ROME BANCORP INC
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  4  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  5  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. 6            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                                                                                                                                            7            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                                                8            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 9  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. 10  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. 11            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’      12                             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 13  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,  14  $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.  15            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.”  16            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   %                                                                                                                           17  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.  18            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                                                                              19            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       WeightedAverage   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.     20  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. 21  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    22                       •   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 23  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 24  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 25  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  26  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     27                 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     28                   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     29                   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;    30               •   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. 31
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 32  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 33  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:    34                        §   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
UNRESOLVED STAFF COMMENTS              None.
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
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.
SUBMISSION OF MATTERS TO A VOTE OF   SECURITY HOLDERS              None. PART II
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.”
SELECTED   FINANCIAL DATA              The following information included in Annual Report is incorporated herein by reference: “Selected Financial Data.”
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.”
QUANTITATIVE   AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   37
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.”
CHANGES   AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE              None.
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
OTHER INFORMATION              None. PART III
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
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
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.
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 2 ex13-1.htm EXHIBIT 13.1     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   ExercisePrice       Shares       Weighted   Average   ExercisePrice       Shares       Weighted   Average   ExercisePrice                                                                     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 3 ex23-1.htm EXHIBIT 23.1       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 4 ex23-2.htm EXHIBIT 23.2     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 5 ex31-1.htm EXHIBIT 31.1     Exhibit 31.1 CERTIFICATIONS I, Charles M. Sprock, certify that:              1.   I have reviewed this Annual Report on Form 10-K of   Rome Bancorp, Inc. (the “Company”);                2.   Based on my knowledge, this report does not contain   any untrue statement of a material fact or omit to state a material fact   necessary to make the statements made, in light of the circumstances under   which such statements were made, not misleading with respect to the period   covered by this report;                3.   Based on my knowledge, the consolidated financial   statements, and other financial information included in this report, fairly   present in all material respects the financial condition, results of   operations and cash flows of the Company as of, and for, the periods   presented in this report.                4.   The Company’s other certifying officer and I are   responsible for establishing and maintaining disclosure controls and   procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and   internal control over financial reporting (as defined in Exchange Act Rules   13a-15(f) and 15d-15(f)) for the registrant and have:                          (a)   Designed such disclosure controls and procedures, or   caused such disclosure controls and procedures to be designed under our   supervision, to ensure that material information relating to the Company,   including its consolidated subsidiaries, is made known to us by others within   those entities, particularly during the period in which this report is being   prepared;                        (b)   Designed such internal control over reporting, or   caused such internal control over financial reporting to be designed under   our supervision, to provide reasonable assurance regarding the reliability of   financial reporting and the preparation of financial statements for external   purposes in accordance with generally accepted accounting principles;                       (c)   Evaluated the effectiveness of the Company’s   disclosure controls and procedures and presented in this report our   conclusions about the effectiveness of the disclosure controls and   procedures, as of the end of the period covered by this report based on such   evaluation; and                       (d)   Disclosed in this report any change in the Company’s   internal control over financial reporting that occurred during the Company’s   fourth fiscal quarter that has materially affected, or is reasonably likely   to materially affect, the Company’s internal control over financial   reporting; and                      5.   The Company’s other certifying officer and I have   disclosed, based on our most recent evaluation of internal control over   financial reporting, to the Company’s auditors and the audit committee of the   Company’s board of directors (or persons performing the equivalent   functions):                   (a)   All significant deficiencies and material weaknesses   in the design or operation of internal control over financial reporting which   are reasonably likely to adversely affect the Company’s ability to record,   process, summarize and report financial information; and                       (b)   Any fraud, whether or not material, that involves   management or other employees who have a significant role in the Company’s   internal control over financial reporting.                      Date:  March 24, 2006   /s/ Charles M. Sprock                          Charles M. Sprock             President and Chief Executive Officer           EX-31 6 ex31-2.htm EXHIBIT 31.2     Exhibit 31.2 I, David C. Nolan, certify that:                  1.   I have   reviewed this annual report on Form 10-K of Rome Bancorp, Inc. (the   “Company”);                2.   Based on my   knowledge, this report does not contain any untrue statement of a material   fact or omit to state a material fact necessary to make the statements made,   in light of the circumstances under which such statements were made, not   misleading with respect to the period covered by this report;                3.   Based on my   knowledge, the consolidated financial statements, and other financial   information included in this report, fairly present in all material respects   the financial condition, results of operations and cash flows of the Company   as of, and for, the periods presented in this report.                 6.   The   Company’s other certifying officer and I are responsible for establishing and   maintaining disclosure controls and procedures (as defined in Exchange Act   Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting   (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant   and have:                       (a)   Designed   such disclosure controls and procedures, or caused such disclosure controls   and procedures to be designed under our supervision, to ensure that material   information relating to the Company, including its consolidated subsidiaries,   is made known to us by others within those entities, particularly during the   period in which this report is being prepared;                        (b)   Designed   such internal control over reporting, or caused such internal control over   financial reporting to be designed under our supervision, to provide   reasonable assurance regarding the reliability of financial reporting and the   preparation of financial statements for external purposes in accordance with   generally accepted accounting principles;                       (c)   Evaluated   the effectiveness of the Company’s disclosure controls and procedures and   presented in this report our conclusions about the effectiveness of the   disclosure controls and procedures, as of the end of the period covered   by  this report based on such   evaluation; and                       (d)   Disclosed in   this report any change in the Company’s internal control over financial   reporting that occurred during the Company’s fourth fiscal quarter that has   materially affected, or is reasonably likely to materially affect, the   Company’s internal control over financial reporting; and                   4.   The   Company’s other certifying officer and I have disclosed, based on our most   recent evaluation of internal control over financial reporting, to the   Company’s auditors and the audit committee of the Company’s board of   directors (or persons performing the equivalent functions):                   (a)   All   significant deficiencies and material weaknesses in the design or operation   of internal control over financial reporting which are reasonably likely to   adversely affect the Company’s ability to record, process, summarize and   report financial information; and                       (b)   Any fraud,   whether or not material, that involves management or other employees who have   a significant role in the Company’s internal control over financial   reporting.                          Date: March   24, 2006   /s/ David C.   Nolan                          David C.   Nolan                 Executive   Vice President and Chief Financial Officer          EX-32 7 ex32-1.htm EXHIBIT 32.1     Exhibit 32.1 STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE  SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350           The undersigned, Charles M. Sprock, is the President and Chief Executive Officer of Rome Bancorp, Inc. (the “Company”). This statement is being furnished in connection with the filing by the Company of the Company’s Annual Report on Form 10-K for the year ended December 31, 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 8 ex32-2.htm EXHIBIT 32.2       Exhibit 32.2 STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE  SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350           The undersigned, David C. Nolan, is the Executive Vice President and Chief Financial Officer of Rome Bancorp, Inc. (the “Company”). This statement is being furnished in connection with the filing by the Company of the Company’s Annual Report on Form 10-K for the year ended December 31, 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           -----END PRIVACY-ENHANCED MESSAGE-----
PRINCIPAL   ACCOUNTING FEES AND SERVICES   39                       PART IV
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