit were approximately $12,969,000 and $11,267,000 at December 31, 2005 and 2004, 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.
	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):

	2005		2004		2003
Basic earnings per share:
Net Income available to common shareholders	$	3,402	$	2,400	$	1,537
Weighted average basic shares outstanding		9,205		9,283		9,334
Basic earnings per share	$	0.37	$	0.26	$	0.16
Diluted earnings per share:
Net Income available to common shareholders	$	3,402	$	2,400	$	1,537
Weighted average basic shares outstanding		9,205		9,283		9,334
Effect of dilutive securities:
Stock options		195		221		245
Unearned compensation		6		18		25
Weighted average diluted shares outstanding		9,406		9,522		9,604
Diluted earnings per share	$	0.36	$	0.25	$	0.16

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

(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, 2005.
	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. Prior to conversion to a federal charter on April 27, 2004, the Bank was a New York-chartered savings bank regulated by the New York State Banking Department and the Federal Deposit Insurance Corporation.
	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 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 December 22, 2005, 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, 2005, that the Company and Bank meet all capital adequacy requirements to which they are subject.
	The Company converted to a savings and loan holding company from a bank holding company on April 27, 2004, at which time it was no longer subject to formula based capital requirements at the holding company level. However, the Company is required by OTS regulation to maintain adequate capital to support its business activities.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

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, 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	%
As of December 31, 2004:
Total capital (to risk weighted assets):	$	29,164	15.4	%	$	15,725	>=8	%	$	18,987	>=10	%
Tier 1 Capital (to risk weighted assets):		29,489	15.5	%		7,862	>=4	%		11,393	>=6	%
Tier 1 Capital (to adjusted assets):		29,489	11.0	%		8,025	>=3	%		13,368	>=5	%

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

Following is a reconciliation of Rome Savings’ GAAP shareholders’ equity to regulatory Tier 1 capital at December 31, 2005 and 2004.

	December 31, 2005			December 31, 2004
GAAP Shareholders’ Equity	$	58,674		$	29,880
Less: Disallowed assets and unrealized gains on available-for- sale securities, net of tax		(31	)		(391	)
Tier 1 Capital		58,643			29,489
Plus: Allowance for loan losses		1,960			2,000
Allowed unrealized gain on available-for-sale securities		—			294
Less: Real estate held for investment		(338	)		(347	)
Other investments required to be deducted		(1,091	)		(2,272	)
Total Regulatory Capital	$	59,174		$	29,164

(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.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

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.

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

	2005				2004
	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets:
Cash and cash equivalents	$	34,235	$	34,235	$	6,929	$	6,929
Securities available for sale		9,666		9,666		16,391		16,391
Securities held to maturity		1,440		1,428		1,623		1,624
Loans, net		251,918		248,073		231,272		231,364
Federal Home Loan Bank Stock		776		776		1,103		1,103
Accrued interest receivable		1,053		1,053		1,002		1,002
Financial liabilities:
Non-interest bearing deposits		30,039		30,039		26,390		26,390
Interest bearing deposits		171,429		171,045		182,397		181,707
Borrowings		9,374		9,235		18,843		18,536
Accrued interest payable		29		29		37		37

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.

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

(18)	Parent Company Only Financial Statements
	Presented below is the condensed balance sheet of the Parent Company as of December 31, 2005 and 2004 and statement of income and statement of cash flows for the years ended December 31, 2005, 2004 and 2003 (in thousands):

	2005		2004
Condensed Balance Sheet
Assets:
Cash and due from banks	$	31,588	$	4,428
Investment in subsidiary bank		58,673		29,879
Loan receivable from ESOP		2,815		643
Other assets		1,308		1,355
Total assets	$	94,384	$	36,305
Total liabilities	$	906	$	47
Total shareholders’ equity		93,478		36,258
Total liabilities and shareholders’ equity	$	94,384	$	36,305

	2005		2004			2003
Condensed Statement of Income
Interest income	$	466	$	94		$	79
Dividends from subsidiary bank		—		6,000			4,500
Total operating income		466		6,094			4,579
Other operating expenses		369		269			294
Income (loss) before income taxes and dividends in excess of net income/equity in undistributed income of subsidiary bank		97		5,825			4,285
(Dividends in excess of net income)/equity in Undistributed income of subsidiary bank		3,305		(3,425	)		(2,748	)
Net income	$	3,402	$	2,400		$	1,537

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

	2005			2004			2003
Condensed Statement of Cash Flows
Operating activities:
Net income	$	3,402		$	2,400		$	1,537
Adjustments to reconcile net income to cash provided by operating activities:
Dividends in excess of net income of (equity in undistributed earnings of subsidiary bank		(3,305	)		3,425			2,748
Decrease (increase) in other assets		483			(449	)		(164	)
Increase (decrease) in other liabilities		859			(244	)		(142	)
Tax benefit from exercise of stock options		57			59			116
Net cash provided by operating activities		1,496			5,191			4,095
Investing activities:
Investment in subsidiary bank		(25,653	)		—			—
(Increase) decrease in loan to ESOP		(2,172	)		47			44
Net cash (used in) provided by investing activities		(27,825	)		47			44
Financing activities:
Net proceeds of common stock offering and conversion		55,462			—			—
Purchase of treasury stock		—			(2,045	)		(1,028	)
Dividends		(2,046	)		(987	)		(1,226	)
Exercise of stock options		73			33			121
Net cash provided by (used in) financing activities		53,489			(2,999	)		(2,133	)
Net increase in cash and cash equivalents		27,160			2,239			2,006
Cash and cash equivalents at beginning of year		4,428			2,189			183
Cash and cash equivalents at end of year	$	31,588		$	4,428		$	2,189

ROME BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Years ended December 31, 2005, 2004 and 2003

(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.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, 2005, 2004 and 2003

(20) Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial data for 2005 and 2004 are as follows:

	2005 Quarter Ending
	March 31,		June 30,		September 30,		December 31,
	(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

	2004 Quarter Ending
	March 31,		June 30,		September 30,		December 31,
	(thousands, except per share amounts)
Net interest income	$	2,796	$	2,790	$	2,853	$	3,017
Net interest income after provision for loan losses		2,696		2,765		2,653		2,952
Net income		446		680		539		736
Earnings per common share:
Basic:	$	0.05	$	0.07	$	0.06	$	0.08
Diluted		0.05		0.07		0.06		0.08

Directors of Rome Bancorp, Inc. & The Rome Savings Bank	Executive Officers of The Rome Savings Bank
Charles M. Sprock	Charles M. Sprock
Chairman of the Board, President and Chief Executive Officer	President and Chief Executive Officer
Bruce R. Engelbert	David C. Nolan
Retired, Former Owner and President, Engelbert’s Jewelers, Inc.	Executive Vice President and Chief Financial Officer
David C. Grow
Partner, law firm of McMahon & Grow	George L. Barzee
	Vice President, Sales and Residential Lending
Kirk B. Hinman
President, Rome Strip Steel Company, Inc.	D. Bruce Fraser
	Vice President, Human Resources, Security and Compliance
T. Richard Leidig
Business Consultant
	Mary Faith Messenger
Richard H. McMahon	Vice President and Controller
Partner, law firm of McMahon & Grow
	Sandra L. Reader
	Vice President, Consumer Loans
Marion C. Scoville
Retired, Former Corporate Secretary and Executive Assistant to the President, The Rome Savings Bank	James F. Sullivan
	Vice President, Senior Loan Officer
Michael J. Valentine
President, Mele Manufacturing Company, Inc.	C. Francis Thalmann
	Vice President, Operations and Branch Administration

EX-23

Exhibit 23.1

Consent of Crowe Chizek and Company LLC

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement No. 333-36282 on Form S-8 of our reports dated March 3, 2006 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, 2005.

/s/ Crowe Chizek and Company LLC

Cleveland, Ohio

March 24, 2006

EX-23

Exhibit 23.2

Consent of KPMG LLP

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement No. 333-36282 on Form S-8 of Rome Bancorp, Inc. of our report dated February 17, 2004, with respect to the Rome Bancorp, Inc. and subsidiary consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for the year ended December 31, 2003, which report has been incorporated by reference in the December 31, 2005 Annual Report on Form 10-K of Rome Bancorp, Inc.

/s/ KPMG LLP

Syracuse, New York

March 24, 2006

EX-31

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 24, 2006	/s/ Charles M. Sprock
	Charles M. Sprock
	President and Chief Executive Officer

EX-31

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 24, 2006	/s/ David C. Nolan
	David C. Nolan
	Executive Vice President and Chief Financial Officer

EX-32

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, 2005 (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 24, 2006	/s/ Charles M. Sprock
		Charles M. Sprock
		President and Chief Executive Officer

EX-32

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, 2005 (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 24, 2006	/s/ David C. Nolan
	David C. Nolan
	Executive Vice President and Chief
	Financial Officer