10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2009

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                            to                          

Commission File No. 000-25101

ONEIDA FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Federal	16-1561678
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
182 Main Street, Oneida, New York	13421-1676
(Address of Principal Executive Offices)	Zip Code

(315) 363-2000
(Registrant’s telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value	The NASDAQ Stock Market, LLC

Securities Registered Pursuant to Section 12(g) of the Act: None

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

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. YES þ NO o

     Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files. YES o NO o

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

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

Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller Reporting Company o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

     The aggregate market value of the 3,500,926 shares of voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price ($9.25) on June 30, 2009, as reported by the Nasdaq Market, was approximately $32.4 million. As of February 28, 2010, there were issued and outstanding 7,809,420 shares of the Registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Proxy Statement for the 2010 Annual Meeting of Stockholders of the Registrant (Part III).

(2) Annual Report to Stockholders (Part II).

TABLE OF CONTENTS

ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	40
ITEM 1.B	UNRESOLVED STAFF COMMENTS	47
ITEM 2.	PROPERTIES	47
ITEM 3.	LEGAL PROCEEDINGS	50
ITEM 4.	[RESERVED]	51
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	51
ITEM 6.	SELECTED FINANCIAL DATA	53
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	55
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	55
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	56
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	56
ITEM 9A.	CONTROLS AND PROCEDURES	56
ITEM 9B.	OTHER INFORMATION	57
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	57
ITEM 11.	EXECUTIVE COMPENSATION	57
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	57
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	58
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	58
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	59

PART I

ITEM 1. BUSINESS

The Companies

     Plan of Conversion and Reorganization

     As of February 9, 2010, the Board of Directors of Oneida Financial, MHC and Oneida Savings Bank adopted a Plan of Conversion and Reorganization providing for the conversion of the MHC into the capital stock form of organization resulting in the formation of a new state- chartered stock holding company, Oneida Financial Corp. (“Holding Company”), which was recently organized under Maryland law. Under the plan, the existing shares of the common stock of Oneida Financial Corp., a federal corporation (the “Company”), owned by Public Stockholders will be converted pursuant to an exchange ratio into shares of common stock of the new Holding Company (“Holding Company Common Stock”). Simultaneously, with the Conversion and Reorganization, the Holding Company will conduct a stock offering which represents the 55.2% ownership interest in the Company now owned by the MHC. The Conversion will result in the Bank being wholly owned by a state-chartered stock holding company which is owned by public stockholders. Shares of conversion stock will be offered in a subscription offering in descending order of priority to eligible deposit account holders, the Bank’s tax qualified employee benefit plan, then to other depositors of the Bank. Any shares of the new Holding Company’s common stock not sold in the subscription offering will be offered for sale to the general public, giving preference to natural persons residing in the Bank’s market area and to the public stockholders of the Company as of a record date to be determined.

     Upon completion of the plan, the public will own 100% of the outstanding stock of the Holding Company. The Holding Company will own 100% of the Bank.

     Oneida Financial, MHC

     Oneida Financial, MHC is the federally chartered mutual holding company of Oneida Financial Corp., a federal corporation. Oneida Financial, MHC’s principal business activity is the ownership of 4,309,750 shares of common stock of Oneida Financial Corp., or 55.2% of the issued and outstanding shares as of February 28, 2010.

     Oneida Financial, MHC’s executive offices are located at 182 Main Street, Oneida, New York 13421. Its telephone number at this address is (315) 363-2000.

     Oneida Financial Corp.

     Oneida Financial Corp. is a federally chartered corporation that owns all of the outstanding common stock of The Oneida Savings Bank (“Oneida Savings Bank”), a New York chartered savings bank. At December 31, 2009, Oneida Financial Corp. had consolidated assets of $590.5 million, deposits of $489.4 million and stockholders’ equity of $59.1 million. As of February 28, 2010, Oneida Financial Corp., the federally chartered corporation, had 7,809,402 shares of common stock issued and outstanding. As of that date, Oneida Financial, MHC owned 4,309,750 shares of common stock of Oneida Financial Corp., representing 55.2% of the issued and outstanding shares of common stock. The remaining shares were owned by the public.

     Oneida Financial Corp.’s executive offices are located at 182 Main Street, Oneida, New York 13421. Its telephone number at this address is (315) 363-2000 and its website address is www.oneidafinancial.com. Information on this website is not and should not be considered to be a part of this annual report and Form 10-K.

     Oneida Savings Bank

     Oneida Savings Bank is a New York chartered savings bank headquartered in Oneida, New York. Oneida Savings Bank was originally founded in 1866 as a mutual (meaning no stockholders) savings bank. In 1998, Oneida Savings Bank converted to a New York chartered stock savings bank and reorganized from the mutual to the two-tiered mutual holding company form of organization. Since 1998 the Bank has grown its traditional community banking franchise organically and through acquisitions of banks and nonbank companies that offer insurance sales, financial services, employee benefit consulting and other risk management products and services. The expansion into insurance and other financial services businesses has enabled Oneida Savings Bank to evolve from a traditional savings bank to a full-service financial services organization.

     Oneida Savings Bank’s deposits are insured by the FDIC up to the maximum amount permitted by law. Oneida Savings Bank is a community bank engaged primarily in the business of accepting deposits from customers through its main office and 11 full service branch offices and using those deposits, together with funds generated from operations and borrowings to make one-to-four family residential and commercial real estate loans, consumer loans and commercial business loans and to invest in mortgage-backed and other securities. Municipal deposit banking services are provided through a limited purpose commercial bank subsidiary, The State Bank of Chittenango. Oneida Savings Bank also sells insurance and other commercial services and products through Bailey & Haskell Associates, Inc., its wholly owned insurance agency subsidiary, and provides employee benefits consulting services through Benefit Consulting Group, Inc., its wholly owned consulting services subsidiary. In addition, Oneida Savings Bank provides risk management services to help mitigate and prevent work related injuries through its wholly owned subsidiary Workplace Health Solutions, Inc. Oneida Savings Bank is subject to comprehensive regulation and examination by the Federal Deposit Insurance Corporation and the New York State Banking Department.

     Oneida Savings Bank’s executive offices are located at 182 Main Street, Oneida, New York 13421. Its telephone number at this address is (315) 363-2000 and its website address is www.oneidabank.com. Information on this website is not and should not be considered to be a part of this annual report and Form 10-K.

     The State Bank of Chittenango

     The State Bank of Chittenango is a New York chartered limited purpose commercial bank headquartered in Chittenango, New York. Oneida Savings Bank acquired State Bank of Chittenango in 2002 and retained the municipal banking operations of the bank in a limited purpose wholly owned subsidiary. New York State law prohibits a savings bank from soliciting and servicing public funds (deposits of counties, cities, towns, school districts, etc.). Holding The State Bank of Chittenango as a limited purpose commercial bank subsidiary has enabled us to offer municipal deposit banking services throughout our market area. At December 31, 2009, State Bank of Chittenango held $110.6 million in assets, consisting primarily of U.S. Government obligations and mortgage-backed securities. The investment securities maintained at State Bank of Chittenango are used to collateralize $86.0 million in municipal deposits. All disclosures in this annual report and Form 10-K relating to Oneida Financial Corp.’s investments and deposits include the investments and deposits that are held by State Bank of Chittenango.

     Bailey & Haskell Associates

     Bailey & Haskell Associates, Inc. is the wholly owned insurance agency subsidiary of Oneida Savings Bank and is headquartered in Oneida, New York. It has six other offices in New York State and

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one office in South Carolina. Oneida Savings Bank completed the acquisition of Bailey & Haskell Associates in 2000. Bailey & Haskell Associates is a full-service insurance and financial services firm with over 90 employees providing services to over 19,000 customers. Bailey & Haskell Associates offers personal and commercial property insurance and other risk management products and services. Bailey & Haskell Associates represents many leading insurance companies, including Travelers, CNA, Hartford, Progressive, Cincinnati and Utica National. We have acquired five insurance agencies in the six years following the acquisition of Bailey & Haskell Associates, including Parsons, Cote & Company which was added during 2006. All of the acquired insurance agencies were merged into Bailey & Haskell Associates. The combination of acquired agencies and organic growth has resulted in total revenue for the year ended December 31, 2009 of $9.7 million. All disclosures in this annual report and Form 10-K relating to Oneida Financial Corp. are consolidated to include the activities of Bailey & Haskell Associates.

     Benefit Consulting Group

     Benefit Consulting Group, Inc., originally acquired in 2006, is the wholly owned employee benefits consulting and retirement plan administration subsidiary of Oneida Savings Bank. Benefit Consulting Group is headquartered in Oneida, New York and operates from offices in North Syracuse, New York and satellite offices in several branch offices of Oneida Savings Bank. Benefit Consulting Group currently serves more than 700 corporate and personal clients and offers employee benefit related services that are complementary to those provided by Oneida Savings Bank and Bailey & Haskell Associates. Benefit Consulting Group provides investment management, financial planning and estate planning services to individuals, and provides defined contribution and benefit plans, actuarial services and human resource management services to businesses. Benefit Consulting Group had total revenue of $5.7 million for the year ended December 31, 2009. All disclosures in this annual report and Form 10-K relating to Oneida Financial Corp. are consolidated to include the activities of Benefit Consulting Group.

     Workplace Health Solutions

     Workplace Health Solutions, Inc. is the wholly owned risk management subsidiary of Oneida Savings Bank. It is headquartered in Oneida, New York and operates from offices in North Syracuse, New York. Workplace Health Solutions was established in January 2008 as a risk management company with services to help mitigate and prevent work related injuries. Specifically, Workplace Health Solutions works with employers to develop informed hiring programs, coordinates employee training programs and consults with and advises employers relative to workers’ compensation coverage and incidents. In addition, this subsidiary develops a network of medical professionals to evaluate injured workers and arrange for proper treatment of and recovery from workplace injuries from a risk management perspective. Workplace Health Solutions was developed to complement and refer the products and services offered by our other subsidiaries with an overall philosophy of providing innovative risk management services. Workplace Health Solutions had total revenue of $491,000 for the year ended December 31, 2009. All disclosures in this annual report and Form 10-K relating to Oneida Financial Corp. are consolidated to include the activities of Workplace Health Solutions.

     Oneida Preferred Funding Corp.

     Oneida Savings Bank established Oneida Preferred Funding Corp. in 1999 as a wholly owned real estate investment trust subsidiary. At December 31, 2009, Oneida Preferred Funding Corp. held $51.1 million in mortgage and mortgage related assets. All disclosures in this Form 10-K relating to Oneida Financial Corp.’s loans and investments include loans and investments that are held by Oneida Preferred Funding Corp.

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Market Area

     We conduct business from our headquarters and 10 full service branch offices throughout Madison and Oneida Counties and 1 full service branch office in Onondaga County in New York. Our primary lending area is Madison and Oneida Counties in New York and surrounding counties and most of our deposit customers reside in the same area. The City of Oneida is located approximately 30 miles east of Syracuse and 20 miles west of Utica. Our market area is characterized as rural and serves as a bedroom community to the cities of Syracuse and Utica, New York. The economy in our market area is relatively diverse with health care, college/university, financial/insurance and tourism/recreation being the most prominent sectors as well as light manufacturing and technology related industries. The largest employers in our market area includes Oneida Nation’s Turning Stone Casino and Resort, Oneida Healthcare Center and other local and regional medical facilities, Colgate University and Morrisville College. There are also many small to mid-sized businesses that employ fewer than 100 persons and support the local economy. Madison, Oneida and Onondaga Counties have a total population of 760,000 and total households of 302,000 according to SNL Financial. Since 2000, our primary market area has had population declines with the exception of Madison County which has demonstrated population growth generally in line with the New York state average according to SNL Financial.

     In view of the current economic downturn and despite the population trends, our primary market area has remained a stable banking market. As of December 2009, the unemployment rates in Madison, Oneida and Onondaga Counties in New York were 8.4%, 7.5% and 7.6%, respectively, compared to the States of New York average of 8.8% and the national average of 9.7%, according to the United States Department of Labor. As of June 30, 2009, median household income levels ranged from $47,038 to $53,512 in the three counties were we maintain branch offices. The median household income growth rates of persons residing in Oneida, Madison and Onondaga Counties were below that of New York State and the United states from 2000 to 2009. However, the median household income growth rates in Madison, Oneida and Onondaga Counties are expected to grow at rates of 7.8%, 9.8% and 8.7%, respectively, between 2009 and 2014 compared to 6.1% for the State of New York average and 4.1% for the national average according to estimates by SNL Financial.

Competition

     Competition in the banking and financial services industry is intense. We compete with commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors have substantially greater resources and lending limits than we do and may offer certain services that we do not or cannot provide. Moreover, credit unions which offer substantially the same services as we offer are not subject to federal or state income taxation. Trends toward consolidation of the financial services industry and the removal of restrictions on interstate branching and banking powers may make it more difficult for smaller institutions such as Oneida Savings Bank to compete effectively with large national and regional banking institutions. Our profitability depends upon the ability to successfully compete in our market area.

Lending Activities

     General. Our principal lending activity has been the origination for retention in our portfolio of adjustable-rate mortgage (“ARM”) loans collateralized by one-to-four family residential real estate located within our primary market area. As a result of the continuation of relatively low market interest rates in recent periods, borrowers have shown a preference for fixed-rate loans. Consequently, in recent periods we have originated more fixed-rate one-to-four family loans for resale in the secondary market, without recourse and on a servicing retained basis. In order to complement our traditional emphasis of one-to-four family residential real estate lending, management has sought to increase the number of higher yielding commercial real estate loans, consumer loans and commercial business loans. To a limited extent, we will originate loans secured by multi-family properties.

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     Loan Portfolio Composition. Set forth below is selected information concerning the composition of our loan portfolio (included loans held for sale) in dollar amounts and in percentages (before deductions for allowance for loan losses) as of the dates indicated.

	At December 31,
	2009					2008					2007					2006					2005
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
Real Estate Loans:
One-to-four family	$	101,095		33.8	%	$	108,702		35.7	%	$	98,707		34.4	%	$	85,467		34.2	%	$	81,018		34.1	%
Multi-family		8,915		3.0			5,824		1.9			3,988		1.4			2,423		0.9			2,695		1.1
Home equity		43,014		14.4			39,684		13.0			32,363		11.3			25,088		10.1			22,189		9.3
Construction and land		4,731		1.6			1,331		0.4			4,225		1.5			6,496		2.6			4,860		2.0
Commercial real estate		59,178		19.8			60,516		19.8			63,936		22.2			50,714		20.4			48,746		20.5
Total real estate loans		216,933		72.6			216,057		70.8			203,219		70.8			170,188		68.2			159,508		67.0
Consumer Loans:
Automobile loans		39,067		13.1			41,879		13.7			38,871		13.5			39,885		16.0			41,123		17.3
Recreational Vehicles		1,278		0.4			1,347		0.4			1,156		0.4			968		0.4			920		0.4
Personal loans		1,897		0.6			2,715		0.9			2,680		1.0			2,236		1.0			2,058		0.9
Other consumer loans		768		0.3			877		0.3			1,070		0.4			953		0.3			794		0.3
Total consumer loans		43,010		14.4			46,818		15.3			43,777		15.3			44,042		17.7			44,895		18.9
Commercial business loans		38,797		13.0			42,241		13.9			39,933		13.9			35,292		14.1			33,633		14.1
Total consumer and commercial business loans		81,807		27.4			89,059		29.2			83,710		29.2			79,334		31.8			78,528		33.0
Total loans	$	298,740		100.0	%	$	305,116		100.0	%	$	286,929		100.0	%	$	249,522		100.0	%	$	238,036		100.0	%
Less:
Allowance for losses		2,901					2,624					2,511					2,081					1,959
Total loans receivable, net	$	295,839				$	302,492				$	284,418				$	247,441				$	236,077

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     The following table sets forth the composition of our loan portfolio (including loans held for sale) by fixed and adjustable rates at the dates indicated.

	At December 31,
	2009					2008					2007					2006					2005
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
FIXED-RATE LOANS:
Real Estate Loans:
One-to-four family	$	33,121		11.1	%	$	33,182		11.0	%	$	36,141		12.6	%	$	25,483		10.2	%	$	25,655		10.8	%
Multi-family		145		0.0			175		0.0			67		0.0			—		—			—		—
Home equity		14,736		4.9			20,198		6.6			17,317		6.1			13,002		5.3			10,716		4.5
Construction and land		4,592		1.6			1,191		0.4			2,481		0.9			6,418		2.6			4,275		1.8
Commercial real estate		3,390		1.1			3,212		1.0			4,230		1.4			3,240		1.3			3,928		1.7
Total real estate loans		55,984		18.7			57,958		19.0			60,236		21.0			48,143		19.4			44,574		18.8
Total consumer loans		41,919		14.0			44,992		14.7			42,657		14.9			43,380		17.4			44,189		18.6
Total commercial loans		21,337		7.2			21,112		7.0			17,770		6.2			17,157		6.9			14,112		5.9
Total fixed-rate loans		119,240		39.9			124,062		40.7			120,663		42.1			108,680		43.7			102,875		43.3
ADJUSTABLE-RATE LOANS:
Real Estate Loans:
One-to-four family	$	67,974		22.7	%	$	75,520		24.7	%	$	62,566		21.8	%	$	59,984		24.0	%	$	55,363		23.3	%
Multi-family		8,770		3.0			5,649		1.9			3,921		1.4			2,423		0.9			2,695		1.1
Home equity		28,278		9.5			19,486		6.4			15,046		5.2			12,086		4.8			11,473		4.8
Construction and land		139		0.0			140		0.0			1,744		0.6			78		0.0			585		0.2
Commercial real estate		55,788		18.7			57,304		18.8			59,706		20.8			47,474		19.1			44,818		19.1
Total real estate loans		160,949		53.9			158,099		51.8			142,983		49.8			122,045		48.8			114,934		48.3
Total consumer loans		1,091		0.4			1,826		0.6			1,120		0.4			662		0.3			706		0.3
Total commercial business loans		17,460		5.8			21,129		6.9			22,163		7.7			18,135		7.2			19,521		8.2
Total adjustable-rate loans		179,500		60.1			181,054		59.3			166,266		57.9			140,842		56.3			135,161		56.7
Total loans		298,740		100.0	%		305,116		100.0	%		286,929		100.0	%		249,522		100.0	%		238,036		100.0	%
Less:
Allowance for loan losses		2,901					2,624					2,511					2,081					1,959
Total loans receivable, net	$	295,839				$	302,492				$	284,418				$	247,441				$	236,077

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     One-to-four family Residential Loans. One of our primary lending activities is the origination of one-to-four family residential mortgage loans secured by property located in our primary lending area. Generally, one-to-four family residential mortgage loans are made in amounts up to 80% of the lesser of the appraised value or purchase price of the property. However, we will originate one-to-four family loans with loan-to-value ratios of up to 97%, provided the borrower obtains private mortgage insurance. Fixed-rate loans are originated for terms of up to 30 years. One-to-four family fixed-rate loans are offered with a monthly payment feature. We do not originate and have not originated sub-prime, Alt-A, negative amortization or other higher risk residential mortgage loans.

     We originate both adjustable-rate and fixed-rate one-to-four family loans. As a result of the continued low interest rate environment during the past year, a greater percentage of our one-to-four family loan originations consisted of fixed-rate one-to-four family mortgage loans. We originate and generally sell in the secondary market fixed-rate one-to-four family loans on a servicing retained basis without recourse to Oneida Savings Bank. At December 31, 2009, loans serviced by Oneida Savings Bank for others totaled $126.3 million. During the years ended December 31, 2009 and December 31, 2008, we sold $55.9 million and $18.6 million, respectively in fixed-rate one-to-four family loans. As of December 31, 2009 we had $4.7 million of mortgage loan forward sale commitments. The fair value of these commitments is not material.

     The interest rate on ARM loans is indexed to the one year Treasury bill rate. Our ARM loans currently provide for maximum rate adjustments of 200 basis points per year and 500 basis points over the term of the loan. We offer ARM loans with initial interest rates that are below the fully indexed equivalent loan rate, referred to as “teaser rates.” Residential ARM loans amortize over a maximum term of up to 30 years. In addition to one year ARM loans, we offer certain hybrid ARM loans which provide for an initial fixed term of three or five years and then are converted into a one year ARM loan after the fixed time period. ARM loans are originated for retention in our portfolio.

     ARM loans decrease the risk associated with changes in market interest rates by periodically repricing, but involve other risks. As interest rates increase, the underlying required periodic payments by the borrower increase, thus increasing the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate is also limited by the maximum periodic and lifetime interest rate adjustment permitted by the terms of the ARM loans, and therefore, is potentially limited in effectiveness during periods of rapidly rising interest rates. Decreasing interest rates could result in a downward adjustment of the contractual interest rates resulting in lower interest income. At December 31, 2009, 22.7% of our loan portfolio consisted of one-to-four family residential loans with adjustable interest rates.

     All one-to-four family residential mortgage loans originated by Oneida Savings Bank include “due-on-sale” clauses, which give us the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid.

     At December 31, 2009, approximately $101.1 million, or 33.8% of our loan portfolio, consisted of one-to-four family residential loans.

     Home Equity Loans. We offer home equity loans that are secured by the borrower’s primary residence. We offer a home equity line of credit under which the borrower is permitted to draw on the home equity line of credit during the first ten years after it is originated and repay the outstanding balance over a term not to exceed 25 years from the date the line of credit is originated. The interest rates on home equity lines of credit are fixed for the first year and adjust monthly thereafter at a margin over the prime interest rate. We also offer a home equity product providing for a fixed-rate of interest. Both

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adjustable-rate and fixed-rate home equity loans are underwritten under the same criteria that we use to underwrite one-to-four family fixed-rate loans. Fixed-rate home equity loans are originated with terms up to ten years. Home equity loans may be underwritten with a loan to value ratio of 90% when combined with the principal balance of the existing mortgage loan. The maximum amount of a home equity loan may not exceed $1.0 million unless approved by the Board of Directors. We generally require an appraisal on the property securing loans in excess of $75,000 at the time of the loan application (but not thereafter) in order to determine the value of the property securing the home equity loans. We utilize alternative methods in determining the value of properties of loans less than $75,000 such as a limited appraisal or review of tax bills. At December 31, 2009 the outstanding balance of home equity loans totaled $43.0 million, or 14.4% of our loan portfolio.

     Commercial Real Estate Loans. At December 31, 2009, $68.1 million, or 22.8% of the total loan portfolio consisted of commercial real estate and multi-family loans. Commercial real estate and multi-family residential loans are secured by office buildings, medical facilities, mixed-use properties, religious facilities, other commercial properties and multi-family residential properties. We originate adjustable rate commercial mortgage loans with terms of up to 20 years. The maximum loan-to-value ratio of commercial real estate loans is 80%. At December 31, 2009, the largest commercial real estate loan had a principal balance of $2.8 million and was secured by a car dealership building and fixtures. This loan was performing in accordance with its terms at December 31, 2009.

     In underwriting commercial real estate and multi-family residential loans, we review the expected net operating income generated by the real estate to ensure that it is at least 110% of the amount of the monthly debt service; the age and condition of the collateral; the financial resources and income level of the borrower; and the borrower’s business experience. Personal guarantees are routinely obtained from all commercial real estate borrowers.

     Loans secured by commercial real estate and multi-family residential properties generally are larger than one-to-four family residential loans and involve a greater degree of risk. Commercial and multi-family residential mortgage loans often involve large loan balances to single borrowers or groups of related borrowers. Payments on these loans depend to a large degree on the results of operations and management of the properties or underlying businesses, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of commercial real estate loans makes them more difficult for management to monitor and evaluate.

     Construction and Land. At December 31, 2009, construction and land loans totaled $4.7 million, or 1.6% of the total loan portfolio. We generally do not originate speculative construction loans, and we had no such loans in our portfolio at December 31, 2009. Our construction and land loans consisted of $700,000 of fixed-rate one-to-four family residential construction loans as well as $4.0 million of commercial new construction loans. One-to-four family residential construction loans are offered as interest-only loans at a fixed rate of interest for up to a five month construction period. Immediately following the construction period the loan begins monthly amortizing payments consistent with the terms of the one-to-four family permanent mortgage loan product. Commercial construction loans can consist of land development loans or new building construction loans. Land development loans are collateralized by a mortgage on the property which is supported by an appraisal. Commercial construction loans are given for the construction phase of a building. There can be an interest only period for new construction loans not to exceed one year. Once the construction is completed, the loan is transferred into permanent financing. Draws for both residential and commercial new construction are based on the loan approval, commitment letter, and a building and loan agreement. Property inspections during the construction phase are also required. Construction financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of

8

construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project proves to be inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property. In the event we make a land acquisition loan on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. Construction loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated.

     Consumer Lending. At December 31, 2009, consumer loans totaled $43.0 million, or 14.4% of the total loan portfolio. Our consumer loans consist of automobile loans, recreational vehicle loans, secured personal loans (secured by bonds, equity securities or other readily marketable collateral), and other consumer loans (consisting of passbook loans and unsecured home improvement loans). Consumer loans are originated with terms to maturity of three to seven years. Historically, we have sought to increase the level of consumer loans primarily through increased automobile lending. We participate in a number of indirect automobile lending programs with local automobile dealerships. All indirect automobile loans must satisfy our underwriting criteria for automobile loans originated directly by us to the borrower and must be approved by one of our lending officers. At December 31, 2009, loans secured by automobiles totaled $39.1 million, of which $31.1 million were originated through our indirect automobile lending program. We have also sought to increase the level of automobile loans directly to borrowers by increasing marketing efforts with existing customers. Automobile loans generally do not have terms exceeding five years. We do not provide financing for leased automobiles.

     Consumer loans generally have shorter terms and higher interest rates than one-to-four family mortgage loans. In addition, consumer loans expand the products and services we offer to better meet the financial services needs of our customers. Consumer loans generally involve greater credit risk than residential mortgage loans because of the difference in the underlying collateral. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage to, loss of, or depreciation in the underlying collateral. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections depend on the borrower’s personal financial stability. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

     Our underwriting procedures for consumer loans include an assessment of the applicant’s credit history and the ability to meet existing and proposed debt obligations. Although the applicant’s creditworthiness is the primary consideration, the underwriting process also includes a comparison of the value of the security to the proposed loan amount. We underwrite consumer loans internally, which we believe limits its exposure to credit risks associated with loans underwritten or purchased from brokers and other external sources.

     Commercial Business Loans. At December 31, 2009, we had $38.8 million of commercial business loans which represented 13.0% of the total loan portfolio. Commercial business loans are originated with terms of up to seven years, at fixed rates of interest except for lines of credit which have variable rates of interest. Commercial business loans are generally originated to persons with a prior relationship with Oneida Savings Bank or referrals from persons with a prior relationship with Oneida Savings Bank. The decision to grant a commercial business loan depends primarily on the creditworthiness and cash flow of the borrower (and any guarantors) and secondarily on the value of and

9

ability to liquidate the collateral which generally consists of receivables, inventory and equipment. We generally require annual financial statements and tax returns from our commercial business borrowers and personal guarantees from the commercial business borrowers. We also generally require an appraisal of any real estate that secures the commercial business loan. At December 31, 2009, the largest commercial business loan totaled $1.8 million, which was secured by business assets, life insurance and a residential property of a construction management company. Although this loan was performing in accordance with its terms at December 31, 2009, this loan was part of a $2.2 million relationship that we had determined to be impaired at that date. See “Asset Quality, Delinquencies and Classified Assets” herein for additional information. At December 31, 2009, unsecured commercial business loans totaled $861,000.

     Commercial business lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and commercial real estate lending. Real estate lending is generally considered to be collateral based, with loan amounts based on predetermined loan to collateral values and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial business loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because equipment and other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment.

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     Loan Maturity Schedule. The following table sets forth certain information as of December 31, 2009, regarding the amount of loans (including loans held for sale) maturing in our portfolio. Demand loans having no stated schedule of repayment and no stated maturity and overdrafts are reported as due in one year or less. All loans are included in the period in which the final contractual repayment is due.

			One Through						Ten Through Twenty-Five
	Within One Year		Three Years		Three Through Five Years		Five Through Ten Years		Years		Beyond Twenty-Five Years		Total
							(In thousands)
Real estate loans:
One-to-four family	$	48	$	564	$	2,264	$	10,621	$	66,121	$	21,477	$	101,095
Multi-family		7		41		644		590		7,633		—		8,915
Home equity		235		1,605		5,288		31,368		4,518		—		43,014
Construction and land		4,731		—		—		—		—		—		4,731
Commercial real estate		39		385		1,867		12,945		43,942		—		59,178
Total real estate loans		5,060		2,595		10,063		55,524		122,214		21,477		216,933
Consumer loans		2,187		10,849		22,228		7,307		275		164		43,010
Commercial business loans		13,635		6,159		10,797		7,296		910		—		38,797
Total loans	$	20,882	$	19,603	$	43,088	$	70,127	$	123,399	$	21,641	$	298,740

     Fixed- and Adjustable-Rate Loan Schedule. The following table sets forth at December 31, 2009, the dollar amount of all fixed-rate and adjustable-rate loans (including loans held for sale) due after December 31, 2010. Adjustable- and floating-rate loans are included based on contractual maturities.

	Due After December 31, 2010
	Fixed		Adjustable		Total
	(In thousands)
Real estate loans
One-to-four family	$	33,105	$	67,942	$	101,047
Multi-family		138		8,770		8,908
Home equity		14,657		28,122		42,779
Construction and land		—		—		—
Commercial real estate		3,385		55,754		59,139
Total real estate loans		51,285		160,588		211,873
Consumer loans		40,488		335		40,823
Commercial business loans		18,909		6,253		25,162
Total loans	$	110,682	$	167,176	$	277,858

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     Loan Origination, Sales and Repayments. The following table sets forth our loan origination, sales and repayment activities for the periods indicated. Purchased loans represent those purchased as part of the acquisition of the National Bank of Vernon as well individual commercial loans which are considered participation loans. The sales of loans represent one-to-four family fixed rate loans that are sold in the secondary market within the normal course of business as well as commercial loans in which a portion for of the loan has been sold.

	Year Ended December 31,
	2009			2008		2007
	(Dollars in thousands)
Originations by Type:
Adjustable-Rate:
Real estate:
One-to-four family	$	4,687		$	20,365	$	10,868
Multi-family		3,675			125		969
Home equity		10,267			13,444		5,838
Construction and land		—			—		2,157
Commercial real estate		4,900			5,753		2,858
Total real estate loans		23,529			39,687		22,690
Consumer loans		1,314			1,844		1,632
Commercial business loans		9,223			4,211		8,023
Total adjustable rate loans	$	34,066		$	45,742	$	32,345
Fixed-Rate:
Real estate:
One-to-four family	$	60,405		$	19,663	$	18,024
Multi-family		—			2,068		—
Home equity		3,819			5,940		7,166
Construction and land		8,363			5,670		8,351
Commercial real estate		1,393			—		2,264
Total real estate loans		73,980			33,341		35,805
Consumer loans		18,409			25,296		20,987
Commercial business loans		10,004			16,508		12,779
Total fixed rate loans	$	102,393		$	75,145	$	69,571
Total loans originated	$	136,459		$	120,887	$	101,916
Purchased:
Adjustable-Rate:
Real estate:
One-to-four family	$	—		$	—	$	—
Multi-family		—			—		1,013
Home equity		—			—		2,353
Commercial real estate		—			—		—
Total real estate loans		—			—		3,366
Consumer loans		—			—		—
Commercial business loans		—			1,000		4,017
Total adjustable loans	$	—		$	1,000	$	7,383
Fixed-Rate:
Real estate:
One-to-four family	$	—		$	—	$	10,676
Multi-family		—			—		—
Home equity		—			—		768
Commercial real estate		—			—		7,307
Total real estate loans		—			—		18,751
Consumer loans		—			—		1,443
Commercial business loans		—			—		1,906
Total fixed rate loans	$	—		$	—	$	22,100
Total loans purchased	$	—		$	1,000	$	29,483
Sales:
Real estate:
One-to-four family	$	55,935		$	18,572	$	17,938
Commercial loans		1,410			—		—
Total loans sold	$	57,345		$	18,572	$	17,938
Repayments:
Real estate:
One-to-four family	$	16,764		$	11,461	$	8,390
Multi-family		584			357		417
Home equity		10,756			12,063		8,850
Construction and land		4,963			8,564		12,779
Commercial real estate		7,631			9,173		(793	)
Total real estate loans		40,698			41,618		29,643
Consumer loans		23,531			24,099		24,327
Commercial business loans		21,261			19,411		22,084
Total repayments	$	85,490		$	85,128	$	76,054
Total reductions	$	142,835		$	103,700	$	93,992
Net (decrease) increase	$	(6,376	)	$	18,187	$	37,407

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     Loan Approval Procedures and Authority. The Board of Directors establishes our lending policies and loan approval limits. Loan officers generally have the authority to originate mortgage loans, consumer loans and commercial business loans up to amounts established for each lending officer. All residential loans over $500,000 must be approved by the Bank Loan Committee (consisting of two persons; the President and/or Executive Vice President in charge of credit administration and either one of two senior lending officers appointed to this committee). All loan relationships in excess of $500,000 and up to $2.0 million (exclusive of residential mortgages and home equity loans secured by a lien on the borrower’s primary residence) must be approved by the Bank Loan Committee. All lending relationships in excess of $2.0 million up to $3.0 million (exclusive of residential mortgages and home equity loans secured by a lien on the borrower’s primary residence) must be approved by the Executive Committee of the Board of Directors. All lending relationships in excess of $3.0 million must be approved by the Board of Directors.

     All independent appraisers are approved by the Board of Directors annually. We require an environmental site assessment for all non-residential mortgage loans. Our policy is to require hazard insurance on all mortgage loans and generally to require title insurance on all residential mortgage loans.

     Loan Origination Fees and Other Income. In addition to interest earned on loans, we receive loan origination fees. Such fees and costs vary with the volume and type of loans and commitments made and purchased, principal repayments and competitive conditions in the mortgage markets, which in turn respond to the demand and availability of money.

     In addition to loan origination fees, we also receive other fees, servicing income and other income that consist primarily of mortgage servicing fees and late charges.

     Loans-to-One Borrower. Savings banks are subject to the same loans-to-one borrower limits as those applicable to national banks, which under current regulations restrict loans to one borrower to an amount equal to 15% of unimpaired net worth on an unsecured basis, and an additional 10% of unimpaired net worth in the case of loans that are fully secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations at least equal to the amount of the loan. Our policy provides that loans to one borrower (or related borrowers) should not exceed 15% of our capital.

     At December 31, 2009, the largest amount loaned to one borrower consisted of commercial real estate loans secured by medical office space to a corporation with an outstanding balance totaling $4.8 million. This amount consisted of four commercial real estate loans secured by the property and other business assets. At December 31, 2009 this lending relationship was performing in accordance with its terms.

Asset Quality, Delinquencies and Classified Assets

     Collection Procedures. A computer generated late notice is sent when a loan’s grace period ends. After the late notice has been mailed, accounts are assigned to collectors for follow-up to determine reasons for delinquency and explore payment options. Generally, loans that are 30 days delinquent will receive a default notice. With respect to consumer loans, we will commence efforts to repossess the

13

collateral after the loan becomes 45 days delinquent. Loans secured by real estate that are delinquent over 60 days are turned over to our Managed Asset Manager. Generally, after 90 days we will commence legal action.

     Loans Past Due and Nonperforming Assets. Loans are reviewed on a regular basis and are placed on non-accrual status when they are 90 days past due or earlier when, in the opinion of management, the collection of additional interest is doubtful. Loans are generally placed on non-accrual status when either principal or interest is 90 days or more past due. Interest accrued and unpaid at the time a loan is placed on a non-accrual status is reversed from interest income.

     Real estate acquired as a result of foreclosure or by deed in lieu of foreclosure is classified as Other Real Estate (“REO”) until such time as it is sold. When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at its fair value, less estimated costs of disposal. If the value of the property is less than the loan balance, less any related specific loan loss provisions, the difference is charged against the allowance for loan losses. Any subsequent write-down of REO is charged against earnings.

     The following table sets forth certain delinquencies in our loan portfolio as of December 31, 2009. When a loan is delinquent 90 days or more or earlier when, in the opinion of management, the collection of additional interest is doubtful, we fully reverse all interest accrued and ceases to accrue interest thereafter.

	Loans Delinquent for:
	60-89 Days				90 Days or More				Total Delinquent Loans
	Number		Amount		Number		Amount		Number		Amount
					(Dollars in thousands)
One-to-four family		1	$	39		3	$	195		4	$	234
Multi-family		—		—		—		—		—		—
Home equity		1		21		2		68		3		89
Construction and land		—		—		—		—		—		—
Commercial real estate		1		25		1		199		2		224
Commercial business		—		—		—		—		—		—
Total		5	$	117		6	$	462		11	$	579

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     Nonaccrual Loans and Nonperforming Assets. The following table sets forth information regarding nonaccrual loans and other nonperforming assets.

	At December 31,
	2009			2008			2007			2006			2005
				(Dollars in thousands)
Non-accruing loans:
One-to-four family	$	195		$	394		$	223		$	51		$	223
Multi-family		—			—			—			—			—
Home equity		68			—			18			—			—
Construction and land		—			—			—			—			—
Commercial real estate		199			—			—			—			—
Consumer		—			—			—			—			2
Commercial business		89			119			134			—			—
Total		551			513			375			51			225
Accruing loans delinquent more than 90 days:
Total		—			—			—			—			—
Total nonperforming loans	$	551		$	513		$	375		$	51		$	225
Foreclosed assets:
Total		—			—			—			—			—
Non-accruing investment securities
Trust preferred securities		1,897			—			—			—			—
Total		1,897			—			—			—			—
Total nonperforming assets	$	2,448		$	513		$	375		$	51		$	225
Total nonperforming loans as a percentage of total loans		0.18	%		0.17	%		0.13	%		0.02	%		0.09	%
Total nonperforming assets as a percentage of total assets		0.41	%		0.09	%		0.07	%		0.01	%		0.05	%

     Of our total nonperforming loans at December 31, 2009 of $551,000, $394,000 consisted of four one-to-four family loans and one commercial real estate loan. The property underlying the commercial real estate loan with an outstanding balance of $199,000 was foreclosed upon in January 2010 and is currently in the process of being listed for sale. We do not anticipate any material loss on this loan. In addition, we believe that the four one-to-four family loans with an aggregate outstanding balance of $195,000 are adequately collateralized and we do not anticipate any losses on such loans. These loans are in various stages of foreclosure. In addition, $68,000 of the nonperforming loans consisted of two home equity loans. One of these loans has been brought current since December 31, 2009 and is not longer considered nonperforming and the property securing the other loan is in the process of being sold. We do not anticipate losses on either of these loans. Also included in nonperforming loans was $89,000 representing two commercial loans, each of which is partially guaranteed by SBA. We do not anticipate a loss on either of these loans.

     During the years ended December 31, 2009 and 2008, respectively, gross interest income of $30,000 and $19,000 would have been recorded on nonaccruing loans under their original terms, if the loans had been current throughout the period. No interest income was recorded on nonaccruing loans during the years ended December 31, 2009 and 2008.

15

     Classification of Assets. On the basis of management’s review of its assets, at the dates indicated we had classified assets and other criticized assets as follows:

	2009		2008		2007
			(In thousands)
Classified assets:
Substandard		2,991		4,954		4,722
Doubtful		239		146		75
Loss		—		—		—
Total classified assets	$	3,230	$	5,100	$	4,797
Impaired assets		8,549		—		—
Special Mention		533		541		2,509
Total criticized assets	$	12,312	$	5,641	$	7,306

     At December 31, 2009, our classified assets included loans identified by bank regulatory definitions of “substandard” and “doubtful”. We had no assets classified as “loss” at December 31, 2009. Substandard assets consisted of (i) four commercial loans with a principal balance of $147,000, (ii) seven commercial real estate loans with a principal balance of $2.4 million and (iii) seven one-to-four family residential loans with a principal balance of $447,000. Doubtful assets consisted of (i) three commercial loans with a principal balance of $203,000 and (ii) one commercial real estate loan with a principal balance of $36,000. In addition to the classified assets, we have identified certain impaired assets at December 31, 2009 consisting of (i) two commercial loans with a principal balance of $2.2 million, (ii) eight trust preferred securities with a carrying value of $5.6 million and (iii) one private placement collateralized mortgage obligation with a carrying value of $744,000. Included as a component of criticized assets are loans identified as “special mention” as determined by management according to regulatory guidance. At December 31, we had one commercial loan identified as special mention with a principal balance of $533,000.

     Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses and valuation of real estate owned. Such agencies may require us to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. At December 31, 2009, the total allowance was $2.9 million, which amounted to 0.98% of loans, net and 526.5% of nonperforming loans. Management monitors and modifies the level of the allowance for loan losses in order to maintain it at a level which it considers adequate to provide for probable incurred loan losses. For the years ended December 31, 2009 and 2008, we had net charge-offs of $483,000 and $412,000, respectively, against this allowance.

     Quarterly, management evaluates the adequacy of the allowance for loan losses and determines the appropriate level of provision for loan losses by applying a range of estimated loss percentages to each category of performing loans and classified loans. The allowance adjustment is based upon the net change in each portfolio category, as well as adjustments related to impaired loans, since the prior quarter. A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. The measurement of impaired loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate, except that all collateral-dependent loans are measured for impairment based on the estimated fair value of the collateral securing the loan. Management believes the current method of determining the adequacy of the allowance is prudent in light of our intention to continue to emphasize the origination of consumer loans, commercial business loans and commercial real estate loans.

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     Analysis of the Allowance For Loan Losses. The following table sets forth the analysis of the allowance for loan losses for the periods indicated.

	At or For the Years Ended December 31,
	2009			2008			2007			2006			2005
				(Dollars in thousands)
Balance at beginning of period	$	2,624		$	2,511		$	2,081		$	1,959		$	1,982
Charge-offs:
One-to-four family		17			23			—			17			9
Multi-family		—			—			—			—			—
Home equity		42			—			—			10			10
Construction and land		—			—			—			—			—
Commercial real estate		27			—			—			—			44
Consumer		547			335			215			301			448
Commercial business		60			168			16			99			10
Total		693			526			231			427			521
Recoveries:
One-to-four family		1			2			6			5			10
Multi-family		—			—			—			—			—
Home equity		—			—			—			19			—
Construction and land		—			—			—			—			—
Commercial real estate		15			—			—			—			—
Consumer		178			91			88			139			127
Commercial business		16			21			41			106			1
Total		210			114			135			269			138
Net charge-offs		(483	)		(412	)		(96	)		(158	)		(383	)
Addition of National Bank of Vernon allowance from acquisition		—			—			526			—			—
Provision charged to operations		760			525			—			280			360
Balance at end of period	$	2,901		$	2,624		$	2,511		$	2,081		$	1,959
Allowance for loan losses as a percentage of total loans receivable, net		0.98	%		0.87	%		0.88	%		0.84	%		0.83	%
Ratio of net charge-offs to average loans		0.16	%		0.14	%		0.04	%		0.06	%		0.17	%
Ratio of net charge-offs to non-performing loans		87.66	%		80.3	%		25.6	%		309.80	%		170.22	%

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     Allocation of Allowance for Loan Losses. The following table sets forth the allocation of the allowance for loan losses by loan category for the periods indicated.

	At December 31,
	2009							2008							2007
					Percentage of							Percentage of							Percentage of
					Loans in							Loans in							Loans in
	Amount of		Loan		Each			Amount of		Loan		Each			Amount of		Loan		Each
	Loan Loss		Amounts by		Category to			Loan Loss		Amounts by		Category to			Loan Loss		Amounts by		Category to
	Allowance		Category		Total Loans			Allowance		Category		Total Loans			Allowance		Category		Total Loans
	(Dollars in Thousands)
One-to-four family	$	385	$	101,095		33.8	%	$	387	$	108,702		35.7	%	$	326	$	98,707		34.4	%
Multi-family		33		8,915		3.0			6		5,824		1.9			7		3,988		1.4
Home equity		191		43,014		14.4			368		39,684		13.0			275		32,363		11.3
Construction and land		17		4,731		1.6			4		1,331		0.4			13		4,225		1.5
Commercial real estate		585		59,178		19.8			535		60,516		19.8			821		63,936		22.2
Consumer		431		43,010		14.4			401		46,818		15.3			413		43,777		15.3
Commercial business		1,259		38,797		13.0			923		42,241		13.9			656		39,933		13.9
Total	$	2,901	$	298,470		100.0	%	$	2,624	$	305,116		100.0	%	$	2,511	$	286,929		100.0	%

	At December 31,
	2006							2005
					Percentage of							Percentage of
					Loans in							Loans in
	Amount of		Loan		Each			Amount of		Loan		Each
	Loan Loss		Amounts by		Category to			Loan Loss		Amounts by		Category to
	Allowance		Category		Total Loans			Allowance		Category		Total Loans
	(Dollars in Thousands)
One-to-four family	$	272	$	85,467		34.2	%	$	369	$	81,018		34.1	%
Multi-family		7		2,423		0.9			9		2,695		1.1
Home equity		221		25,088		10.1			222		22,189		9.3
Construction and land		21		6,496		2.6			18		4,860		2.0
Commercial real estate		518		50,714		20.4			276		48,746		20.5
Consumer		424		44,042		17.7			451		44,895		18.9
Commercial business		618		35,292		14.1			614		33,633		14.1
Total	$	2,081	$	249,522		100.0	%	$	1,959	$	238,036		100.0	%

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Securities Investment Activities

     The securities investment policy is established by our Board of Directors. This policy dictates that investment decisions will be made based on the safety of the investment, our liquidity needs, potential returns, cash flow targets and desired risk parameters. In pursuing these objectives, management considers the ability of an investment to provide earnings consistent with factors of quality, maturity, marketability, liquidity and risk diversification.

     Our current policies generally limit security investments to U.S. Government and agency securities, tax-exempt bonds, public utilities debt obligations, corporate debt obligations and corporate equity securities. In addition, our policy permits investments in mortgage related securities, including securities issued by government sponsored enterprises such as Fannie Mae, Freddie Mac and Ginnie Mae. Our investment strategy is to increase overall investment securities yields while managing interest rate risk. We will only purchase securities rated as investment grade by a nationally recognized investment rating agency. We do not engage in any hedging transactions, such as interest rate swaps or caps.

     We evaluate securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. In determining OTTI for debt securities, management considers many factors, including: (1) the length of time and extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market value decline was affected by macroeconomic conditions and (4) whether we have the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary impairment decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

     At December 31, 2009, we had nine trust preferred securities with an aggregate fair value of $5.9 million and aggregate unrealized losses of $3.5 million. Of the $5.9 million, $1.9 million have variable rates of interest. All of these securities are rated below investment grade as of December 31, 2009. The $1.9 million of variable rate trust preferred securities are on nonaccrual as of December 31, 2009. The issuers of these securities are primarily banks, but some of the pools do include a limited number of insurance companies. As of December 31, 2009, through review of the current and expected cash flow analysis based on the credit quality of the underlying collateral, the class of securities we own, default probabilities and anticipated losses given default assumptions and stress tests performed on these securities, eight of the trust preferred securities have been considered impaired as of December 31, 2009. The other-than-temporary impairment loss taken for the year ended December 31, 2009 was $2.3 million.

     Unrealized losses on other investments have not been recognized into income because the issuer(s) securities are of investment grade (except for a General Motors Acceptance Corp. bond and SLMA bond), management does not intend to sell the security and it is more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bond(s) approach maturity.

     At December 31, 2009, we had a $2.0 million General Motors Acceptance Corp. (GMAC) bond, maturing October 15, 2010 which has a rating below investment grade. This is a variable rate note based on the three month Treasury bill. The unrealized loss at December 31, 2009 was $100,000. In addition, at December 31, 2009, we had a $2.5 million Sallie Mae (SLMA) bond, maturing May 1, 2012 which has a rating below investment grade. This is a variable rate note based on the consumer price index. The unrealized loss on this security was $402,000 as of December 31, 2009. Both GMAC and SLMA are paying as agreed. These losses have not been considered other-than-temporary in that we do not intend to

19

sell the securities and it is not more likely than not that we will be required to sell these securities before the recovery of their cost basis, which may be at maturity.

     Investment Securities. At December 31, 2009, we had $96.5 million, or 16.3% of total assets, invested in investment securities, which consisted primarily of U.S. Government obligations, tax-exempt securities and corporate debt obligations. There were trust preferred investments with an aggregate fair value of $5.9 million and an amortized cost of $9.4 million included in corporate debt obligations at December 31, 2009. We are required to designate securities as held to maturity, available for sale or trading, depending on our ability and intent regarding our investments. During 2009, we have designated certain investment securities as held to maturity in addition to available for sale. Investment securities in which the fair value option has been elected are considered trading assets and are recorded at fair value with changes in fair value included in earnings. Trading securities, which consisted of common and preferred equity securities, totaled $7.6 million or 1.3% of total assets at December 31, 2009. At December 31, 2009, our investment securities portfolio had a weighted average life of 6.84 years.

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     Investment Securities. The following table sets forth certain information regarding the investment securities and other interest earning assets as of the dates indicated.

	At December 31,
	2009				2008				2007				2006				2005
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
									(Dollars in thousands)
Investment securities available for sale:
Federal agency securities	$	23,964	$	23,896	$	21,015	$	21,217	$	38,019	$	37,963	$	36,909	$	36,264	$	36,546	$	35,459
Corporate debt securities		26,175		22,126		27,802		21,882		23,791		22,455		18,361		18,067		22,696		21,903
State and municipal bonds		17,644		17,988		17,274		17,347		19,120		19,252		15,747		15,706		32,491		32,498
Equity securities		—		—		—		—		18,688		16,155		15,392		15,699		17,012		16,595
Total	$	67,783	$	64,010	$	66,091	$	60,446	$	99,618	$	95,825	$	86,409	$	85,736	$	108,745	$	106,455
Average remaining life of investment securities available for sale	6.34 years				7.92 years				6.89 years				5.99 years				7.18 years
Investment securities held to maturity:
Federal agency securities	$	23,862	$	23,807	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal bonds		8,615		8,925		—		—		—		—		—		—		—		—
Total	$	32,477	$	32,732	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Average remaining life of investment securities held to maturity	7.84 years					—				—				—				—
Trading securities:
Equity securities		—		7,627		—		5,941		—		—		—		—		—		—
Total	$	—	$	7,627	$	—	$	5,941	$	—	$	—	$	—	$	—	$	—	$	—
Other interest earning assets:
Interest-earning deposits with banks		3,052		3,052		2,589		2,589		1,234		1,234		854		854		1,437		1,437
Federal funds sold		4,103		4,103		71		71		1,717		1,717		6,196		6,196		730		730
FHLB Stock		2,665		2,665		3,784		3,784		3,404		3,404		3,228		3,228		3,858		3,858
Total	$	9,820	$	9,820	$	6,444	$	6,444	$	6,355	$	6,355	$	10,278	$	10,278	$	6,025	$	6,025

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     Investment Portfolio Maturities. The following table sets forth the scheduled maturities, market value and weighted average yields for our available for sale investment portfolio at December 31, 2009.

	December 31, 2009
				After 1 Year but			After 5 Years but
	Within			Within			Within			After
	1 Year			5 Years			10 Years			10 Years			Total
	Carrying Value			Carrying Value			Carrying Value			Carrying Value			Carrying Value
				(Dollars in Thousands)
Federal agency securities	$	—		$	6,385		$	15,553		$	1,958		$	23,896
Corporate debt securities		5,050			4,042			4,863			8,171			22,126
Tax exempt bonds		911			4,840			8,356			3,881			17,988
Total securities	$	5,961		$	15,267		$	28,772		$	14,010		$	64,010
Weighted average yield (1)		3.83	%		2.69	%		4.16	%		3.32	%		3.59	%

⁽¹⁾ Weighted average yield has not been adjusted to reflect tax equivalent adjustments.

The following table sets forth the scheduled maturities, market value and weighted average yields for our held to maturity investment portfolio at December 31, 2009.

	December 31, 2009
				After 1 Year but			After 5 Years but
	Within			Within			Within			After
	1 Year			5 Years			10 Years			10 Years			Total
	Carrying Value			Carrying Value			Carrying Value			Carrying Value			Carrying Value
							(Dollars in Thousands)
Federal agency securities	$	8		$	6,000		$	15,854		$	2,000		$	23,862
Tax exempt bonds		45			1,160			3,748			3,662			8,615
Total securities	$	53		$	7,160		$	19,602		$	5,662		$	32,477
Weighted average yield (1)		2.91	%		3.27	%		4.30	%		6.04	%		4.37	%

⁽¹⁾ Weighted average yield has not been adjusted to reflect tax equivalent adjustments.

     Mortgage-Backed Securities. We purchase mortgage-backed securities in order to: (i) generate positive interest rate spreads with minimal administrative expense; (ii) lower our credit risk; and (iii) increase liquidity. At December 31, 2009, we had $65.7 million or 11.1% of total assets invested in mortgage-backed securities; of which $15.2 million were classified as held to maturity. Prior to January 1, 2009, all mortgage-backed securities were classified as available for sale. The mortgage-backed securities portfolio had coupon rates ranging from 0.63% to 7.79%, a weighted average yield of 4.47% and a weighted average life (including payment assumption) of 6.72 years at December 31, 2009.

     Mortgage-backed securities are created by the pooling of mortgages and the issuance of a security with an interest rate that is less than the interest rate on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multi-family mortgages, although we focus our investments on mortgage-related securities backed by single-family mortgages. The issuers of such securities (generally U.S. Government agencies and government sponsored enterprises, including Fannie Mae, Freddie Mac and Ginnie Mae) pool and resell the participation interests in the form of securities to investors, such as Oneida Savings Bank, and guarantee the payment of principal and interest to these investors. Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. In addition, mortgage-related securities are usually more liquid than individual mortgage loans and may be used to collateralize certain of our liabilities and obligations. Investments in mortgage-backed securities involve a risk that actual prepayments will be greater than estimated over the life of the security, which

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may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments thereby reducing the net yield on such securities. There is also reinvestment risk associated with the cash flows from such securities or in the event such securities are redeemed by the issuer. In addition, the market value of such securities may be adversely affected by changes in interest rates. Management reviews prepayment estimates periodically to ensure that prepayment assumptions are reasonable considering the underlying collateral for the securities at issue and current interest rates and to determine the yield and estimated maturity of our mortgage-backed securities portfolio. Of our $65.7 million mortgage-backed securities portfolio at December 31, 2009, $333,249 with a weighted average yield of 4.21% had contractual maturities within five years, $2.6 million with a weighted average yield of 4.17% had contractual maturities of five to ten years and $62.8 million with a weighted average yield of 4.50% had contractual maturities of over ten years. However, the actual maturity of a mortgage-backed security may be less than its stated maturity due to prepayments of the underlying mortgages or significant defaults of the underlying mortgages. Prepayments that are faster than anticipated may shorten the life of the security and may result in a loss of any premiums paid and thereby reduce the net yield on such securities. Although prepayments of underlying mortgages depend on many factors, the difference between the interest rates on the underlying mortgages and the prevailing mortgage interest rates generally is the most significant determinant of the rate of prepayments. Historically, during periods of declining mortgage interest rates, refinancing generally increases and accelerates the prepayment of the underlying mortgages and the related security. Under such circumstances, we may be subject to reinvestment risk because, to the extent that our mortgage related securities prepay faster than anticipated, we may not be able to reinvest the proceeds of such repayments and prepayments at a comparable rate of return. During 2009, mortgage interest rates remained at historical low levels throughout the year. The impact on our mortgage-backed securities portfolio is to increase the prepayments at a faster rate than anticipated. Conversely, in a rising interest rate environment prepayments may decline, thereby extending the estimated life of the security and depriving us of the ability to reinvest cash flows at the increased rates of interest.

     Collateralized Mortgage Obligations (“CMOs”) are debt securities issued by a special-purpose entity that aggregates pools of mortgages and mortgage-backed securities and creates different classes of securities with varying maturities and amortization schedules, as well as a residual interest, with each class possessing different risk characteristics. The cash flows from the underlying collateral are generally divided into “tranches” or classes that have descending priorities with respect to the distribution of principal and interest cash flows, while cash flows on pass-through mortgage-backed securities are distributed pro rata to all security holders.

     We have a $1.0 million private placement collateralized mortgage obligation which is not rated as of December 31, 2009. The unrealized loss at December 31, 2009 was $237,000. As of December 31, 2009, through review of the current and expected cash flow analysis based on the credit quality of the underlying collateral, default probabilities and anticipated losses, this security has been considered impaired. The other-than-temporary impairment loss taken for the year ended December 31, 2009 was $13,100.

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Mortgage-Backed Securities. Set forth below is information relating to our mortgage-backed securities for the periods indicated.

									December 31,
	2009				2008				2007				2006				2005
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value		Cost		Value		Cost		Value
									(In thousands)
Mortgage-backed securities available for sale:
GinnieMae	$	11,983	$	12,298	$	23,939	$	24,447	$	2,860	$	2,888	$	994	$	989	$	—	$	—
FannieMae		16,418		16,924		19,640		19,840		15,683		15,678		10,224		10,008		9,226		8,937
FreddieMac		14,902		15,471		22,857		23,190		22,252		22,193		16,571		16,196		18,494		18,034
CMOs		6,758		5,829		7,569		6,839		5,804		5,810		1,903		1,871		2,161		2,103
Total	$	50,061	$	50,522	$	74,005	$	74,316	$	46,599	$	46,569	$	29,692	$	29,064	$	29,881	$	29,074
Mortgage-backed securities held to maturity:
GinnieMae	$	5,250	$	5,227	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Fannie Mae		9,965		10,007		—		—		—		—		—		—		—		—
Total	$	15,215	$	15,234	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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Sources of Funds

     General. Our primary sources of funds for use in lending, investing and for other general purposes are deposits, repayments and prepayments of loans and securities, proceeds from sales of loans and securities, proceeds from maturing securities and cash flows from operations.

     Deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Our deposit accounts consist of savings, interest-bearing demand accounts, non interest-bearing checking accounts, money market accounts and certificates of deposit. We also offer IRAs and other qualified plan accounts. Through our limited purpose subsidiary, State Bank of Chittenango, we held $86.0 million in municipal deposits at December 31, 2009.

     At December 31, 2009, deposits totaled $489.4 million. At December 31, 2009, we had a total of $156.9 million in certificates of deposit, of which $123.4 million had maturities of one year or less. Although we have a significant portion of deposits in shorter term certificates of deposit, management monitors activity on these accounts. Based on historical experience and our current pricing strategy, management believes it will retain a large portion of such accounts upon maturity. At December 31, 2009 certificates of deposit with balances of $100,000 or more totaled $56.7 million.

     The flow of deposits is influenced significantly by general economic conditions, changes in prevailing interest rates, internal pricing decisions and competition. Deposits are obtained predominantly from the areas in which our branch offices are located. We rely primarily on competitive pricing of deposit products and customer service and long-standing relationships with customers to attract and retain these deposits; however, market interest rates and rates offered by competing financial institutions significantly affect our ability to attract and retain deposits. We use traditional means of advertising our deposit products, including radio and print media and generally do not solicit deposits from outside our market area. While we accept certificates of deposit in excess of $100,000, and may be subject to preferential rates, we do not actively solicit such deposits as they are more difficult to retain than core deposits. During 2009, the FDIC temporarily increased federal deposit insurance to $250,000 per depositor from $100,000. In 2009, Congress enacted legislation to extend the increase to $250,000 in insurable deposits per depositor until 2013. Moreover, we have elected to participate in the Temporary Liquidity Guarantee Program pursuant to which the FDIC will provide unlimited deposit coverage for non-interest bearing accounts, NOW accounts and certain other designated accounts, until June 30, 2010. Historically, we have not used brokers to obtain deposits. We participate in the Certificate of Deposit Account Registry Service (“CDARs”) that enables the institution to provide customers to access to up to $50 million in FDIC insurance on CD investments.

     The following table sets forth our deposit activities for the periods indicated.

	Year Ended December 31,
	2009			2008			2007
	(Dollars in thousands)
Opening balance	$	425,698		$	400,129		$	313,270
Deposits acquired from NBV		—			—			54,631
Deposits		3,835,906			3,766,461			3,373,810
Withdrawals		(3,778,117	)		(3,749,408	)		(3,350,619	)
Interest credited		5,877			8,516			9,037
Ending balance	$	489,364		$	425,698		$	400,129
Net increase (decrease)	$	63,666		$	25,569		$	86,859
Percent increase (decrease).		14.96	%		6.39	%		27.73	%

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     The following table indicates the amount of our certificates of deposit by time remaining until maturity as of December 31, 2009.

			Maturity
	3 Months			Over 3 to 6		Over 6 to 12		Over 12
	or Less			Months		Months		Months		Total
				(In thousands)
Certificates of deposit less than $100,000	$	27,413		$	20,917	$	28,704	$	23,180	$	100,214
Certificates of deposit of $100,000 or more		13,219			13,134		19,971		10,365		56,689
Total of certificates of deposit	$	40,632		$	34,051	$	48,675	$	33,545	$	156,903

     The following tables set forth information, by various rate categories, regarding the dollar balance of deposits by types of deposit for the periods indicated.

	December 31,
	2009					2008					2007
	Amount		Percent			Amount		Percent			Amount		Percent
						(Dollars in thousands)
Transactions and savings deposits:
Noninterest-bearing	$	62,997		12.87	%	$	60,787		14.28	%	$	65,685		16.42	%
Savings accounts(1)		82,938		16.95			75,338		17.70			71,345		17.83
Interest-bearing checking		50,931		10.41			41,773		9.81			38,170		9.54
Money market accounts		135,595		27.71			91,975		21.61			72,031		18.00
Total		332,461		67.94			269,873		63.40			247,231		61.79
Certificates of deposit:
Less than 2.00% (2)		106,715		21.81			14,941		3.51			4,482		1.12
2.00-3.99%		34,565		7.06			102,381		24.05			17,491		4.37
4.00-5.99%		15,623		3.19			38,503		9.04			129,217		32.29
6.00-7.99%		—		—			—		—			1,708		0.43
Total certificates of deposit		156,903		32.06			155,825		36.60			152,898		38.21
Total deposits	$	489,364		100.00	%	$	425,698		100.00	%	$	400,129		100.00	%

(1)	Includes mortgage escrow accounts
(2)	At December 31, 2009, includes $20.3 million of certificates of deposit with rates below 1.00%

     The following table sets forth the amount and remaining maturities of our certificates of deposit accounts at December 31, 2009.

												Percent
	<2.00%			2.00-3.99%		4.00-5.99%		6.00-7.99%		Total		of Total
				(Dollars in thousands)
Certificate accounts maturing in quarter ending:
March 31, 2010	$	29,978		$	7,729	$	2,925	$	—	$	40,632		25.90	%
June 30, 2010		30,008			3,088		955		—		34,051		21.70
September 30, 2010		19,061			2,830		1,542		—		23,433		14.93
December 31, 2010		20,485			3,441		1,316		—		25,242		16.09
March 31, 2011		1,854			1,980		2,318		—		6,152		3.92
June 30, 2011		2,791			1,828		538		—		5,157		3.29
September 30, 2011		922			1,564		614		—		3,100		1.97
December 31, 2011		1,047			388		787		—		2,222		1.42
Thereafter		569			11,717		4,628		—		16,914		10.78
Total	$	106,715	(1)	$	34,565	$	15,623	$	—	$	156,903		100.00	%

(1) Includes $20.3 million of certificates of deposit with rates below 1.00%

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     Borrowed Funds. Our borrowings consist of term advances and repurchase agreements borrowed under agreements with the Federal Home Loan Bank of New York. In addition we have access to overnight advances with the FHLBNY and other correspondent banks under line of credit facilities accessed from time to time. At December 31, 2009, we had access to additional FHLBNY advances of up to $109.9 million. The following table sets forth information concerning balances and interest rates on our borrowings at the dates and for the periods indicated.

	At and For the Years Ended December 31,
	2009			2008			2007
	(Dollars in thousands)
Overnight line of credit:
Balance at end of period	$	—		$	3,825		$	—
Average balance during period		248			1,457			102
Maximum outstanding at any month end		—			5,150			—
Weighted average interest rate at end of period		0.00	%		0.44	%		0.00	%
Average interest cost during the year		2.43	%		2.08	%		4.95	%
Term advances:
Balance at end of period	$	28,000		$	36,000		$	43,400
Average balance during period		29,945			41,736			46,608
Maximum outstanding at any month end		34,000			43,400			58,830
Weighted average interest rate at end of period		4.44	%		4.46	%		4.86	%
Average interest cost during the year		4.47	%		4.39	%		4.95	%
Repurchase agreements:
Balance at end of period	$	3,000		$	13,000		$	13,000
Average balance during period		6,041			13,000			13,000
Maximum outstanding at any month end		13,000			13,000			13,000
Weighted average interest rate at end of period		6.74	%		5.39	%		5.39	%
Average interest cost during the year		5.83	%		5.39	%		5.39	%

Trust Activities

     Oneida Savings Bank provides trust and investment services, acts as executor or administrator of estates and as trustee or custodian for various types of trusts. Trust services are offered through Oneida Savings Bank’s Trust Department. Services include fiduciary services for trusts and estates, money management and custodial services. At December 31, 2009, Oneida Savings Bank maintained 553 trust/fiduciary accounts, with total assets of $116.8 million under management as compared to 555 trust/fiduciary accounts, with total assets of $105.8 million at December 31, 2008. Management anticipates that in the future the Trust Department will become a more significant component of Oneida Savings Bank’s business.

Limited Purpose Commercial Bank — State Bank of Chittenango

     The State Bank of Chittenango is a New York chartered limited purpose commercial bank headquartered in Chittenango, New York. Oneida Savings Bank acquired State Bank of Chittenango in 2002 and retained the municipal banking operations of the bank in a limited purpose wholly owned subsidiary. New York State prohibits a savings bank from soliciting and servicing public funds (deposits of counties, cities, towns, school districts, etc.). The use of a limited purpose commercial bank subsidiary has facilitated the expansion of municipal deposit banking services throughout the service area of Oneida Savings Bank. At December 31, 2009, State Bank of Chittenango held $110.6 million in assets, consisting primarily of U.S. Government obligations and mortgage-backed securities. The investment securities maintained at State Bank of Chittenango are used to collateralize $86.0 million in municipal deposits. All disclosures in this annual report and Form 10-K relating to Oneida Financial Corp.’s investments and deposits include the investments and deposits that are held by The State Bank of Chittenango.

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Insurance Activities — Bailey & Haskell Associates, Inc.

     On October 2, 2000, Oneida Savings Bank completed the acquisition of Bailey & Haskell Associates, Inc., (“B&H”), an insurance agency located in Central New York State. Bailey & Haskell Associates is the wholly owned insurance agency subsidiary of Oneida Savings Bank. It operates out of its headquarters in Oneida, New York and six other offices in New York State and one office in South Carolina. Bailey & Haskell Associates is a full-service insurance and financial services firm with over 90 employees providing services to over 19,000 customers. The expansion into the insurance and financial services business has enabled Oneida Savings Bank to evolve from a traditional depository institution into a full-service financial services organization. Bailey & Haskell Associates offers personal and commercial property insurance and other risk management products and services. Bailey & Haskell Associates represents dozens of leading insurance companies including Travelers, CNA, Hartford, Progressive, Cincinnati, Utica National and many more. Our opportunistic acquisition strategy has resulted in five subsequently acquired insurance agencies in the six years following the acquisition of Bailey & Haskell Associates, including Parsons, Cote & Company which was added during 2006. All of the acquired insurance agencies were merged into Bailey & Haskell Associates. The combination of acquired agencies and organic growth has resulted in total revenue of $9.7 million for the year ended December 31, 2009, an increase of 14.3% or $1.2 million, from $8.5 million for the year ended December 31, 2008. All disclosures in this annual report and Form 10-K relating to Oneida Financial Corp. are consolidated to include the activities of Bailey & Haskell Associates.

Employee Benefit Consulting Activities — Benefit Consulting Group, Inc.

     On June 28, 2006, Oneida Savings Bank completed the acquisition of Benefit Consulting Group L.L.C., an employee benefits consulting and retirement plan administration firm. Benefit Consulting Group, Inc. is the wholly owned subsidiary of Oneida Savings Bank headquartered in Oneida, New York and operates from offices in North Syracuse, New York and satellite offices in several branch offices of Oneida Savings Bank. Benefit Consulting Group currently serves more than 700 corporate and personal clients and offers employee benefit related services that are complementary to those provided by Oneida Savings Bank and Bailey & Haskell Associates. Benefit Consulting Group provides defined contribution and benefit plans, actuarial services, investment management, financial planning, estate planning and human resource management services. Benefit Consulting Group had total revenue for the year ended December 31, 2009 of $5.7 million, an increase of 12.7% or $635,000 from $5.0 million for the year ended December 31, 2008. All disclosures in this annual report and Form 10-K relating to Oneida Financial Corp. are consolidated to include the activities of Benefit Consulting Group.

Risk Management Activities — Workplace Health Solutions, Inc.

     Workplace Health Solutions, Inc. is the wholly owned risk management subsidiary of Oneida Savings Bank and is headquartered in Oneida, New York and operates from offices in North Syracuse, New York. Workplace Health Solutions was established in January 2008 as a risk management company with services to help mitigate and prevent work related injuries. Specifically, Workplace Health Solutions will work with employers to develop informed hiring programs, coordinate employee training programs and consults with and advises employers relative to workers’ compensation coverage and incidents. In addition, this subsidiary develops a network of medical professionals to evaluate injured workers and arrange for the proper treatment of and recovery from workplace injuries all from a risk management perspective. Workplace Health Solutions was developed to complement and refer the products and services offered by our other subsidiaries with an overall philosophy of innovative risk management services. Workplace Health Solutions had total revenue of $491,000 for the year ended December 31, 2009. All disclosures in this annual report and Form 10-K relating to Oneida Financial Corp. are consolidated to include the activities of Workplace Health Solutions.

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Personnel

     As of December 31, 2009, we had 309 full-time employees and 15 part-time employees. The employees are not represented by a collective bargaining unit. Management believes that we have a good relationship with its employees.

Regulation

     General. Oneida Savings Bank is a New York-chartered savings bank and our deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation under the Deposit Insurance Fund. Oneida Savings Bank is subject to extensive regulation by the New York State Banking Department (the “Department”) as its chartering agency, and by the Federal Deposit Insurance Corporation, as the insurer of its deposit accounts. Oneida Savings Bank must file reports with the Department and the Federal Deposit Insurance Corporation concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions, including acquisitions of other financial institutions. Oneida Savings Bank is examined periodically by the Department and the Federal Deposit Insurance Corporation to test Oneida Savings Bank’s compliance with various laws and regulations. This regulation and supervision, as well as federal and state law, establishes a comprehensive framework of activities in which Oneida Savings Bank may engage and is intended primarily for the protection of the Federal Deposit Insurance Corporation insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and with their examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.

     Any change in these laws or regulations, whether by the Department or the Federal Deposit Insurance Corporation could have a material adverse impact on Oneida Financial Corp. and Oneida Savings Bank and their operations.

     Set forth below is a brief description of certain regulatory requirements that are applicable to Oneida Financial Corp. and Oneida Savings Bank. The description below is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Oneida Financial Corp. and Oneida Savings Bank.

     Proposed Federal Legislation. Legislation has been introduced in the United States Senate and House of Representatives that would implement sweeping changes to the current bank regulatory structure described in this section. The House Bill (H.R. 4173) would eliminate one of our federal regulators, the Office of Thrift Supervision, by merging the Office of Thrift Supervision into the Comptroller of the Currency (the primary federal regulator for national banks). The proposed legislation would authorize the Comptroller of the Currency to charter mutual and stock savings banks and mutual holding companies, which would be under the supervision of the Division of Thrift Supervision of the Comptroller of the Currency. The proposed legislation would also establish a Financial Services Oversight Council and grant the Board of Governors of the Federal Reserve System exclusive authority to regulate all bank and thrift holding companies. If the proposed legislation is enacted, Oneida Financial Corp. would become a holding company subject to the regulation and supervision of the Federal Reserve Board as opposed to the Office of Thrift Supervision. The Federal Reserve Board’s holding company regulations differ in a number of areas from those of the Office of Thrift Supervision including holding company capital requirements.

     New York Bank Regulation. Oneida Savings Bank derives its lending, investment, branching and other authority primarily from the applicable provisions of New York State Banking Law and the regulations of the Department, as limited by federal laws and regulations. Under these laws and regulations, savings banks, including Oneida Savings Bank, may invest in real estate mortgages,

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consumer and commercial loans, certain types of debt securities, including certain corporate debt securities and obligations of federal, state and local governments and agencies, certain types of corporate equity securities and certain other assets. Under the statutory authority for investing in equity securities, a savings bank may invest up to 7.5% of its assets in corporate stock, with an overall limit of 5% of its assets invested in common stock. Investment in the stock of a single corporation is limited to the lesser of 2% of the outstanding stock of such corporation or 1% of the savings bank’s assets, except as set forth below. Such equity securities must meet certain earnings ratios and other tests of financial performance. A savings bank’s lending powers are not subject to percentage of assets limitations, although there are limits applicable to single borrowers. A savings bank may also, pursuant to the “leeway” power, make investments not otherwise permitted under the New York State Banking Law. This power permits investments in otherwise impermissible investments of up to 1% of assets in any single investment, subject to certain restrictions and to an aggregate limit for all such investments of up to 5% of assets. Additionally, in lieu of investing in such securities in accordance with and reliance upon the specific investment authority set forth in the New York State Banking Law, savings banks are authorized to elect to invest under a “prudent person” standard in a wider range of investment securities as compared to the types of investments permissible under such specific investment authority. However, in the event a savings bank elects to utilize the “prudent person” standard, it will be unable to avail itself of the other provisions of the New York State Banking Law and regulations which set forth specific investment authority. Oneida Savings Bank has not elected to conduct its investment activities under the “prudent person” standard. A savings bank may also exercise trust powers upon approval of the Department.

     New York State chartered savings banks may also invest in subsidiaries under their service corporation investment authority. A savings bank may use this power to invest in corporations that engage in various activities authorized for savings banks, plus any additional activities that may be authorized by the Banking Board. Investment by a savings bank in the stock, capital notes and debentures of its service corporations is limited to 3% of the bank’s assets, and such investments, together with the bank’s loans to its service corporations, may not exceed 10% of the savings bank’s assets. Furthermore, New York banking regulations impose requirements on loans which a bank may make to its executive officers and directors and to certain corporations or partnerships in which such persons have equity interests. These requirements include that (i) certain loans must be approved in advance by a majority of the entire board of directors and the interested party must abstain from participating directly or indirectly in voting on such loan, (ii) the loan must be on terms that are not more favorable than those offered to unaffiliated third parties, and (iii) the loan must not involve more than a normal risk of repayment or present other unfavorable features.

     Under the New York State Banking Law, the Superintendent may issue an order to a New York State chartered banking institution to appear and explain an apparent violation of law, to discontinue unauthorized or unsafe practices and to keep prescribed books and accounts. Upon a finding by the Department that any director, trustee or officer of any banking organization has violated any law, or has continued unauthorized or unsafe practices in conducting the business of the banking organization after having been notified by the Superintendent to discontinue such practices, such director, trustee or officer may be removed from office after notice and an opportunity to be heard. Oneida Savings Bank does not know of any past or current practice, condition or violation that may lead to any proceeding by the Superintendent or the Department against Oneida Savings Bank or any of its directors, trustees or officers.

     Insurance of Deposit Accounts. Oneida Savings Bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. Deposit accounts at Oneida Savings Bank are insured by the Federal Deposit Insurance Corporation, generally up to a maximum of $100,000 for each separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. However, the Emergency Economic Stabilization Act of 2008 increased the deposit insurance available on all deposit accounts to $250,000, effective until December 31, 2013. In addition, certain noninterest-bearing transaction accounts maintained with financial institutions participating in the

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Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program are fully insured regardless of the dollar amount until June 30, 2010. Oneida Savings Bank has opted to participate in the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.

     The Federal Deposit Insurance Corporation imposes an assessment against institutions for deposit insurance which is based on the risk category of the institution. Under the final risk-based assessment rule which was issued on February 27, 2009, the Federal Deposit Insurance Corporation first establishes an institution’s initial base assessment rate for determining deposit insurance premiums. This initial base assessment rate ranges, depending on the risk category of the institution, from 12 to 45 basis points. The Federal Deposit Insurance Corporation then adjusts the initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustments to the initial base assessment rate are based upon an institution’s levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate ranges from 7 to 77.5 basis points of the institution’s deposits. Additionally, on May 22, 2009, the Federal Deposit Insurance Corporation issued a final rule that imposed a special 5 basis points assessment on each FDIC-insured depository institution’s assets, minus its Tier 1 capital on June 30, 2009, which was collected on September 30, 2009. The special assessment was capped at 10 basis points of an institution’s domestic deposits. Future special assessments could also be assessed. The Bank’s Federal Deposit Insurance Corporation premium assessment for the second quarter of 2009 and the year ended December 31, 2009 increased by approximately $631,000 and $970,000, respectively, including the special assessment.

     The Federal Deposit Insurance Corporation has adopted a final rule pursuant to which all insured depository institutions were required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. Under the rule, this pre-payment was made on December 30, 2009. The assessment rate for the fourth quarter of 2009 and for 2010is based on each institution’s total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 will be equal to the modified third quarter assessment rate plus an additional 3 basis points. In addition, each institution’s base assessment rate for each period will be calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. Our prepayment amount was approximately $2.4 million.

     Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

     In addition to the Federal Deposit Insurance Corporation assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the Federal Deposit Insurance Corporation, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended December 31, 2009, the annualized FICO assessment was equal to 1.04 basis points for each $100 in domestic deposits.

     Temporary Liquidity Guarantee Program. On October 14, 2008, the Federal Deposit Insurance Corporation announced a new program — the Temporary Liquidity Guarantee Program, which guarantees newly issued senior unsecured debt of a participating organization, up to certain limits established for each institution, issued between October 14, 2008 and June 30, 2009. The Federal Deposit Insurance Corporation will pay the unpaid principal and interest on Federal Deposit Insurance Corporation-guaranteed debt instruments upon the uncured failure of the participating entity to make timely payments of principal or interest in accordance with the terms of the instrument. The guarantee will remain in effect until June 30, 2012. In return for the Federal Deposit Insurance Corporation’s guarantee,

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participating institutions will pay the Federal Deposit Insurance Corporation a fee based on the amount and maturity of the debt. We opted not to participate in this part of the Temporary Liquidity Guarantee Program.

     The other part of the Temporary Liquidity Guarantee Program provides full federal deposit insurance coverage for noninterest-bearing transaction deposit accounts, regardless of dollar amount, until December 31, 2009. An annualized 10 basis point assessment on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 will be assessed on a quarterly basis to insured depository institutions that have not opted out of this component of the Temporary Liquidity Guarantee Program. We opted to participate in this component of the Temporary Liquidity Guarantee Program. On August 26, 2009, the Federal Deposit Insurance Corporation extended the program until June 30, 2010. Institutions had until November 2, 2009 to decide whether to opt out of the extension which became effective on January 1, 2010. An annualized assessment rate between 15 and 25 basis points on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 is assessed depending on the institution’s risk category. We opted into the extension.

     U.S. Treasury’s Troubled Asset Relief Program Capital Purchase Program. The Emergency Economic Stabilization Act of 2008, which was enacted on October 3, 2008, provides the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to U.S. financial markets. One of the programs resulting from the legislation is the Troubled Asset Relief Program Capital Purchase Program (“CPP”), which provides direct equity investment by the U.S. Treasury Department in perpetual preferred stock of qualified financial institutions. The program is voluntary and requires an institution to comply with a number of restrictions and provisions, including limits on executive compensation, stock redemptions and declaration of dividends. The CPP provides for a minimum investment of one percent of total risk-weighted assets and a maximum investment equal to the lesser of three percent of total risk-weighted assets or $25 billion. Participation in the program is not automatic and is subject to approval by the U.S. Treasury Department. We opted not to participate in the CPP.

     Regulatory Capital Requirements. The FDIC has adopted risk-based capital guidelines which are applicable to Oneida Savings Bank. The guidelines establish a systematic analytical framework that makes regulatory capital requirements more sensitive to differences in risk profiles among banking organizations. Oneida Savings Bank is required to maintain certain levels of regulatory capital in relation to regulatory risk-weighted assets. The ratio of such regulatory capital to regulatory risk-weighted assets is referred to as Oneida Savings Bank’s “risk-based capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance sheet items to four risk-weighted categories ranging from 0% to 100%, with higher levels of capital being required for the categories perceived as representing greater risk.

     These guidelines divide a savings bank’s capital into two tiers. The first tier (“Tier I”) includes common equity, retained earnings, certain non-cumulative perpetual preferred stock (excluding auction rate issues) and minority interests in equity accounts of consolidated subsidiaries, less goodwill and other intangible assets (except mortgage servicing rights and purchased credit card relationships subject to certain limitations). Supplementary (“Tier II”) capital includes, among other items, cumulative perpetual and long-term limited-life preferred stock, mandatory convertible securities, certain hybrid capital instruments, term subordinated debt and the allowance for loan and lease losses, subject to certain limitations, less required deductions. Savings banks are required to maintain a total risk-based capital ratio of at least 8%, of which at least 4% must be Tier I capital.

     In addition, the FDIC has established regulations prescribing a minimum Tier I leverage ratio (Tier I capital to adjusted total assets as specified in the regulations). These regulations provide for a minimum Tier I leverage ratio of 3% for banks that meet certain specified criteria, including that they have the highest examination rating and are not experiencing or anticipating significant growth. All other

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banks are required to maintain a Tier I leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The FDIC may, however, set higher leverage and risk-based capital requirements on individual institutions when particular circumstances warrant. Savings banks experiencing or anticipating significant growth are expected to maintain capital ratios, including tangible capital positions, well above the minimum levels.

     Limitations on Dividends and Other Capital Distributions. The FDIC has the authority to use its enforcement powers to prohibit a savings bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Federal law also prohibits the payment of dividends by a bank that will result in the bank failing to meet its applicable capital requirements on a pro forma basis. New York law also restricts Oneida Savings Bank from declaring a dividend which would reduce its capital below (i) the amount required to be maintained under state law and regulation or (ii) the amount of Oneida Savings Bank’s liquidation account established in connection with the Reorganization.

     Prompt Corrective Action. The federal banking agencies have promulgated regulations to implement the system of prompt corrective action required by federal law. Under the regulations, a bank shall be deemed to be (i) “well capitalized” if it has total risk-based capital of 10.0% or more, has a Tier I risk-based capital ratio of 6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not subject to any written capital order or directive; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of “well capitalized”; (iii) “undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0% under certain circumstances); (iv) “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is less than 3.0%; and (v) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. Federal law and regulations also specify circumstances under which a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized institution to comply with supervisory actions as if it were in the next lower category (except that the FDIC may not reclassify a significantly undercapitalized institution as critically undercapitalized).

     Based on the foregoing, Oneida Savings Bank is currently classified as a well capitalized savings institution.

     Activities and Investments of Insured State-Chartered Banks Acting as Principal. Federal law generally limits the activities and equity investments of FDIC-insured state-chartered banks to those that are permissible for national banks, notwithstanding state laws. Under federal regulations dealing with equity investments, an insured state bank generally may not, directly or indirectly, acquire or retain any equity investment of a type, or in an amount, that is not permissible for a national bank. An insured state bank is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary, the activities of which are limited to those permissible for a subsidiary of a national bank; (ii) investing as a limited partner in a partnership the sole purpose of which is the direct or indirect investment in the acquisition, rehabilitation, or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the bank’s total assets; (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors’, trustees’, and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions; and (iv) acquiring or retaining the voting shares of a depository institution if certain requirements are met.

     Federal law and FDIC regulations permit certain exceptions to the foregoing limitation. For example, certain state-chartered banks, such as Oneida Savings Bank, may continue to invest in common or preferred stock listed on a National Securities Exchange, and in the shares of an investment company registered under the Investment Company Act of 1940, as amended. As of December 31, 2009, the Bank had $2.7 million of securities pursuant to this exception. As a savings bank, Oneida Savings Bank may also continue to sell savings bank life insurance.

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     Transactions With Affiliates. Under current federal law, transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act and its implementing regulations. An affiliate of a savings bank is any company or entity that controls, is controlled by, or is under common control with the savings bank, other than a subsidiary of the savings bank. In a holding company context, at a minimum, the parent holding company of a savings bank and any companies which are controlled by such parent holding company are affiliates of the savings bank. Generally, Section 23A limits the extent to which the savings bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such savings bank’s capital stock and surplus and contains an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus. The term “covered transaction” includes the making of loans or other extensions of credit to an affiliate; the purchase of assets from an affiliate, the purchase of, or an investment in, the securities of an affiliate; the acceptance of securities of an affiliate as collateral for a loan or extension of credit to any person; or issuance of a guarantee, acceptance, or letter of credit on behalf of an affiliate. Section 23A also establishes specific collateral requirements for loans or extensions of credit to, or guarantees, acceptances on letters of credit issued on behalf of an affiliate. Section 23B requires that covered transactions, and a broad list of other specified transactions, be on terms substantially the same, or no less favorable, to the savings bank or its subsidiary as similar transactions with nonaffiliates.

     Further, the Federal Reserve Act and its implementing regulation restricts a savings bank with respect to loans to directors, executive officers, principal stockholders, and their related interests. Under these regulations, loans to directors, executive officers and stockholders who control, directly or indirectly, 10% or more of voting securities of a savings bank and certain related interests of any of the foregoing, may not exceed, together with all other outstanding loans to such persons and affiliated entities, the savings bank’s total capital and surplus. In addition, federal law also prohibits loans above amounts prescribed by the appropriate federal banking agency to directors, executive officers, and stockholders who control 10% or more of voting securities of a stock savings bank, and their respective related interests, unless such loan is approved in advance by a majority of the disinterested directors on the board of directors of the savings bank. Any “interested” director may not participate in the voting. The loan amount (which includes all other outstanding loans to such person) as to which such prior board of director approval is required, is the greater of $25,000 or 5% of capital and surplus or any loans over $500,000. Further, loans to directors, executive officers and principal stockholders must generally be made on terms substantially the same as offered in comparable transactions to other persons. Additional limitations are also imposed on loans to executive officers.

     Federal Community Reinvestment Regulation. Under the Community Reinvestment Act, as amended (the “CRA”), and its implementing regulations, a savings bank 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 FDIC, in connection with its examination of a savings institution, to assess the institution’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 institution. The CRA requires the FDIC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. Oneida Savings Bank’s latest CRA rating was “satisfactory.”

     New York State Community Reinvestment Regulation. Oneida Savings Bank is also subject to provisions of the New York State Banking Law which imposes continuing and affirmative obligations upon banking institutions organized in New York State to serve the credit needs of its local community

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(“NYCRA”) which are substantially similar to those imposed by the CRA. Pursuant to the NYCRA, a bank must file an annual NYCRA report and copies of all federal CRA reports with the Department. The NYCRA requires the Department to make a biennial written assessment of a bank’s compliance with the NYCRA, utilizing a four-tiered rating system and make such assessment available to the public. The NYCRA also requires the Superintendent to consider a bank’s NYCRA rating when reviewing a bank’s application to engage in certain transactions, including mergers, asset purchases and the establishment of branch offices or automated teller machines, and provides that such assessment may serve as a basis for the denial of any such application. Oneida Savings Bank’s NYCRA rating as of its latest examination was “outstanding.”

     Federal Home Loan Bank System. Oneida Savings Bank is a member of the FHLB of New York, which is one of 12 regional FHLBs, that administers the home financing credit function of savings institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the board of directors of the FHLB. These policies and procedures are subject to the regulation and oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide funds for residential home financing.

     As a member, Oneida Savings Bank is required to purchase and maintain stock in the FHLB of New York. As of December 31, 2009, Oneida Savings Bank had $2.7 million of FHLB stock. The dividend yield from FHLB stock was 5.6% at December 31, 2009. No assurance can be given that the FHLB will pay any dividends in the future.

     Under federal law, the FHLBs are required to provide funds for the resolution of troubled savings institutions and to contribute to low and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions have affected adversely the level of FHLB dividends paid and could continue to do so in the future. These contributions could also have an adverse effect on the value of FHLB stock in the future. A reduction in value of Oneida Savings Bank’s FHLB stock may result in a corresponding reduction in the Bank’s capital.

Federal Holding Company Regulation

     General. Federal law allows a state savings bank, such as Oneida Savings Bank, that qualifies as a “Qualified Thrift Lender,” as discussed below, to elect to be treated as a savings association for purposes of the savings and loan holding company provision of the Home Owners’ Loan Act of 1933, as amended. Such election results in its holding company being regulated as a savings and loan holding company by the Office of Thrift Supervision rather than as a bank holding company by the Federal Reserve Board. In 2001, Oneida Financial Corp. and Oneida Financial, MHC made such election by converting from a Delaware corporation and a New York mutual holding company to a Federal corporation and Federal mutual holding company, respectively. As such, Oneida Financial Corp. and Oneida Financial, MHC are registered with the Office of Thrift Supervision and are subject to Office of Thrift Supervision regulations, examinations, supervision and reporting requirements. In addition, the Office of Thrift Supervision has enforcement authority over Oneida Financial Corp. and Oneida Financial, MHC and any non-savings institution subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution.

     Permissible Activities. Under present law, the business activities of Oneida Financial Corp. and Oneida Financial, MHC are generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, or for multiple

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savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c ) (8) of the Bank Holding Company Act, subject to the prior approval of the Office of Thrift Supervision, and certain additional activities authorized by Office of Thrift Supervision regulations.

     Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings association or holding company thereof, without prior written approval of the Office of Thrift Supervision. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a non-subsidiary company engaged in activities that are not closely related to banking or financial in nature, or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision must consider the financial and managerial resources, future prospects of the company and institution involved the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

     The Office of Thrift Supervision is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies, and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

     Qualified Thrift Lender Test. To be regulated as a savings and loan holding company by the Office of Thrift Supervision (rather than as a bank holding company by the Federal Reserve Board), Oneida Savings Bank must qualify as a Qualified Thrift Lender. To qualify as a Qualified Thrift Lender, Oneida Savings Bank must be a “domestic building and loan association,” as defined in the Internal Revenue Code, or comply with the Qualified Thrift Lender test under Office of Thrift Supervision regulations. Under the Qualified Thrift Lender test, a savings institution is required to maintain at least 65% of its “portfolio assets” (total assets less: (1) specified liquid assets up to 20% of total assets; (2) intangibles, including goodwill; and (3) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed and related securities) in at least nine months out of each 12-month period. As of December 31, 2009 Oneida Savings Bank met the Qualified Thrift Lender test.

New York State Bank Holding Company Regulation

     General. In addition to the federal regulation, a holding company controlling a state chartered savings bank organized or doing business in New York State also may be subject to regulation under the New York State Banking Law. The term “bank holding company,” for the purposes of the New York State Banking Law, is defined generally to include any person, company or trust that directly or indirectly either controls the election of a majority of the directors or owns, controls or holds with power to vote more than 10% of the voting stock of a bank holding company or, if the company is a banking institution, another banking institution, or 10% or more of the voting stock of each of two or more banking institutions. In general, a bank holding company controlling, directly or indirectly, only one banking institution will not be deemed to be a bank holding company for the purposes of the New York State Banking Law. Under New York State Banking Law, the prior approval of the Banking Board is required before: (1) any action is taken that causes any company to become a bank holding company; (2) any action is taken that causes any banking institution to become or be merged or consolidated with a subsidiary of a bank holding company; (3) any bank holding company acquires direct or indirect ownership or control of more than 5% of the voting stock of a banking institution; (4) any bank holding

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company or subsidiary thereof acquires all or substantially all of the assets of a banking institution; or (5) any action is taken that causes any bank holding company to merge or consolidate with another bank holding company. Additionally, certain restrictions apply to New York State bank holding companies regarding the acquisition of banking institutions, which have been chartered five years or less and are located in smaller communities. Officers, directors and employees of New York State bank holding companies are subject to limitations regarding their affiliation with securities underwriting or brokerage firms and other bank holding companies and limitations regarding loans obtained from its subsidiaries.

     Bank holding companies that wish to engage in expanded activities but do not wish to become financial holding companies may elect to establish “financial subsidiaries,” which are subsidiaries of national banks with expanded powers. The Act permits financial subsidiaries to engage in the same types of activities permissible for nonbank subsidiaries of financial holding companies, with the exception of merchant banking, insurance underwriting and real estate investment and development. Merchant banking may be permitted after a five-year waiting period under certain circumstances.

Federal Securities Laws

     General. Our common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. We are subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

     Shares of common stock held by persons who are not affiliates (generally officers, directors and principal stockholders) of Oneida Financial Corp may be resold without registration. Shares held by persons who are affiliates are subject to the resale restrictions of Rule 144 under the Securities Act of 1933. If Oneida Financial Corp. meets specified current public information requirements of Rule 144 under the Securities Act of 1933, each affiliate of Oneida Financial Corp. that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of Oneida Financial Corp., or the average weekly volume of trading in the shares during the preceding four calendar weeks.

The USA PATRIOT Act

     General. The USA PATRIOT Act gives the federal government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. Title III of the USA PATRIOT Act amended the Bank Secrecy Act to encourage information sharing among bank regulatory agencies and law enforcement bodies. Moreover, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, savings associations, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.

Sarbanes-Oxley Act of 2002

     General. The Sarbanes-Oxley Act of 2002 addresses, among other issues corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporation information. As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer will be required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rule adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting.

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Federal Reserve System

     General. The Federal Reserve Board requires all depository institutions to maintain noninterest-bearing reserves at specified levels against their transaction accounts (primarily checking, NOW and Super NOW checking accounts). At December 31, 2009, Oneida Savings Bank was in compliance with these reserve requirements.

Federal Taxation

     General. Oneida Financial, MHC, Oneida Financial Corp. and Oneida Savings Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to Oneida Financial, MHC, Oneida Financial Corp. or Oneida Savings Bank.

     Oneida Savings Bank’s most recent IRS audit was relative to Oneida Savings bank’s 1993, 1994 and 1995 federal and state income tax returns.

     Method of Accounting. For federal income tax purposes, Oneida Financial Corp. currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its consolidated federal income tax returns.

     Alternate Minimum Tax. The Internal Revenue Code of 1986, as amended (the “Code”) imposes an alternative minimum tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax preferences (“alternative minimum taxable income” or “AMTI”). The AMT is payable to the extent such AMTI is in excess of an exemption amount. Net operating losses can offset no more than 90% of AMTI. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. Oneida Financial Corp. and Oneida Savings Bank are subject to the AMT however, neither corporation has any minimum tax credit carry forwards at December 31, 2009.

     Net Operating Loss Carryovers. Generally, a financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. However, as a result of recent legislation, subject to certain limitations, the carry back period for net operating losses incurred in 2008 and 2009 (but not both years) has been expanded to five years. At December 31, 2009, Oneida Financial Corp. and Oneida Savings Bank had no net operating loss carry forward for federal income tax purposes.

     Corporate Dividends-Received Deduction. Oneida Financial Corp. may exclude from its federal taxable income 100% of dividends received from Oneida Savings Bank as a member of the same affiliated group of corporations. Because the Mutual Holding Company owns less than 80% of the outstanding common stock of the Company it is not permitted to file a consolidated federal income tax return with the Company and the Bank. The corporate dividends-received deduction is 80% in the case of dividends received from corporations with which a corporate recipient does not file a consolidated return and owns at least 20% but less than 80% of the outstanding common stock of such corporation.

State Taxation

     General. Oneida Financial Corp. and Oneida Savings Bank report income on a combined calendar year basis to New York State. New York State Franchise Tax on corporations is imposed in an amount equal to the greater of (a) 7.1% of “entire net income” allocable to New York State (b) 3% of

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“alternative entire net income” allocable to New York State (c) 0.01% of the average value of assets allocable to New York State or (d) nominal minimum tax. Entire net income is based on federal taxable income, subject to certain modifications. Alternative entire net income is equal to entire net income without certain modifications.

     Audit of Tax Returns. New York State Department of Taxation’s most recent audits were of the Company’s state income tax returns for the years of 1999, 2000 and 2001.

Executive Officers of the Registrant

     Listed below is information, as of December 31, 2009, concerning the Company’s executive officers. There are no arrangements or understandings between the Registrant and any of persons named below with respect to which he or she was or is to be selected as an officer.

Name	Age		Position and Term
Michael R. Kallet		59	President and Chief Executive Officer since 1990
Eric E. Stickels		48	Executive Vice President and Chief Financial Officer since 1998
Thomas H. Dixon		55	Executive Vice President and Chief Credit Officer since 1998

     A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009 IS AVAILABLE FOR REVIEW ON OUR WEBSITE AT WWW.ONEIDAFINANCIAL.COM AND WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS UPON WRITTEN OR TELEPHONIC REQUEST TO ERIC E. STICKELS, SECRETARY, ONEIDA FINANCIAL CORP., 182 MAIN STREET, ONEIDA, NEW YORK 13421, OR CALL (315) 363-2000.

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ITEM 1A. RISK FACTORS

Concentration of loans in our primary market area may increase risk.

     Our success depends primarily on the general economic conditions in upstate New York, as nearly all of our loans are to customers in this market. Accordingly, the local economic conditions in upstate New York have a significant impact on the ability of borrowers to repay loans. As such, a decline in real estate valuations in this market would lower the value of the collateral securing those loans. In addition, a significant weakening in general economic conditions such as inflation, recession, unemployment, or other factors beyond our control could negatively affect our financial results.

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 financial results depend substantially on net interest income, which is the difference between the interest income that we earn on interest-earning assets, such as loans and securities, and the interest expense we pay on interest-bearing liabilities, such as deposits and borrowings. Because our interest-bearing liabilities generally reprice or mature more quickly than our interest-earning assets, an increase in interest rates generally would tend to result in a decrease in our net interest income. We have taken steps to mitigate this risk such as holding fewer longer-term residential mortgages as well as investing excess funds in shorter-term investments.

     Changes in interest rates also affect the value of our interest-earning assets and in particular our investment securities available for sale. Generally, the value of our investment securities fluctuates inversely with changes in interest rates. At December 31, 2009, our investment securities available for sale totaled $114.5 million. Unrealized losses on our securities available for sale totaled $3.3 million and are reported in other comprehensive income as a separate component of our stockholders’ equity. Decreases in the fair value of our securities available for sale, therefore, could have an adverse effect on our stockholders’ equity or our earnings if the decrease in fair value is deemed to be other than temporary.

     Changes in interest rates may also affect the average life of our 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 our existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.

     A majority of our real estate loans held for investment are adjustable-rate loans. Any rise in market interest rates may result in increased payments for borrowers who have adjustable rate mortgage loans, increasing the possibility of default. In addition, although adjustable-rate mortgage loans help make our loan portfolio more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits. At December 31, 2009, approximately 60.1% of our total loans had adjustable rates of interest.

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We could record future losses on our securities portfolio.

     During the year ended December 31, 2009, we recognized $2.9 million of impairment losses on securities, of which $600,000 was recognized as other comprehensive loss in the equity section of our balance sheet, and $2.3 million was recognized in our income statement. At December 31, 2009, we held trust preferred securities, corporate debt securities and non-government agency collateralized mortgage obligations with unrealized losses of $3.5 million, $780,000 and $979,000, respectively.

     A number of factors or combinations of factors could require us to conclude in one or more future reporting periods that an unrealized loss that exists with respect to these securities constitutes an impairment that is other than temporary, which could result in material losses to us. These factors include, but are not limited to, continued failure by the issuer to make scheduled interest payments, an increase in the severity of the unrealized loss on a particular security, an increase in the continuous duration of the unrealized loss without an improvement in value or changes in market conditions and/or industry or issuer specific factors that would render us unable to forecast a full recovery in value. In addition, the fair values of securities could decline if the overall economy and the financial condition of some of the issuers continues to deteriorate and there remains limited liquidity for these securities.

     We also hold investment securities for which the fair value option has been elected, which are considered trading securities. Changes in the fair value of these securities are recorded in earnings and may result in higher volatility in our earnings.

If our non-performing assets increase, our earnings will suffer.

     At December 31, 2009, our non-performing assets (which consist of non-accrual loans, loans 90 days or more delinquent, foreclosed real estate assets and non-accruing investment securities) totaled $2.4 million, which is an increase of $1.9 million over non-performing assets at December 31, 2008. Our non-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans or investments or on real estate owned. We must reserve for probable losses, which are established through a current period charge to income in the provision for loan losses, and from time to time, write down the value of properties in our other real estate owned portfolio to reflect changing market values. Additionally, there are legal fees associated with the resolution of problem assets as well as carrying costs such as taxes, insurance and maintenance related to our other real estate owned. Further, the resolution of non-performing assets requires the active involvement of management, which can distract us from the overall supervision of operations and other income-producing activities of Oneida Savings Bank. Finally, if our estimate of the allowance for loan losses is inadequate, we will have to increase the allowance accordingly.

Increases to the allowance for loan losses would cause our earnings to decrease.

     Our customers may not repay their loans according to the original terms, and the collateral securing the payment of these loans may be insufficient to repay the remaining principal balance of the loan. Hence, we may experience significant loan losses, which could have a material adverse effect on our operating results. We make various assumptions and judgments about the collectability 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

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of loans. In determining the amount of the allowance for loan losses, we rely on loan quality reviews, past loss experience, and an evaluation of economic conditions, among other factors. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require us to make additions to the allowance. Material additions to the allowance would materially decrease our net income.

     Our emphasis on the origination of commercial real estate and business loans is one of the more significant factors in determining the amount of our allowance for loan losses. As we continue to emphasize the origination of these loans, additional provisions for loan losses may be necessary which would decrease our earnings.

     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. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities would have an adverse effect on our results of operations and/or financial condition.

Commercial real estate and business loans increase our exposure to credit risks.

     At December 31, 2009, our portfolio of commercial real estate and multi-family loans totaled $68.1 million, or 22.8% of total loans, and our commercial business loans totaled $38.8 million, or 13.0% of total loans. We plan to continue to emphasize the origination of these types of loans. Commercial real estate and commercial business loans generally expose us to a greater risk of nonpayment and loss than one-to-four family residential real estate lending because repayment of such loans often depends on the successful business operations and income stream of the borrowers. Additionally, such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential real estate loans. Many of our borrowers have more than one commercial loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship may expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four family residential real estate loan. Finally, if we foreclose on a commercial real estate or commercial business loan, our holding period for the collateral, if any, typically is longer than for one-to-four family residential mortgage loans because there are fewer potential purchasers of the collateral.

     We target our business lending and marketing strategy towards small to medium-sized businesses. These small to medium-sized businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If general economic conditions negatively impact these businesses, our results of operations and financial condition may be adversely affected.

Our loan portfolio has greater risk due to the substantial number of home equity loans and consumer loans.

     At December 31, 2009, our home equity loans totaled $43.0 million, or 14.4% of our total loan portfolio. Our home equity loans are primarily secured by second mortgages, and the combined loan-to-value ratio (first and second mortgage liens) for home equity loans may have been as high as 90% at the time of origination and may be higher at present. At December 31, 2009, our consumer loans totaled $43.0 million, or 14.4% of our total loan portfolio, of which $39.1 million consisted of automobile loans. Our automobile loans include a substantial number of automobile loans that are referred to us by participating automobile dealerships located in our

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market area, although our lending staff underwrites and approves such loans. Our consumer loan portfolio also includes automobile loans originated directly by us, as well as unsecured loans and loans secured by other personal property. Home equity loans and consumer loans generally have greater risk than one-to-four family residential mortgage loans, particularly in the case of loans that are secured by second mortgages or by rapidly depreciable assets, such as automobiles, or that are unsecured. In these cases, we face the risk that collateral, when we have it, for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. Particularly with respect to our home equity loans, any decrease in real estate values that adversely affect the value of the property serving as collateral for our loans would have a greater effect on the value of collateral securing a second mortgage. Thus, the recovery of such property could be insufficient to compensate us for the value of these loans.

     As a result of our large portfolio of home equity loans and consumer loans, it may become necessary to increase our provision for loan losses, which could reduce our profits

Municipal deposits are price sensitive and could result in an increase in interest expense or funding fluctuations.

     In recent years we have had significant growth in our municipal deposits from sources within our market area. These deposits are price sensitive source of funds from both an interest and service charge perspective. We may experience a sudden increase in interest expense if market interest rates rise suddenly or risk the possibility of deposit outflow if we are unwilling to price these deposits as aggressively as our competition. This liquidity risk may require us to sell the investment securities collateralizing the municipal deposits at a loss or to access higher cost borrowings which would result in an increase in our interest expense related.

Our operations may be adversely affected if we are unable to hire and retain qualified employees.

     Our performance is largely dependent on the talents and efforts of our employees. Our continued ability to compete effectively in our businesses, and to expand into new businesses and geographic regions depends on our ability to attract retain and motivate our employees. Competition for qualified employees is often intense. Moreover, future laws or regulations limiting the amount of compensation financial institutions may pay to senior management may adversely affect our ability to hire and retain qualified employees.

     We have continued to increase total revenue and net income from non-banking sources such as insurance commissions and employee benefit consulting and services. Key employees provide expertise in the management of these business lines and develop and maintain customer relationships. The loss of those key employees would adversely affect the growth of our non-banking businesses and their continued profitability.

Conditions in insurance markets could adversely affect our earnings.

     As we have diversified our sources of income, we have become increasingly reliant on non-interest income, particularly insurance fees and commissions. Revenue from these sources could be negatively affected by fluctuating premiums in the insurance markets or other factors beyond our control. Other factors that affect our insurance revenue are the profitability and growth of our clients, continued development of new products and services, as well as our access

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to new markets. Our insurance revenues and profitability may also be adversely affected by regulatory developments impacting the healthcare and insurance markets, possibly including recent legislative proposals relating to national health insurance.

We hold certain intangible assets that in the future could be classified as either partially or fully impaired, which would reduce our earnings and the book values of these assets.

     We test our intangible assets for impairment at least annually. Our impairment testing incorporates the current market price of our common stock, the estimated fair value of our assets and liabilities, and certain information of similar companies. It is possible that future impairment testing could result in a decline in value of our intangible assets which would adversely affect our financial condition. If we determine an impairment exists at a given point in time, our earnings and the book value of the related intangibles would be reduced by the amount of the impairment. If an impairment loss is recorded, it will have little or no impact on the tangible book value of our shares of common stock or our regulatory capital levels. If we acquire additional financial institutions or financial services companies, it is likely that the amount of goodwill included in our intangible assets will increase.

Strong competition may limit our growth and profitability.

     Competition in the banking and financial services industry is intense. We compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors (whether regional or national institutions) have substantially greater resources and lending limits than we have and may offer certain services that we do not or cannot provide. Our profitability depends upon our ability to successfully compete in our market area.

Higher Federal Deposit Insurance Corporation insurance premiums and special assessments will adversely affect our earnings.

     Recent bank failures coupled with the severe economic recession and continued weakness in the national economy have significantly reduced the deposit insurance fund’s reserve ratio. On February 27, 2009, the Federal Deposit Insurance Corporation issued a final rule that alters the way the Federal Deposit Insurance Corporation calculates federal deposit insurance assessment rates. Under the rule, the Federal Deposit Insurance Corporation first establishes an institution’s initial base assessment rate. This initial base assessment rate ranges from 12 to 45 basis points, depending on the risk category of the institution. The Federal Deposit Insurance Corporation then adjusts the initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustments to the initial base assessment rate are based upon an institution’s levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate ranges from 7 to 77.5 basis points of the institution’s deposits. In addition, on May 22, 2009, the Federal Deposit Insurance Corporation adopted a final rule levying a five basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. We recorded an expense of $258,000 during the quarter ended June 30, 2009, to reflect the special assessment. Any further special assessments that the Federal Deposit Insurance Corporation levies will be recorded as an expense during the appropriate period.

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     The Federal Deposit Insurance Corporation also has adopted a rule pursuant to which all insured depository institutions were required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. This pre-payment was due on December 30, 2009. The assessment rate for the fourth quarter of 2009 and for 2010 was based on each institution’s total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 was equal to the modified third quarter assessment rate plus an additional three basis points. In addition, each institution’s base assessment rate for each period was calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. We are required to record the pre-payment as a prepaid expense, which will be amortized to expense over three years. Our prepayment amount was $2.4 million.

     These actions will significantly increase our noninterest expense in 2010 and in future years as long as the increased premiums continue.

The United States economy remains weak and unemployment levels are high. The prolonged economic downturn will adversely affect our business and financial results.

     The United States experienced a severe economic recession in 2008 and 2009. While economic growth has resumed recently, the rate of growth has been slow and unemployment remains at very high levels and is not expected to improve in the near future. Loan portfolio quality has deteriorated at many financial institutions reflecting, in part, the weak U.S. economy and high unemployment. In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. The continuing real estate downturn also has resulted in reduced demand for the construction of new housing and in increased delinquencies in construction, residential and commercial mortgage loans. Bank and bank holding company stock prices have declined substantially, and it is significantly more difficult for banks and bank holding companies to raise capital or borrow in the debt markets.

     Continued negative developments in the financial services industry and the domestic and international credit markets may significantly affect the markets in which we do business, the market for and value of our loans and investments, and our ongoing operations, costs and profitability. Moreover, continued declines in the stock market in general, or stock values of financial institutions and their holding companies specifically, could adversely affect our stock performance.

A legislative proposal has been introduced that would eliminate the Office of Thrift Supervision, Oneida Financial Corp.’s primary federal regulator which would require Oneida Financial Corp. to become a bank holding company.

     Legislation has been proposed that would implement sweeping changes to the current bank regulatory structure. The proposal would, among other things, merge the Office of Thrift Supervision into the Office of the Comptroller of the Currency or a new Federal bank regulator. As discussed further under “Regulation—Federal Holding Company Regulation,” federal law allows a state savings bank that qualifies as a Qualified Thrift Lender, such as Oneida Savings Bank, to elect to be treated as a savings association for purposes of the savings and loan holding company provisions of the Home Owners’ Loan Act of 1933, as amended. Such election results

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in the state savings bank’s holding company being regulated as a savings and loan holding company by the Office of Thrift Supervision rather than as a bank holding company regulated by the Board of Governors of the Federal Reserve System. Pursuant to such an election, Oneida Financial Corp. and Oneida Financial, MHC are currently regulated by the Office of Thrift Supervision. If the Office of Thrift Supervision is eliminated, Oneida Financial Corp. would become a bank holding company subject to regulation and supervision under the Bank Holding Company Act of 1956 which would include holding company regulatory capital requirements to which Oneida Financial Corp. is currently not subject.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income.

     In response to the financial crisis of 2008 and early 2009, Congress has taken actions that are intended to strengthen confidence and encourage liquidity in financial institutions, and the Federal Deposit Insurance Corporation has taken actions to increase insurance coverage on deposit accounts. In addition, there have been proposals made by members of Congress and others that would reduce the amount delinquent borrowers are otherwise contractually obligated to pay under their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral.

     The potential exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards. Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders requiring capital ratios in excess of regulatory requirements. Bank regulatory agencies, such as the New York State Banking Department, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors. In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge, and our ongoing operations, costs and profitability. Further, legislative proposals limiting our rights as a creditor could result in credit losses or increased expense in pursuing our remedies as a creditor.

We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.

     We are subject to extensive regulation, supervision and examination by the Federal Deposit Insurance Corporation, the New York State Banking Department and the Office of Thrift Supervision. Such regulation and supervision govern the activities in which an institution and its holding companies may engage and are intended primarily for the protection of the insurance fund and depositors. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution’s allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations or legislation or additional deposit insurance premiums could have a material impact on our operations. Because our business is highly regulated, the laws and applicable regulations are subject to frequent change. Any new laws, rules and regulations could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition or prospects.

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If our investment in the Federal Home Loan Bank of New York becomes impaired, our earnings and stockholders’ equity could decrease.

     We are required to own common stock of the Federal Home Loan Bank of New York to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the Federal Home Loan Bank’s advance program. The aggregate carrying value of our Federal Home Loan Bank common stock as of December 31, 2009 was $2.7 million. Federal Home Loan Bank common stock is not a marketable security and can only be redeemed by the Federal Home Loan Bank.

     Federal Home Loan Banks may be subject to accounting rules and asset quality risks that could materially lower their regulatory capital. In an extreme situation, it is possible that the capitalization of a Federal Home Loan Bank, including the Federal Home Loan Bank of New York, could be substantially diminished or reduced to zero. Consequently, we believe that there is a risk that our investment in Federal Home Loan Bank of New York common stock could be deemed impaired at some time in the future, and if this occurs, it would cause our earnings and stockholders’ equity to decrease by the amount of the impairment charge.

System failure or breaches of our information systems could subject us to increased operating costs as well as litigation and other liabilities.

     We rely heavily on communications and information systems to conduct business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our general ledger, deposit, loan and other systems, including risk to data integrity. While we have policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

ITEM 1.B UNRESOLVED STAFF COMMENTS

     Not applicable.

ITEM 2. PROPERTIES

     Oneida Savings Bank conducts its business through its main office located in Oneida, New York, and 11 additional full service branch offices. The following table sets forth certain information concerning our property and equipment at December 31, 2009. The aggregate net book value of our premises and equipment was $21.2 million at December 31, 2009. Bailey & Haskell Associates conducts its business through one owned and four leased facilities with lease expirations not exceeding five years. Benefit Consulting Group conducts its business through one leased facility. Workplace Health Solutions conducts its business through one leased facility.

47

	Original		Date of		Net Book Value
	Year		Lease		of Property and Equipment
Location	Acquired		Expiration		at December 31, 2009
					(In thousands)
Main Office:
182 Main Street		1889		N/A	$	2,380
Oneida, New York 13421
Branch Offices:
Camden Branch		1997		N/A		645
41 Harden Boulevard Camden, New York 13316
Canastota Branch		1999		N/A		702
104 S. Peterboro St. Canastota, New York 13032
Cazenovia Branch		1971		N/A		1,676
48 Albany Street Cazenovia, New York 13035
Hamilton Branch		1976		N/A		186
35 Broad Street Hamilton, New York 13346
Convenience Center		1988		N/A		1,081
585 Main Street Oneida, New York 13421
Chittenango Branch		2005		N/A		1,780
519 Genesee Street Chittenango, New York 13037
Bridgeport Branch		2002	December 2012			14
8786 State Route 31 Bridgeport, New York 13030
Griffiss Park Branch		2005		N/A		6,151
160 Brooks Road Rome, NY 13441
Vernon Branch 5238 W. Seneca Street Vernon, NY 13476		2007		N/A		1,125
Westmoreland Branch 4675 State Route 233 Westmoreland, NY 13490		2007		N/A		193
South Utica Branch 2711 Genesee Street Utica, NY 13505		2007		N/A		1,069
Mortgage Center 126 Lenox Avenue		1989		N/A		90
Oneida, New York 13421
Operations Center 169 Main Street		2001		N/A		1,333
Oneida, New York 13421
Bailey & Haskell Associates, Inc. Various locations		2000	Various			468
(Headquarters) 169 Main Street Oneida, New York 13421
Bailey & Haskell Associates, Inc.		2006		N/A		2,137
Benefit Consulting Group Inc. Workplace Health Solutions 5232 Witz Drive North Syracuse, New York 13212

48

	Original		Date of		Net Book Value
	Year		Lease		of Property and Equipment
Location	Acquired		Expiration		at December 31, 2009
Bailey & Haskell Associates, Inc.		1999	May 2010			N/M
8246 Seneca Turnpike Clinton, NY 13323
Bailey & Haskell Associates, Inc.		2009	Monthly			N/M
111 Clebourne Street Suite 230A Fort Mills, SC 29715
Other Bank Property 102 S. Peterboro St.		2000		N/A		162
Canastota, New York 13032
6 Cambridge Avenue Morrisville, New York 13408		2006		N/A		83

49

ITEM 3. LEGAL PROCEEDINGS

     Much of Oneida Savings Bank’s market area is included in the 250,000-acre land claim of the Oneida Indian Nation (“Oneidas”). The land claim area is held primarily by private persons. Over 16 years ago, the United States Supreme Court ruled in favor of the Oneidas in a lawsuit which management believes was intended to encourage the State of New York to negotiate an equitable settlement in a land dispute that has existed for 200 years.

     In June 1998, the United States Justice Department intervened in the action on behalf of the Oneidas against Madison County and Oneida County in New York State. In September 1998, a United States District Court removed a stay of litigation, having been in place since the late 1980’s pending settlement negotiations. In December 1998, both the Oneidas and the United States Justice Department filed motions to amend the long outstanding claim against the State of New York. The motions attempt to include in the claim, various named and 20,000 unnamed additional defendants, who own real property in parts of Madison and Oneida Counties, thereby including the additional defendants in the original suit. The U.S. District Court granted the motions to add as a defendant the State of New York, but denied the motions to add the private landowners. Neither Oneida Savings Bank nor Oneida Financial Corp. is a named defendant in the motion. The Court further rejected as not being viable the remedies of ejectment and/or of monetary damages against private landowners. In January 2001, amended complaints were served by the Oneidas and the United States, which seek to eject the Counties of Madison and Oneida from lands owned by the counties, and the Oneidas also seek a declaration that they have the right to possess all land within the land claim area. In June 2001, the Court determined that certain land purchased by the Oneidas in 1997 and 1998 are exempt from real estate taxes, accepting the Oneidas argument that the acquired parcels lie within the boundaries of the “reservation” established in 1794 by the Federal Government. The State of New York, Counties of Madison and Oneida and the City of Sherrill appealed the Courts decision with a court date in March 2002. In February 2002, a joint statement was issued by the Oneidas, State of New York and the Counties of Madison and Oneida, indicating that the framework for a settlement had been agreed upon, subject to the approval by the State legislature and the Federal Government. The Oneidas of Wisconsin and the Stockbridge-Munsee Band of Mohican Indians have commenced separate actions in the United States District Court for the Northern District of New York to dispute and interrupt any settlement pending. In July 2003, the United States Court of Appeals affirmed the decision of the lower court against the City of Sherrill but appeals continue relative to the decision against the Counties of Madison and Oneida. In January 2005 the United States Supreme Court heard the appeal brought forward by the City of Sherrill against the Oneidas arguing that the acquisition of real property by the Oneidas within the land claim area does not return the property to sovereign status. Therefore, the City of Sherrill contends that the property is subject to the payment of real property taxes or reverts to the ownership of the taxing authority if assessed property taxes are not paid. The United States Supreme Court ruled in favor of the City of Sherrill in June 2005. The Oneida Indian Nation is attempting to put all land acquired to date in a federal land trust. All parties involved continue to pursue all legal options available.

     To date neither the original claim nor the motion to amend has had an adverse impact on the local economy or real property values. In addition, title insurance companies continue to underwrite policies in the land claim area with no change in premiums or underwriting standards. Oneida Savings Bank requires title insurance on all residential real estate loans, excluding home equity loans. Both the State of New York and the Oneidas have indicated in their respective communications that individual landowners will not be adversely affected by the ongoing litigation. Oneida Financial Corp. continues to monitor the situation.

50

     We and our subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on our financial position or results of operations.

ITEM 4. [RESERVED]

PART II

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

     For information concerning the market for the Company’s common stock, the section captioned “Stockholder Information” in the Company’s Annual Report to Stockholders for the Year Ended December 31, 2009 (the “Annual Report to Stockholders”) is incorporated herein by reference.

     During the fourth quarter of 2009, the Company repurchased shares of its common stock as follows:

							Maximum Number of Shares that
	# of Shares		Average Price		Total Shares		may still be purchased under the
Period	Purchased		Paid Per Share		Purchased		repurchase program
Oct. 1 — Oct. 31		—	$	—		—		—
Nov. 1 — Nov. 30		—	$	—		—		—
Dec. 1 — Dec. 31		2,806	$	8.95		2,806		250,000

Equity Compensation Plans

     Set forth below is certain information as of December 31, 2009 regarding equity compensation to directors and executive officers of Oneida Financial Corp. approved by stockholders. Other than the employee stock ownership plan, Oneida Financial Corp. did not have any equity plans in place that were not approved by stockholders.

	Number of securities
	to be issued upon
	exercise of outstanding		Weighted average		Number of securities remaining available for
Plan	options and rights		exercise price		issuance under plan
Equity compensation plans approved by stockholders		122,175	$	10.401	9,243(options)/11,286(shares of restricted stock)
Equity compensation plans not approved by stockholders		—		—		—
Total		122,175	$	10.401	9,243 (options)/ 11,286(shares of restricted stock)

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Stock Performance Graph

     Set forth hereunder is a stock performance graph comparing (a) the cumulative total return on the Common Stock for the period beginning December 31, 2004, as reported by the NASDAQ Market, through December 31, 2009, (b) the cumulative total return on stocks included in the S&P 500 Index over such period,(c) the cumulative total return on stocks included in the NASDAQ Bank Index over such period, and (d) the cumulative total return of publicly traded thrifts or thrift holding companies in the mutual holding company structure over such period. Cumulative return assumes the reinvestment of dividends, and is expressed in dollars based on an assumed investment of $100.

	Period Ending
Index	12/31/04		12/31/05		12/31/06		12/31/07		12/31/08		12/31/09
Oneida Financial Corp.		100.00		75.02		92.13		78.14		64.17		81.03
S&P 500		100.00		103.00		117.03		121.16		74.53		92.01
MHC Thrifts		100.00		99.42		132.27		112.43		115.50		101.13
NASDAQ Bank Index		100.00		95.67		106.20		82.76		62.96		51.31

Assuming an initial investment in the Common Stock of Oneida Financial Corp. of $100.00 at December 31, 2004, the cumulative total value with dividends reinvested would be $81.03 at December 31, 2009.

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ITEM 6. SELECTED FINANCIAL DATA

     The following tables set forth selected consolidated historical financial data of the Company as of and for each of the years in the five-year period ended December 31, 2009. The historical “Selected Financial Condition Data” and historical “Selected Operating Data” are derived from the audited financial statements. The “Selected Financial Ratios”, “Summary Quarterly Data” and other data for all periods are unaudited. All financial information in these tables should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the Consolidated Financial Statements and the related notes thereto.

	At December 31,
Selected Financial Condition Data:	2009		2008		2007		2006		2005
					( in thousands )
Total assets	$	590,506	$	540,130	$	522,315	$	442,937	$	436,761
Cash and cash equivalents		39,537		13,294		16,461		18,710		12,877
Loans receivable, net		295,839		302,492		284,418		247,441		236,077
Mortgage-backed securities		65,737		74,316		46,569		29,064		29,074
Investment securities		96,487		60,446		95,825		85,736		106,455
Trading securities		7,627		5,941		—		—		—
Goodwill and other intangibles		24,813		25,063		25,434		19,870		14,364
Interest bearing deposits		426,368		364,911		334,444		260,173		250,142
Non-interest bearing deposits		62,997		60,787		65,685		53,097		51,044
Borrowed funds		31,000		52,825		56,400		65,400		77,270
Total stockholders’ equity		59,116		54,829		59,400		58,460		53,648

	Years ended December 31,
Selected Operating Data:	2009			2008			2007		2006		2005
	(dollars in thousands, except per share data )
Total interest income	$	25,001		$	26,734		$	25,673	$	22,261	$	21,012
Total interest expense		7,574			11,081			12,028		9,446		7,687
Net interest income		17,427			15,653			13,645		12,815		13,325
Provision for loan losses		760			525			—		280		360
Net interest income after provision for loan losses		16,667			15,128			13,645		12,535		12,965
Net investment (losses) gains		(1,507	)		(959	)		353		308		275
Change in fair value of trading securities		1,725			(7,675	)		—		—		—
Non-interest income		20,884			18,318			17,838		16,671		11,617
Non-interest expense		31,975			28,171			26,416		23,407		19,496
Intangible amortization		470			541			548		383		113
Income (loss) before income taxes		5,324			(3,900	)		4,872		5,724		5,248
Income tax provision (benefit)		1,211			(2,223	)		1,368		1,526		1,390
Net income (loss)	$	4,113		$	(1,677	)	$	3,504	$	4,198	$	3,858
Earnings (loss) per share — basic	$	0.53		$	(0.22	)	$	0.45	$	0.55	$	0.51
Earnings (loss) per share — diluted	$	0.52		$	(0.22	)	$	0.45	$	0.54	$	0.50
Cash dividends paid	$	0.48		$	0.48		$	0.48	$	0.45	$	0.41

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	Three Months Ended
Summary Quarterly Data:	31-Mar-09			30-Jun-09			30-Sep-09			31-Dec-09
	(dollars in thousands, except per share data )
Net interest income	$	4,059		$	4,291		$	4,442		$	4,635
Provision for loan losses		—			160			400			200
Net investment gains (losses)		238			(454	)		(658	)		(633	)
Change in fair value of trading securities		(429	)		998			739			417
Non-interest income		5,556			5,001			4,794			5,533
Non-interest expense		7,898			8,209			7,991			8,347
Income before income taxes		1,526			1,467			926			1,405
Income tax provision		412			398			230			171
Net income	$	1,114		$	1,069		$	696		$	1,234
Earnings per share — basic	$	0.14		$	0.14		$	0.09		$	0.16
Earnings per share — diluted	$	0.14		$	0.14		$	0.09		$	0.16
Cash dividends declared	$	0.24		$	—		$	0.24		$	—

	Three Months Ended
	31-Mar-08			30-Jun-08		30-Sep-08			31-Dec-08
	(dollars in thousands, except per share data )
Net interest income	$	3,723		$	3,867	$	3,924		$	4,139
Provision for loan losses		—			150		125			250
Net investment (losses) gains		(4	)		22		(826	)		(151	)
Change in fair value of trading securities		(604	)		5		(6,436	)		(640	)
Non-interest income		4,625			4,474		4,468			4,751
Non-interest expense		7,156			7,333		7,047			7,176
Income (loss) before income taxes		584			885		(6,042	)		673
Income tax provision (benefit)		155			239		(1,614	)		(1,003	)
Net income (loss)	$	429		$	646	$	(4,428	)	$	1,676
Earnings (loss) per share — basic	$	0.06		$	0.08	$	(0.57	)	$	0.22
Earnings (loss) per share — diluted	$	0.06		$	0.08	$	(0.57	)	$	0.21
Cash dividends declared	$	0.24		$	—	$	0.24		$	—

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	Years ended December 31,
Selected Financial Ratios:	2009			2008			2007			2006			2005
Performance ratios:
Return on average assets		0.73	%		-0.31	%		0.71	%		0.96	%		0.89	%
Return on average equity		7.41	%		-2.99	%		5.99	%		7.67	%		7.30	%
Interest rate spread		3.55	%		3.18	%		3.02	%		3.05	%		3.15	%
Net interest margin		3.69	%		3.42	%		3.34	%		3.45	%		3.50	%
Efficiency ratio		82.99	%		111.18	%		82.98	%		78.56	%		77.32	%
Non-interest income to average total assets		3.76	%		1.78	%		3.68	%		3.90	%		2.75	%
Non-interest expense to average total assets		5.78	%		5.27	%		5.46	%		5.46	%		4.53	%
Ratio of average interest-earning assets to average interest-bearing liablitites		108.73	%		109.73	%		110.99	%		115.73	%		117.37	%
Average equity to average total assets		9.89	%		10.42	%		11.83	%		12.58	%		12.21	%
Equity to total assets		10.01	%		10.15	%		11.37	%		13.20	%		12.28	%
Tangible equity to tangible assets		6.06	%		5.78	%		6.84	%		9.12	%		9.30	%
Dividend payout ratio		40.69	%		-99.10	%		47.05	%		36.05	%		34.82	%
Asset quality ratios:
Nonperforming assets to total assets		0.41	%		0.09	%		0.07	%		0.01	%		0.05	%
Nonperforming loans to total loans		0.18	%		0.17	%		0.13	%		0.02	%		0.09	%
Net charge-offs to average loans		0.16	%		0.14	%		0.04	%		0.06	%		0.17	%
Allowance for loan losses to loans receivable, net		0.98	%		0.87	%		0.88	%		0.84	%		0.83	%
Allowance for loan losses to nonperforming loans		526.50	%		511.50	%		669.60	%		4080.39	%		870.67	%
Bank Regulatory Capital Ratios:
Total capital (to risk-weighted assets)		10.73	%		10.21	%		10.18	%		13.36	%		13.64	%
Tier 1 capital (to risk-weighted assets)		10.00	%		9.49	%		9.45	%		12.63	%		12.96	%
Tier 1 capital (to average assets)		7.19	%		6.64	%		6.60	%		8.89	%		8.80	%
Number of full-service banking offices		12			12			12			8			8
Number of FTEs		318			314			317			277			237

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

     The “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s Annual Report to Stockholders is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Management of Market Risk and Other Risks” section of the Company’s Annual Report to Stockholders is incorporated herein by reference.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements identified in Item 15(a)(1) hereof are incorporated by reference hereunder.

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

          None.

ITEM 9A. CONTROLS AND PROCEDURES

     (a) Evaluation of disclosure controls and procedures.

     Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the fiscal year (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective in timely alerting them to the material information relating to us (or our consolidated subsidiaries) required to be included in our periodic SEC filings.

     (b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rules 13a-15(f) and 15d — 15(f) under the Securities Exchange Act of 1934. The Company’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 U.S. generally accepted accounting principles.

All internal control systems have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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 and procedures may deteriorate.

Management assessed the Company’s internal control over financial reporting as of December 31, 2009. This assessment was based on criteria for effective internal control over financial reporting established in Internal Control — Integrated Framework issues by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, we have concluded that, as of December 31, 2009, the Company’s internal control over financial reporting is effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this Annual Report.

56

Oneida Financial Corp.
By:	/s/ Michael R. Kallet
	Michael R. Kallet,
	President and Chief Executive Officer
By:	/s/ Eric E. Stickels
	Eric E. Stickels
	Executive Vice President and Chief Financial Officer

     (c) Changes in internal controls.

     There were no significant changes made in our internal controls during the period covered by this report or, to our knowledge, in other factors that has materially affected or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

     None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     Information concerning Directors of the Company is incorporated by reference from the Company’s definitive Proxy Statement for the 2009 Annual Meeting of Stockholders (the “Proxy Statement”), specifically the section captioned “Proposal I—Election of Directors.” In addition, see Item 1. “Executive Officers of the Registrant” for information concerning the Company’s executive officers. Information concerning corporate governance matters is incorporated by reference from the Company’s Proxy Statement, specifically the section captioned “Meetings and Committees of the Board of Directors.”

     The Company has adopted a Code of Ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics may be accessed on the Company’s website at www.oneidafinancial.com.

ITEM 11. EXECUTIVE COMPENSATION

     Information concerning executive compensation is incorporated by reference from the Registrant’s Proxy Statement, specifically the sections captioned “Proposal I—Election of Directors—Executive Compensation,” “—Directors’ Compensation,” and “—Benefits.”

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

     Information concerning security ownership and equity compensation of certain owners and management is incorporated by reference from the Company’s Proxy Statement.

57

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

     Information concerning relationships and transactions, and director independence, is incorporated by reference from the Company’s Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Information concerning principal accountant fees and services is incorporated by reference from the Company’s Proxy Statement.

58

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     The exhibits and financial statement schedules filed as a part of this Form 10-K are as follows:

     (a)(1) Financial Statements

• Report of Independent Registered Public Accounting Firm

• Consolidated Statements of Condition, December 31, 2009 and 2008

• Consolidated Statements of Income, Years Ended December 31, 2009, 2008 and 2007

• Consolidated Statements of Changes in Stockholders’ Equity, Years Ended December 31, 2009, 2008 and 2007

• Consolidated Statements of Cash Flows, Years Ended December 31, 2009, 2008 and 2007

• Notes to Consolidated Financial Statements.

     (a)(2) Financial Statement Schedules

No financial statement schedules are filed because the required information is not applicable or is included in the consolidated financial statements or related notes.

     (a)(3) Exhibits

3.1	Certificate of Incorporation of Oneida Financial Corp. (1)
3.2	Bylaws of Oneida Financial Corp. (1)
4	Form of Stock Certificate (2)
10.1	Employment Agreement by and Among Oneida Financial Corp., Oneida Savings Bank and Michael R. Kallet (3)
10.2	Employment Agreement by and Among Oneida Financial Corp., Oneida Savings Bank and Eric E. Stickels (4)
10.3	Employment Agreement by and Among Oneida Financial Corp., Oneida Savings Bank and Thomas H. Dixon (5)
10.4	Employment Agreement between Bailey & Haskell Associates, Inc. and John E. Haskell (12)
10.5	Amendment to Employment Agreement between Bailey & Haskell Associates, Inc. and John E. Haskell (13)
10.6	Employment Agreement between Benefit Consulting Group Inc. and John F. Catanzarita (14)

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10.7	Oneida Financial Corp. Performance Based Compensation Plan (15)
10.8	Oneida Financial Corp. 2006 Recognition and Retention Plan (6)
10.9	Oneida Financial Corp. 2000 Stock Option Plan (7)
10.10	Amendment to the Oneida Financial Corp. 2000 Stock Option Plan (8)
10.11	Oneida Financial Corp. 2000 Recognition and Retention Plan (9)
13	Annual Report to Stockholders
14	Code of Ethics (10)
16	Letter regarding change in certifying accountant (11)
21	Subsidiaries of the Company
23	Consent of Independent Registered Public Accounting Firm to incorporate financial statements into Form S-8
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 20, 2001. (File No. 000-25101).
(2)	Incorporated by reference to the Company’s Registration Statement on Form S-1 filed on September 17, 1998. (File No. 333-63603).
(3)	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 10, 2009 (File No. 000-25101) .
(4)	Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 10, 2009 (File No. 000-25101).
(5)	Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 10, 2009 (File No. 000-25101).
(6)	Incorporated by reference to Appendix A of the Company’s Proxy Statement filed with the Securities and Exchange Commission on March 30, 2006 (File No. 000-25101).
(7)	Incorporated by reference to Appendix A of the Company’s Proxy Statement filed with the Securities and Exchange Commission on March 23, 2000 (File No. 000-25101).

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(8)	Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2006 (File No. 000-25101).
(9)	Incorporated by reference to Appendix B of the Company’s Proxy Statement filed with the Securities and Exchange Commission on March 23, 2000 (File No. 000-25101).
(10)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-25101).
(11)	Incorporated by reference to the Company’s Current Report on Form 8-K, Item 4. Changes in Registrant’s Certifying Accountant, filed on September 3, 2003 (File No. 000-25101).
(12)	Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1 filed by Oneida Financial Corp., a Maryland corporation, with the Securities and Exchange Commission on March 12, 2010.
(13)	Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1 filed by Oneida Financial Corp., a Maryland corporation, with the Securities and Exchange Commission on March 12, 2010.
(14)	Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 filed by Oneida Financial Corp., a Maryland corporation, with the Securities and Exchange Commission on March 12, 2010.
(15)	Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 filed by Oneida Financial Corp., a Maryland corporation, with the Securities and Exchange Commission on March 12, 2010.

61

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.

	ONEIDA FINANCIAL CORP.
Date: March 12, 2010	By:	/s/ Michael Kallet
		Michael R. Kallet
		President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange 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.

By:	/s/ Michael Kallet	By:	/s/ Eric Stickels
	Michael R. Kallet, President and Chief		Eric E. Stickels, Executive Vice President and
	Executive Officer		Chief Financial Officer
	(Principal Executive Officer)		(Principal Financial and Accounting Officer)
Date: March 12, 2010		Date: March 12, 2010
By:	/s/ Thomas Dixon	By:	/s/ Patricia Caprio
	Thomas H. Dixon, Executive Vice President		Patricia D. Caprio, Director
Date: March 12, 2010		Date: March 12, 2010
By:	/s/ Edward Clarke	By:	/s/ John Haskell
	Edward J. Clarke, Director		John E. Haskell, Director
Date: March 12, 2010		Date: March 12, 2010
By:	/s/ Rodney Kent	By:	/s/ Richard Myers
	Rodney D. Kent, Director		Richard B. Myers, Director
Date: March 12, 2010		Date: March 12, 2010
By:	/s/ Dr. Ralph Stevens	By:	/s/ Frank White Jr.
	Dr. Ralph L. Stevens, Director		Frank O. White Jr., Director
Date: March 12, 2010		Date: March 12, 2010
By:	/s/ Dr. John Wight	By:	/s/ Gerald Volk
	Dr. John A. Wight, Director		Gerald N. Volk, Director
Date: March 12, 2010		Date: March 12, 2010
		By:	/s/ Nancy E. Ryan
			Nancy E. Ryan, Director
		Date: March 12, 2010

62

EX-13

Exhibit 13

Oneida Financial Corp.
2009 Annual Report to Stockholders

Management’s Discussion and Analysis of Financial Condition
and Results of Operations

     This section presents Management’s Discussion and Analysis of and Changes to the Company’s Consolidated Financial Condition and Results of Operations and should be read in conjunction with the Company’s financial statements and notes thereto included herein.

     When used in this Annual Report the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company’s market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

     The Company does not undertake, and specifically declines any obligation, to publicly release the result of any revisions which may be made to 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. This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements and should read in conjunction with the business and financial information regarding Oneida Financial Corp. provided in the consolidated financial statements and corresponding notes to the financial statements.

Overview

     Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of loans, investment securities, mortgage-backed securities and other interest-earning assets (primarily cash and cash equivalents), and the interest we pay on our interest-bearing liabilities, consisting primarily of deposits and Federal Home Loan Bank advances and other borrowings. Net interest income is a function of our interest rate spread, which is the difference between the average yield earned on our interest-earning assets and the average rate paid on our interest-bearing liabilities, as well as a function of the average balance of interest-earning assets compared to interest-bearing liabilities. Also contributing to our earnings is noninterest income, which consists primarily of service charges and fees on loan and deposit products and services, fees from our insurance agency, benefits consulting and risk management subsidiaries and fees from trust services, and net gains and losses on sale of investments. Interest income and noninterest income are offset by provisions for loan losses, general administrative and other expenses, including employee compensation and benefits and occupancy and equipment costs, as well as by state and federal income tax expense.

     Our results of operations are also significantly affected by general economic and competitive conditions, particularly with respect to changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially affect our financial condition and results of operations.

Business Strategy

     In guiding our operations, we seek to implement various strategies designed to enhance the institution’s profitability consistent with safety and soundness considerations. These strategies include a continuing focus on our community banking franchise while distinguishing our company as a complete financial services provider, and by promoting and continuing to expand our insurance, consulting and risk management businesses. We believe these strategies will enable us to continue to grow our assets, while providing superior service to our customers, remaining focused on high asset quality, continuing to grow and diversify revenue and generating favorable returns to our stockholders. The following are the key elements of our business strategy:

     Continuing Our Community Oriented Focus. We have been committed to meeting the financial needs of the communities we serve and providing quality service to our customers. We believe we can be more effective than many of our competitors in serving our customers because of our ability to promptly and effectively respond to customer needs and

inquiries. Our ability to succeed in our communities is enhanced by the stability of senior management. Senior management has an average tenure with Oneida Savings Bank of over 20 years and each individual who comprises senior management has over 25 years experience in the banking industry.

     Our community focus is further supported by the community service activities of our employees and the charitable activities of The Oneida Savings Bank Charitable Foundation. Our foundation was established in December 1998 in connection with our initial public offering. The foundation provides funds to eligible nonprofit organizations to help them carry out unique, innovative projects in specific fields of interest. The foundation’s goal is to fund projects that will enhance the quality of life in the communities served by Oneida Savings Bank.

     Expanding Our Geographic Reach. Since 1998, we have grown our traditional community banking franchise organically and through acquisitions of banks and nonbank corporations that offer trust services, insurance sales, financial services, employee benefits consulting and risk management services. The expansion into insurance and other financial services businesses has enabled Oneida Savings Bank to evolve from a traditional savings bank to a full-service financial services organization. We plan to continue to seek opportunities to grow our business through a combination of de novo branching and complementary acquisitions in our existing market and contiguous markets. We will consider acquisition opportunities that expand our geographic reach in banking, insurance or other complementary financial service businesses, although we do not currently have any agreements or understandings regarding any specific acquisition.

     Continuing to Improve Earnings and Diversify Income Sources. We continue to seek ways of increasing our income by increasing our fee income and other sources of non-interest income through traditional banking sources and insurance and financial services businesses.

• Community Banking. We continue to actively market our core banking products to attract new fee-based deposit accounts and checking account related services to new and existing customers. We offer our customers internet banking, an account overdraft program, e-commerce capabilities and debit cards as an account retention tool and to increase non-interest income. These products and services represent continuing sources of fee income. We also emphasize our trust department services with the expectation that fees generated by the trust department will increase as the assets under management grow. In addition, we receive fee income from servicing loans sold in the secondary market.

• Financial Service Subsidiaries. In recent years, we have increased the services and products we offer through our insurance agency, benefits consulting, and risk management subsidiaries. We initially entered the insurance and financial services business with the acquisition in 2000 of Bailey & Haskell Associates, Inc., which operates as an insurance agency subsidiary of Oneida Savings Bank with six New York offices and an office in South Carolina. We acquired Benefit Consulting Group LLC, an employee benefits consulting and retirement plan administration firm in 2006. The resulting company, Benefit Consulting Group Inc., is also a wholly owned subsidiary of Oneida Savings Bank. The expansion of our financial services business has continued to provide an increasing revenue source. During 2008, we established Workplace Health Solutions, Inc. a wholly owned subsidiary of Oneida Savings Bank, to develop a series of risk management services to help mitigate and prevent work related injuries, and to assist injured workers and their employers when a workplace injury occurs. This subsidiary was designed to complement our other subsidiaries with an overall philosophy of innovative risk management services. We intend to continue to expand our financial services businesses to increase our earnings and diversify our revenue sources.

     Growing Our Loan Portfolios. We intend to grow our loan portfolios while continuing to exercise prudent loan underwriting and administration standards.

• Emphasizing Origination of Commercial Real Estate, Consumer and Commercial Business Loans. We have sought to increase commercial real estate, consumer and commercial business lending in a controlled, safe and sound manner. Because these loans generally have higher yields and shorter terms than one-to-four family residential mortgage loans, our goal is to increase the origination of these loans consistent with safety and soundness considerations. At December 31, 2009, our loan portfolio was composed of 19.8% commercial real estate loans, 14.4% consumer loans and 13.0% commercial business loans.

• Continuing the Origination of One-to-Four Family Real Estate Loans. Historically, Oneida Savings Bank has emphasized the origination of one-to-four family residential mortgage loans within Madison and Oneida counties and the surrounding counties. During 2009, our one-to-four family mortgage loan originations have been primarily fixed-rate loans. We generally sell our fixed-rate one-to-four family loan

originations and such loans are sold without recourse and on a servicing-retained basis. During the years ended December 31, 2009 and 2008, we sold $55.9 million and $18.6 million, respectively, in fixed-rate one-to-four family mortgage loans. In addition, adjustable-rate mortgage (“ARM”) loans and hybrid ARM loans, which have a fixed rate of interest for the first three to five years and adjust annually thereafter, represented a lower percentage of total originations. Residential real estate loan origination volume, particularly fixed-rate originations, increased significantly during 2009 compared with 2008 due to declining market interest rates and a reduction of non-bank mortgage brokers competing in the market area.

     Continuing Our Conservative Underwriting Standards and Maintaining our Strong Asset Quality. We continue to maintain exceptional asset quality and reserve coverage. At December 31, 2009, our non performing loans totaled $551,000 or 0.18% of total loans and our ratio of allowance for loan losses to total nonperforming loans was 526.5%. Our asset quality reflects our conservative underwriting standards, the diligence and experience of our loan collection personnel and the stability of the local economy. As part of our evaluation of our asset quality, we also use an independent third party loan review firm to evaluate certain parts of the loan portfolio on a semiannual basis. Finally, we have not and do not plan to originate or participate in any sub-prime or Alt-A lending programs or loans.

     Growing Our Core Deposit Base. Oneida Savings Bank is a market leader in offering deposit accounts in the communities we serve. We continue to emphasize offering core deposits to individuals, businesses and municipalities located in our market area. Core deposits represent our best opportunity to develop customer relationships that enable us to cross sell the products and services of our complementary subsidiaries. Core deposits are our least costly source of funds which improves our interest rate spread and also contribute non-interest income from account related services.

Financial Condition

     Assets. Total assets at December 31, 2009 were $590.5 million, an increase of $50.4 million, or 9.3%, from $540.1 million at December 31, 2008. The increase in total assets was primarily attributable to an increase in cash equivalents and investment securities.

     Management continues to maintain a diversified loan portfolio mix. This strategy is supported through the origination and retention of consumer and commercial business loans with the intent of increasing the average yield on our interest-earning assets, and the origination for sale in the secondary market of lower yielding fixed-rate one-to-four family residential real estate loans. Total consumer, commercial business and commercial real estate loans decreased by $2.3 million during 2009. The decrease in consumer, commercial business and commercial real estate loans was primarily due to a decrease in demand, particularly automobile lending, and commercial borrowers reducing their outstanding commercial line of credit balances during 2009. Residential real estate loans decreased $4.0 million during 2009. During the year ended December 31, 2009, a total of $55.9 million in fixed-rate residential mortgage loans were sold, compared with loan sales of $18.6 million during 2008.

     Oneida Savings Bank reinvests proceeds from loan sales and investment sales and investment security maturities in other loans as new loan origination volume warrants. Investment and mortgage-backed securities provide improved liquidity as compared with individual mortgage loans thereby allowing Oneida Savings Bank to accommodate periods of increased loan demand.

     Mortgage-backed securities decreased $8.6 million, or 11.6%, to $65.7 million at December 31, 2009 as compared with $74.3 million at December 31, 2008. The decrease in mortgage-backed securities is primarily the result of the repayment and sales of securities during 2009. Investment securities increased $36.1 million, or 60.0%, to $96.5 million at December 31, 2009 as compared to $60.4 million at December 31, 2008. The increase in investment securities was due to the increase in municipal deposits which require full collateralization with treasury, agency and municipal securities.

     We adopted The Fair Value Option of Financial Assets and Financial Liabilities, resulting in the reclassification of certain investment securities to that of trading securities as of January 1, 2008. Trading securities increased $1.7 million, or 28.8%, to $7.6 million at December 31, 2009 as compared with $5.9 million at December 31, 2008 and represent common and preferred equity securities that we have elected to adjust to fair value. The increase in trading securities represents the increase in fair value during 2009 and was reflected through the income statement.

     Cash and cash equivalents increased $26.2 million or 197.4% to $39.5 million at December 31, 2009 from $13.3 million at December 31, 2008. The increase in cash and cash equivalents was due to our intention to maintain a higher level of cash liquidity, an increase in deposits and maintaining a larger cash balance with the Federal Reserve Bank of New York for more favorable risk-based capital treatment.

     Liabilities. Total liabilities increased by $46.1 million or 9.5% to $531.4 million at December 31, 2009 from $485.3 million at December 31, 2008. The increase was primarily the result of an increase in deposits of $63.7 million, partially offset by a decrease in borrowings of $21.8 million.

     Deposit accounts increased $63.7 million, or 15.0%, to $489.4 million at December 31, 2009 from $425.7 million at December 31, 2008. Interest-bearing deposit accounts increased by $61.5 million, or 16.8%, to $426.4 million at December 31, 2009 from $364.9 million at December 31, 2008. Non-interest bearing deposit accounts increased $2.2 million, or 3.6%, to $63.0 million at December 31, 2009 from $60.8 million at December 31, 2008. Core deposit accounts which include checking, savings and money market accounts increased $62.6 million or 23.3%. Time deposits increased $1.1 million or 0.7%. The increase in core deposit accounts was distributed throughout our existing retail banking branch network and as a result of an increase in municipal deposits offered through our limited purpose commercial banking subsidiary, State Bank of Chittenango. Municipal deposits increased $31.1 million to $86.0 million at December 31, 2009 from $54.9 million at December 31, 2008.

     Borrowings decreased $21.8 million, or 41.3%, to $31.0 million at December 31, 2009 from $52.8 million at December 31, 2008. The decrease in borrowings was due to our decision not to renew a portion of the advances that matured during the year. At December 31, 2009, our FHLBNY overnight line of credit facility was not in use. At December 31, 2008, there was $3.8 million outstanding in the overnight line of credit facility. Overnight advances are accessed from time to time to fund loan originations and short-term deposit outflows.

     Other liabilities increased $4.2 million, or 61.8%, to $11.0 million at December 31, 2009 from $6.8 million at December 31, 2008. The increase in other liabilities is primarily due to an increase in future dated commissions and premiums payable in our insurance subsidiary at December 31, 2009.

     Stockholders’ Equity. Total stockholders’ equity at December 31, 2009 was $59.1 million, an increase of $4.3 million, or 7.8%, from $54.8 million at December 31, 2008. The increase in stockholders’ equity reflects the contribution of net income of $4.1 million. In addition, there was an increase in accumulated other comprehensive income of $1.6 million at December 31, 2009 resulting from an increase in the market value of mortgage-backed and investment securities and the change in the unrealized loss on pension benefits. Changes in interest rates and market volatility resulted in a decrease in the net unrealized loss on our available for sale securities.

     Partially offsetting the increases in stockholders’ equity was the payment of cash dividends to stockholders. Stockholders were paid dividends during 2009 of $0.48 per share resulting in a reduction in stockholders’ equity of $1.7 million. Share based compensation earned under our stock plans was $259,000 during 2009 as compared to $166,000 during 2008.

Analysis of Net Interest Income

     Oneida Savings Bank’s principal business has historically consisted of offering savings accounts and other deposits to the general public and using the funds from such deposits to make loans secured by residential and commercial real estate, as well as consumer and commercial business loans. Oneida Savings Bank also invests a significant portion of its assets in investment securities and mortgage-backed securities both of which have classifications of available for sale and held to maturity. Our results of operations depend primarily upon net interest income, which is the difference between income earned on interest-earning assets, such as loans and investments, and interest paid on interest-bearing liabilities, such as deposits and borrowings. Net interest income is directly affected by changes in volume and mix of interest-earning assets and interest-bearing liabilities which support those assets, as well as the changing interest rates when differences exist in the repricing of assets and liabilities.

     Average Balance Sheet. The following table sets forth certain information relating to our average balances, average yields and costs, and certain other information for the years ending December 31, 2009, 2008 and 2007. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities is expressed both in dollars and rates. No tax equivalent adjustments were made. The average balance is an average daily balance. Non-accrual loans have been included in the average balances.

	For the Years Ending December 31,
	2009								2008								2007
	Average					Yield/			Average					Yield/			Average					Yield/
	Balance		Interest			Rate			Balance		Interest			Rate			Balance		Interest			Rate
									( dollars in thousands )
Interest-earning assets:
Loans receivable	$	298,449	$	17,761			5.95	%	$	293,499	$	18,535			6.32	%	$	271,789	$	18,552			6.83	%
Investment and MBS securities		154,151		6,905			4.48	%		143,987		7,379			5.12	%		107,120		5,442			5.08	%
Federal funds		13,723		37			0.27	%		7,342		169			2.30	%		15,814		829			5.24	%
Equity securities		6,290		298			4.74	%		12,814		651			5.08	%		13,648		850			6.23	%
Total interest-earning assets		472,613		25,001			5.29	%		457,642		26,734			5.84	%		408,371		25,673			6.29	%
Non interest-earning assets:
Cash and due from banks		13,188								11,725								14,771
Other assets		75,112								74,999								71,107
Total Assets	$	560,913							$	544,366							$	494,249
Interest-bearing liabilities:
Money market deposits	$	117,472	$	1,516			1.29	%	$	83,115	$	1,654			1.99	%	$	58,370	$	1,831			3.14	%
Savings accounts		80,714		488			0.60	%		77,266		603			0.78	%		74,332		570			0.77	%
Interest-bearing checking		46,359		139			0.30	%		40,459		238			0.59	%		36,024		265			0.74	%
Time deposits		153,870		3,734			2.43	%		159,933		6,020			3.76	%		138,651		6,372			4.60	%
Borrowings		36,235		1,697			4.68	%		56,194		2,561			4.56	%		59,710		2,948			4.94	%
Notes payable		1		0			0.00	%		88		5			5.68	%		836		42			5.02	%
Total interest-bearing liabilities		434,651		7,574			1.74	%		417,055		11,081			2.66	%		367,923		12,028			3.27	%
Non interest-bearing liabilities:
Demand deposits		60,024								63,711								61,187
Other liabilities		10,740								6,867								6,661
Total liabilities		505,415								487,633								435,771
Stockholders’ equity		55,498								56,733								58,478
Total Liabilities and Stockholders’ Equity	$	560,913							$	544,366							$	494,249
Net interest income			$	17,427							$	15,653							$	13,645
Net interest spread							3.55	%							3.18	%							3.02	%
Net earning assets	$	37,962							$	40,587							$	40,448
Net interest margin				3.69	%							3.42	%							3.34	%
Ratio of interest-earning assets to interest-bearing liabilities				108.73	%							109.73	%							110.99	%

     Rate and Volume Analysis. The following table presents the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (changes in volume multiplied by current rate); (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume) and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

	Years Ended December 31,
	2009 vs. 2008									2008 vs. 2007
	Increase / (Decrease)						Total			Increase / (Decrease)						Total
	Due to						Increase/			Due to						Increase/
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
	( In Thousands)
Interest-earning assets:
Loans receivable	$	295		$	(1,069	)	$	(774	)	$	1,371		$	(1,388	)	$	(17	)
Investment and mortgage-backed securities		455			(929	)		(474	)		1,889			48			1,937
Federal funds		17			(149	)		(132	)		(195	)		(465	)		(660	)
Equity securities		(309	)		(44	)		(353	)		(42	)		(157	)		(199	)
Total interest-earning assets	$	458		$	(2,191	)	$	(1,733	)	$	3,023		$	(1,962	)	$	1,061
Interest-bearing liabilities:
Money market deposits	$	443		$	(581	)	$	(138	)	$	492		$	(669	)	$	(177	)
Savings accounts		21			(136	)		(115	)		23			10			33
Interest-bearing checking		18			(117	)		(99	)		26			(53	)		(27	)
Time deposits		(147	)		(2,139	)		(2,286	)		801			(1,153	)		(352	)
Borrowings		(935	)		71			(864	)		(160	)		(227	)		(387	)
Notes payable		—			(5	)		(5	)		(43	)		6			(37	)
Total interest-bearing liabilities	$	(600	)	$	(2,907	)	$	(3,507	)	$	1,139		$	(2,086	)	$	(947	)
Net increase (decrease) in net interest income							$	1,774								$	2,008

Comparison of Operating Results for the Years Ended December 31, 2009 and December 31, 2008.

     General. Net income for the year ended December 31, 2009 was $4.1 million compared to a net loss of $1.7 million for the year ended December 31, 2008. For the year ended December 31, 2009, the basic net income per share was $0.53 as compared with the 2008 reported basic loss per share of $0.22. The increase in net income is primarily the result of an increase in net interest income, an increase in non-interest income and an increase in the fair value of trading securities. These increases in income were partially offset by an increase in non-interest expense, an increase in income tax provision, an increase in net investment losses and an increase in provision for loan losses during 2009 as compared with 2008. The net loss in 2008 was largely due to noncash investment charges of $8.7 million, an increase in the provision for loan loss reserve and an increase in non-interest expenses. Partially offsetting the factors attributable to the net loss were increases in net interest income and non-interest income and a decrease in the provision for income taxes.

     The net income from operations for the year ending December 31, 2009, which excludes non-cash impairment charges incurred on eight trust preferred securities of $2.3 million and the non-cash benefit to earnings recognized in the connection with the increase in market value of our trading securities of $1.7 million, net of $130,000 in income taxes, was $4.6 million or $0.58 per basic share. This compares to net income from operations for the year ending December 31, 2008 of $3.5 million, or $0.45 per basic share. Net income excluding the non-cash charges and benefits to earnings increased due primarily to an increase in net interest income, an increase in investment gains realized and an increase in non-interest income, partially offset by an increase in

non-interest expense, provisions for loan losses and income tax provisions. We believe these non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of our business, and facilitate investors’ assessments of business and performance trends in comparison to others in the financial services industry. In addition, we believe the exclusion of these items enables management to perform a more effective evaluation and comparison of our results and assess performance in relation to our ongoing operations.

     Interest and Dividend Income. Interest and dividend income decreased by $1.7 million, or 6.5%, to $25.0 million for the year ended December 31, 2009 from $26.7 million for the year ended December 31, 2008. Interest and fees on loans decreased by $774,000 for the year ended December 31, 2009 as compared with the same period in 2008. Interest and dividend income on mortgage-backed and other investment securities decreased $827,000 to $7.2 million for the year ended December 31, 2009 from $8.0 million for the year ended December 31, 2008. Interest income earned on federal funds sold decreased $132,000 during 2009 as compared with the year ended December 31, 2008.

     The decrease in income on loans resulted from a decrease of 37 basis points in the average yield on loans to 5.95% from 6.32% partially offset by an increase of $4.9 million in the average balance of loans to $298.4 million in 2009 from $293.5 million in 2008. As of December 31, 2009, residential real estate loans totaled $144.1 million, a decrease of $4.0 million from December 31, 2008. During 2009, a total of $55.9 million in fixed-rate residential real estate loans were sold in the secondary market. In addition, commercial loans decreased $3.4 million to $38.8 million at December 31, 2009 from $42.2 million at December 31, 2008. At December 31, 2009, total loans receivable were $298.7 million as compared with $305.1 million at December 31, 2008, a decrease of 2.1%. The decrease in the yield on loans is a result of lower market interest rates during 2009 as compared with 2008.

     The decrease in interest income from investment and mortgage-backed securities was the result of a decrease of 64 basis points in the average yield earned to 4.48% from 5.12% partially offset by an increase of $10.2 million in the average balance of investment and mortgage-backed securities to $154.2 million at December 31, 2009 from $144.0 million at December 31, 2008. The increase in the average balance on investment and mortgage-backed securities is the result of purchases during the year reflecting the increase in municipal deposits that require collateral to be pledged against the balances.

     Interest income on federal funds sold decreased as a result of a decrease of 203 basis points in the average yield partially offset by an increase in the average balance of federal funds sold of $6.4 million to $13.7 million during the 2009 period as compared with $7.3 million at December 31, 2008. The decrease in the yield is due to decreases in interest rates paid on federal funds during the period. The increase in the average balance of federal funds sold reflects a decision in 2009 to increase the total liquidity of Oneida Financial Corp.

     Income from equity securities decreased $353,000 due to a decrease in the average yield of 34 basis points. In addition, the average balance decreased $6.5 million from $12.8 million as of December 31, 2008 to $6.3 million as of December 31, 2009.

     Interest Expense. Interest expense decreased $3.5 million, or 31.5%, to $7.6 million for the year ended December 31, 2009 from $11.1 million for the year ended December 31, 2008. The decrease in interest expense was primarily due to a decrease in interest paid on deposit accounts during 2009 of $2.6 million, decreasing to $5.9 million during 2009 from $8.5 million during 2008. In addition, borrowing expense decreased to $1.7 million for 2009 compared with $2.6 million for 2008.

     The decrease in interest expense paid on deposits was primarily due to a decrease in the average cost of deposits. Core deposits, including money market accounts, savings accounts and interest-bearing checking accounts, experienced an increase in the average balance of $43.7 million, or 21.8%, to $244.5 million at an average cost of 0.88% during 2009 from $200.8 million at an average cost of 1.24% during 2008. During the same period the average balance of time deposits decreased $6.1 million or 3.8%, to $153.9 million in 2009 from $159.9 million during 2008 and the average rate paid on time deposits decreased 133 basis points.

     The decrease in borrowing expense was due to the decrease in the average balance of borrowings outstanding in the 2009 period to $36.2 million as compared with $56.2 million during the 2008 period, offset by a 12 basis point increase in the average rate paid on borrowed funds to 4.68% for the 2009 period.

     The decrease in notes payable expense was due to the decrease in average balance of $87,000 as well as a decrease in the average yield outstanding. The notes payable represent the balances owed to Parsons, Cote & Company and Benefit Consulting Group LLC as part of the acquisition of the companies during the year ended December 31, 2006 which were paid in full during 2009 according to the terms of the notes.

     Provision for Loan Losses. Provision for loan losses increased $235,000, or 44.8%, to $760,000 for the year ended December 31, 2009 as compared with a provision of $525,000 for the year ended December 31, 2008. Oneida Savings Bank establishes provisions for loan losses, which are charged to operations, in order to maintain the allowance for loan losses at a level deemed appropriate to absorb probable incurred credit losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Management evaluates the adequacy of the allowance and determines the appropriate level of provision for loan losses by applying a range of estimated loss percentages to each category of performing and classified loans. The evaluation considers volume changes in the loan portfolio mix in response to changes in loan asset origination and retention toward consumer and commercial business loan assets, and provides within the allowance adequacy formula for the higher relative degree of credit risk associated with this activity as compared with traditional residential real estate lending. Management continues to monitor the adequacy of the allowance for loan losses given the risk assessment of the loan portfolio and current economic conditions making appropriate provisions for loan losses on a quarterly basis.

     The increase in the provision from 2008 to 2009 was a result of an increase in charge-offs taken during 2009 and provisions for loan impairments which were partially offset by a decrease in loan balances. During 2009, we identified an impaired commercial lending relationship with a principal balance of $2.2 million as of December 31, 2009. At December 31, 2009, a specific reserve of $570,000 had been established for that loan. As of December 31, 2009, the borrower of the impaired loan has made all payments as agreed. Nonperforming loans remained at low levels during the years ended December 31, 2009 and 2008, totaling $551,000 or 0.09% of total assets at December 31, 2009 compared with $513,000 or 0.09% of total assets at December 31, 2008. Net charge-off activity for the year ended December 31, 2009 was $483,000 as compared with $412,000 in net charge-offs during 2008. The balance of the allowance for loan losses was $2.9 million or 0.98% of loans receivable at December 31, 2009 compared with $2.6 million or 0.87% of loans receivable at December 31, 2008.

     Non-interest Income. Non-interest income consists of non-interest income, changes in fair value of trading securities, net gains on sales of securities as well as net impairment losses recognized in earnings. Non-interest income increased by $11.4 million, or 117.5%, to $21.1 million for the year ended December 31, 2009 from $9.7 million for the year ended December 31, 2008. The increase in non-interest income was primarily due to a positive net fair value adjustment of $1.7 million for the increase in market value of our trading securities at December 31, 2009 from the prior year end. This compares with a net decrease in the fair value for the 2008 period of $7.7 million that was recognized in connection with the adoption of fair value accounting for certain preferred and common equity securities including Freddie Mac preferred securities. In addition, we also recorded other-than-temporary impairment charges in both 2009 and 2008 periods.

     Revenue derived from Oneida Savings Bank’s subsidiaries increased $2.2 million or 16.3% to $15.8 million during 2009 as compared with $13.6 million during 2008. Insurance subsidiary revenue of Bailey & Haskell Associates was $9.7 million for the year ended December 31, 2009 as compared with $8.5 million during 2008. The increase in insurance subsidiary revenue is primarily due to increased sales volume and a high level of account revenue retention from the prior year. Consulting activities of Benefit Consulting Group generated revenue of $5.7 million for the year ended December 31, 2009 as compared with $5.0 million during 2008. The increase in consulting revenue is primarily the result of an increase in employee benefit consulting services and increased pension administration revenue resulting from required pension plan amendments prepared for clients. Risk management activities of Workplace Health Solutions generated $491,000 of revenue for the year ended December 31, 2009 as compared with $120,000 in revenue during 2008. The increase in risk management revenue was the result of continued client growth for this new subsidiary established at the beginning of 2008.

     Deposit account service fees decreased to $2.6 million during the year ended December 31, 2009 from $2.8 million during 2008. The combination of fee reductions and the higher account balances currently maintained resulted in the decrease in deposit account service fee revenue.

     We experienced an increase in income from the sale and servicing of fixed-rate residential real estate loans. Such income increased to $985,000 during 2009 compared with $465,000 during 2008. The increase is primarily the result of an increase in the volume of loan activity in 2009 as compared with 2008.

     We have identified the preferred and common equity securities we hold in the investment portfolio as trading securities and as such the change in fair value of these securities is reflected as a non-cash adjustment through the income statement. For the year ended December 31, 2009 the market value of our trading securities increased $1.7 million as compared with a decrease of $7.7 million in the 2008 period. The 2008 period was negatively impacted by the significant decline in value of Freddie Mac perpetual preferred stock following the announcement by the United States Treasury and the FHFA that Freddie Mac was placed under conservatorship during September 2008.

     Net investment losses for the year ended December 31, 2009 were $1.5 million as compared with net investment losses of $959,000 during 2008. The net investment loss was the result of a non-cash impairment charge of $2.3 million recorded for the year ended December 31, 2009 for eight trust preferred securities which were determined to be other-than-temporarily impaired. The trust preferred securities are diversified pools of collateralized debt obligations primarily issued by domestic financial institutions and their holding companies. Partially offsetting the non-cash impairment charge were investment gains resulting from our decision to realize a portion of the appreciation in our mortgage-backed and investment securities portfolio resulting in net gains realized of $788,000 during 2009. For the year ended December 31, 2008, we recorded a non-cash other-than-temporary impairment charge on a Lehman Brothers medium term note of $1.0 million following their bankruptcy announcement in September 2008, partially offset by realized net investment gains of $63,000 during 2008.

     Non-interest Expense. Non-interest expense increased by $3.7 million or 12.9% to $32.4 million for the year ended December 31, 2009 from $28.7 million for the year ended December 31, 2008. The increase was primarily due to an increase in operating expenses associated with our insurance agency and consulting subsidiaries associated with commissions paid concurrent with revenue increases. In addition, an increase in premiums being assessed by the Federal Deposit Insurance Corporation for the current calendar year has resulted in additional non-interest expense of $970,000 for the year ended December 31, 2009 as compared with the same period in 2008.

     Salaries, wages and other compensation paid to the employees of Oneida Financial Corp. during 2009 was $20.4 million, an increase of $2.3 million, or 12.7%, as compared with compensation expense of $18.1 million during 2008. The increase in compensation expense was primarily the result of the increase in sales of insurance and other non-banking products through our subsidiaries resulting in an increase in commissions paid and employee benefit expense. In 2006, Oneida Financial Corp. approved a Management Recognition and Retention Plan for directors, officers and key employees. The expense associated with this benefit was $180,000 for 2009 as compared with $166,000 in 2008. In addition, we recognized compensation expense in connection with the exercise of stock options during 2009 of $78,000 as compared with no compensation expense recognized in 2008 related to the exercise of stock options.

     Building occupancy and equipment expense increased $9,000, or 0.2%, to $4.7 million for the year ended December 31, 2009 as compared to $4.7 million during 2008.

     Non-interest expense was negatively impacted during 2009 as a result of Oneida Savings Bank being assessed significantly higher deposit insurance premiums, including a special assessment of 5 basis points on its assets. Deposit insurance premiums and assessments during 2009 totaled $1.0 million as compared with FDIC premiums of $58,000 during 2008. At the end of 2009, the FDIC required all banks to prepay their base deposit insurance premiums for the next three years. This new requirement resulted in Oneida Financial Corp. transferring $2.4 million to the FDIC representing a prepaid assessment for 2010, 2011 and 2012. We anticipate additional FDIC insurance assessments beyond the current assessment level.

     Provision for Income Taxes. Provision for income taxes was $1.2 million for the year ended December 31, 2009 an increase of $3.4 million from the 2008 income tax benefit recorded of $2.2 million. The increase in income tax provision reflects the increase in net income for the year ended December 31, 2009. The effective tax rate was 22.7% during 2009. The increase in income tax provision is due to a return to profitability in 2009 and the special tax treatment received in 2008 for the investment losses recognized by holders of Freddie Mac preferred stock.

Comparison of Operating Results for the Years Ended December 31, 2008 and December 31, 2007.

     General. For the year ended December 31, 2008 we incurred a net loss of $1.7 million compared to net income of $3.5 million for the year ended December 31, 2007. For the year ended December 31, 2008, the basic net loss per share was $0.22 as compared with the 2007 reported basic earnings per share of $0.45. The net loss was largely due to noncash investment charges of $8.7 million, an increase in the provision for loan loss reserve and an increase in non-interest expenses. Partially offsetting the factors attributable to the net loss was an increase in net interest income and non-interest income and a decrease in the provision for income taxes.

     The net income from operations for the year ending December 31, 2008, which excludes a non-cash impairment charge of a medium term note and the non-cash charge to earnings recognized in connection with the adoption of fair value accounting for certain common and preferred equity securities of $8.7 million, net of $3.5 million in income taxes, was $3.5 million or $0.45 per basic share. This compares to net income from operations for the year ending December 31, 2007 of $3.5 million, or $0.45 per basic share. Net income excluding the non-cash charge to earnings remained stable as non-interest income remained stable, and non-interest expenses increased offsetting an increase in net interest income. We believe these non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of our business, and facilitate investors’ assessments of business and performance trends in comparison to others in the financial services industry. In addition, we believe the exclusion of these items enables management to perform a more effective evaluation and comparison of our results and assess performance in relation to Oneida Financial Corp.’s ongoing operations.

     Interest and Dividend Income. Interest and dividend income increased by $1.0 million or 3.9%, to $26.7 million for the year ended December 31, 2008 from $25.7 million for the year ended December 31, 2007. Interest and fees on loans decreased by $17,000 for the year ended December 31, 2008 as compared with the same period in 2007. Interest and dividend income on mortgage-backed and other investment securities increased $1.7 million to $8.0 million for the year ended December 31, 2008 from $6.3 million for the year ended December 31, 2007. Interest income earned on federal funds sold decreased $660,000 during 2008 as compared with the year ended December 31, 2007.

     The decrease in income on loans resulted from a decrease of 51 basis points in the average yield on loans to 6.32% from 6.83% partially offset by an increase of $21.7 million in the average balance of loans to $293.5 million in 2008 from $271.8 million in 2007. As of December 31, 2008, residential real estate loans totaled $148.8 million, an increase of $16.9 million from December 31, 2007. During 2008, a total of $18.6 million in fixed-rate residential real estate loans were sold in the secondary market. In addition, commercial loans increased $2.3 million to $42.2 million at December 31, 2008 from $39.9 million at December 31, 2007. At December 31, 2008, total loans receivable were $305.1 million as compared with $286.9 million at December 31, 2007, an increase of 6.3%. The decrease in the yield on loans is a result of lower market interest rates during 2008 as compared with 2007, and the changes in the composition of the loan portfolio to residential real estate loans.

     The increase in interest income from investment and mortgage-backed securities was the result of an increase of $36.9 million in the average balance of investment and mortgage-backed securities to $144.0 million at December 31, 2008 from $107.1 million at December 31, 2007 as well as an increase of 4 basis points in the average yield on investment and mortgage-backed securities. The increase in the average balance of investment and mortgage-backed securities is the result of purchases during the year reflecting the increase in municipal deposits that require collateral to be pledged against the balances.

     Interest income on federal funds sold decreased as a result of a decrease in the average balance of federal funds sold of $8.5 million to $7.3 million during 2008 as compared with $15.8 million during 2007 as well as a 294 basis point decrease in the average yield. The decrease in the yield is due to the decreases in interest rates paid on federal funds during the period. The decrease in the average balance of federal funds sold reflects a decision in 2008 to reallocate assets to investment securities.

     Income from equity securities decreased $199,000 due primarily to a decrease in the average yield of 115 basis points. In addition, the average balance decreased $834,000 from $13.6 million during 2007 to $12.8 million during 2008.

     Interest Expense. Interest expense decreased by $947,000, or 7.9%, to $11.1 million for the year ended December 31, 2008 from $12.0 million for the year ended December 31, 2007. The decrease in interest expense was primarily due to a decrease in interest paid on deposit accounts during 2008 of $523,000, decreasing to $8.5 million during 2008 from $9.0 million during 2007. In addition, borrowing expense decreased to $2.6 million for 2008 compared with $3.0 million for 2007.

     The decrease in interest expense paid on deposits was primarily due to a decrease in the average yield of deposits. Core deposits, including money market accounts, savings accounts and interest-bearing checking accounts, experienced an increase in the average balance of $32.1 million, or 19.1%, to $200.8 million at an average cost of 1.24% during 2008 from $168.7 million at an average cost of 1.58% during 2007. During the same period the average balance of time deposits increased $21.2 million or 15.3%, to $159.9 million in 2008 from $138.7 million during 2007 and the average rate paid on time deposits increased 84 basis points.

     The decrease in borrowing expense was due to the decrease in the average balance of borrowings outstanding in the 2008 period to $56.2 million as compared with $59.7 million during the 2007 period. The average rate paid on borrowed funds decreased 38 basis points to 4.56% for the 2008 period.

     The decrease in notes payable expense was due to the decrease in average balance of $748,000 as well as a decrease in the average yield outstanding. As noted above, the notes payable represent the balances owed to Parsons, Cote & Company and Benefit Consulting Group LLC as part of the acquisition of the companies during the year ended December 31, 2006.

     Provision for Loan Losses. For the year ended December, 31 2008, there was a provision of $525,000 made to the allowance for loan loss as compared with no provision made for the year ended December 31, 2007. The increase in the provision from 2007 to 2008 was largely due to the increase in nonperforming loans, an increase in charge-offs that had taken place during the year as well as an increase in loan growth. Nonperforming loans remained at low levels during the years ended December 31, 2008 and 2007, totaling $513,000 or 0.09% of total assets at December 31, 2008 compared with $375,000 or 0.07% of total assets at December 31, 2007. Net charge-off activity for the year ended December 31, 2008 was $412,000 as compared with $95,000 in net charge-offs during 2007. The balance of the allowance for loan losses was $2.6 million or 0.87% of loans receivable at December 31, 2008 compared with $2.5 million or 0.88% of loans receivable at December 31, 2007.

     Non-interest Income. Non-interest income decreased by $8.5 million, or 46.7%, to $9.7 million for the year ended December 31, 2008 from $18.2 million for the year ended December 31, 2007. The decrease in non-interest income was primarily due to a change in fair value of $7.7 million that was recognized in connection with the adoption of fair value accounting for certain preferred and common equity securities including Freddie Mac preferred securities. In addition to the noncash charge due to fair value accounting, we also recorded an other-than-temporary impairment charge on a Lehman Brothers medium term note.

     Revenue derived from Oneida Savings Bank’s subsidiaries increased $98,000 or 0.7% to $13.6 million during 2008 as compared with $13.5 million during 2007. Insurance subsidiary revenue of Bailey & Haskell Associates was $8.5 million for the year ended December 31, 2008 as compared with $9.9 million for 2007. Consulting activities of Benefit Consulting Group generated revenue of $5.0 million for the year ended December 31, 2008 as compared with $3.6 million in revenue for 2007. The decrease in insurance subsidiary revenue and the increase in consulting subsidiary revenue is primarily due to the transfer of the financial services and life insurance sales divisions from Bailey & Haskell Associates to Benefit Consulting Group during 2008 to better align the services of the various subsidiaries. Risk management activities generated $120,000 of revenue for the year ended December 31, 2008 in this new subsidiary established at the beginning of 2008.

     Deposit account service fees also contributed to the improvement in non-interest income, increasing to $2.8 million during December 31, 2008 from $2.5 million during December 31, 2007. The combination of fees charged on new accounts generated and acquired resulted in the increase in deposit account service fee revenue.

     We experienced an increase in income from the sale and servicing of fixed-rate residential real estate loans. Such income increased to $465,000 during 2008 compared with $433,000 during 2007. The increase is primarily the result of an increase in the volume of loan activity in 2008 as compared with 2007.

     Net investment securities losses realized were $8.6 million for the year ended December 31, 2008 as compared to net investment securities gains of $353,000 for the year ended December 31, 2007. The net investment losses recognized in 2008 were the result of fair value non-cash adjustments for certain investments securities which resulted in cumulative charges against earnings of $7.7 million and a non-cash impairment charge recorded for our investment in a medium term note in Lehman Brothers Holdings of $1.0 million during 2008 resulting in a complete write-down of this investment as we cannot reasonably conclude collection is probable. These non-cash investment charges were partially offset by realized investment gains of $63,000 during the year ended December 31, 2008.

     Non-interest Expense. Non-interest expense increased by $1.7 million, or 6.3%, to $28.7 million for the year ended December 31, 2008 from $27.0 million for the year ended December 31, 2007. The increase was primarily due to salary and employee benefits expense which increased $1.1 million to $18.1 million for the year ended December 31, 2008 from $17.0 million for the year ended December 31, 2007.

     The increase in compensation expense was primarily the result of the addition of National Bank of Vernon employees and the office in Griffiss Park. In 2006, Oneida Financial Corp. approved a Management Recognition and Retention Plan for directors, officers and key employees. The expense associated with this benefit was $166,000 for 2008 as compared with $175,000 in the 2007.

     Building occupancy and equipment expense increased $312,000 to $4.7 million for the year ended December 31, 2008 as compared to $4.4 million during 2007. The increase was due to the addition of four banking offices during 2007.

     Provision for Income Taxes. Income tax benefit was $2.2 million for the year ended December 31, 2008 a decrease of $3.6 million from the 2007 income tax provision of $1.4 million. The decrease in income tax provision reflects the decrease in net income for the year ended December 31, 2008. The 2008 tax benefit is compared with an effective tax rate of 28.1% during 2007. The decrease in the income tax provision in 2008 is due to an increase in tax exempt and tax preferred investment income of Oneida Financial Corp. which qualifies for dividends received deductions and the special tax treatment received in 2008 for the investment losses recognized by holders of Freddie Mac preferred stock.

Application of Critical Accounting Policies

     Oneida Financial Corp.’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the industries in which it operates. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal cash flow modeling techniques.

     The most significant accounting policies followed by Oneida Financial Corp. are presented in Note 1 to the consolidated financial statements. These policies, along with the disclosures presented in the other financial statement notes and in this financial review, provide information on how significant assets and liabilities are recorded in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses, the fair value of trading securities and investment securities and the evaluation of other-than-temporary impairment on securities whose fair value is less than amortized cost, actuarial assumptions associated with Oneida Financial Corp.’s pension plan and the fair value methodologies used to review the carrying value of goodwill to be the accounting areas that require the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.

     The allowance for loan losses represents management’s estimate of probable incurred credit losses in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the collateral value and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents the largest asset type on the consolidated balance sheet. Note 1 to the consolidated financial statements describes the methodology used to determine the allowance for loan losses and a discussion of the factors driving changes in the amount of the allowance for loan losses is included in the Allowance for Loan Losses section of the annual report.

     As of December 31, 2009, $47.7 million of securities were considered held to maturity and are carried at amortized cost on our statement of condition. Securities available for sale, which represented $114.5 million at December 31, 2009, are recorded at current market value on our statement of condition. Unrealized gains or losses, net of the deferred tax effect, are reported in other comprehensive income as a separate component of stockholders’ equity. Recorded values are based on prices obtained from nationally recognized resources or securities dealer’s valuations. We conduct a quarterly review and evaluation of the securities portfolios to determine if any declines in fair value are other than temporary. Any valuation decline that is determined to be other than temporary would require us to write down the security to fair value through a charge to current period operations.

     Securities in which the fair value option has been elected, which include both common and preferred equity securities, are classified as trading assets and are recorded at fair value on our statement of condition. Changes in fair value are included in earnings.

     The estimation of fair value is significant to several of our assets, including trading securities and securities available for sale. Fair values are determined based on third party sources, when available. Furthermore, accounting principles generally accepted in the United States require disclosure of the fair value of financial instruments as a part of the notes to the consolidated financial statements. Fair values may be influenced by a number of factors, including market interest rates, prepayment speeds, discount rates and the shape of the yield curve.

     Fair values for securities available for sale are typically based on quoted market prices. If a quoted market price is not available, fair values are estimated using quoted market prices for similar securities or level 3 values. Note 4 to the consolidated financial statements provides additional information on how we determine level 3 values.

     The valuation of our obligation associated with pension plans utilizes various actuarial assumptions. These assumptions include discount rate and expected return on plan assets. Specific discussion of the assumptions used by management is discussed in Note 11.

     Although goodwill is not subject to amortization, we must test the carrying value for impairment at least annually or more frequently if events or circumstances indicate that the asset might be impaired. Impairment testing requires that the fair value of each of the reporting units be compared to the carrying amount of its net assets, including goodwill. Determining the fair value of reporting units requires us to use a high degree of subjective judgment. We utilize discounted cash flow valuation models that incorporate such variables as revenue growth rates, expense trends, interest rates, and terminal values. Management also reviews current acquisition multiples with consideration of market conditions surrounding those acquisitions. Management will compare multiples of revenue, EBITDA as well as book value as a determination of fair value. Future changes in the economic environment or operations of our reporting units could cause changes to these variables, which could result in impairment being identified.

Management of Market Risk and Other Risks

     Our most significant form of market risk is interest rate risk, as the majority of our assets and liabilities are sensitive to changes in interest rates. Ongoing monitoring and management of this risk is an important component of our asset and liability management process. We do not own any trading assets other than common and preferred equity securities classified as trading in accordance with fair value accounting. We do not engage in hedging transactions, such as interest rate swaps and caps, other than forward sale commitments on certain mortgage loan commitments. Our interest rate risk management program focuses primarily on evaluating and managing the composition of our assets and liabilities in the context of various interest rate scenarios. Factors beyond Management’s control, such as market interest rates and competition, also have an impact on interest income and interest expense.

     Interest Rate Risk. In recent years, the we have used the following strategies to manage interest rate risk: (i) emphasizing the origination and retention of adjustable-rate residential mortgage loans, adjustable-rate commercial mortgage loans, other business purpose loans and consumer loans consisting primarily of auto loans; (ii) selling substantially all newly originated longer-term fixed rate one-to-four family residential mortgage loans into the secondary market without recourse and on a servicing retained basis; (iii) seeking to increase and diversify our sources of revenue, particularly non-interest income and (iv) managing our investment activities in a prudent manner in the context of overall balance sheet asset/liability management. Investing in shorter-term securities will generally bear lower yields as compared to longer-term investments, but improves our position for increases in market interest rates and better matches the maturities of our certificate of deposit accounts. Certificates of deposit that mature in one year or less, at December 31, 2009 totaled $123.4 million, or 28.4% of total interest-bearing liabilities. Borrowed funds that mature in one year or less at December 31, 2009 totaled $19.0 million, or 4.4% of total interest-bearing liabilities. Management believes that this balanced approach to investing will reduce the exposure to interest rate fluctuations and will enhance long-term profitability.

     Net Income and Portfolio Value Analysis. Our interest rate sensitivity is monitored by management through the use of a net income model and a net portfolio value (“NPV”) model which generates estimates of the change in our net income and NPV over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets and liabilities. The model assumes estimated loan prepayment rates and reinvestment rates. The following sets forth our net interest income and NPV as of December 31, 2009.

Change in
Interest Rates	Net Interest Income								Net Portfolio Value
In Basis Points	Dollars		Dollar			Percent			Dollars		Dollar			Percent
(Rate Shock)	Amount		Change			Change			Amount		Change			Change
	(Dollars in Thousands)
+300	$	16,732	$	(695	)		(3.99	)%	$	39,089	$	(19,109	)		(32.83	)%
+200	$	17,054	$	(373	)		(2.14	)%	$	48,239	$	(9,960	)		(17.11	)%
+100	$	17,281	$	(146	)		(0.84	)%	$	54,597	$	(3,602	)		(6.19	)%
Static	$	17,427	$	—			—	%	$	58,198	$	—			—	%

     The following sets forth our net interest income and NPV as of December 31, 2008.

Change in
Interest Rates	Net Interest Income								Net Portfolio Value
In Basis Points	Dollars		Dollar			Percent			Dollars		Dollar			Percent
(Rate Shock)	Amount		Change			Change			Amount		Change			Change
	(Dollars in Thousands)
+300	$	14,657	$	(996	)		(6.36	)%	$	36,281	$	(14,709	)		(28.85	)%
+200	$	15,133	$	(520	)		(3.32	)%	$	43,728	$	(7,262	)		(14.24	)%
+100	$	15,450	$	(203	)		(1.30	)%	$	48,848	$	(2,142	)		(4.20	)%
Static	$	15,653	$	—			—	%	$	50,990	$	—			—	%

     As of December 31, 2009, a 200 basis point increase in market interest rates was estimated to have a negative impact of 2.14% on net interest income during 2010 while a 300 basis point increase in rates would have a negative impact of 3.99% on net interest income during 2010. This analysis is based on numerous assumptions including the nature and timing of interest rate levels, prepayment on loans and securities, deposit decay rates, pricing decisions on loans and deposits and other assumptions, and should not be relied upon as being indicative of expected operating results.

     There are certain shortcomings inherent in the methodology used in the above interest rate risk measurements. Modeling changes in net interest income and NPV requires the making of certain assumptions, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net interest income in the table assumes that the composition of our interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

     Credit Risk. Our loan and investment portfolios are subject to varying degrees of credit risk. Credit risk is mitigated through portfolio diversification, limiting exposure to any single industry or customer, collateral protection, standard lending and investment policies and loan underwriting criteria.

     Note 1 to the consolidated financial statements describes the accounting policies related to nonperforming loans and charge-offs and describes the methodologies used to develop the allowance for loan losses. The policies governing nonperforming loans and charge-offs are consistent with regulatory standards. We maintain an allowance for loan losses sufficient to absorb estimated probable incurred losses in the loan portfolio. The evaluation of each element and the overall allowance are based on the size and current risk characteristics of the loan portfolio and include an assessment of individual problem loans, actual loss experience, current economic events in specific industries and geographical areas, including unemployment levels, and other pertinent factors, including regulatory guidance and general economic conditions.

     While management considers the allowance for loan losses to be adequate based on information currently available, future adjustments to the allowance may be necessary due to changes in economic conditions, delinquencies or loss rates, and management’s intent with regard to asset disposition options. In addition, the allowance for loan losses is periodically reviewed by the bank regulatory agencies as an integral part of their examination process. Based on their review, the agencies may require us to adjust the allowance for loan losses based on their judgments about information available to them at the time of their review.

     The securities investment policy is established by the Board of Directors. This policy dictates that investment decisions will be made based on the safety of the investment, liquidity requirements, potential returns, cash flow targets and desired risk parameters. In pursuing these objectives, management considers the ability of an investment to provide earnings consistent with factors of quality, maturity, marketability and risk diversification. We will only purchase securities rated as investment grade by a nationally recognized investment rating agency. The ability of an issuer of a corporate debt instrument to repay the obligation is influenced by a number of factors including general economic conditions, cash flow, events in specific industries, regional crisis, bankruptcy and many other factors. Corporate bonds are not typically guaranteed beyond their ability to repay and therefore may result in a loss to us if conditions change from those in place at the time the investment was acquired. We conduct a quarterly evaluation of the securities portfolio to determine if any declines in fair value are other-than-temporary. Part of this analysis includes forecasting of rate projections and investment spreads over bond indices as compared to historical performance. Fluctuations in market conditions could impact the evaluation and outcome of projections.

     Concentration Risk. Our lending activities are primarily conducted in Madison and Oneida Counties, located in Central New York State, and the adjacent counties. Our mortgage loan portfolio, consisting primarily of loans on residential real property located in its market area, is subject to risks associated with the local economy. If the local economy, national economy or real estate market weakens, our financial condition and results of operations could be adversely affected. A weakening in the local real estate market or a decline in the local economy could increase the number of delinquent or nonperforming loans and reduce the value of the collateral securing such loans, which would reduce our net income.

     Legal Proceedings. We and our subsidiaries are subject to various legal actions arising in the normal course of business. For a complete discussion see Form 10-K “ITEM 3. LEGAL PROCEEDINGS”.

     Liquidity Risk. The objective of liquidity management is to ensure the cash flow requirements of depositors and borrowers, as well as the operating cash needs of our business, are met, taking into account all on- and off-balance sheet funding demands. Liquidity management also includes ensuring cash flow needs are met at a reasonable cost. Liquidity risk arises from the possibility that we may not be able to satisfy current or future financial commitments, or may become unduly reliant on alternative funding sources. We maintain a liquidity risk management policy to address and manage this risk. The policy identifies the primary sources of liquidity, establishes procedures for monitoring and measuring liquidity, and establishes minimum liquidity requirements which comply with regulatory guidance. The policy also includes a contingency funding plan to address liquidity needs in the event of an institution-specific or a systemic financial market crisis. The liquidity position is continually monitored and reported on monthly to the Asset/Liability Management Committee.

     Our primary sources of funds are deposits; FHLB borrowings; proceeds from the principal and interest payments on loans and mortgage-related, debt and equity securities; and to a lesser extent, proceeds from the sale of fixed rate residential real estate loans and additional borrowing ability available as needed. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows, mortgage prepayments, mortgage loan sales and borrowings are greatly influenced by general interest rates, economic conditions and competition.

     Liquidity management is both a short-term and long-term responsibility of Management. We adjust our investments in liquid assets based upon Management’s assessment of (i) expected loan demand, (ii) projected purchases of investment and mortgage-backed securities, (iii) acquisition activities, (iv) expected deposit flows, (v) yields available on interest-bearing deposits, and (vi) liquidity of its asset/liability management program. Excess liquidity is generally invested in interest-earning overnight deposits, federal funds sold and other short-term U.S. agency obligations. At December 31, 2009, cash and interest-earning deposits totaled $39.5 million, or 6.7% of total assets.

     If Oneida Savings Bank requires funds beyond its ability to generate them internally, it has the ability to borrow funds from the FHLB. Oneida Savings Bank may borrow from the FHLB under a blanket agreement, which assigns all investments in FHLB stock as well as qualifying first mortgage loans equal to 150% of the outstanding balance as collateral to secure the amounts borrowed. At December 31, 2009, Oneida Savings Bank has available a $109.9 million line of credit with the Federal Home Loan Bank of which none was outstanding at December 31, 2009. In addition, we can utilize investment and mortgage-backed securities as collateral for repurchase agreements. We also maintain lines of credit with various commercial banks as an additional source of short-term borrowing. At December 31, 2009 we had approximately $10.0 million available to it under these borrowing arrangements.

     We must also maintain adequate levels of liquidity to satisfy loan commitments. At December 31, 2009, we had outstanding commitments to originate loans of $63.0 million. We anticipate that it will have sufficient funds to meet current loan commitments.

     Certificates of deposit, which are scheduled to mature in one year or less from December 31, 2009, totaled $123.4 million. Based upon our experience and current pricing strategy, Management believes that a significant portion of such deposits will remain with the Bank. Deposits less than $100,000 totaled $279.2 million at December 31, 2009.

     Management believes that our liquidity policies and sources are effective to satisfy current and anticipated financial commitments.

     Capital Requirements. The FDIC has adopted risk-based capital guidelines to which Oneida Savings Bank is subject. The guidelines establish a systematic analytical framework that makes regulatory capital requirements more sensitive to differences in risk profiles among banking organizations. Oneida Savings Bank is required to maintain certain levels of regulatory capital in relation to regulatory risk-weighted assets. The ratio of such regulatory capital to regulatory risk-weighted assets is referred to as the Bank’s “risk-based capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance sheet items to four risk-weighted categories ranging from 0% to 100%, with higher levels of capital being required for the categories perceived as representing greater risk.

     These guidelines divide a savings bank’s capital into two tiers. The first tier (“Tier I”) includes common equity, retained earnings, certain non-cumulative perpetual preferred stock (excluding auction rate issues) and minority interests in equity accounts of consolidated subsidiaries, less goodwill and other intangible assets (except mortgage servicing rights and purchased credit card relationships subject to certain limitations). Supplementary (“Tier II”) capital includes, among other items, cumulative perpetual and long-term limited-life preferred stock, mandatory convertible securities, certain hybrid capital instruments, term subordinated debt and the allowance for loan and lease losses, subject to certain limitations, less required deductions.

     Based on the foregoing, Oneida Savings Bank is currently classified as a “well capitalized” savings institution. The following table sets forth information regarding Oneida Savings Bank’s capital levels as of December 31, 2009.

				To Be Well
				Capitalized Under
	Minimum			Prompt Corrective
	Required			Action Provisions			Actual
Tier I Capital to Average Assets		4	%		5	%		7.19	%
Tier I Capital to Risk-Weighted Assets		4	%		6	%		10.00	%
Total Capital to Risk-Weighted Assets		8	%		10	%		10.73	%

Contractual Obligations, Commitments, and Off-Balance Sheet Arrangements. We have various financial obligations, including contractual obligations and commitments that may require future cash payments.

     Contractual Obligations: The following table presents as of December 31, 2009, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements.

(Dollars in thousands)			Payments Due In
Contractual Obligation	Note Reference		One Year or Less		One to Three Years		Three to Five Years		Over Five Years		Total
Certificates of Deposit		8	$	123,358	$	22,385	$	11,156	$	4	$	156,903
Borrowings		9	$	19,000	$	6,000	$	6,000		—	$	31,000

     Commitments and Off-Balance Sheet Arrangements: In the normal course of business, to meet the financing needs of its customers and to reduce its exposure to fluctuations in interest rates, we are a party to financial instruments with off-balance sheet risk, held for purposes other than trading. The financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument, for loan commitments and standby letters of credit, is represented by the contractual amount of those instruments, assuming that the amounts are fully advanced and that collateral or other security is of no value. We use the same credit policies in making such commitments as it does for on-balance sheet loans. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on management’s credit evaluation of the borrower. Commitments to originate loans, unused lines of credit, and unadvanced portions of construction loans are agreements to lend to a customer provided 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. Many of the commitments are expected to expire without being drawn upon. Therefore, the amounts presented below do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments that we issue to guarantee the performance by a customer to a third party. These guarantees are issued primarily to support public and private borrowing arrangements, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

     The following table details the amounts and expected maturities of significant commitments and off-balance sheet arrangements as of December 31, 2009. Further discussion of these commitments and off-balance sheet arrangements is included in Note 14 to the consolidated financial statements.

	One Year		One to		Three to		Over
Commitments to extend credit:	or Less		Three years		Five years		Five years		Total
			(In thousands)
Commercial real estate and commercial business	$	39,197	$	473	$	1,000	$	—	$	40,670
Residential real estate		4,224		—		—		—		4,224
Revolving home equity lines		302		732		3,119		12,236		16,389
Consumer revolving credit		1,308		—		—		—		1,308
Standby letters of credit		360		—		—		—		360

Impact of Inflation and Changing Prices

     Our consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

     Market for Common Stock. The Company’s common stock commenced trading on December 30, 1998. The table below provides information on the high and low trading prices of the common stock for the periods indicated, as reported on the Capital Market System of the NASDAQ Stock Market, as well as the dividends paid during such periods. All information provided has been adjusted for the 3-for-2 stock split of April 23, 2002 and the 3-for-2 stock split of February 24, 2004. Oneida Financial Corp.’s common stock is traded on the NASDAQ market under the symbol “ONFC”.

	Price Per Share				Cash
	High		Low		Dividend Per Share
2009
Fourth quarter	$	9.95	$	8.25	$	—
Third quarter		11.75		7.06		0.24
Second quarter		11.25		7.35		—
First quarter		9.00		7.00		0.24
2008
Fourth quarter	$	11.50	$	6.99	$	—
Third quarter		11.25		8.80		0.24
Second quarter		11.49		9.00		—
First quarter		11.37		8.71		0.24

     As of December 31, 2009, there were 8,322,452 shares of the Company’s common stock issued and approximately 701 shareholders of record. The shareholders of record include banks and brokers who act as nominees, each of whom may represent more than one shareholder.

     The Board of Directors of the Company declared two semiannual cash dividends during the year ended December 31, 2009, as shown in the table above. The Board will review the dividend regularly and expects to maintain a regular semiannual dividend in the future, based upon the Company’s earnings, financial condition and other factors.

Oneida Financial Corp.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Statements of Condition as of December 31, 2009 and 2008	F-2
Consolidated Statements of Income for the Years Ended December 31, 2009, 2008 and 2007	F-3
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2009, 2008 and 2007	F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007	F-6
Notes to Consolidated Financial Statements	F-8

All schedules are omitted as the required information either is not applicable or is included in the financial statements or related notes.

Separate financial statements for new Oneida Financial Corp. have not been included in this prospectus because new Oneida Financial Corp., which has engaged only in organizational activities to date, has no significant assets, contingent or other liabilities, revenues or expenses.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Oneida Financial Corp.
Oneida, New York

We have audited the accompanying consolidated statements of condition of Oneida Financial Corp. as of December 31, 2009 and 2008 and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 Oneida Financial Corp. as of December 31, 2009 and 2008 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009 in conformity with U.S. generally accepted accounting principles.

/s/ Crowe Horwath LLP

Crowe Horwath LLP
March 12, 2010
Livingston, New Jersey

F-1

Oneida Financial Corp.

Consolidated Statements of Condition
December 31, 2009 and 2008

	2009			2008
Assets
Cash and due from banks	$	35,433,901		$	13,223,027
Federal funds sold		4,103,101			71,036
Total cash and cash equivalents		39,537,002			13,294,063
Trading securities		7,627,280			5,941,476
Securities available for sale		114,532,578			134,763,154
Securities held to maturity (fair value 2009 $47,966,244)		47,692,150			—
Mortgage loans held for sale		687,424			740,730
Loans receivable		298,052,583			304,375,976
Allowance for loan losses		(2,900,587	)		(2,624,283	)
Net loans receivable		295,151,996			301,751,693
Federal Home Loan Bank stock		2,664,800			3,784,200
Premises and equipment, net		21,274,516			21,789,766
Accrued interest receivable		2,468,977			2,659,074
Bank owned life insurance		15,712,187			15,019,970
Other assets		18,344,389			15,322,202
Goodwill		23,183,101			22,963,439
Other intangible assets		1,629,931			2,100,001
Total Assets	$	590,506,331		$	540,129,768
Liabilities and Stockholders’ Equity
Interest bearing deposits	$	426,367,669		$	364,911,270
Non-interest bearing deposits		62,996,738			60,786,827
Borrowings		31,000,000			52,825,000
Notes payable		—			12,481
Other liabilities		11,025,751			6,764,948
Total liabilities		531,390,158			485,300,526
Commitments and contingent liabilities (Note 14)		—			—
Stockholders’ equity:
Preferred stock, 1,000,000 shares authorized		—			—
Common stock, $.01 par value, 20,000,000 shares authorized; 8,322,452 shares issued		83,225			83,225
Additional paid-in capital		19,481,956			19,221,421
Retained earnings		44,024,272			41,584,629
Accumulated other comprehensive loss		(3,960,866	)		(5,562,481	)
Treasury stock (at cost, 490,620 and 533,106 shares)		(3,071,414	)		(3,057,552	)
Total stockholders’ equity — controlling interest		56,557,173			52,269,242
Noncontrolling interest		2,559,000			2,560,000
Total stockholders’equity		59,116,173			54,829,242
Total Liabilities and Stockholders’ Equity	$	590,506,331		$	540,129,768

The accompanying notes are an integral part of the consolidated financial statements.

F-2

Oneida Financial Corp.

Consolidated Statements of Income
Years Ended December 31, 2009, 2008 and 2007

	2009			2008			2007
Interest and dividend income:
Interest and fees on loans	$	17,761,357		$	18,535,294		$	18,551,557
Interest and dividends on investment securities:
U. S. Government and agency obligations		1,068,409			1,371,440			1,727,445
Corporate debt and equity obligations		1,333,524			2,232,170			2,080,557
Mortgage-backed securities		3,481,521			3,377,135			1,588,704
Tax exempt securities		988,844			809,620			600,702
Other		330,233			239,026			294,781
Interest on federal funds sold and interest-earning deposits		37,324			169,340			829,079
Total interest and dividend income		25,001,212			26,734,025			25,672,825
Interest expense:
Savings deposits		488,033			602,747			569,628
Money market and interest-bearing checking		1,654,830			1,892,303			2,095,836
Time deposits		3,734,008			6,020,667			6,371,634
Federal funds purchased		—			—			53,120
Short-term borrowings		245,156			288,187			364,976
Long-term borrowings		1,451,765			2,277,416			2,572,589
Total interest expense		7,573,792			11,081,320			12,027,783
Net interest income		17,427,420			15,652,705			13,645,042
Provision for loan losses		760,000			525,000			—
Net interest income after provision for loan losses		16,667,420			15,127,705			13,645,042
Other-than-temporary loss
Total impairment loss		(2,908,143	)		(1,021,845	)		—
Loss recognized in other comprehensive income		613,302			—			—
Net impairment loss recognized in earnings		(2,294,841	)		(1,021,845	)		—
Net gains on sales of securities		787,842			62,854			352,825
Changes in fair value of trading securities		1,725,032			(7,674,699	)		—
Non-interest income		20,884,330			18,318,255			17,837,947
Non-interest expenses		32,445,506			28,712,160			26,963,857
Income (Loss) before income taxes		5,324,277			(3,899,890	)		4,871,957
Provision (Benefit) for income taxes		1,210,920			(2,222,800	)		1,367,650
Net Income (Loss)	$	4,113,357		$	(1,677,090	)	$	3,504,307
Earnings (Loss) per share — basic	$	0.53			($0.22	)	$	0.45
Earnings (Loss) per share — diluted	$	0.52			($0.22	)	$	0.45

The accompanying notes are an integral part of the consolidated financial statements.

F-3

Oneida Financial Corp.

Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2009, 2008 and 2007

																				Common Stock
														Accumulated						Issued Under
					Additional									Other						Employee
	Common Stock				Paid-In			Retained			Comprehensive			Comprehensive			Treasury			Stock Plans -			Noncontrolling
	Shares		Amount		Capital			Earnings			Income			Income(Loss)			Stock			Unearned			Interest			Total
Balance at December 31, 2006		8,322,452	$	83,225	$	18,704,350		$	44,579,507			—		$	(1,786,692	)	$	(3,038,926	)	$	(141,678	)	$	60,000		$	58,459,786
Net income									3,504,307		$	3,504,307															3,504,307
Other comprehensive income, net of tax
Unrealized losses on securities arising during period												(2,167,052	)
Reclassification adjustment for gains included in net income												(352,825	)
Net unrealized holding losses												(2,519,877	)
Change in unrealized loss on pension benefits												228,994
Other comprehensive loss before tax												(2,290,883	)
Income tax benefit												916,353
Other comprehensive loss, net of tax												(1,374,530	)		(1,374,530	)											(1,374,530	)
Comprehensive income											$	2,129,777
Shares issued under ESOP plan						195,730															141,678						337,408
Shares earned under stock plans						153,210																					153,210
Common stock cash dividends: $.48 per share									(1,648,916	)																	(1,648,916	)
Stock repurchased																								(1,000	)		(1,000	)
Treasury stock purchased																		(65,159	)								(65,159	)
Treasury stock reissued						(177	)											34,295									34,118
Balance at December 31, 2007		8,322,452	$	83,225	$	19,053,113		$	46,434,898			—		$	(3,161,222	)	$	(3,069,790	)	$	—		$	59,000		$	59,399,224
Reclassification adjustment to initially apply fair value guidance, net of tax									(1,519,341	)					1,519,341												—
Adjustment to initially apply measurement provisions of pension guidance									8,215						(69,854	)											(61,639	)
Net loss									(1,677,090	)	$	(1,677,090	)														(1,677,090	)
Other comprehensive loss, net of tax
Unrealized losses on securities arising during period
												(5,001,265	)
Reclassification adjustment for losses included in net income												958,991
Net unrealized holding losses												(4,042,274	)
Change in unrealized loss on pension benefits												(2,375,636	)
Other comprehensive loss before tax												(6,417,910	)
Income tax benefit												2,567,164
Other comprehensive loss, net of tax												(3,850,746	)		(3,850,746	)											(3,850,746	)
Comprehensive loss											$	(5,527,836	)
Shares earned under stock plans						165,654																					165,654
Tax benefit from stock plans						2,822																					2,822
Common stock cash dividends: $.48 per share									(1,662,053	)																	(1,662,053	)
Stock issued																								2,501,000			2,501,000
Treasury stock purchased																		(20,277	)								(20,277	)
Treasury stock reissued						(168	)											32,515									32,347
Balance at December 31, 2008		8,322,452	$	83,225	$	19,221,421		$	41,584,629			—		$	(5,562,481	)	$	(3,057,552	)	$	—		$	2,560,000		$	54,829,242

(Continued)

F-4

Oneida Financial Corp.

Consolidated Statements of Stockholders’ Equity (Continued)
Years Ended December 31, 2009, 2008 and 2007

																			Common Stock
													Accumulated						Issued Under
					Additional								Other						Employee
	Common Stock				Paid-In			Retained			Comprehensive		Comprehensive			Treasury			Stock Plans -		Noncontrolling
	Shares		Amount		Capital			Earnings			Income (Loss)		Income(Loss)			Stock			Unearned		Interest			Total
Balance at December 31, 2008 (continued)		8,322,452	$	83,225	$	19,221,421		$	41,584,629				$	(5,562,481	)	$	(3,057,552	)	$	—	$	2,560,000		$	54,829,242
Net income									4,113,357		$	4,113,357													4,113,357
Other comprehensive loss, net of tax
Unrealized gains on securities arising during period												514,308
Reclassification adjustment for losses included in net income												1,506,999
Net unrealized holding losses												2,021,307
Change in unrealized loss on pension benefits												648,051
Other comprehensive income before tax												2,669,358
Income tax benefit												1,067,743
Other comprehensive income, net of tax												1,601,615		1,601,615											1,601,615
Comprehensive income											$	5,714,972
Shares earned under stock plans						258,830																			258,830
Tax benefit from stock plans						3,608																			3,608
Common stock cash dividends: $.48 per share									(1,673,714	)															(1,673,714	)
Stock repurchased																						(1,000	)		(1,000	)
Treasury stock purchased																	(379,976	)							(379,976	)
Treasury stock reissued						(1,903	)										366,114								364,211
Balance at December 31, 2009		8,322,452	$	83,225	$	19,481,956		$	44,024,272			—	$	(3,960,866	)	$	(3,071,414	)	$	—	$	2,559,000		$	59,116,173

The accompanying notes are an integral part of the consolidated financial statements.

F - 5

Oneida Financial Corp.

Consolidated Statements of Cash Flows
Years Ended December 31, 2009, 2008 and 2007

	2009			2008			2007
Operating activities:
Net (loss) income	$	4,113,357		$	(1,677,090	)	$	3,504,307
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		2,078,087			2,149,989			1,954,067
Amortization of premiums and (accretion of discounts) on securities, net		242,344			95,508			75,141
Net change in fair value of trading securities		(1,725,032	)		7,674,699			—
Provision for loan losses		760,000			525,000			—
Provision for deferred income taxes		349,184			(2,853,698	)		109,065
Gain on sale of premises and equipment		—			(135,395	)		(15,000	)
Loss (gain) on available for sale securities, net		1,506,999			958,991			(352,825	)
ESOP shares earned		—			—			337,408
Stock compensation earned		258,830			165,654			174,806
Loss (gain) on sale of foreclosed assets		61,762			29,249			(1,808	)
Gain on sale of loans		(343,622	)		(134,809	)		(137,415	)
Income taxes payable		(16,549	)		355,719			(318,216	)
Accrued interest receivable		190,097			(1,362	)		(298,312	)
Other assets		(3,818,757	)		(502,167	)		(1,146,961	)
Other liabilities		4,896,373			(1,211,634	)		(328,794	)
Earnings on bank owned life insurance, net		(692,217	)		(552,250	)		(566,692	)
Origination of loans held for sale		(55,882,280	)		(15,719,216	)		(19,949,867	)
Proceeds from sale of loans		56,279,208			18,706,624			18,075,307
Net cash provided by operating activities		8,257,784			7,873,812			1,114,211
Investing activities:
Purchase of securities available for sale		(54,791,609	)		(77,674,551	)		(57,479,297	)
Proceeds from sales of securities available for sale		31,953,561			31,666,785			22,928,266
Maturities and calls of securities available for sale		20,813,063			24,355,809			16,328,554
Principal collected on securities available for sale		22,614,146			10,570,453			6,346,991
Purchase of securities held to maturity		(50,040,459	)		—			—
Maturities and calls of securities held to maturity		1,000,000			—			—
Principal collected on securities held to maturity		1,300,916			—			—
Purchase of FHLB stock		(600,200	)		(4,329,000	)		(1,207,400	)
Redemption of FHLB Stock		1,119,400			3,948,500			1,031,300
Net decrease (increase) in loans		5,404,815			(21,711,825	)		(9,004,402	)
Purchase of bank premises and equipment		(1,092,767	)		(870,449	)		(4,604,612	)
Proceeds from sale of bank premises and equipment		—			139,166			15,000
Proceeds from sale of foreclosed assets		373,120			230,400			23,950
Purchase of insurance agency		(84,245	)		(72,567	)		(66,153	)
Purchase of employee benefits company		(135,417	)		(129,044	)		(131,417	)
Purchase of bank, net of cash received		—			(8,800	)		907,934
Net cash used in investing activities		(22,165,676	)		(33,885,123	)		(24,911,286	)

(Continued)

F - 6

Oneida Financial Corp.

Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 2009, 2008 and 2007

	2009			2008			2007
Financing activities:
Net increase in demand deposits, savings, money market, interest-bearing checking and mortgagor’s escrow accounts	$	62,587,639		$	22,642,526		$	15,924,715
Net increase in time deposits		1,078,671			2,926,277			16,303,696
Proceeds from borrowings		2,975,000			50,825,000			67,180,000
Repayment of borrowings		(24,800,000	)		(54,400,000	)		(76,180,000	)
Cash dividends		(1,673,714	)		(1,662,053	)		(1,648,916	)
Stock issued — minority interest		—			2,501,000			—
Stock repurchased — minority interest		(1,000	)		—			(1,000	)
Exercise of stock options (using treasury stock)		364,211			32,347			34,118
Purchase of treasury stock		(379,976	)		(20,277	)		(65,159	)
Net cash provided by financing activities		40,150,831			22,844,820			21,547,454
Increase (decrease) in cash and cash equivalents		26,242,939			(3,166,491	)		(2,249,621	)
Cash and cash equivalents at beginning of year		13,294,063			16,460,554			18,710,175
Cash and Cash Equivalents at End of Year	$	39,537,002		$	13,294,063		$	16,460,554
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and obligations	$	7,753,508		$	11,125,771		$	12,106,305
Income taxes		875,285			551,000			1,615,000
Non-cash investing activities:
Transfer of loans to foreclosed assets		434,882			259,649			22,142

The accompanying notes are an integral part of the consolidated financial statements.

F - 7

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Nature of Operations

The consolidated financial statements include Oneida Financial Corp. (the “Company”) and its wholly-owned subsidiary, Oneida Savings Bank (the “Bank”). Inter-company transactions and balances are eliminated in consolidation.

The Bank is located in Central New York with offices in the City of Oneida, Rome and South Utica and the Villages of Cazenovia, Hamilton, Canastota, Camden, Chittenango, Bridgeport, Vernon and Westmoreland and owns two banking related subsidiaries; Oneida Preferred Funding Corporation (OPFC) and The State Bank of Chittenango (SBC). The Bank is engaged primarily in accepting deposits and providing various types of loans to the community. The Bank also provides trust and brokerage services. OPFC, a Real Estate Investment Trust, primarily engages in investing activities of residential and commercial real estate mortgages. SBC is a limited purpose commercial bank subsidiary which is permitted to accept municipal deposit accounts from various municipalities, school districts and other public sources; a source of funds not available to the Bank under New York Law. The Bank also owns one insurance and risk management subsidiary; Bailey & Haskell Associates, Inc. (B&H) which has six central New York offices. During 2006, the Bank purchased an employee benefits consulting and retirement plan administration firm, Benefit Consulting Group Inc. (BCG) which has an office in central New York. During 2007, the Bank purchased Vernon Bank Corporation, the stock holding company for National Bank of Vernon which had offices in Vernon, Westmoreland and South Utica. Workplace Health Solutions was established in January 2008 as a risk management company with services to help mitigate and prevent work related injuries. This subsidiary was developed to complement the products and services offered by our other subsidiaries with an overall philosophy of innovative risk management services.

Oneida Financial MHC, (the “Holding Company”) a mutual holding company whose activity is not included in the accompanying financial statements, owns approximately 55.2% of the outstanding common stock of the Company at December 31, 2009. Salaries, employee benefits and rent approximating $21,000 were allocated from the Company to the MHC during 2009, 2008 and 2007.

Subsequent Events

The Company reviews subsequent events for recognition and disclosure.

Use of Estimates

To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses, mortgage servicing rights, deferred tax assets, the evaluation of other-than-temporary impairment for securities whose fair value is less than amortized cost and fair values of financial instruments are particularly subject to change.

Cash and Cash Equivalents

Cash and cash equivalents include cash, deposits in other financial institutions with original maturities under 90 days and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.

F - 8

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Trading Assets
	Securities in which the fair value option has been elected are considered trading assets and are recorded at fair value with changes in fair value included in earnings. Interest and dividends are included in net interest income based on the contractual amount of interest income. Cash flows from the purchase and sale of securities for which the fair value option has been elected are shown as investing activities within the consolidated statement of cash flows. The Company has elected the fair value option for certain common and preferred equity securities as of January 1, 2008. The cumulative effect of the adoption was to decrease retained earnings by $1.5 million, net of tax.
	Investment Securities (including Mortgage-Backed Securities)
	Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.
	Declines in the fair value of securities below their cost that are other-than-temporary are reflected as realized losses. The Company evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. In determining OTTI for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market value decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.
	Loans Held for Sale
	Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.
	Mortgage loans held for sale are generally sold with servicing rights retained. The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing right. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.
	Loans
	Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of deferred origination fees and costs and the allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

F - 9

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Loans (Continued)
	Interest income on loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
	All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
	Concentration of Credit Risk
	Most of the Company’s business activity is with customers located throughout Madison and Oneida Counties. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in those counties.
	Allowance for Loan Losses
	The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.
	The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. Loans that have been classified but not considered impaired or homogenous loans not evaluated for impairment but which are classified are considered part of the general component of the allowance but are calculated using a higher estimated loss percentage. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors. Quarterly, management evaluates the adequacy of the allowance and determines the appropriate level of provision for loan losses by applying a range of estimated loss percentages to each category of performing loans and classified loans. The allowance adjustment is based upon the net change in each portfolio category, as well as adjustments related to impaired loans, since the prior quarter. Management monitors and modifies the level of the allowance for loan losses to maintain it at a level which it considers adequate to provide for probable incurred loan losses.
	A loan is considered impaired, based on current information and events, if it is probable that the Bank will be unable to collect the scheduled payments of principle or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. The measurement of impaired loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate, except that all collateral dependent loans are measured for impairment based on the estimated fair value of the collateral. Loans, for which the terms have been modified, and for which the borrower

F - 10

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Allowance for Loan Losses (Continued)
	is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.
	Mortgage Servicing Rights
	Servicing rights are recognized separately when they are acquired through sales of loans. When mortgage loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Company compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.
	Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amounts. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase in income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.
	Servicing fee income which is reported on the income statement as other non-interest income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Servicing fees totaled $641,358, $329,920 and $295,526 for the years ended December 31, 2009, 2008 and 2007.
	Federal Home Loan Bank (FHLB) Stock
	The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest additional amounts. FHLB stock is carried at cost and periodically evaluated for impairment based on the ultimate recovery of par value. Both cash and stock dividends are reported as income.
	Foreclosed Assets
	Assets acquired through or instead of loan foreclosure are initially recorded at lower of cost or fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

F - 11

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Premises and Equipment
	Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 5 to 39 years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 10 years. Maintenance and repairs are charged to operating expense as incurred.
	Bank Owned Life Insurance
	The Company has purchased life insurance policies on certain key officers. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
	Goodwill and Other Intangible Assets
	All goodwill resulted from business combinations prior to January 1, 2009 and represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31 as the date to perform the annual impairment test.
	Other intangible assets consist of core deposit and acquired customer relationship intangible assets arising from whole bank and other acquisitions. They are initially measured at fair value and then are amortized on an accelerated method over their estimated useful lives. Core deposit intangibles are being amortized over a range of 10 to 12 years and acquired customer relationship intangible over 5 years.
	Long Term Assets
	Premises and equipment, core deposit and other intangible assets, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.
	Loan Commitments
	Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
	Income Taxes
	Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
	The Company adopted guidance issued by the FASB with respect to accounting for uncertainty in income taxes as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax

F - 12

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Income Taxes (Continued)
	examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no affect on the Company’s financial statements.
	The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
	Insurance
	Commissions from sales of insurance are recorded as income when earned.
	Trust Department Assets
	Assets held in fiduciary or agency capacities for customers are not included in the accompanying consolidated statements of condition, since such items are not assets of the Company. Fees associated with providing trust management services are recorded as earned, and are included Non-Interest Income. At December 31, 2009, the Bank maintained 553 trust/fiduciary accounts, with total assets of $116.8 million under management as compared to 555 trust/fiduciary accounts with $105.8 million of total assets at December 31, 2008.
	Employee Benefits
	Pension expense is the net of service and interest cost, return on plan assets and amortization of gains and losses not immediately recognized. Employee 401(k) expense is the amount of matching contributions. Deferred compensation allocates the benefits over years of service.
	Stock-Based Compensation
	Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.
	Employee Stock Ownership Plan
	The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of stockholders’ equity. Compensation expense is based on the market price of shares as they are committed to be released to participant accounts. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce debt and accrued interest.
	Earnings per Share
	Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are considered outstanding for the calculation unless unearned. All outstanding unvested share-based payment awards that contain nonforfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares

F - 13

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Earnings per Share (Continued)
	issuable under stock options and awards using the treasury stock method. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.
	Other Comprehensive Income (Loss)
	Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale and changes in funded status of pension plans which are also recognized as separate components of equity.
	Loss Contingencies
	Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the financial statements.
	Restrictions on Cash
	The Bank is required to maintain a reserve balance, as established by the Federal Reserve Bank of New York. The required average total reserve for the 14-day maintenance period including December 31, 2009 and 2008 was $850,000 and $850,000 respectively, which was represented by cash on hand or on deposit with the Federal Reserve Bank. Balances with the Federal Reserve Bank earn nominal interest.
	Equity
	Common stock has $0.01 par and 20,000,000 shares authorized. In addition, one million shares of serial preferred stock were authorized. There is no serial preferred stock outstanding as of December 31, 2009.
	Dividend Restrictions
	Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the holding company or by the holding company to shareholders.
	Treasury Stock
	Common stock that upon purchase is classified as treasury stock is recorded at cost. During 2009 and 2008, the Company purchased 34,645 and 2,700 shares classified as treasury stock at an average cost of $10.97 and $7.51 per share respectively. During 2009 and 2008, 77,131 and 6,850 shares of treasury stock were reissued at an average cost of $4.75 and $4.75, respectively. The shares reissued during 2009 and 2008 were issued on the exercise of stock options.
	Fair Value of Financial Instruments
	Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

F - 14

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Segments
	Internal financial information is primarily reported and aggregated in four lines of business; banking, insurance, employee benefit consulting and risk management activities.
	Reclassification
	Some items in the prior year financial statements were reclassified to conform to the current presentation.
	Adoption of New Accounting Standards
	In December 2007, the FASB issued guidance that establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. The guidance is effective for fiscal years beginning on or after December 15, 2008. The adoption of this standard did not have an impact on the Company’s results of operations or financial position.
	In September 2006, the FASB issued guidance that defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This guidance also establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The guidance was effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued guidance that delayed the effective date of this fair value guidance for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of this adoption was not material.
	In December 2007, the FASB issued guidance that changes the accounting and reporting for minority interests, which is recharacterized as noncontrolling interests and classified as a component of equity within the consolidated balance sheets. The guidance was effective as of the beginning of the first fiscal year beginning on or after December 15, 2008. The presentation and disclosure requirements have been applied retrospectively for all periods presented. The adoption of this standard resulted in a reclassification of $60,000 from other liabilities to equity as of December 31, 2006. The adoption of this standard did not have an impact on the results of operations. The noncontrolling interest represents the preferred shareholder minority interest in Oneida Preferred Funding Corp, a real estate investment trust.
	In June 2009, the FASB replaced The Hierarchy of Generally Accepted Accounting Principles, with the FASB Accounting Standards Codification (The Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification was effective for financial statements issued for periods ending after September 15, 2009.
	In June 2008, the FASB issued guidance which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, included in the earnings allocation in computing earnings per share (EPS) under the two-class method. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend

F - 15

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Adoption of New Accounting Standards (Continued)
	equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. This guidance was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented were to be adjusted retrospectively (including interim financial statements, summaries of earnings and, selected financial data) to conform to the provisions of this guidance. The impact of this adoption was not material.
	In December 2008, the FASB issued guidance on an employer’s disclosure about plan assets of a defined benefit pension or post retirement plan. These additional disclosures include disclosure of investment policies and fair value disclosures of plan assets, including fair value hierarchy. The guidance also includes a technical amendment that requires a nonpublic entity to disclose net period benefit cost for each annual period for which a statement of income is presented. This guidance is effective for fiscal years ending after December 15, 2009. Upon initial application, provisions of the new guidance are not required for earlier periods that are presented for comparative purposes. The new disclosures have been presented in the notes to the consolidated financial statements.
	In April 2009, the FASB amended existing guidance for determining whether impairment is other-than-temporary for debt securities. The guidance requires an entity to assess whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of these criteria is met, the entire difference between amortized cost and fair value is recognized as impairment in earnings. For securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) other-than-temporary impairment (OTTI) related to other factors, which is recognized in other comprehensive income and 2) OTTI related to credit loss, which must be recognized in the income statement. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. Additionally, disclosures about other-than-temporary impairments for debt and equity securities were expanded.
	This guidance was effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. This guidance was adopted April 1, 2009. There was no transfers between retained earnings and accumulated other comprehensive income upon adoption of this guidance. As a result of implementing this guidance, the amount of other-than-temporary impairment recognized in the income statement for the year ended December 31, 2009 was $2.3 million. Had the standard not been issued, the other-than- temporary impairment that would have been recognized in income for the period would have been $2.9 million.
	In April, 2009, the FASB issued guidance that emphasizes that the objective of a fair value measurement does not change even when market activity for the asset or liability has decreased significantly. Fair value is the price that would be received for an asset sold or paid to transfer a liability in an orderly transaction (that is, not forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. When observable transactions or quoted prices are not considered orderly, then little if any weight should be assigned to the indication of the asset or liability’s fair value. Adjustments to those transactions or prices should be applied to determine the appropriate fair value. The guidance, which was applied prospectively, was effective for interim and annual reporting periods ending after June 15, 2009, early adoption for periods ending after March 15, 2009. The adoption of this guidance did not have an impact on the consolidated financial statements.

F - 16

Oneida Financial Corp.

Notes to Consolidated Financial Statements

1.	Summary of Significant Accounting Policies (Continued)
	Adoption of New Accounting Standards (Continued)
	In August 2009, the FASB amended existing guidance for the fair value measurement of liabilities by clarifying that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using a valuation technique that uses the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or that is consistent with existing fair value guidance. The amendments in this guidance also clarify that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The guidance was effective for the first reporting period beginning after issuance. The adoption of this guidance did not have an impact on the consolidated financial statements.
	Effect of Newly Issued But Not Yet Effective Accounting Standards
	In June 2009, the FASB amended previous guidance related to transfers of financial assets and eliminates the concept of a qualifying special purpose entity. This guidance must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. This guidance must be applied to transfers occurring on or after the effective date. Additionally, on and after the effective date, the concept of a qualifying special purpose entity is no longer relevant for accounting purposes. Therefore, formerly qualifying special purpose entities should be evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidelines. The disclosure provisions were also amended and apply to transfers that occurred both before and after the effective date of this guidance. The Company does not expect that the adoption to have a material impact on the Company’s consolidated financial statements.
	In June 2009, the FASB amended guidance for consolidation of variable interest entity guidance by replacing the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. Additional disclosures about an enterprise’s involvement in variable interest entities are also required. This guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Early adoption is prohibited. The Company does not expect that the adoption to have a material impact on the Company’s consolidated financial statements.

F - 17

Oneida Financial Corp.

Notes to Consolidated Financial Statements

2. Investment Securities and Mortgage-Backed Securities

The following table summarizes the amortized cost and fair value of the available-for-sale securities and held-to-maturity investment securities portfolio at December 31, 2009 and 2008 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) are as follows. There were no held-to-maturity investments at December 31, 2008.

			2009
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
Available-for-sale
Investment Securities
Debt securities:
U. S. Agencies	$	23,951,698	$	162,684	$	230,648	$	23,883,734
Corporate		16,739,255		246,263		779,971		16,205,547
Trust preferred securities		9,435,890		—		3,515,126		5,920,764
State and municipals		17,643,641		486,916		142,555		17,988,002
Small Business Administration		12,243		—		143		12,100
	$	67,782,727	$	895,863	$	4,668,443	$	64,010,147
Mortgage-backed securities
Fannie Mae	$	16,418,038	$	548,210	$	42,357	$	16,923,891
Freddie Mac		14,901,761		574,751		5,833		15,470,679
Government National Mortgage Assoc.		11,982,885		330,582		15,243		12,298,224
Collateralized Mortgage Obligations		6,758,271		49,957		978,591		5,829,637
	$	50,060,955	$	1,503,500	$	1,042,024	$	50,522,431
Total available-for-sale	$	117,843,682	$	2,399,363	$	5,710,467	$	114,532,578
Held-to-Maturity
Investment Securities
Debt securities:
U. S. Agencies	$	22,975,417	$	113,368	$	164,311	$	22,924,474
State and municipals		8,615,302		335,117		25,410		8,925,009
Small Business Administration		886,546		—		3,865		882,681
	$	32,477,265	$	448,485	$	193,586	$	32,732,164
Mortgage-backed securities
Fannie Mae	$	9,964,536	$	42,842	$	—	$	10,007,378
Government National Mortgage Assoc.		5,250,349		3,629		27,276		5,226,702
	$	15,214,885	$	46,471	$	27,276	$	15,234,080
Total held-to-maturity	$	47,692,150	$	494,956	$	220,862	$	47,966,244

F - 18

Oneida Financial Corp.

Notes to Consolidated Financial Statements

2. Investment Securities and Mortgage-Backed Securities (Continued)

			2008
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
Available-for-sale
Investment Securities
Debt securities:
U. S. Agencies	$	21,002,009	$	215,847	$	13,254	$	21,204,602
Corporate		16,052,259		—		3,378,655		12,673,604
Trust preferred securities		11,749,677		—		2,541,750		9,207,927
State and municipals		17,273,625		223,495		149,804		17,347,316
Small Business Administration		13,096		—		188		12,908
	$	66,090,666	$	439,342	$	6,083,651	$	60,446,357
Mortgage-backed securities
Fannie Mae		19,640,184	$	282,417	$	82,617	$	19,839,984
Freddie Mac		22,857,048		416,112		82,672		23,190,488
Government National Mortgage Assoc.		23,938,697		533,185		24,422		24,447,460
Collateralized Mortgage Obligations		7,568,970		—		730,105		6,838,865
	$	74,004,899	$	1,231,714	$	919,816	$	74,316,797
Total available for sale	$	140,095,565	$	1,671,056	$	7,003,467	$	134,763,154

The amortized cost and fair value of the investment securities portfolio are shown by expected maturities. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2009
	Amortized		Fair
	Cost		Value
Available-for-sale
Within one year	$	6,055,255	$	5,960,786
After one year through five years		15,477,926		15,267,625
After five years through ten years		28,431,307		28,772,022
After ten years		17,818,239		14,009,714
Total	$	67,782,727	$	64,010,147
Held-to-maturity
Within one year	$	53,179	$	53,593
After one year through five years		7,160,000		7,272,752
After five years through ten years		19,602,014		19,554,985
After ten years		5,662,072		5,850,834
Total	$	32,477,265	$	32,732,164

	December 31, 2008
	Amortized		Fair
	Cost		Value
Available-for-sale
Within one year	$	3,645,788	$	3,659,301
After one year through five years		16,711,146		14,686,950
After five years through ten years		25,639,849		25,643,133
After ten years		20,093,883		16,456,973
Total	$	66,090,666	$	60,446,357

F - 19

Oneida Financial Corp.

Notes to Consolidated Financial Statements

2. Investment Securities and Mortgage-Backed Securities (Continued)

Sales and write-downs of available-for-sale securities were as follows:

	2009		2008		2007
Proceeds	$	31,953,561	$	31,666,785	$	22,928,266
Gross Gains	$	790,839	$	200,727	$	372,074
Gross Losses	$	2,297,838	$	1,159,718	$	19,249

The tax (benefit) provision related to these net realized gains and losses was ($583,058), ($371,034) and $136,508 respectively.

Investment securities with a carrying value of $112,007,067 and $79,845,752 at December 31, 2009 and 2008 respectively were pledged to collateralize borrowing arrangements, secure public deposits and for other purposes required or permitted by law. At year-end 2009 and 2008, there were no holdings of securities of any one issuer, other than the U.S. Government, its agencies and government sponsored enterprises, in an amount greater than 10% of stockholders’ equity.

The following table summarizes the investment securities with unrealized losses at December 31, 2009 and 2008 aggregated by major security type and length of time in a continuous unrealized loss position:

December 31, 2009	Less than 12 Months				More than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss		Value		Loss		Value		Loss
Available-for-Sale
U. S. Agencies	$	15,767,782	$	230,648	$	—	$	—	$	15,767,782	$	230,648
Corporate		—		—		7,167,660		779,971		7,167,660		779,971
Trust preferreds						5,920,764		3,515,126		5,920,764		3,515,126
State and municipals		1,914,637		17,465		2,921,616		125,090		4,836,253		142,555
Small Business Administration		12,100		143		—		—		12,100		143
Fannie Mae		2,621,059		42,357		—		—		2,621,059		42,357
Freddie Mac		464,352		5,833		—		—		464,352		5,833
Government National Mortgage Assoc		1,418,705		15,243		—		—		1,418,705		15,243
Collateralized Mortgage Obligations		1,400,904		37,314		3,544,626		941,277		4,945,530		978,591
Total available-for-sale	$	23,599,539	$	349,003	$	19,554,666	$	5,361,464	$	43,154,205	$	5,710,467
Held-to-Maturity
U. S. Agencies	$	11,812,292	$	164,311	$	—	$	—	$	11,812,292	$	164,311
State and municipals		2,157,214		25,410		—		—		2,157,214		25,410
Small Business Administration		882,681		3,865		—		—		882,681		3,865
Government National Mortgage Assoc		3,015,496		27,276		—		—		3,015,496		27,276
Total held-to-maturity	$	17,867,683	$	220,862	$	—	$	—	$	17,867,683	$	220,862

F - 20

Oneida Financial Corp.

Notes to Consolidated Financial Statements

2. Investment Securities and Mortgage-Backed Securities (Continued)

December 31, 2008	Less than 12 Months				More than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Loss		Value		Loss		Value		Loss
Available-for-sale
U. S. Agencies	$	1,588,769	$	13,254	$	—	$	—	$	1,588,769		$13,254
Corporate		7,203,397		676,419		2,070,206		2,702,236		9,273,603		3,378,655
Trust preferreds						9,207,927		2,541,750		9,207,927		2,541,750
State and municipals		4,346,876		149,804		—		—		4,346,876		149,804
Small Business Administration		12,908		188		—		—		12,908		188
Fannie Mae		4,481,752		60,422		1,192,322		22,195		5,674,074		82,617
Freddie Mac		3,919,533		79,349		119,495		3,323		4,039,028		82,672
Government National Mortgage Assoc		1,115,863		24,422		—		—		1,115,863		24,422
Collateralized Mortgage Obligations		6,837,590		730,103		1,275		2		6,838,865		730,105
Total available-for-sale	$	29,506,688	$	1,733,961	$	12,591,225	$	5,269,506	$	42,097,913		$7,003,467

As of December 31, 2009, the Company’s security portfolio consisted of 286 securities, 73 of which were in an unrealized loss position. The majority of the unrealized losses are related to the Company’s agency, mortgage-backed securities, corporate and trust preferred securities as discussed below.

U.S. Agency and Agency Mortgage-Backed Securities

Fannie Mae, Freddie Mac, Ginnie Mae and the Small Business Administration guarantee the contractual cash flows of our agency and mortgage-backed securities. Fannie Mae and Freddie Mac are institutions which the government has affirmed its commitment to support. Our Ginnie Mae mortgage-backed securities are backed by the full faith and credit of the U.S. Government.

At December 31, 2009, of the forty-two U.S. Government sponsored enterprise agency and mortgage-backed securities in an unrealized loss position in our available-for-sale and held-to-maturity portfolios, none were in a continuous unrealized loss position for 12 months or more. The unrealized losses at December 31, 2009 were primarily attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these agency and mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2009.

Non-Agency Collateralized Mortgage Obligations.

All of our non-agency collateralized mortgage obligations carry various amounts of credit enhancement and none are collateralized with subprime loans. These securities were purchased based on the underlying loan characteristics such as loan to value ratio, credit scores, property type, location and the level of credit enhancement. Current characteristics of each security are reviewed regularly by management. If the level of credit loss coverage is sufficient, it indicates that we will receive all of the originally scheduled cash flows.

F - 21

Oneida Financial Corp.

Notes to Consolidated Financial Statements

2. Investment Securities and Mortgage-Backed Securities (Continued)

At December 31, 2009, of the five non-agency collateralized mortgage obligations in an unrealized loss position; four were in a continuous unrealized loss position of 12 months or more. All were rated Aaa or better at time of purchase. Two are currently rated below investment grade. We have assessed these securities in an unrealized loss position at December 31, 2009 and determined that the decline in fair value was temporary except for one collateralized mortgage obligation. The Bank currently has a $1.0 million obligation rated below investment grade that based on expected cash flows, delinquencies and credit support that the Company has considered impaired. The unrealized losses at December 31, 2009 and 2008 were $237,000 and $224,000 respectively. The one security had an OTTI loss of $25,000 of which $13,100 was recorded as expense during the period and $12,000 was recorded in other comprehensive income. This security remains classified as available-for-sale at December 31, 2009. For the other securities, we believe the decline in fair value was caused by the significant widening in liquidity spreads across sectors related to the continued illiquidity and uncertainty in the markets and not the credit quality of the individual issuer or underlying assets. In making this determination, we considered the period of time the securities were in a loss position, the percentage decline in comparison to the securities’ amortized cost, the financial condition of the issuer, and the delinquency or default rates of the underlying collateral. The Company monitors to insure it has adequate credit support. In addition, we do not intend to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. Included in the four securities with unrealized losses considered temporary was a $1.4 million collateralized mortgage obligation, maturing August 25, 2035 which has an interest rate of 5.5% and is rated below investment grade. The unrealized loss on this security was $422,000 and $90,000 at December 31, 2009 and 2008, respectively.

Corporate Debt and Municipal Securities

At December 31, 2009, of the seventeen corporate debt and municipal securities in an unrealized loss position, seven were in a continuous unrealized loss position of 12 months or more. We have assessed these securities and determined that the decline in fair value was temporary. In making this determination, we considered the period of time the securities were in a loss position, the percentage decline in comparison with the securities’ amortized cost, the financial condition of the issuer, and the delinquency or default rates based on the applicable bond ratings. In addition, we do not have the intent to sell these securities and it is not more likely than not that we will be required to sell these securities before the recovery of their cost basis, which may be at maturity. Included in the nine securities whose unrealized loss position exceeds 12 months was a $2.0 million General Motors Acceptance Corp. (GMAC) bond, maturing October 15, 2010 which has a rating below investment grade. This is a variable rate note based on the three month Treasury bill whose unrealized loss was $100,000 and $1.1 million at December 31, 2009 and December 31, 2008 respectively. In addition, also included was a $2.5 million Sallie Mae (SLMA) bond, maturing May 1, 2012 which is rated below investment grade. This is a variable rate note based on the consumer price index. The unrealized loss at December 31, 2009 and December 31, 2008 was $402,000 and $875,000, respectively. Both GMAC and SLMA are paying as agreed.

Trust Preferred Securities

The Company currently has $5.9 million invested in nine trust preferred securities as of December 31, 2009 whose unrealized losses have been in a continuous loss position exceeding 12 months or

F - 22

Oneida Financial Corp.

Notes to Consolidated Financial Statements

2. Investment Securities and Mortgage-Backed Securities (Continued)

more. Of the $5.9 million, $1.9 million have variable rates of interest. $1.9 million of the investments are on nonaccrual as of December 31, 2009. The unrealized losses at December 31, 2009 and December 31, 2008 on the nine securities totaled $3.5 million and $2.5 million respectively. All of the securities are rated below investment grade as of December 31, 2009. The issuers of these securities are primarily banks, but some of the pools do include a limited number of insurance companies. The Company uses the OTTI evaluation model to compare the present value of expected cash flows to the previous estimates to ensure there are no adverse changes in cash flows during the quarter. The OTTI model considers the structure and term of the trust preferred securities and the financial condition of the underlying issuers, the timing and amount of interest and principal payments of the underlying issuers, and the allocation of the payments to the note classes. The current estimate of expected cash flows is based on the most recent trustee reports and any other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities. Assumptions used in the models are as follows:

	Significant inputs at December 31, 2009
Annual prepayment	0% annually, 100% at maturity
Projected specific defaults/deferrals		19.50% - 52.26	%
Projected severity of loss on specific defaults/deferrals		85% - 100	%
Projected additional defaults:
QTR 1 — 2010	1% (not annualized)
Thereafter	0.50% applied annually
Projected severity of loss on additional defaults		85% - 100	%
Present value discount rates		5.39% - 9.48	%

The discount rates range can vary depending on the index the instruments are tied to as well as the spread for each instrument. In addition, three of the nine trust preferred securities are fixed rate instruments. Upon completion of the December 31, 2009 analysis, our model indicated other-than-temporary impairment on eight of these securities, all of which experienced additional defaults or deferrals during the period.

These eight securities had OTTI losses of $2.9 million of which $2.3 million was recorded as expense during the period and $600,000 was recorded in other comprehensive income. These eight securities remain classified as available-for-sale at December 31, 2009. It is possible that the underlying collateral of these securities will perform worse than expectations including an increase in deferrals/defaults above projections, which may lead to adverse changes in cash flows on these securities and potential future other-than-temporary impairment losses. Events that may trigger material declines in fair value for these securities in the future would include, but are not limited to, deterioration of credit metrics, such as significantly higher levels of defaults, and severity of loss on the underlying collateral and further illiquidity.

F - 23

Oneida Financial Corp.

Notes to Consolidated Financial Statements

2. Investment Securities and Mortgage-Backed Securities (Continued)

The table below presents a roll-forward of the credit losses recognized in earnings for the twelve months ended December 31, 2009:

Beginning Balance	$	—
Amounts related to credit loss for which an other-than temporary impairment was not previously recognized		2,294,841
Additions/Subtractions
Amounts realized for securities sold during the period		—
Amounts related to securities for which the company intends to sell or that it will be more likely than not that the company will be required to sell prior to recovery of amortized cost basis		—
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security		—
Increases to the amount related to the credit loss for which other-than-temporary was previously recognized		—
Ending Balance December 31, 2009	$	2,294,841

The Company has a $1.0 million Lehman Brothers Holding Inc. medium term fixed rate note. The security has been considered other-than-temporarily impaired as a result of Lehman Brothers having filed for Chapter 11 bankruptcy protection on September 15, 2008. As a result, the Company recorded a non-cash charge to earnings of $1.0 million during 2008.

Unrealized losses on other investments have not been recognized into income because the issuer(s) securities are of investment grade (except as indicated above), management does not intend to sell and it is more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bond(s) approach maturity.

3. Loans Receivable

The components of loans receivable at December 31 are as follows:

	2009			2008
Residential	$	144,118,057		$	148,097,760
Consumer loans		43,010,889			46,817,598
Commercial real estate		72,127,037			67,218,848
Commercial loans		38,796,600			42,241,770
		298,052,583			304,375,976
Allowance for loan losses		(2,900,587	)		(2,624,283	)
Net loans	$	295,151,996		$	301,751,693

At December 31, 2009 and 2008 loans to officers and directors were approximately $7.1 million and $4.1 million respectively. During 2009 and 2008, $1.6 million and $1.7 million of new loans were made to officers and directors respectively. Net pay downs and repayments in aggregate on loans to officers and directors were approximately $1.6 million and $883,000 during 2009 and 2008 respectively. Effect of changes in the composition of related parties was approximately $3.1 million and $124,000 during 2009 and 2008 respectively.

F - 24

Oneida Financial Corp.

Notes to Consolidated Financial Statements

3. Loans Receivable (Continued)

At December 31, 2009, Federal Home Loan Bank advances are collateralized by residential mortgages in the amount of $72,574,283 pledged under a blanket collateral agreement.

An analysis of the change in the allowance for loan losses for the years ended December 31 is as follows:

	2009			2008			2007
Balance at beginning of year	$	2,624,283		$	2,511,310		$	2,080,913
Loans charged off		(693,066	)		(526,196	)		(230,877	)
Recoveries		209,640			114,169			135,703
Provision for loan losses		760,000			525,000			—
NBV Acquisition		—			—			525,571
Balance at end of year	$	2,900,857		$	2,624,283		$	2,511,310

Impaired loans were as follows:

	2009		2008		2007
Impaired loans	$	2,158,500	$	—	$	—
Allocated allowance for loan losses	$	569,978	$	—	$	—
Average of impaired loans during the year	$	1,060,019	$	—	$	—
Cash-basis interest income recognized	$	106,862	$	—	$	—

Nonperforming loans were as follows:

	2009		2008
Loans past due over 90 days still on accrual	$	—	$	—
Nonaccrual loans	$	551,409	$	512,612

Nonperforming loans includes both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

Loans having carrying values of $434,882 and $259,649 were transferred to foreclosed assets in 2009 and 2008, respectively.

4. Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

F - 25

Oneida Financial Corp.

Notes to Consolidated Financial Statements

4. Fair Value (Continued)

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The company uses the following methods and significant assumptions to estimate the fair value of each type of financial instrument.

Securities: The fair values of trading securities and investment securities are determined by quoted market prices, if available (Level 1 inputs). For securities where quoted prices are not available, fair values are calculated based on market price of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. Defaults and deferrals on individual securities are reviewed and incorporated into the calculations. During times when trading is more liquid, broker quotes are used (if available) to validate the model .

Trust Preferred Securities which are issued by financial institutions and insurance companies were historically priced using Level 2 inputs. The decline in the level of observable inputs and market activity in this class of investments by the measurement date has been significant and resulted in unreliable external pricing. Broker pricing and bid/ask spreads, when available, vary widely. The once active market has become comparatively inactive. As such, these investments are now priced using Level 3 inputs.

The Company has developed an internal model for pricing these securities. Information such as historical and current performance of the underlying collateral, deferral/default rates, collateral coverage ratios, break in yield calculations, cash flow projections, liquidity and credit premiums required by a market participant, and financial trend analysis with respect to the individual issuing financial institutions and insurance companies, are utilized in determining individual security valuations. Due to current market conditions as well as the limited trading activity of these securities, the market value of the securities is highly sensitive to assumption changes and market volatility.

Corporate securities were historically priced using Level 2 inputs. Due to the lack of market of similar type investments, one of our corporate securities is considered Level 3. The Company does obtain some broker quotes on this investment based on trading desk information in which the prices are heavily influenced by unobservable market inputs.

Common and preferred equity securities are generally priced using Level 1 or Level 2 inputs due to the market activity of these types of securities. One of the preferred securities is considered level 3 pricing due to the limited trading activity of the individual security in the market and lack of certain brokers providing quotes on this type of security. The company does obtain available, if any broker quotes, reviews past history of contractual payments and financial condition of the corporation in determining an appropriate market value for this type of security.

Impaired Loans: Estimates of fair value used for other collateral supporting commercial loans generally is not observable in the marketplace and therefore, such valuations have been classified as Level 3. Impaired loans had a principal balance of $2.2 million with a valuation allowance of $570,000 as of December 31, 2009 resulting in an additional provision for loan losses of $570,000 for the year then ended. There were no impaired loans as of December 31, 2008.

F - 26

Oneida Financial Corp.

Notes to Consolidated Financial Statements

4. Fair Value (Continued)

Loan Servicing Rights: Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income.

Loans Held for Sale: Loans held for sale are carried at the lower of cost or fair value, as determined by outstanding commitments, from third party investors.

Assets measured at fair value on a recurring basis for which the Company has elected the fair value option, are summarized below:

			Fair Value Measurements
			at December 31, 2009 Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Assets:
Trading securities
Common and preferred equities	$	7,627,280	$	—	$	5,568,437	$	2,058,843
Available for sale securities
U.S. Agency		23,883,734		—		23,883,734		—
Corporate		16,205,547		—		13,955,547		2,250,000
Trust preferreds		5,920,764		—		—		5,920,764
State and municipal		17,988,002		—		17,988,002		—
Small Business Administration		12,100		—		12,100		—
Residential mortgage-backed securities		44,692,794		—		44,692,794		—
Collateralized mortgage obligations		5,829,637		—		5,829,637		—
Total	$	122,159,858	$	—	$	111,930,251	$	10,229,607

			Fair Value Measurements
			at December 31, 2008 Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Assets:
Trading securities
Common and preferred equities	$	5,941,476	$	—	$	3,921,096	$	2,020,380
Available for sale securities
U.S. Agency		21,204,602		—		21,204,602		—
Corporate		12,673,604		—		11,173,604		1,500,000
Trust preferreds		9,207,927		—		—		9,207,927
State and municipal		17,347,316		—		17,347,316		—
Small Business Administration		12,908		—		12,908		—
Residential mortgage-backed securities		67,477,932		—		66,709,763		768,169
Collateralized mortgage obligations		6,838,865		—		6,838,865		—
Total	$	140,704,630	$	—	$	127,208,154	$	13,496,476

F - 27

Oneida Financial Corp.

Notes to Consolidated Financial Statements

4. Fair Value (Continued)

The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2009:

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Trading					Trust			Collateralized
	Securities			Corporate		Preferreds			Mortgage Obligations			Total
Beginning balance, January 1, 2009	$	2,020,380		$	1,500,000	$	9,207,927		$	768,169		$	13,496,476
Total gains or losses (realized/unrealized)
Included in earnings
Interest income on securities		(39,228	)		440		(18,890	)		6,948			(50,730	)
Other changes in fair value		77,691			—		—			—			77,691
Net impairment losses recognized in earnings		—			—		(2,281,741	)		(13,100	)		(2,294,841	)
Included in other comprehensive income		—			749,560		(986,532	)		(184,769	)		(421,741	)
Purchases, issuances, and settlements		—			—		—			—			—
Transfers in and/or out of Level 3		—			—		—			(577,248	)		(577,248	)
Ending balance, December 31, 2009	$	2,058,843		$	2,250,000	$	5,920,764		$	—		$	10,229,607

	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	Trading						Trust			Collateralized
	Securities			Corporate			Preferreds			Mortgage Obligations			Total
Beginning balance, January 1, 2008	$	1,996,527		$	2,360,000		$	6,094,996		$	—		$	10,451,523
Total gains or losses (realized/unrealized)
Included in earnings
Interest income on securities		(39,228	)		440			(23,271	)		139			(61,920	)
Other changes in fair value		63,081			—			(8,384	)		—			54,697
Gains (losses) on sale of securities		—			—			—			—			—
Included in other comprehensive income		—			(860,440	)		(1,167,178	)		(64,272	)		(2,091,890	)
Purchases, issuances, and settlements		—			—			—			—			—
Transfers in and/or out of Level 3		—			—			4,311,764			832,302			5,144,066
Ending balance, December 31, 2008	$	2,020,380		$	1,500,000		$	9,207,927		$	768,169		$	13,496,476

Mortgage servicing rights are carried at the lower of cost or fair value. There was no valuation allowance for mortgage servicing rights as of December 31, 2009 and 2008, and no charges included in earnings were reported for the years then ended.

The carrying amounts and estimated fair values of financial instruments, at December 31, 2009 and December 31, 2008 are as follows:

F - 28

Oneida Financial Corp.

Notes to Consolidated Financial Statements

4. Fair Value (Continued)

	2009				2008
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
	(Amounts in thousands)
Financial assets:
Cash and cash equivalents	$	39,537	$	39,537	$	13,294	$	13,294
Investment securities, held-to-maturity		47,692		47,966		N/A		N/A
Loans held for sale		687		700	$	741	$	749
Loans receivable, net		295,152		297,331		301,752		317,625
Federal Home Loan Bank stock		2,665		N/A		3,784		N/A
Accrued interest receivable		2,469		2,469		2,659		2,659
Financial liabilities:
Deposits	$	489,364	$	476,171	$	425,698	$	421,101
Federal Home Loan Bank advances		31,000		31,335		52,825		52,788
Notes payable		—		—		12		12
Accrued interest payable		117		117		332		332

The methods and assumptions, not previously presented, used to estimate fair value are described as follows:

Carrying amount is the estimated fair value for cash and cash equivalents, interest bearing deposits, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. The method for determining the fair values for securities were described previously. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair value of debt is based on current rates for similar financing. It is not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability. The fair value of off-balance-sheet items is not considered material.

Fair Value Option

The Company adopted “The Fair Value Option for Financial Assets and Liabilities” on January 1, 2008. This guidance permits, but does not require, companies to measure many financial instruments and certain other items at fair value. The decision to elect the fair value option is made individually for each instrument and is irrevocable once made. Changes in fair value for the selected instruments are recorded in earnings. The Company has elected to adopt this standard for common and preferred equity securities as they do not have stated maturity values and the fair value fluctuates with market changes and using fair value appears to be an appropriate measure.

The following table summarizes the impact of adopting the fair value option as of January 1, 2008:

F - 29

Oneida Financial Corp.

Notes to Consolidated Financial Statements

4. Fair Value (Continued)

							Balance Sheet
	Balance Sheet			Net Gain/(Loss)			January 1, 2008
	January 1, 2008			upon			after Adoption of
	Prior to Adoption			Adoption			Fair Value Option
Securities available for sale transferred to trading account assets:
Amortized cost	$	13,655,404		$	(2,532,235	)	$	11,123,169
Unrealized depreciation		(2,532,235	)		2,532,235			—
Net transferred to trading account	$	11,123,169		$	—		$	11,123,169
Cumulative effect of adoption (pre-tax)					(2,532,235	)
Tax impact					1,012,894
Cumulative effect adjustment (net of tax)
Decrease to retained earnings				$	(1,519,341	)

The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets and liabilities carried at fair value for the years ended December 31, 2009 and 2008:

	Changes in Fair Values for the year ended December 31, 2009
			for Items Measured at Fair Value
	Pursuant to Election of the Fair Value Option
								Total Changes
								in Fair Values
	Other							Included in
	Gains and		Interest			Interest		Current Period
	Losses		Income			Expense		Earnings
Trading securities	$	1,725,032	$	(39,228	)	$	—	$	1,685,804

	Changes in Fair Values for the year ended December 31, 2008
				for Items Measured at Fair Value
	Pursuant to Election of the Fair Value Option
									Total Changes
									in Fair Values
	Other								Included in
	Gains and			Interest			Interest		Current Period
	Losses			Income			Expense		Earnings
Trading securities	$	(7,674,699	)	$	(39,228	)	$	—	$	(7,713,927	)

5. Secondary Mortgage Market Activities

Mortgage loans serviced for others are not included in the accompanying consolidated statements of condition. The principal balance of these loans at year end are as follow:

	2009		2008
Mortgage loan portfolios serviced for:
Freddie Mac	$	111,043,793	$	83,133,952
Federal Home Loan Bank	$	15,252,193	$	18,970,092

F -30

Oneida Financial Corp.

Notes to Consolidated Financial Statements

5. Secondary Mortgage Market Activities (Continued)

Custodial escrow balances maintained in connection with serviced loans were approximately $1,528,000 and $1,275,000 at December 31, 2009 and 2008, respectively.

Activity for mortgage servicing rights and the related valuation allowance follows:

	2009			2008			2007
Balance at beginning of year	$	320,210		$	332,987		$	326,081
Additions		331,104			95,935			117,026
Disposals		—			—			—
Amortized to expense		(150,564	)		(108,712	)		(110,120	)
Balance at end of year	$	500,750		$	320,210		$	332,987
Valuation Allowance	$	—		$	—		$	—

The fair value of mortgage servicing rights approximated book value as of year-end 2009 and 2008. Fair value at year-end 2009 was determined using a discount rate of 6.25%, prepayment speed of 20% and a weighted average default rate of 5%. Fair value at year end 2008 was determined using a discount rate of 7.5%, prepayment speed of 20% and a weighted average default rate of 5%.

The weighted average amortization period is 8 years. Estimated amortization expense for each of the next five years is:

2010	$	142,562
2011		103,927
2012		75,382
2013		54,346
2014		38,888

6. Premises and Equipment

Premises and equipment consist of the following at December 31:

	2009			2008
Land	$	2,814,483		$	2,814,483
Buildings		23,803,681			22,914,538
Equipment and fixtures		10,605,092			10,262,948
Construction in progress		44,312			184,692
		37,267,568			36,176,661
Accumulated depreciation		(15,993,052	)		(14,386,895	)
Net book value	$	21,274,516		$	21,789,766

Depreciation expense was $1,608,017, $1,609,404 and $1,406,308 in 2009, 2008 and 2007 respectively.

F -31

Oneida Financial Corp.

Notes to Consolidated Financial Statements

7. Goodwill and Other Intangible Assets

Other intangible assets consist of the following at December 31:

	As of December 31, 2009
	Gross
	Carrying		Accumulated
	Value		Amortization			Net
Core deposit intangible	$	2,705,391	$	(1,485,828	)	$	1,219,563
Customer relationship intangible		1,265,543		(855,175	)		410,368
Total	$	3,970,934	$	(2,341,003	)	$	1,629,931

	As of December 31, 2008
	Gross
	Carrying		Accumulated
	Value		Amortization			Net
Core deposit intangible	$	2,705,391	$	(1,158,828	)	$	1,546,563
Customer relationship intangible		1,265,543		(712,105	)		553,438
Total	$	3,970,934	$	(1,870,933	)	$	2,100,001

Aggregate amortization expense was $470,070, $540,585, and $547,759 for 2009, 2008 and 2007.

Estimated amortization expense for each of the next five years:

2010	$	411,990
2011		361,307
2012		312,507
2013		263,014
2014		125,946

The changes in the carrying amount of goodwill for the year ended December 31 is as follows:

	Banking			Insurance		Benefit Consulting
	Activities			Activities		Activities		Total
Balance as of December 31, 2006	$	5,577,913		$	10,045,301	$	2,513,826	$	18,137,040
Goodwill acquired		4,457,992			66,153		131,417		4,655,562
Balance as of December 31, 2007		10,035,905			10,111,454		2,645,243		22,792,602
Goodwill acquired		(30,774	)		72,567		129,044		170,837
Balance as of December 31, 2008		10,005,131			10,184,021		2,774,287		22,963,439
Goodwill acquired		—			84,245		135,417		219,662
Balance as of December 31, 2009	$	10,005,131		$	10,268,266	$	2,909,704	$	23,183,101

During 2006, the Company completed its acquisition of Parsons, Cote & Company and Benefit Consulting Group LLC. Goodwill in the amount of $576,000 and intangible assets in the amount of $71,000 were recorded as part of the Parsons, Cote & Company acquisition. Under the terms of the agreement, contingent purchase payments based on future performance levels may be made over a five-year period ending December 31, 2010. Additional goodwill in the amount of $84,245, $72,567 and $66,153 was recorded for the contingent purchase payment made in 2009, 2008 and 2007 respectively.

F -32

Oneida Financial Corp.

Notes to Consolidated Financial Statements

7. Goodwill and Other Intangible Assets (Continued)

During 2006, the Company completed its acquisition of Benefit Consulting Group LLC. Goodwill in the amount of $2.5 million and other intangible assets in the amount of $1.1 million were recorded as part of the acquisition of Benefit Consulting Group LLC. Under the terms of the agreement, continent purchase payments based on future performance levels may be made over a five-year period ending December 31, 2010. Additional goodwill in the amount of $135,417, $129,044 and $131,417 was recorded for the contingent purchase payment made in 2009, 2008 and 2007 respectively.

During 2007, the Company completed its acquisition of Vernon Bank Corporation, the stock holding company of the National Bank of Vernon. Goodwill in the amount of $4.4 million and other intangible assets in the amount of $1.5 million were recorded as part of the acquisition.

Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two-step test. Step 1 includes the determination of the carrying value of our reporting units, including the existing goodwill and intangible assets, and estimating the fair value of the reporting units. We determined the fair value of our reporting units and compared them to their carrying amount. If the carrying amount of the reporting units exceeds their fair value, we are required to perform a second step to the impairment test. Our annual impairment analysis as of December 31, 2009 indicated that a step 2 analysis was not required. As of December 31, 2009 and 2008, no impairment was recorded for goodwill.

8. Due to Depositors

Amounts due to depositors at December 31 are as follows:

	2009		2008
Non-interest bearing demand	$	62,996,738	$	60,786,827
Savings		81,889,687		74,241,962
Money market and interest-bearing checking		186,526,234		133,748,368
Time deposits		156,903,181		155,824,510
Mortgage escrow funds		1,048,567		1,096,430
Total due to depositors	$	489,364,407	$	425,698,097

At December 31, 2009 and 2008, time deposits with balances in excess of $100,000 totaled $56,688,882 and $45,851,817, respectively.

     The contractual maturity of time deposits as of December 31, are as follows:

	2009					2008
Maturity	Amount		Percent			Amount		Percent
One year or less	$	123,357,912		78.6	%	$	124,083,627		79.6	%
One to two years		16,630,577		10.6			17,526,028		11.2
Two to three years		5,754,751		3.7			7,092,806		4.6
Three to four years		3,669,521		2.3			3,744,525		2.4
Four to five years		7,485,961		4.8			3,353,795		2.2
Over five years		4,459		0.0			23,729		0.0
	$	156,903,181		100.0	%	$	155,824,510		100.0	%

F -33

Oneida Financial Corp.

Notes to Consolidated Financial Statements

9. Borrowings

Outstanding borrowings as of December 31 are as follows:

	2009		2008
Short-term borrowings:
Federal Home Loan Bank overnight line of credit	$	—	$	3,825,000
Federal Home Loan Bank advances		19,000,000		18,000,000
Long-term borrowings:
Federal Home Loan Bank advances		12,000,000		31,000,000
	$	31,000,000	$	52,825,000

Borrowings at December 31, 2009 have maturity dates as follows:

	Range of			Average
	Rates			Rate
2010		2.87% - 6.74	%		4.82	%		19,000,000
2011		5.74	%		5.74	%		1,000,000
2012		3.34	%		3.34	%		5,000,000
2013		5.00	%		5.00	%		5,000,000
2014		5.33	%		5.33	%		1,000,000
Thereafter								—
							$	31,000,000

The Bank has available a $109,922,600 line of credit with the Federal Home Loan Bank of which $0 is outstanding at December 31, 2009. Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. At December 31, 2009, borrowings are collateralized by pledged securities, which had a carrying value of $7.6 million and residential mortgages in the amount of $72,574,283 pledged under a blanket collateral agreement. The Bank also has available a $5,000,000 unsecured line of credit with Key Bank of which $0 is outstanding at December 31, 2009. In addition, the Bank also has available a $5,000,000 unsecured line of credit with M&T Bank of which $0 is outstanding at December 31, 2009.

10. Income Taxes

The provision for income taxes for the years ended December 31, consists of the following:

	2009			2008			2007
Current:
Federal	$	865,283		$	626,812		$	1,154,383
State		(3,547	)		4,086			104,202
Deferred:
Federal		299,057			(2,322,612	)		21,267
State		50,127			(531,086	)		87,798
	$	1,210,920		$	(2,222,800	)	$	1,367,650

A reconciliation of the federal statutory rate to the effective income tax rate for the years ended December 31, is as follow

F -34

Oneida Financial Corp.

Notes to Consolidated Financial Statements

10. Income Taxes (Continued)

	2009			2008			2007
Federal statutory income tax rate		34	%		34	%		34	%
State tax, net of federal benefit		1	%		9	%		3	%
Tax exempt investment income		(7	)%		7	%		(4	)%
Earnings from bank owned life insurance		(4	)%		5	%		(4	)%
Other		(1	)%		2	%		(1	)%
Effective tax rate		23	%		57	%		28	%

The components of deferred income taxes included in other assets in the statements of condition are approximately as follows:

	2009			2008
	Asset (Liability)
Allowance for loan losses	$	1,093,000		$	972,000
Deferred compensation		296,000			228,000
Investment security charges/adjustments		4,162,000			4,536,000
Unrealized losses on securities available for sale		1,324,000			2,133,000
Pension benefits		514,000			789,000
Depreciation		(388,000	)		(296,000	)
Mortgage related fees		(389,000	)		(336,000	)
Intangible amortization		(257,000	)		(158,000	)
Purchase accounting adjustments		(314,000	)		(426,000	)
Prepaid expenses		(316,000	)		(307,000	)
Other		(72,000	)		(65,000	)
Total deferred income tax asset, net	$	5,653,000		$	7,070,000

At December 31, 2009 and December 31, 2008, the Company had no unrecognized tax benefits recorded. The Company does not expect the amount of unrecognized tax benefits to significantly change within the next twelve months.

The Company recognizes interest and penalties related to income tax matters as part of income tax expense. At December 31, 2009 and December 31, 2008, there were no amounts accrued for interest and penalties.

The Company is subject to U.S. federal income tax as well as New York state income tax. The Company is no longer subject to federal or state examinations for tax years prior to 2006. The tax years 2006-2008 remain open to federal and state examination.

11. Benefit Plans

The Bank provides a noncontributory defined benefit retirement accumulation plan (cash balance plan) covering substantially all employees. Under the plan, retirement benefits are primarily a function of the employee’s years of service and level of compensation. As of June 15, 2004, the Bank had a plan amendment to freeze the plan benefits for plan participants. The Bank uses a December 31 measurement date for its pension plan.

F - 35

Oneida Financial Corp.

Notes to Consolidated Financial Statements

11. Benefit Plans (Continued)

Information about changes in obligations and funded status of the defined benefit pension plan follows:

	2009			2008
Change in benefit obligation:
Benefit obligation at beginning of year	$	4,253,399		$	4,312,486
Service cost		—			—
Interest cost		163,330			212,080
Actuarial gain (loss)		58,741			61,346
Benefits paid		(186,805	)		(332,513	)
Benefit obligation at end of year	$	4,288,665		$	4,253,399
Change in plan assets, at fair value:
Beginning plan assets	$	2,747,228		$	4,010,169
Actual return		509,000			(1,013,908	)
Benefits paid		(186,805	)		(332,513	)
Employer contributions		164,000			83,480
Settlements		—			—
Ending plan assets	$	3,233,423		$	2,747,228
Funded status at year end (plan assets less benefit obligation)	$	(1,055,242	)	$	(1,506,171	)

Amounts recognized in accumulated other comprehensive income at December 31 consist of:

	2009		2008
Net actuarial loss (gain)	$	2,436,186	$	2,828,011
Prior service cost (credit)		—		—
	$	2,436,186	$	2,828,011

The accumulated benefit obligation for the pension plan was $4,288,665 and $4,253,399, at year-end 2009 and 2008 respectively.

The net periodic pension cost and other amounts recognized in other comprehensive income for the years ended December 31 includes the following components:

	2009			2008			2007
Service cost benefits earned during the period	$	—		$	—		$	—
Interest cost on projected benefit obligation		163,330			212,080			220,870
Expected return on plan assets		(205,187	)		(291,424	)		(292,236	)
Net amortization and deferral		146,753			65,736			58,154
Net periodic pension (benefit) cost	$	104,896		$	(13,608	)	$	(13,212	)
Net loss (gain)		(391,825	)		1,300,942			(113,978	)
Prior service cost (credit)		—			—			—
Amortization of prior service cost		—			—			—
Total recognized in other comprehensive income		(391,825	)		1,300,942			(113,978	)
Total recognized in net periodic benefit cost and other comprehensive income	$	(286,929	)	$	1,287,334		$	(127,190	)

F - 36

Oneida Financial Corp.

Notes to Consolidated Financial Statements

11. Benefit Plans (Continued)

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $146,000.

Assumptions	2009			2008			2007
Weighted-average assumptions used to determine benefit obligation at year-end
Discount rate		3.97	%		5.06	%		5.18	%
Weighted-average assumptions used to determine net cost
Discount rate		5.06	%		5.18	%		5.08	%
Expected return on plan assets		7.50	%		7.50	%		7.50	%

Plan Assets

The Company’s overall investment strategy is to achieve a mix of approximately 65% of investments for long-term growth and 35% for near-term benefit payments with a wide diversification of asset types, fund strategies, and fund managers. The target allocations for plan assets are shown in the table below. Equity securities primarily include investments in common stock. Fixed income securities include corporate bonds, government issues and mortgage-backed securities. Other fixed income securities include a money market account and checking account.

The weighted average expected long-term rate of return is estimated based on current trends in the plan assets as well as projected future rates of return on those assets. The following assumptions were used in determining the long-term rate of return:

Equity securities	Dividend discount model, the smoothed earnings yield model and the equity risk premium model
Fixed income securities	Current yield to maturity and forecasts of future yields

The long term rate of return considers historical returns. There were no adjustments made to historical returns.

The plan is not prohibited from investing in any investments as long as they meet fiduciary standards as set forth in the plan document.

The Company’s pension plan asset allocation at year-end 2009 and 2008, target allocation for 2010, and expected long-term rate of return by asset category are as follows:

				Percentage of						Weighted-
	Target			Plan Assets						Average Expected
	Allocation			at December 31						Long Term Rate
Asset Category	2010			2009			2008			of Return
Equity Securities		65	%		29	%		50	%		10	%
Debt Securities		35	%		71	%		50	%		5	%
Other		0	%		0	%		0	%
Total		100	%		100	%		100	%		8	%

F-37

Oneida Financial Corp.

Notes to Consolidated Financial Statements

11. Benefit Plans (Continued)

The fair value of the plan assets, as previously defined, at December 31, 2009, by asset category, is as follows:

			Fair Value Measurements
			at December 31, 2009 Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Plan Assets:
Equities
Common stock	$	948,360	$	948,360	$	—	$	—
Fixed income securities
Corporate bonds		581,348		—		581,348		—
Government issues		1,277,704		—		1,277,704		—
FHLMC		142,795		—		142,795		—
FNMA		133,939		—		133,939		—
Other fixed income securities		149,277		—		149,277		—
Total	$	3,233,423	$	948,360	$	2,285,063	$	—

There were no plan assets measured at fair value using significant unobservable inputs (Level 3) for period ending December 31, 2009.

The Company expects to contribute $200,000 to the Plan for the year ending December 31, 2010.

     The following benefit payments are expected to be paid:

Fiscal year ending December 31:
2010	$	350,000
2011		368,000
2012		386,000
2013		405,000
2014		425,000
Years 2015 - 2019		2,468,000

State Bank of Chittenango participated in the New York State Bankers Retirement System (the System) plan which was a noncontributory defined benefit plan covering substantially all employees. Under the plan, retirement benefits were primarily a function of the employee’s years of service and level of compensation. The plan was frozen as of May 31, 2002. State Bank of Chittenango uses a December 31 measurement date for its pension plan.

In September 2006, the FASB issued guidance which requires that defined benefit plan assets and obligations to be measured as of the date of the employer’s fiscal year-end, starting in 2008. Through 2007, the Company utilized the early measurement date, and measured the funded status of the defined benefit plan assets and obligations as of September 30^th each year. In accordance with the new guidance, the net periodic benefit cost for the period between the September 30 measurement date and the 2008 fiscal year end measurement were allocated proportionately between amounts to be recognized as an adjustment to retained earnings and net period benefit cost

F - 38

Oneida Financial Corp.

Notes to Consolidated Financial Statements

11. Benefit Plans (Continued)

for the fiscal year. As a result, the Company increased January 1, 2008 opening retained earnings by $8,215, increased deferred income taxes by $41,093, decreased the pension liability by $102,732 and debited accumulated other comprehensive income for $69,854.

The following table represents a reconciliation of the change in benefit obligation, plan assets and funded status of the plan as of December 31:

	2009			2008
Change in benefit obligation:
Beginning benefit obligation	$	2,351,556		$	2,250,073
Service cost		26,716			27,200
Interest cost		135,800			134,793
Actuarial gain (loss)		39,755			158,930
Benefits paid		(221,788	)		(219,440	)
Ending benefit obligation	$	2,332,039		$	2,351,556
Change in plan assets, at fair value:
Beginning plan assets	$	1,952,609		$	2,878,899
Actual return on plan assets		370,819			(706,850	)
Contributions		60,000			—
Benefits paid		(213,981	)		(219,440	)
Ending plan assets		2,169,447			1,952,609
Funded status at end of year	$	(162,592	)	$	(398,947	)

Amounts recognized in accumulated other comprehensive income at December 31 consist of:

	2009		2008			2007
Net actuarial loss (gain)	$	854,151	$	1,110,377	$	(80,740	)
Prior service cost (credit)		—		—		—
	$	854,151	$	1,110,377	$	(80,740	)

The accumulated benefit obligation for the pension plan was $2,332,039 and $2,351,556 at year-end 2009 and 2008 respectively.

The net periodic pension cost and other amounts recognized in other comprehensive income for the years ended December 31 includes the following components:

	2009			2008			Transition			2007
Service cost benefits earned during the period	$	26,716		$	27,200		$	6,800		$	24,400
Interest cost on projected benefit obligation		135,800			134,793			33,874			133,564
Expected return on plan assets		(139,125	)		(208,914	)		(54,365	)		(203,130	)
Amortization of net loss		56,480			—			—			—
Net periodic pension benefit	$	79,871		$	(46,921	)	$	(13,691	)	$	(45,166	)
Net loss (gain)		(199,746	)		1,074,694			—			(115,016	)
Prior service cost (credit)		—			—			—			—
Amortization of net loss		(56,480	)		—			—			—
Total recognized in other comprehensive income		(256,226	)		1,074,694			—			(115,016	)
Total recognized in net periodic benefit cost and other comprehensive income	$	(176,355	)	$	1,027,773		$	(13,691	)	$	(160,182	)

F - 39

Oneida Financial Corp.

Notes to Consolidated Financial Statements

11. Benefit Plans (Continued)

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $42,783.

Assumptions	2009			2008			2007
Weighted-average assumptions used to determine benefit obligation at year-end
Discount rate		6.03	%		6.03	%		6.25	%
Weighted-average assumptions used to determine net periodic pension cost
Discount rate		6.03	%		6.25	%		6.25	%
Expected return on plan assets		7.50	%		7.50	%		7.50	%

Plan Assets

The Company’s overall investment strategy is to achieve a mix of approximately 97% of investments for long-term growth and 3% for near-term benefit payments with a wide diversification of asset types, fund strategies, and fund managers. The target allocations for System assets are shown in the table below. Cash equivalents consist primarily of short term investment funds. Equity securities primarily include investments in common stock and depository receipts.

Fixed income securities include corporate bonds, government issues and mortgage-backed securities. Other financial instruments primarily include rights and warrants.

The weighted average expected long-term rate of return is estimated based on current trends in the System’s assets as well as projected future rates of return on those assets and reasonable actuarial assumptions based on the guidance provided by ASOP No. 27 for long term inflation, and the real and nominal rate of investment return for a specific mix of asset classes. The following assumptions were used in determining the long-term rate of return:

Equity securities	Dividend discount model, the smoothed earnings yield model and the equity risk premium model
Fixed income securities	Current yield to maturity and forecasts of future yields
Other financial instruments	Comparison of the specific investment’s risk to that of fixed income and equity instruments and using judgment

The long term rate of return considers historical returns. Adjustments were made to historical returns in order to reflect expectations of future returns. These adjustments were due to factor forecasts by economists and long-term U.S. Treasury yields to forecast long-term inflation. In addition, forecasts by economists and others for long-term GDP growth were factored into the development of assumptions for earnings growth and per capital income.

Effective March 2009, the System revised its investment guidelines. The System currently prohibits its investment managers from purchasing the following investments; (1) Equity securities in emerging market countries as defined by the Morgan Stanley Emerging Markets Index, short sales, unregistered securities and margin purchases; (2) fixed income securities that are of BBB quality or less, CMOs that have an inverse floating rate and whose payments don’t include principal or which aren’t certified and guaranteed by the U.S. Government, ABS that aren’t issued or guaranteed by the U.S. or its agencies or its instrumentalities, non-agency residential subprime or ALT-A MBS and structured notes; and (3) other financial instruments such as unhedged currency exposure in

F - 40

Oneida Financial Corp.

Notes to Consolidated Financial Statements

11. Benefit Plans (Continued)

countries not defined as “high income economies” by the World Bank. All other investments not prohibited by the System are permitted. At December 31, 2009, the System holds certain investments which are no longer deemed acceptable to acquire. These positions will be liquidated when the investment managers deem that such liquidation is in the best interest of the System.

The Company’s pension plan asset allocation at year-end 2009 and 2008, target allocation for 2010 and expected long-term rate of return by asset category are as follows:

				Percentage of						Weighted-
	Target			Plan Assets						Average Expected
	Allocation			at December 31,						Long Term Rate
Asset Category	2010			2009			2008			of Return
Cash equivalents		0 - 20	%		14	%		10	%		0	%
Equity securities		40 - 60	%		46	%		48	%		4.6	%
Fixed income securities		40 - 60	%		40	%		41	%		2.1	%
Other financial instruments		0 - 5	%		0	%		1	%		0	%
Total					100	%		100	%		6.7	%

The following table represents the Plan’s fair value hierarchy for its financial assets (investments), as defined previously measured at fair value on a recurring basis as of December 31, 2009:

			Fair Value Measurements
			at December 31, 2009 Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Plan Assets:
Cash equivalents
Short term investment funds	$	294,071	$	294,071	$	—	$	—
Equities
Common stock		970,858		970,858
Depository receipts		13,581		13,581
Other equities		10,764		10,764
Fixed income securities
Corporate bonds		206,883				206,883
Government issues		361,394				361,394
Collateralized mortgage obligations		52,565				52,565
FHLMC		87,836				87,836
FNMA		135,382				135,382
GNMA I		23,881				23,881
Other fixed income securities		12,232				12,232
Total	$	2,169,447	$	1,289,274	$	880,173	$	—

The table below presents a reconciliation of all plan assets measured at fair value using significant unobservable inputs (Level 3) for the year ended December 31, 2009:

F - 41

Oneida Financial Corp.

Notes to Consolidated Financial Statements

11. Benefit Plans (Continued)

Beginning balance, January 1, 2009	$	790,000
Actual return on plan assets:
Relating to assets still held at the reporting date		321,000
Relating to assets sold during the period		(348,000	)
Purchases, sales, and settlements, net		(763,000	)
Transfers in and/or out of Level 3		—
Ending balance, December 31, 2009	$	—

The Company expects to contribute $0 for the year ending December 31, 2010.

The following benefit payments are expected to be paid:

Fiscal year ending December 31:
2010	$	187,950
2011		183,155
2012		178,245
2013		179,926
2014		174,926
Years 2015 - 2019		846,413

In addition to the retirement plan, the Company sponsors a 401(k) savings plan which enables employees who meet the plan’s eligibility requirements to defer income on a pre-tax basis. Employees may elect to contribute a portion of their compensation, with the Company matching the contribution up to 5% of compensation. Employer contributions associated with the plan amounted to $570,401, $531,426 and $493,218 for the years ended December 31, 2009, 2008 and 2007, respectively.

The Bank provides The Oneida Savings Bank Employee Stock Ownership Plan with all employees meeting the age and service requirements eligible to participate in the Plan. Employees are eligible for the Plan if they are twenty-one years of age and have one year of service with at least 1,000 hours. The ESOP purchased 299,655 shares of common stock which was funded by a loan from the Company payable in ten equal installments over 10 years bearing a variable interest rate of prime at the beginning of the year which was 8.25% for 2007. Loan payments are to be funded by cash contributions from the Bank. The loan can be prepaid without penalty. Shares purchased by the ESOP are maintained in a suspense account and held for allocation among the participants. As loan payments are made, shares are committed to be released and subsequently allocated to employee accounts at each calendar year end. Compensation expense is recognized related to the shares committed to be released based on the average market price during the period. Cash dividends received on unallocated shares are used to pay debt service. For the purpose of computing earnings per share, unallocated ESOP shares are not considered outstanding.

Compensation expense approximated $337,000 for the year ended 2007. Of the 299,655 shares acquired on behalf of the ESOP 29,045 were released in December 31, 2007. As of December 31, 2007, all shares had been released and allocated to participants. In 2009 and 2008, the Company made a discretionary contribution to the plan and recorded compensation expense of $300,000 and $200,000 respectively for the plan to purchase additional shares to allocate to participants.

F - 42

Oneida Financial Corp.

Notes to Consolidated Financial Statements

12. Stock Based Compensation Plans

The Company has two share based compensation plans as described below. Total compensation cost that has been charged against income for those plans was $258,830, $165,654 and $174,806 for 2009, 2008 and 2007. The total income tax benefit was $99,649, $63,777, and $67,300.

Stock Option Plan

The Company’s 2000 Stock Option Plan, which is shareholder approved, permits the granting of share options to its directors, officer and key employees for up to 374,568 share of common stock. The exercise price of options granted is equal to the market value of the Company’s shares at the date of grant. All options granted expire by April 2010 and options vest and become exercisable ratably over a one to five-year period. The plan also has a reload feature which entitles the option holder, who has delivered common stock as payment of the exercise price for option stock, to a new option to acquire additional shares in the amount equal to the shares traded in. The option period during which the reload option may be exercised expires at the same time as that of the original option that the holder has exercised. The Company has a policy of using shares held as treasury stock to satisfy share option exercises. There were 9,243 shares available for future grants under the plan described above as of December 31, 2009 and 2008. Compensation recorded in conjunction with these plans was $78,543, $0 and $0 for 2009, 2008, and 2007, respectively.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The fair value of options granted was determined using the following weighted-average assumptions as of grant date:

	2009			2008		2007
Risk-free interest rate		0.50	%		N/A		N/A
Expected stock price volatility		62.09	%		N/A		N/A
Expected dividend rate		3.00	%		N/A		N/A
Expected life		0.94			N/A		N/A

A summary of the activity in the stock option plan for 2009 follows:

	Options			Range of		Weighted Average
	Outstanding			Option		Exercise Price
	and			Price		Shares		Intrinsic
	Exercisable			Per Share		Outstanding		Value
Outstanding at December 31, 2008		168,967		$	4.722 - $18.167	$	7.707	$	315,434
Granted		31,839		$	10.750 - $11.250
Exercised		(77,131	)	$	4.722
Forfeited		(1,500	)		14.773
Outstanding at December 31, 2009		122,175		$	4.722 - $18.167	$	10.401	$	152,346

F - 43

Oneida Financial Corp.

Notes to Consolidated Financial Statements

12. Stock Based Compensation Plans (Continued)

There was no unrecognized compensation cost for this plan as of December 31, 2009 as all shares are vested under the terms of the plan. New grants are for the reload option feature which are expensed at date of grant.

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

	2009		2008		2007
Intrinsic value of options exercised	$	489,449	$	26,164	$	49,378
Cash received from option exercises		9,326		32,348		34,118
Shares received from option exercises		31,839		—		—
Tax benefit realized from option exercises		—		—		—
Weighted average fair value of options granted		2.467		—		—

At December 31, 2009, the weighted average information for outstanding and exercisable shares is as follows:

	Options Outstanding						Options Exercisable
			Weighted Average						Weighted
Range of					Remaining				Average
Exercise			Exercise		Life				Exercise
Price	Shares		Price		(Years)		Shares		Price
$4.722 - $5.45		36,009	$	4.722		0.32		36,009	$	4.722
$9.084 - $10.90		11,118	$	10.216		0.32		11,118	$	10.216
$10.90 - $12.717		40,957	$	11.532		0.32		40,957	$	11.532
$12.717 - $14.534		18,689	$	14.000		0.32		18,689	$	14.000
$14.534 - $16.350		5,100	$	14.800		0.32		5,100	$	14.800
$16.350 - $18.167		10,302	$	17.247		0.32		10,302	$	17.247
Total/Average		122,175	$	10.401		0.32		122,175	$	10.401

Recognition Plan

The Management Recognition and Retention Plan provides for the issuance of shares of restricted stock to directors, officers and key employees. Compensation expense equal to the market value of Oneida Financial Corp.’s stock on the grant date is recognized ratably over the five year vesting period for shares of restricted stock granted that will be fully vested at December 31, 2010. Compensation recorded in conjunction with these plans was $180,287, $165,654 and $174,806 for 2009, 2008, and 2007, respectively. Shares unallocated under the plan available for future awards were 11,286, 15,886 and 12,886 as of December 31, 2009, 2008 and 2007 respectively.

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

				Weighted Average
				Grant-Date
Nonvested Shares	Shares			Fair Value
Nonvested at January 1, 2009		28,800		$	11.44
Granted		4,000			8.98
Vested		(16,400	)		11.14
Forfeited		—
Nonvested at December 31, 2009		16,400		$	11.14

F - 44

Oneida Financial Corp.

Notes to Consolidated Financial Statements

12. Stock Based Compensation Plans (Continued)

As of December 31, 2009, there was a total of $165,376 of unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted average of 2 years. The total fair value of shares vested during the years ended December 31, 2009, 2008 and 2007 were $146,780, $111,148 and $164,552 respectively.

13. Non-Interest Income and Expenses

Non-interest income and non-interest expenses for the years ended December 31 consist of the following:

	2009		2008		2007
Non-interest income:
Service charges on deposit accounts	$	2,615,542	$	2,775,053	$	2,546,514
Commissions and fees on sales of non-banking products		15,836,266		13,618,392		13,520,891
Cash surrender value increase		696,916		587,602		626,385
Other		1,735,606		1,337,208		1,144,157
Total non-interest income	$	20,884,330	$	18,318,255	$	17,837,947
Non-interest expenses:
Salaries and employee benefits	$	20,425,328	$	18,127,522	$	16,984,755
Building occupancy and equipment		4,748,134		4,739,353		4,427,212
FDIC and N.Y.S. assessment		1,121,204		121,300		94,849
Advertising		542,817		551,311		577,474
Postage and telephone		681,307		697,763		717,718
Director compensation		243,185		220,609		242,508
Professional fees		386,333		462,027		372,793
Travel and meetings		752,836		826,206		918,049
Insurance		344,388		257,052		388,703
Dues and subscriptions		167,944		185,356		205,661
Service fees		720,755		597,377		566,729
ORE expenses		38,423		11,898		26,344
Contributions		87,497		59,020		83,178
Sales tax		4,279		6,783		8,376
Other		1,455,056		1,239,498		795,774
Minority interest dividends		255,950		68,500		5,975
Intangible amortization		470,070		540,585		547,759
Total non-interest expenses	$	32,445,506	$	28,712,160	$	26,963,857

14. Commitments

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance-sheet risk at year end were as follows:

F - 45

Oneida Financial Corp.

Notes to Consolidated Financial Statements

14. Commitments (Continued)

	2009				2008
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	10,373,320	$	2,034,200	$	7,556,680	$	4,528,250
Unused lines of credit		1,663,317		48,880,467		2,573,940		43,797,752

Commitments to make loans are generally made for periods of 60 days or less. The fixed rate loan commitments have interest rates ranging from 4.36% to 6.75% and maturities ranging from 15 years to 30 years. 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. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies, but includes residential and commercial real estate.

15. Dividends and Restrictions

The Company’s ability to pay dividends to its shareholders is largely dependent on the Bank’s ability to pay dividends to the Company. In addition to state law requirements and the capital requirements discussed below, the circumstances under which the Bank may pay dividends are limited by federal statutes, regulations, and policies. Retained earnings of the Bank are subject to certain restrictions under New York State Banking regulations. The amount of retained earnings legally available for dividends under these regulations was $703,565 and $1,891,284 as of December 31, 2009 and 2008 respectively.

In addition, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation are authorized to determine under certain circumstances that the payment of dividends would be an unsafe or unsound practice and to prohibit payment of such dividends. The payment of dividends that deplete a bank’s capital base could be deemed to constitute such an unsafe or unsound practice. The Federal Reserve Board has indicated that banking organizations could generally pay dividends only out of current operating earnings.

The Board of Trustees of Oneida Financial MHC determines whether the MHC will waive or receive cash dividends declared by the Company each time the Company declares a cash dividend, which is expected to be on a semi-annual basis. The MHC may elect to receive dividends and utilize such funds to pay expenses or for other allowable purposes. The Office of Thrift Supervision (the “OTS”) has indicated that it does not object to the waiver of cash dividends by MHC subject to the following: (i) the Bank notifies OTS prior to paying any cash dividends to the Company if such a capital distribution becomes necessary and (ii) the Board of Trustees of the MHC must ratify the determination that the dividend waiver is consistent with the director’s fiduciary duties to the members of the federally chartered mutual holding company.

16. Regulatory Matters

The Bank is subject to regulatory capital requirements administered by the federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting

F - 46

Oneida Financial Corp.

Notes to Consolidated Financial Statements

16. Regulatory Matters (Continued)

practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes as of December 31, 2009, the Bank meets all capital adequacy requirements to which it is subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2009 and 2008, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

The Bank’s actual capital amounts and ratios are as follows:

											To Be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2009:
Total Capital (to Risk Weighted Assets)	$	42,634,376		10.73	%	$	31,799,429		8	%	$	39,749,286		10	%
Tier I Capital (to Risk Weighted Assets)	$	39,733,789		10.00	%	$	15,899,714		4	%	$	23,849,572		6	%
Tier I Capital (to Average Assets)	$	39,733,789		7.19	%	$	22,101,172		4	%	$	27,626,465		5	%
As of December 31, 2008:
Total Capital (to Risk Weighted Assets)	$	37,214,182		10.21	%	$	29,164,557		8	%	$	36,456,596		10	%
Tier I Capital (to Risk Weighted Assets)	$	34,589,899		9.49	%	$	14,582,279		4	%	$	21,873,418		6	%
Tier I Capital (to Average Assets)	$	34,589,899		6.64	%	$	20,836,854		4	%	$	26,046,068		5	%

The Qualified Thrift Lender test requires at least 65% of assets be maintained in housing-related finance and other specified areas. If this test is not met, limits are placed on growth, branching, new investments, Federal Home Loan Bank advances and new dividends. Management believes this test is met.

F - 47

Oneida Financial Corp.

Notes to Consolidated Financial Statements

17. Parent Company Statements

     Condensed financial information of Oneida Financial Corp. follows:

Condensed Balance Sheets

	December 31,
	2009		2008
Assets:
Cash	$	149,797	$	37,385
Investments in and advances to subsidiary		59,735,244		53,008,623
Other assets		187,772		74,030
Total assets	$	60,072,813	$	53,120,038
Liabilities and shareholders’ equity:
Other liabilities	$	139,500	$	—
Due to related parties		817,140		850,796
Shareholders’ equity		59,116,173		52,269,242
Total liabilities and shareholders’ equity	$	60,072,813	$	53,120,038

Condensed Statements of Income

	Years Ended December 31,
	2009			2008			2007
Revenue:
Dividends from subsidiary	$	2,000,000		$	—		$	—
Interest on investments and deposits		725			13,571			52,941
Rental income		—			51,322			307,935
Total revenue		2,000,725			64,893			360,876
Expenses:
Compensations and benefits		139,500			23,360			93,739
Other expenses		171,436			153,620			254,117
Total expenses		310,936			176,980			347,856
Income (loss) before taxes and equity in undistributed net income of subsidiary		1,689,789			(112,087	)		13,020
Benefit for income taxes		(120,000	)		(35,000	)		—
Income (loss) before equity in undistributed net income of subsidiary		1,809,789			(77,087	)		13,020
Equity in undistributed net income (loss):
Subsidiary bank		2,303,568			(1,600,003	)		3,491,287
Net income (loss)	$	4,113,357		$	(1,677,090	)	$	3,504,307

F - 48

Oneida Financial Corp.

Notes to Consolidated Financial Statements

17. Parent Company Statements (Continued)

Condensed Statements of Cash Flow

	Years Ended December 31,
	2009			2008			2007
Operating activities:
Net income (loss)	$	4,113,357		$	(1,677,090	)	$	3,504,307
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense		—			16,976			105,377
ESOP shares earned		—			—			337,408
Other assets/liabilities, net		25,757			(125,882	)		(44,077	)
Equity in undistributed net loss (income) of subsidiary bank		(2,303,568	)		1,600,003			(3,491,287	)
Net cash provided by (used by) operating activities		1,835,546			(185,993	)		411,728
Investing activities:
Proceeds from sales of investment securities		—			—			292,000
Purchase of premises and equipment		—			—			(287,416	)
Disposition of premises and equipment		—			3,204,282			—
Change in due from related parties		(33,655	)		(2,155,199	)		1,474,836
Net cash (used in) provided by investing activities		(33,655	)		1,049,083			1,479,420
Financing activities:
Purchase of treasury stock		(379,976	)		(20,277	)		(65,159	)
Dividends paid		(1,673,714	)		(1,662,053	)		(1,648,916	)
Exercise of stock options (using treasury stock)		364,211			32,347			34,118
Net cash (used in) provided by financing activities		(1,689,479	)		(1,649,983	)		(1,679,957	)
Net increase (decrease) in cash and cash equivalents		112,412			(786,893	)		211,191
Cash and cash equivalents at beginning of year		37,385			824,278			613,087
Cash and cash equivalents at end of year	$	149,797		$	37,385		$	824,278

F - 49

Oneida Financial Corp.

Notes to Consolidated Financial Statements

18. Earnings per Share

Earnings per common share have been computed based on the following for the years ended December 31:

	2009			2008			2007
Basic
Distributed earnings allocated to common stock	$	1,659,891		$	1,640,933		$	1,618,964
Undistributed earnings allocated to common stock		2,434,505			(3,320,069	)		1,844,445
Net earnings allocated to common stock	$	4,094,396		$	(1,679,136	)	$	3,463,409
Weighted average common shares outstanding including shares considered participating securities		7,789,021			7,757,205			7,729,653
Less: Average participating securities		(16,400	)		(28,800	)		(45,600	)
Weighted average shares		7,772,621			7,728,405			7,684,053
Basic earnings per share	$	0.53		$	(0.22	)	$	0.45
Diluted
Net earnings allocated to common stock	$	4,094,396		$	(1,679,136	)	$	3,463,409
Weighted average common shares outstanding for basic		7,772,621			7,728,405			7,684,053
Dilutive effect of stock options		27,949			54,592			67,485
Weighted average shares		7,800,570			7,782,997			7,751,538
Diluted earnings per share	$	0.52		$	(0.22	)	$	0.45

Stock options for 86,166, 106,675 and 53,820 shares of common stock were not considered in computing dilutive earnings per common share for 2009, 2008, and 2007 respectively because they were anti-dilutive.

19. Other Comprehensive Income (Loss)

Other comprehensive income (loss) components and related tax effects were as follows:

F - 50

Oneida Financial Corp.

Notes to Consolidated Financial Statements

19. Other Comprehensive Income (Loss) (Continued)

	2009			2008			2007
Unrealized (losses) gains on available for sale securities Available for sale securities:
Unrealized holding gains (losses) on securities arising during period	$	3,422,451		$	(3,979,420	)	$	(2,167,052	)
Less: reclassification adjustment for (gains) realized in income		(787,842	)		(62,854	)		(352,825	)
Net unrealized gains (losses)		2,634,609			(4,042,274	)		(2,519,877	)
Tax effect		(1,053,844	)		1,616,910			1,007,951
Net-of-tax amount		1,580,765			(2,425,364	)		(1,511,926	)
Other-than-temporary impaired securities:
Unrealized holding (losses) on securities arising during period	$	(2,908,143	)	$	(1,021,845	)	$	—
Less: reclassification adjustment for losses realized in income		2,294,841			1,021,845			—
Net unrealized (losses)		(613,302	)		—			—
Tax effect		245,321			—			—
Net-of-tax amount		(367,981	)		—			—
Change in unrealized loss on pension liability		648,051			(2,375,636	)		228,994
Tax effect		(259,220	)		950,254			(91,598	)
Net-of-tax amount		388,831			(1,425,382	)		137,396
	$	1,601,615		$	(3,850,746	)	$	(1,374,530	)

The following is a summary of the accumulated other comprehensive income balances, net of tax:

	Balance			Current		Balance
	at			Period		at
	12/31/2008			Change		12/31/2009
Unrealized (losses) gains on securities available for sale	$	(3,199,447	)	$	1,212,783	$	(1,986,664	)
Unrealized loss on pension benefits		(2,363,034	)		388,832		(1,974,202	)
Total	$	(5,562,481	)	$	1,601,615	$	(3,960,866	)

20. Segment Information

The Company has determined that it has four primary business segments, its banking franchise, its insurance activities, its employee benefit consulting activities and its risk management activities. For the years ended December 31, 2009, 2008 and 2007, the Company’s insurance activities consisted of those conducted through its wholly owned subsidiary, Bailey & Haskell Associates, Inc. For the years ended December 31, 2009, 2008 and 2007, the benefit consulting activities consisted of those conducted through its wholly owned subsidiary, Benefit Consulting Group Inc. For the year ended December 31, 2009 and 2008, the risk management activities consisted of those conducted through its wholly owned subsidiary Workplace Health Solutions Inc.; a segment that did not exist prior to 2008. Information about the Company is presented in the following table for the periods indicated:

F - 51

Oneida Financial Corp.

Notes to Consolidated Financial Statements

20. Segment Information (Continued)

	2009
							Risk
	Banking		Insurance		Consulting		Management
	Activities		Activities		Activities		Activities			Total
Net interest income	$	17,427,420	$	—	$	—	$	—		$	17,427,420
Provision for loan losses		760,000		—		—		—			760,000
Net interest income after provision for loan losses		16,667,420		—		—		—			16,667,420
Non-interest income		5,266,097		9,694,191		5,650,646		491,429			21,102,363
Non-interest expenses		16,545,145		8,580,478		4,532,450		709,346			30,367,419
Depreciation and amortization		1,699,210		223,847		153,430		1,600			2,078,087
Income (loss) before taxes		3,689,162		889,866		964,766		(219,517	)		5,324,277
Income tax expense (benefit)		517,720		378,000		405,200		(90,000	)		1,210,920
Net income (loss)	$	3,171,442	$	511,866	$	559,566	$	(129,517	)	$	4,113,357
Total Assets	$	571,983,646	$	19,962,553	$	4,389,768	$	89,526		$	596,425,493

	2008
								Risk
	Banking			Insurance		Consulting		Management
	Activities			Activities		Activities		Activities			Total
Net interest income	$	15,652,705		$	—	$	—	$	—		$	15,652,705
Provision for loan losses		525,000			—		—		—			525,000
Net interest income after provision for loan losses		15,127,705			—		—		—			15,127,705
Non-interest (loss) income		(3,933,827	)		8,483,321		5,015,527		119,544			9,684,565
Non-interest expenses		14,497,015			7,620,924		4,052,298		391,934			26,562,171
Depreciation and amortization		1,714,045			249,640		185,224		1,080			2,149,989
(Loss) Income before taxes		(5,017,182	)		612,757		778,005		(273,470	)		(3,899,890	)
Income tax (benefit) expense		(2,773,000	)		330,500		325,000		(105,300	)		(2,222,800	)
Net (loss) income	$	(2,244,182	)	$	282,257	$	453,005	$	(168,170	)	$	(1,677,090	)
Total Assets	$	523,447,403		$	15,607,987	$	4,857,175	$	57,552		$	543,970,117

F - 52

Oneida Financial Corp.

Notes to Consolidated Financial Statements

20. Segment Information (Continued)

	2007
	Banking		Insurance		Consulting
	Activities		Activities		Activities		Total
Net interest income	$	13,645,042	$	—	$	—	$	13,645,042
Provision for loan losses		—		—		—		—
Net interest income after provision for loan losses		13,645,042		—		—		13,645,042
Non-interest income		4,669,881		9,925,204		3,595,687		18,190,772
Non-interest expenses		13,802,743		8,197,710		3,009,337		25,009,790
Depreciation and amortization		1,492,222		236,843		225,002		1,954,067
Income before taxes		3,019,958		1,490,651		361,348		4,871,957
Income tax expense		759,650		500,000		108,000		1,367,650
Net income	$	2,260,308	$	990,651	$	253,348	$	3,504,307
Total Assets	$	505,109,464	$	19,631,205	$	4,083,910	$	528,824,579

The following represents a reconciliation of the Company’s reported segment assets to consolidated assets as of December 31:

Assets	2009			2008
Total assets for reportable segments	$	596,425,493		$	543,970,117
Elimination of intercompany cash balances		(5,919,162	)		(3,840,349	)
Consolidated total	$	590,506,331		$	540,129,768

The accounting policies of the segment are the same as those described in the summary of significant accounting policies.

21. Quarterly Financial Data (Unaudited)

	Interest		Net Interest		Net
2009	Income		Income		Income (Loss)			Basic			Diluted
	(Dollars in thousands)
First Quarter	$	6,232	$	4,059	$	1,114		$	0.14		$	0.14
Second Quarter		6,225		4,291		1,069			0.14			0.14
Third Quarter		6,234		4,442		696			0.09			0.09
Fourth Quarter		6,311		4,635		1,234			0.16			0.16
2008
First Quarter	$	6,725	$	3,723	$	429		$	0.06		$	0.06
Second Quarter		6,718		3,867		646			0.08			0.08
Third Quarter		6,651		3,924		(4,428	)		(0.57	)		(0.57	)
Fourth Quarter		6,639		4,139		1,676			0.22			0.22

F - 53

Oneida Financial Corp.

Notes to Consolidated Financial Statements

22. Adoption of Plan of Conversion and Reorganization (unaudited)

On February 9, 2010, the Board of Directors of Oneida Financial, MHC (“MHC”) and Oneida Savings Bank (“Bank”) adopted a Plan of Conversion and Reorganization providing for the conversion of the MHC into the capital stock form of organization resulting in the formation of a new federally-chartered stock holding company, Oneida Financial Corp. - New (“Holding Company”). Under the plan, the existing shares of the Company’s common stock owned by Public Stockholders will be converted pursuant to an exchange ratio into shares of common stock of the Holding Company (“Holding Company Common Stock”). Simultaneously, with the Conversion and Reorganization, the Holding Company will conduct a stock offering which represents the 55.2% ownership interest in Oneida Financial Corp. now owned by the MHC. The Conversion will result in the Bank being wholly owned by a state-chartered stock holding company which is owned by public stockholders. Shares of conversion stock will be offered in a subscription offering in descending order of priority to eligible deposit account holders, the Bank’s tax qualified employee benefit plan, then to other depositors of the Bank. Any shares of the Stock Holding Company’s common stock not sold in the subscription offering will be offered for sale to the general public, giving preference to natural persons residing in the bank’s market area.

Upon completion of the plan, the public will own 100% of the outstanding stock of the Holding Company. The Holding Company will own 100% of the Bank. The Bank may not pay dividends to the Holding Company if the dividends would cause the Bank to fall below the “well capitalized” capital threshold.

The Holding Company intends to contribute approximately 50% of the proceeds of the offering to the Bank. The balance will be retained as the Holding Company’s initial capitalization and may be used for general business purposes including investment in securities, repurchasing shares of its common stock, paying dividends as well as to effect corporate transactions, including mergers, acquisitions and branch expansions. The funds received by the Bank will be used for general business purposes including originating loans and purchasing securities and may also be used for growth through expansion of the branch office network.

The plan of conversion provides for the establishment, upon the completion of the conversion, of a liquidation account by the Holding Company for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders in an amount equal to (i) the MHC’s ownership interest in the Company’s total stockholders’ equity as of the date of the latest statement of financial condition used in the prospectus plus (ii) the value of the net assets of the MHC as of the date of the latest statement of financial condition of the MHC used in the prospectus. The plan of conversion also provides the establishment of a bank liquidation account at the Bank to support the Holding Company’s liquidation account. The liquidation account is designed to provide payments to depositors of their liquidation interests in the event of a liquidation of the Holding Company and the Bank or a liquidation solely of the Bank. Specifically, in the unlikely event that either the Bank or the Holding Company and the Bank were to liquidate after the conversion, all claims of creditors, including those of depositors, would be paid first, followed by distribution to eligible depositors of their interests in the liquidation account maintained by the Holding Company.

Offering costs will be deferred and deducted from the proceeds of the shares sold in the stock offering. If the offering is not completed, all costs will be charged to expense. At December 31, 2010 (unaudited), approximately $83,000 of expense has been incurred.

F - 54

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

Parent Company	Subsidiary Company	State of Incorporation
Oneida Financial Corp	The Oneida Savings Bank	New York
The Oneida Savings Bank	Oneida Preferred Funding Corp.	New York
The Oneida Savings Bank	Bailey & Haskell Associates, Inc.	New York
The Oneida Savings Bank	The State Bank of Chittenango	New York
The Oneida Savings Bank	Workplace Health Solutions Inc.	New York
The Oneida Savings Bank	Benefit Consulting Group Inc.	New York

EX-23

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Nos. 333-135230, 333-36764, 333-70745) on Form S-8 of Oneida Financial Corp. of our report dated March 12, 2010, incorporated by reference in this Annual Report on Form 10-K of Oneida Financial Corp. for the year ended December 31, 2009.

/s/ Crowe Horwath LLP

Crowe Horwath LLP

Livingston, New Jersey
March 12, 2010

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

     I, Michael R. Kallet, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Oneida Financial Corp.;
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 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 registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers 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 13-a-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 registrant, 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 financial 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; and
c)	evaluated the effectiveness of the registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’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 registrant’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 registrant’s internal control over financial reporting.

March 12, 2010	/s/ Michael Kallet
Date	Michael R. Kallet
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

     I, Eric E. Stickels, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Oneida Financial Corp.;
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 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 registrant as of, and for, the periods presented in this report;
5.	The registrant’s other certifying officers 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 13-a-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 registrant, 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 financial 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; and
c)	evaluated the effectiveness of the registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’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 registrant’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 registrant’s internal control over financial reporting.

March 12, 2010	/s/ Eric E. Stickels
Date	Eric E. Stickels
	Executive Vice President and Chief Financial Officer (Principal financial and accounting Officer)

EX-32

Exhibit 32

Certification pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

Michael R. Kallet, President and Chief Executive Officer and Eric E. Stickels, Executive Vice President and Chief Financial Officer of Oneida Financial Corp. (the “Company”) each certify in his capacity as an officer of the Company that he has reviewed the annual report of the Company on Form 10-K for the year ended December 31, 2009 and that to the best of his knowledge:

(1)	the report fully complies with the requirements of Sections 13(a) of the Securities Exchange Act of 1934; and
(2)	the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.

March 12, 2010	/s/ Michael Kallet
Date	President and Chief Executive Officer
March 12, 2010	/s/ Eric Stickels
Date	Executive Vice President and Chief Financial Officer
	(Principal financial and accounting Officer)