##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Securities Exchange Act Number 000-25101
 ONEIDA FINANCIAL CORP.
  Federal
    
    16-1561678(State or other jurisdiction of
    
    (IRS Employer)incorporation or organization)
    
    Identification Number)
 
 
  þ o
 o o
  o Large accelerated filer
o Accelerated filer
o Non-accelerated filer(Do not check if a smaller reporting company)
þ Smaller reporting company o þ
 o þ




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##### 



PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    1Consolidated
Statements of Condition (unaudited) As of March 31, 2010 and December 31, 2009
    
    
    1Consolidated Statements of Operations (unaudited) For the three months ended March 31, 2010 and 2009
    
    
    2Consolidated Statements of Comprehensive Income (unaudited) For the three months ended March 31, 2010 and 2009
    
    
    3Consolidated Statements of Changes in Stockholders Equity (unaudited) For the three months ended March 31, 2010
    
    
    4Consolidated Statements of Cash Flows (unaudited) For the three months ended March 31, 2010 and 2009
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition And Results of Operations
    
    
    25Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    35Item 4T.
    
    Controls and Procedures
    
    
    35PART II. OTHER INFORMATION
    
    
    36Item 1.
    
    Legal Proceedings
    
    
    36Item 1a.
    
    Risk Factors
    
    
    36Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 3.
    
    Defaults Upon Senior Securities
    
    
    37Item 4.
    

[Removed
and Reserved]
    
    
    37Item 5.
    
    Other Information
    
    
    37Item 6.
    
    Exhibits
    
    
    37EX-31.1EX-31.2EX-32.1




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##### Table of Contents



Item I.
    
    Financial Statements
 
 
 (unaudited)At March 31,
    
    At December 31,2010
    
    2009(in thousands, except share data)ASSETSCash and due from banks
    
    $
    20,151
    
    
    $
    35,434Federal funds sold
    
    
    22,131
    
    
    
    4,103TOTAL CASH AND CASH EQUIVALENTS
    
    
    42,282
    
    
    
    39,537Trading securities
    
    
    7,757
    
    
    
    7,627Securities, available for sale
    
    
    128,107
    
    
    
    114,532Securities, held to maturity (fair value $43,387
and $47,966 respectively)
    
    
    42,697
    
    
    
    47,692Mortgage loans held for sale
    
    
    823
    
    
    
    687Loans receivable
    
    
    295,501
    
    
    
    298,053Allowance for loan losses
    
    
    (3,300
    )
    
    
    (2,901
    )LOANS RECEIVABLE, NET
    
    
    292,201
    
    
    
    295,152Fixed assets held for sale
    
    
    1,018
    
    
    
    Federal Home Loan Bank stock
    
    
    2,302
    
    
    
    2,665Bank premises and equipment, net
    
    
    20,147
    
    
    
    21,275Accrued interest receivable
    
    
    2,338
    
    
    
    2,469Bank owned life insurance
    
    
    15,879
    
    
    
    15,712Other assets
    
    
    15,892
    
    
    
    18,345Goodwill
    
    
    23,300
    
    
    
    23,183Other intangible assets
    
    
    1,522
    
    
    
    1,630TOTAL ASSETS
    
    $
    596,265
    
    
    $
    590,506LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Interest bearing deposits
    
    $
    444,627
    
    
    $
    426,368Non-interest bearing deposits
    
    
    60,889
    
    
    
    62,997Borrowings
    
    
    23,500
    
    
    
    31,000Other liabilities
    
    
    7,550
    
    
    
    11,025TOTAL LIABILITIES
    
    
    536,566
    
    
    
    531,390Oneida Financial Corp. 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
    
    
    
    83Additional paid-in capital
    
    
    19,543
    
    
    
    19,482Retained earnings
    
    
    43,807
    
    
    
    44,024Accumulated other comprehensive (loss)
    
    
    (3,257
    )
    
    
    (3,961
    )Treasury stock (at cost, 469,257
and 490,620 shares)
    
    
    (3,037
    )
    
    
    (3,071
    )Total Oneida Financial Corp stockholders equity
    
    
    57,139
    
    
    
    56,557Noncontrolling interest
    
    
    2,560
    
    
    
    2,559TOTAL STOCKHOLDERS EQUITY
    
    
    59,699
    
    
    
    59,116TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    596,265
    
    
    $
    590,506
 The accompanying notes are an integral part of the consolidated financial statements.




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##### Table of Contents



Three Months EndedMarch 31,
    
    March 31,2010
    
    2009(in thousands, except per share data)INTEREST INCOME:Interest and fees on loans
    
    $
    4,318
    
    
    $
    4,481Interest on investment and mortgage-backed securities
    
    
    1,438
    
    
    
    1,632Dividends on equity securities
    
    
    74
    
    
    
    105Interest on federal funds sold and
interest-earning deposits
    
    
    7
    
    
    
    14Total interest and dividend income
    
    
    5,837
    
    
    
    6,232INTEREST EXPENSE:Core deposits
    
    
    530
    
    
    
    521Time deposits
    
    
    697
    
    
    
    1,096Borrowings
    
    
    329
    
    
    
    556Total interest expense
    
    
    1,556
    
    
    
    2,173NET INTEREST INCOME
    
    
    4,281
    
    
    
    4,059Less: Provision for loan losses
    
    
    400
    
    
    
    Net interest income after provision for loan losses
    
    
    3,881
    
    
    
    4,059OTHER INCOME:Total other-than-temporary impairment losses
    
    
    (642
    )
    
    
    Portion of loss recognized in OCI (before taxes)
    
    
    (348
    )
    
    
    Net impairment losses
    
    
    (990
    )
    
    
    Net gains on sale of securities, net
    
    
    309
    
    
    
    238Changes in fair value of trading securities
    
    
    139
    
    
    
    (429
    )Commissions and fees on sales of
non-banking products
    
    
    4,662
    
    
    
    4,149Other operating income
    
    
    1,166
    
    
    
    1,407Total other income
    
    
    5,286
    
    
    
    5,365OTHER EXPENSES:Compensation and employee benefits
    
    
    5,237
    
    
    
    4,987Occupancy expenses, net
    
    
    1,274
    
    
    
    1,229Other operating expense
    
    
    1,833
    
    
    
    1,682Total other expenses
    
    
    8,344
    
    
    
    7,898INCOME BEFORE INCOME TAXES
    
    
    823
    
    
    
    1,526Provision for income taxes
    
    
    196
    
    
    
    412NET INCOME
    
    $
    627
    
    
    $
    1,114EARNINGS PER SHARE  BASIC
    
    $
    0.08
    
    
    $
    0.14EARNINGS PER SHARE  DILUTED
    
    $
    0.08
    
    
    $
    0.14
 The accompanying notes are an integral part of the consolidated financial statements.




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##### Table of Contents



Three Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009(In thousands)Net income
    
    $
    627
    
    
    $
    1,114Other comprehensive income (loss), net of tax:Net change in unrealized gains (losses):Other-than-temporary impaired securities
Available for sale:Unrealized losses on securities
arising during period
    
    
    (642
    )
    
    
    Less: reclassification adjustment for
losses included in net income
    
    
    990
    
    
    
    Net unrealized gain
    
    
    348
    
    
    
    Income tax effect
    
    
    (139
    )
    
    
    Net of tax amount
    
    
    209
    
    
    
    Securities available for sale:Unrealized gains (losses) on securities
arising during period
    
    
    1,102
    
    
    
    (3,466
    )Less: reclassification adjustment for
gains included in net income
    
    
    (309
    )
    
    
    (238
    )Net unrealized gains (losses)
    
    
    793
    
    
    
    (3,704
    )Income tax effect
    
    
    (317
    )
    
    
    1,482Unrealized holding gains (losses) on securities
net of tax
    
    
    476
    
    
    
    (2,222
    )Change in unrealized loss on pension benefits
    
    
    32
    
    
    
    37Income tax effect
    
    
    (13
    )
    
    
    (15
    )19
    
    
    
    22Other comprehensive gain (loss), net of tax
    
    
    704
    
    
    
    (2,200
    )Comprehensive income (loss) attributable to
Oneida Financial Corp.
    
    $
    1,331
    
    
    $
    (1,086
    )
 The accompanying notes are an integral part of the consolidated financial statements.




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##### Table of Contents



AccumulatedAdditional
    
    
    
    
    
    OtherCommon Stock
    
    Paid-In
    
    Retained
    
    Comprehensive
    
    Treasury
    
    NoncontrollingShares
    
    Amount
    
    Capital
    
    Earnings
    
    Loss
    
    Stock
    
    Interest
    
    Total(in thousands, except number of shares)Balance as of December 31, 2009
    
    
    8,322,452
    
    
    $
    83
    
    
    $
    19,482
    
    
    $
    44,024
    
    
    $
    (3,961
    )
    
    $
    (3,071
    )
    
    $
    2,559
    
    
    $
    59,116Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    627
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    627Other comprehensive loss,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    704
    
    
    
    
    
    
    
    
    
    
    
    704Shares earned under stock plans
    
    
    
    
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62Common stock dividends: $0.24 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (844
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (844
    )Treasury stock reissued
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    169Treasury stock purchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136
    )
    
    
    
    
    
    
    (136
    )Stock issued-noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Balance as of March 31, 2010
    
    
    8,322,452
    
    
    $
    83
    
    
    $
    19,543
    
    
    $
    43,807
    
    
    $
    (3,257
    )
    
    $
    (3,037
    )
    
    $
    2,560
    
    
    $
    59,699
 The accompanying notes are an integral part of the consolidated financial statements.




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##### Table of Contents



Three Months EndedMarch 31,
    
    March 31,2010
    
    2009(in thousands)Operating Activities:Net income
    
    $
    627
    
    
    $
    1,114Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    510
    
    
    
    525Amortization of premiums/discounts on securities, net
    
    
    83
    
    
    
    40Net change in fair value of trading securities
    
    
    (139
    )
    
    
    429Provision for loan losses
    
    
    400
    
    
    
    Stock compensation earned
    
    
    62
    
    
    
    38Loss (gain) on available for sale securities, net
    
    
    681
    
    
    
    (238
    )Gain on sale of loans, net
    
    
    (61
    )
    
    
    (128
    )Income tax payable
    
    
    194
    
    
    
    409Accrued interest receivable
    
    
    131
    
    
    
    459Other assets
    
    
    2,029
    
    
    
    117Other liabilities
    
    
    (3,443
    )
    
    
    (7
    )Earnings on bank owned life insurance
    
    
    (167
    )
    
    
    (144
    )Origination of loans held for sale
    
    
    (4,518
    )
    
    
    (17,900
    )Proceeds from sales of loans
    
    
    4,443
    
    
    
    18,073Net cash provided by operating activities
    
    
    832
    
    
    
    2,787Investing Activities:Purchase of securities available for sale
    
    
    (31,382
    )
    
    
    (34,685
    )Proceeds from sale of securities available for sale
    
    
    8,340
    
    
    
    10,888Maturities and calls of securities available for sale
    
    
    4,242
    
    
    
    13,409Principal collected on securities available for sale
    
    
    5,658
    
    
    
    4,864Maturities and call of securities held to maturity
    
    
    4,016
    
    
    
    Principal collected on securities held to maturity
    
    
    933
    
    
    
    Purchase of FHLB stock
    
    
    
    
    
    
    (459
    )Redemption of FHLB stock
    
    
    363
    
    
    
    931Net decrease in loans
    
    
    2,310
    
    
    
    6,588Purchase of bank premises and equipment
    
    
    (292
    )
    
    
    (348
    )Purchase of employee benefits company
    
    
    (117
    )
    
    
    (136
    )Net cash (used in) provided by investing activities
    
    
    (5,929
    )
    
    
    1,052Financing Activities:Net increase in demand deposit, savings,
money market, super now and escrow
    
    
    15,506
    
    
    
    17,096Net increase in time deposits
    
    
    645
    
    
    
    2,745Proceeds from borrowings
    
    
    110
    
    
    
    Repayment of borrowings
    
    
    (7,610
    )
    
    
    (8,825
    )Cash dividends
    
    
    (844
    )
    
    
    (831
    )Stock repurchased  noncontrolling interest
    
    
    1
    
    
    
    Exercise of stock options (using treasury stock)
    
    
    170
    
    
    
    9Purchase of treasury stock
    
    
    (136
    )
    
    
    Net cash provided by financing activities
    
    
    7,842
    
    
    
    10,194Increase in cash and cash equivalents
    
    
    2,745
    
    
    
    14,033Cash and cash equivalents at beginning of period
    
    
    39,537
    
    
    
    13,294Cash and cash equivalents at end of period
    
    $
    42,282
    
    
    $
    27,327




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##### Table of Contents



Three Months EndedMarch 31,
    
    March 31,2010
    
    2009(in thousands)Supplemental disclosures of cash flow information:Cash paid for interest
    
    
    1,569
    
    
    
    2,184Cash paid for income taxes
    
    
    
    
    
    
    Supplemental noncash disclosures:Transfer of loans to other real estate
    
    
    241
    
    
    
    Adoption of fair value option:Securities transferred from available for sale to trading
    
    
    
    
    
    
    Deferred tax asset related to fair value adjustments
    
    
    54
    
    
    
    166
 The accompanying notes are an integral part of the consolidated financial statements.




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##### Table of Contents



2010
    
    
    2009Net income per consolidated statements of income
    
    $
    627,085
    
    
    $
    1,114,416Net earnings allocated to participating securities
    
    
    (3,482
    )
    
    
    (7,960
    )Net earnings allocated to common stock
    
    $
    623,603
    
    
    $
    1,106,456BasicDistributed earnings allocated to common stock
    
    $
    839,921
    
    
    $
    824,547Undistributed earnings allocated to common stock
    
    
    (216,318
    )
    
    
    281,909Net earnings allocated to common stock
    
    $
    623,603
    
    
    $
    1,106,456
 Page 7 of 38




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##### Table of Contents



2010
    
    
    2009Weighted average common shares outstanding
including shares considered participating securities
    
    
    7,828,228
    
    
    
    7,774,338Less: Average participating securities
    
    
    (16,400
    )
    
    
    (28,800
    )Weighted average shares
    
    
    7,811,828
    
    
    
    7,745,538Basic earnings per share
    
    $
    0.08
    
    
    $
    0.14DilutedNet earnings allocated to common stock
    
    $
    623,603
    
    
    $
    1,106,456Weighted average common shares outstanding
for basic earnings per common share
    
    
    7,811,828
    
    
    
    7,745,538Add: Dilutive effects of assumed
exercise of stock options
    
    
    11,536
    
    
    
    40,650Weighted average shares and dilutive
potential common shares
    
    
    7,823,364
    
    
    
    7,786,188Diluted earnings per common share
    
    $
    0.08
    
    
    $
    0.14
     2010
    
    2009Risk-free interest rate
    
    
    0.50
    %
    
    
    N/AExpected stock price volatility
    
    
    66.44
    %
    
    
    N/AExpected dividend rate
    
    
    3.00
    %
    
    
    N/AExpected life
    
    
    0.17
    years
    
    
    N/A
  2010
    
    2009Intrinsic value of options exercised
    
    $
    163,977
    
    
    
    N/ACash received from option exercises
    
    $
    34,835
    
    
    
    N/ATax benefit realized from option exercises
    
    
    
    
    
    
    N/AWeighted average fair value of options granted
    
    $
    0.966
    
    
    
    N/A
 Page 8 of 38




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Range of
    
    Weighted AverageOption Exercise
    
    Exercise PriceOptions
    
    Price
    
    Shares
    
    IntrinsicOutstanding
    
    Per Share
    
    Outstanding
    
    ValueOutstanding at December 31, 2009
    
    
    122,175
    
    
    
    $4.722 - $17,2477
    
    
    $
    10.401
    
    
    $
    152,346Granted
    
    
    13,568
    
    
    
    $9.230 - $9.500Exercised
    
    
    (36,009
    )
    
    
    $4.722Forfeited
    
    
    Outstanding at March 31, 2010
    
    
    99,734
    
    
    
    $9.715 - $17,247
    
    
    $
    12.302
    
    
    $
    0
  Shares outstanding and ExercisableAverage
    
    
    AverageExercise
    
    
    Remaining LifeRange of Exercise Price
    
    Shares
    
    
    Price
    
    
    (Years)$9.715 - $10.900
    
    
    24,686
    
    
    $
    9.715
    
    
    
    0.07$10.900 - $12.717
    
    
    40,957
    
    
    $
    11.532
    
    
    
    0.07$12.717 - $14.534
    
    
    18,689
    
    
    $
    14.000
    
    
    
    0.07$14.534 - $16.350
    
    
    5,100
    
    
    $
    14.800
    
    
    
    0.07$16.350 - $17.247
    
    
    10,302
    
    
    $
    17.247
    
    
    
    0.07Total
    
    
    99,734
    
    
    $
    12.302
    
    
    
    0.07
       Three Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009Service cost
    
    $
    
    
    
    $
    Interest cost
    
    
    52,000
    
    
    
    41,000Expected return on plan assets
    
    
    (60,000
    )
    
    
    (49,000
    )Net amortization and deferral
    
    
    32,000
    
    
    
    37,000
 Page 9 of 38




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Three Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009Net periodic pension cost
    
    $
    24,000
    
    
    $
    29,000Net gain
    
    
    (19,000
    )
    
    
    (22,200
    )Prior service cost
    
    
    
    
    
    
    Total recognized in other comprehensive income
    
    
    (19,000
    )
    
    
    (22,200
    )Total
recognized in net periodic benefit cost and Other comprehensive income
    
    $
    5,000
    
    
    $
    6,800
 2010
    
    2009Weighted-average assumptions as of December 31:Discount rate
    
    
    3.970
    %
    
    
    5.390
    %Expected return on plan assets
    
    
    7.500
    %
    
    
    7.500
    %
    Three Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009Service cost
    
    $
    5,500
    
    
    $
    6,500Interest cost
    
    
    33,000
    
    
    
    34,000Expected return on plan assets
    
    
    (39,000
    )
    
    
    (34,500
    )Net amortization and deferral
    
    
    10,700
    
    
    
    14,000Net periodic pension cost (benefit)
    
    $
    10,200
    
    
    $
    20,000Net loss
    
    
    
    
    
    
    Prior service cost
    
    
    
    
    
    
    Total recognized in other comprehensive income
    
    
    
    
    
    
    Total recognized in net periodic benefit cost and
Other comprehensive income
    
    $
    10,200
    
    
    $
    20,000
 2010
    
    2009Weighted-average assumptions as of December 31:Discount rate
    
    
    6.03
    %
    
    
    6.25
    %Expected return on plan assets
    
    
    7.50
    %
    
    
    7.50
    %
    March 31, 2010Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-sale portfolio:Investment SecuritiesDebt securities:U. S. Agencies
    
    $
    36,359
    
    
    $
    173
    
    
    $
    (83
    )
    
    $
    36,449Corporate
    
    
    16,745
    
    
    
    337
    
    
    
    (534
    )
    
    
    16,548Trust preferred securities
    
    
    8,246
    
    
    
    
    
    
    
    (3,215
    )
    
    
    5,031
 Page 10 of 38




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##### Table of Contents



March 31, 2010Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueState and municipal
    
    
    18,392
    
    
    
    592
    
    
    
    (57
    )
    
    
    18,927Small business administration
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12$
    79,754
    
    
    $
    1,102
    
    
    $
    (3,889
    )
    
    $
    76,967Mortgage-Backed SecuritiesFannie Mae
    
    $
    14,976
    
    
    $
    407
    
    
    $
    (13
    )
    
    $
    15,370Freddie Mac
    
    
    11,530
    
    
    
    486
    
    
    
    
    
    
    
    12,016Government National Mortgage Assoc.
    
    
    17,655
    
    
    
    286
    
    
    
    (18
    )
    
    
    17,923Collateralized Mortgage Obligations
    
    
    6,363
    
    
    
    40
    
    
    
    (572
    )
    
    
    5,831$
    50,524
    
    
    $
    1,219
    
    
    $
    (603
    )
    
    $
    51,140Total available-for-sale
    
    $
    130,278
    
    
    $
    2,321
    
    
    $
    (4,492
    )
    
    $
    128,107Held-to-maturity portfolioInvestment SecuritiesDebt securities:U. S. Agencies
    
    $
    18,977
    
    
    $
    151
    
    
    $
    (31
    )
    
    $
    19,097State and municipal
    
    
    8,597
    
    
    
    405
    
    
    
    (6
    )
    
    
    8,996Small business administration
    
    
    862
    
    
    
    
    
    
    
    
    
    
    
    862$
    28,436
    
    
    $
    556
    
    
    $
    (37
    )
    
    $
    28,955Mortgage-Backed SecuritiesFannie Mae
    
    $
    7,521
    
    
    $
    125
    
    
    $
    
    
    
    $
    7,646Freddie Mac
    
    
    1,706
    
    
    
    24
    
    
    
    
    
    
    
    1,730Government National Mortgage Assoc.
    
    
    5,034
    
    
    
    27
    
    
    
    (5
    )
    
    
    5,056$
    14,261
    
    
    $
    176
    
    
    $
    (5
    )
    
    $
    14,432Total held-to-maturity
    
    $
    42,697
    
    
    $
    732
    
    
    $
    (42
    )
    
    $
    43,387
 December 31, 2009Amortized
    
    
    Gross Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-sale portfolio:Investment SecuritiesDebt securities:U. S. Agencies
    
    $
    23,952
    
    
    $
    163
    
    
    $
    (231
    )
    
    $
    23,884Corporate
    
    
    16,739
    
    
    
    246
    
    
    
    (780
    )
    
    
    16,205Trust preferred securities
    
    
    9,436
    
    
    
    
    
    
    
    (3,515
    )
    
    
    5,921State and municipal
    
    
    17,643
    
    
    
    487
    
    
    
    (142
    )
    
    
    17,988Small business administration
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12$
    67,782
    
    
    $
    896
    
    
    $
    (4,668
    )
    
    $
    64,010Mortgage-Backed SecuritiesFannie Mae
    
    $
    16,418
    
    
    $
    548
    
    
    $
    (42
    )
    
    $
    16,924Freddie Mac
    
    
    14,902
    
    
    
    575
    
    
    
    (6
    )
    
    
    15,471Government National Mortgage Assoc.
    
    
    11,983
    
    
    
    330
    
    
    
    (15
    )
    
    
    12,298Collateralized Mortgage Obligations
    
    
    6,758
    
    
    
    50
    
    
    
    (979
    )
    
    
    5,829$
    50,061
    
    
    $
    1,503
    
    
    $
    (1,042
    )
    
    $
    50,522Total available-for-sale
    
    $
    117,843
    
    
    $
    2,399
    
    
    $
    (5,710
    )
    
    $
    114,532Held-to-maturity portfolioInvestment SecuritiesDebt securities:U. S. Agencies
    
    $
    22,975
    
    
    $
    113
    
    
    $
    (164
    )
    
    $
    22,924State and municipal
    
    
    8,615
    
    
    
    335
    
    
    
    (25
    )
    
    
    8,925Small business administration
    
    
    887
    
    
    
    
    
    
    
    (4
    )
    
    
    883$
    32,477
    
    
    $
    448
    
    
    $
    (193
    )
    
    $
    32,732Mortgage-Backed SecuritiesFannie Mae
    
    $
    9,965
    
    
    $
    42
    
    
    $
    
    
    
    $
    10,007Government National Mortgage Assoc.
    
    
    5,250
    
    
    
    4
    
    
    
    (27
    )
    
    
    5,227$
    15,215
    
    
    $
    46
    
    
    $
    (27
    )
    
    $
    15,234Total held-to-maturity
    
    $
    47,692
    
    
    $
    494
    
    
    $
    (220
    )
    
    $
    47,966
 Page 11 of 38




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Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In thousands)Within one year
    
    $
    5,881
    
    
    $
    5,842
    
    
    $
    53
    
    
    $
    54After one year through five years
    
    
    18,434
    
    
    
    18,596
    
    
    
    7,160
    
    
    
    7,313After five years through ten
years
    
    
    38,576
    
    
    
    39,108
    
    
    
    15,577
    
    
    
    15,663After ten years
    
    
    16,863
    
    
    
    13,421
    
    
    
    5,646
    
    
    
    5,925Total
    
    $
    79,754
    
    
    $
    76,967
    
    
    $
    28,436
    
    
    $
    28,955
  March 31, 2010
    
    March 31, 2009(In thousands)Proceeds
    
    $
    8,340
    
    
    $
    10,888Gross Gains
    
    $
    309
    
    
    $
    238Gross Losses
    
    $
    
    
    
    $
    
  March 31, 2010
    
    Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss(In thousands)U.S. Agency
    
    $
    16,916
    
    
    $
    83
    
    
    $
    
    
    
    $
    
    
    
    $
    16,916
    
    
    $
    83Corporate
    
    
    
    
    
    
    
    
    
    
    6,455
    
    
    
    534
    
    
    
    6,455
    
    
    
    534Trust preferred
securities
    
    
    
    
    
    
    
    
    
    
    5,031
    
    
    
    3,215
    
    
    
    5,031
    
    
    
    3,215State and municipals
    
    
    502
    
    
    
    2
    
    
    
    1,198
    
    
    
    55
    
    
    
    1,700
    
    
    
    57Small business
administration
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12
    
    
    
    Fannie Mae
    
    
    2,928
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    2,928
    
    
    
    13Freddie Mac
    
    
    421
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    421
    
    
    
    Ginnie Mae
    
    
    3,076
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    3,076
    
    
    
    18Collateralized
mortgage
obligations
    
    
    1,296
    
    
    
    6
    
    
    
    3,838
    
    
    
    566
    
    
    
    5,134
    
    
    
    572Total securities
available-for-sale
in an unrealized loss
position
    
    $
    25,139
    
    
    $
    122
    
    
    $
    16,534
    
    
    $
    4,370
    
    
    $
    41,673
    
    
    $
    4,492U.S. Agency
    
    $
    2,961
    
    
    $
    31
    
    
    $
    
    
    
    $
    
    
    
    $
    2,961
    
    
    $
    31Small business
administration
    
    
    862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    862
    
    
    
    State and municipals
    
    
    1,162
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    1,162
    
    
    
    6Ginnie Mae
    
    
    981
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    981
    
    
    
    5Total securities
held-to-maturity in
an unrealized loss
position
    
    $
    5,966
    
    
    $
    42
    
    
    $
    
    
    
    $
    
    
    
    $
    5,966
    
    
    $
    42
 Page 12 of 38




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##### Table of Contents



December 31, 2009
    
    Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss(In thousands)U.S. Agency
    
    $
    15,768
    
    
    $
    231
    
    
    $
    
    
    
    $
    
    
    
    $
    15,768
    
    
    $
    231Corporate
    
    
    
    
    
    
    
    
    
    
    7,168
    
    
    
    780
    
    
    
    7,168
    
    
    
    780Trust preferred
securities
    
    
    
    
    
    
    
    
    
    
    5,921
    
    
    
    3,515
    
    
    
    5,921
    
    
    
    3,515State and municipals
    
    
    1,915
    
    
    
    17
    
    
    
    2,922
    
    
    
    125
    
    
    
    4,837
    
    
    
    142Small business
administration
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    Fannie Mae
    
    
    2,621
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    2,621
    
    
    
    42Freddie Mac
    
    
    464
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    464
    
    
    
    6Ginnie Mae
    
    
    1,418
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    1,418
    
    
    
    15Collateralized
mortgage
obligations
    
    
    1,401
    
    
    
    38
    
    
    
    3,544
    
    
    
    941
    
    
    
    4,945
    
    
    
    979Total securities
available-for-sale
in an unrealized loss
position
    
    $
    23,599
    
    
    $
    349
    
    
    $
    19,555
    
    
    $
    5,361
    
    
    $
    43,154
    
    
    $
    5,710U.S. Agency
    
    $
    11,812
    
    
    $
    164
    
    
    $
    
    
    
    $
    
    
    
    $
    11,812
    
    
    $
    164Small business
administration
    
    
    2,157
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    2,157
    
    
    
    25State and municipals
    
    
    883
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    883
    
    
    
    4Ginnie Mae
    
    
    3,016
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    3,016
    
    
    
    27Total securities
held-to-maturity in
an unrealized loss
position
    
    $
    17,868
    
    
    $
    220
    
    
    $
    
    
    
    $
    
    
    
    $
    17,868
    
    
    $
    220
      Page 13 of 38




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Page 14 of 38




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##### Table of Contents



ExpectedNumber of
    
    
    Actual
    
    
    Additional
    
    
    ExcessBanks and
    
    
    Deferrals and
    
    
    Deferrals and
    
    
    SubordinationInsurance
    
    
    Defaults
    
    
    Defaults
    
    
    DefaultsCompanies
    
    
    as % of
    
    
    as % of
    
    
    as % ofBook
    
    
    Fair
    
    
    Unrealized
    
    
    Realized
    
    
    Lowest
    
    
    Currently
    
    
    Original
    
    
    Performing
    
    
    PerformingDescription
    
    Class
    
    

Value (2)
    
    
    Value
    
    
    Loss
    
    

Loss
(2)(3)
    
    
    Rating (1)
    
    
    Performing
    
    
    Collateral
    
    
    Collateral
    
    
    Collateral(Dollars In thousands)Preferred Term Ltd.
    
    Mezz
    
    $
    1,071
    
    
    $
    874
    
    
    $
    (197
    )
    
    $
    (86
    )
    
    Caa1
    
    
    26
    
    
    
    24.86
    %
    
    
    13.98
    %
    
    
    -11.19
    %Preferred Term Ltd.
    
    Mezz
    
    
    2,142
    
    
    
    1,677
    
    
    
    (465
    )
    
    
    (180
    )
    
    Caa1
    
    
    26
    
    
    
    24.86
    %
    
    
    13.98
    %
    
    
    -11.19
    %Preferred Term Ltd.
    
    Mezz
    
    
    1,427
    
    
    
    1,118
    
    
    
    (309
    )
    
    
    (120
    )
    
    Caa1
    
    
    26
    
    
    
    24.86
    %
    
    
    13.98
    %
    
    
    -11.19
    %Preferred Term X
    
    
    B-3
    
    
    
    813
    
    
    
    307
    
    
    
    (506
    )
    
    
    (1,163
    )
    
    Ca
    
    
    37
    
    
    
    43.50
    %
    
    
    15.02
    %
    
    
    -63.05
    %Preferred Term XV
    
    
    B-2
    
    
    
    860
    
    
    
    408
    
    
    
    (452
    )
    
    
    (140
    )
    
    Ca
    
    
    56
    
    
    
    26.08
    %
    
    
    15.37
    %
    
    
    -25.00
    %Preferred Term XV
    
    
    B-3
    
    
    
    870
    
    
    
    413
    
    
    
    (457
    )
    
    
    (130
    )
    
    Ca
    
    
    56
    
    
    
    26.08
    %
    
    
    15.37
    %
    
    
    -25.00
    %Preferred Term XXVI
    
    
    C-1
    
    
    
    731
    
    
    
    173
    
    
    
    (558
    )
    
    
    (254
    )
    
    C
    
    
    43
    
    
    
    28.31
    %
    
    
    16.42
    %
    
    
    -23.07
    %Preferred Term XXVI
    
    
    D-1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (497
    )
    
    N/R
    
    
    43
    
    
    
    28.31
    %
    
    
    16.42
    %
    
    
    -32.49
    %MMCF IX
    
    
    B-2
    
    
    
    332
    
    
    
    61
    
    
    
    (271
    )
    
    
    (650
    )
    
    Caa3
    
    
    21
    
    
    
    31.98
    %
    
    
    16.02
    %
    
    
    -48.00
    %$
    8,246
    
    
    $
    5,031
    
    
    
    ($3,215
    )
    
    $
    (3,220
    )
 
 (1)
    
    The table represents ratings information as of March 31, 2010. The securities had
investment grade ratings by Moodys (Baa2 or better) at time of purchase, but have since been
downgraded by the rating agencies.(2)
    
    Book value has been reduced by realized losses to reflect a
new amortized cost basis.(3)
    
    Represents life to date cumulative loss recognized in the
income statement.    Significant inputs at March 31, 2010Annual prepayment
    
    0% annually, 100% at maturityProjected severity of loss on specific defaults/deferrals
    
    85%  100%
 Page 15 of 38




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Projected additional defaults:QTR 2  2010
    
    3% (not annualized)QTR 3  2010
    
    2%QTR 4  2010
    
    1%QTR 1  2011
    
    1%Thereafter
    
    0.375% applied annuallyProjected severity of loss on additional defaults
    
    0%  100Present value discount rates for OTTI
    
    5.58%  9.91%Present value discount rates for fair value
    
    12%
      Page 16 of 38




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##### Table of Contents



Beginning Balance
    
    $
    3,317Additional credit loss for which other-than-temporary impairment
was not previously recognized
    
    
    990Balance of credit losses on debt securities for which a portion of
other-than-temporary impairment was recognized in other
comprehensive income, end of period
    
    $
    4,307
      Three Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009(in thousands)Balance at beginning of period
    
    $
    2,901
    
    
    $
    2,624Charge-offs
    
    
    (81
    )
    
    
    (141
    )Recoveries
    
    
    80
    
    
    
    71Provision for loan losses
    
    
    400
    
    
    
    Balance at end of period
    
    $
    3,300
    
    
    $
    2,554
 March 31, 2010
    
    December 31, 2009(in thousands)Impaired loans were as follows:Impaired loans
    
    $
    2,151
    
    
    $
    2,158Allocated allowance for loan losses
    
    $
    1,108
    
    
    $
    570Average of impaired loans during the year
    
    $
    2,157
    
    
    $
    1,060Cash-basis interest income recognized
    
    $
    35
    
    
    $
    107
 Page 17 of 38




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##### Table of Contents



Three Months Ended March 31, 2010Banking
    
    
    Insurance
    
    
    Benefit Consulting
    
    
    Risk ManagementActivities
    
    
    Activities
    
    
    Activities
    
    
    Activities
    
    
    Total(in thousands)Net interest income
    
    $
    4,281
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,281Provision for loan losses
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400Net interest income after provision
for loan losses
    
    
    3,881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,881Other income
    
    
    624
    
    
    
    3,021
    
    
    
    1,440
    
    
    
    201
    
    
    
    5,286Other expenses
    
    
    4,240
    
    
    
    2,244
    
    
    
    1,141
    
    
    
    209
    
    
    
    7,834Depreciation and amortization
    
    
    432
    
    
    
    46
    
    
    
    31
    
    
    
    1
    
    
    
    510(Loss) income before income taxes
    
    
    (167
    )
    
    
    731
    
    
    
    268
    
    
    
    (9
    )
    
    
    823Income tax (benefit) expense
    
    
    (229
    )
    
    
    318
    
    
    
    110
    
    
    
    (3
    )
    
    
    196Net income (loss)
    
    $
    62
    
    
    $
    413
    
    
    $
    158
    
    
    $
    (6
    )
    
    $
    627Total Assets
    
    $
    579,650
    
    
    $
    17,354
    
    
    $
    4,924
    
    
    $
    122
    
    
    $
    602,050
 Three Months Ended March 31, 2009Banking
    
    
    Insurance
    
    
    Benefit Consulting
    
    
    Risk ManagementActivities
    
    
    Activities
    
    
    Activities
    
    
    Activities
    
    
    Total(in thousands)Net interest income
    
    $
    4,059
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,059Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net interest income after provision
for loan losses
    
    
    4,059
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,059Other income
    
    
    1,216
    
    
    
    3,029
    
    
    
    1,060
    
    
    
    60
    
    
    
    5,365Other expenses
    
    
    3,952
    
    
    
    2,174
    
    
    
    1,106
    
    
    
    141
    
    
    
    7,373Depreciation and amortization
    
    
    429
    
    
    
    58
    
    
    
    38
    
    
    
    
    
    
    
    525Income (loss) before income taxes
    
    
    894
    
    
    
    797
    
    
    
    (84
    )
    
    
    (81
    )
    
    
    1,526Income tax expense (benefit)
    
    
    149
    
    
    
    333
    
    
    
    (40
    )
    
    
    (30
    )
    
    
    412Net income (loss)
    
    $
    745
    
    
    $
    464
    
    
    $
    (44
    )
    
    $
    (51
    )
    
    $
    1,114Total Assets
    
    $
    532,908
    
    
    $
    16,186
    
    
    $
    4,418
    
    
    $
    51
    
    
    $
    553,563
  2010
    
    
    2009(In thousands)AssetsTotal assets for reportable segments
    
    $
    602,050
    
    
    $
    553,563Elimination of intercompany cash balances
    
    
    (5,785
    )
    
    
    (4,317
    )Consolidated Total
    
    $
    596,265
    
    
    $
    549,246
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Changes in Fair Values for the Period ended March 31, 2010, for itemsMeasured at Fair Value Pursuant to Election of the Fair Value OptionTotal ChangesIn Fair ValuesOther
    
    
    
    
    
    
    
    
    
    Included inGains and
    
    Interest
    
    Interest
    
    Current Period(Losses)
    
    Income
    
    Expense
    
    Earnings(in thousands)Assets:Trading securities
    
    $
    130
    
    
    
    9
    
    
    
    
    
    
    $
    139
 Changes in Fair Values for the Period ended March 31, 2009, for itemsMeasured at Fair Value Pursuant to Election of the Fair Value OptionTotal ChangesIn Fair ValuesOther
    
    
    
    
    
    
    
    
    
    Included inGains and
    
    Interest
    
    Interest
    
    Current Period(Losses)
    
    Income
    
    Expense
    
    Earnings(in thousands)Assets:Trading securities
    
    
    ($438
    )
    
    
    9
    
    
    
    
    
    
    
    ($429
    )
       Securities
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Impaired Loans:
  Fair Value Measurements at March 31, 2010 UsingSignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsMarch 31, 2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)Assets:Trading securitiesCommon and preferred equities
    
    $
    7,757
    
    
    
    
    
    
    $
    5,732
    
    
    $
    2,025Available-for- sale securitiesU.S. Agency
    
    
    36,449
    
    
    
    
    
    
    
    36,449
    
    
    
    Corporate
    
    
    16,548
    
    
    
    
    
    
    
    14,298
    
    
    
    2,250Trust preferred securities
    
    
    5,031
    
    
    
    
    
    
    
    
    
    
    
    5,031State and municipal
    
    
    18,927
    
    
    
    
    
    
    
    18,927
    
    
    
    Small Business Administration
    
    
    12
    
    
    
    
    
    
    
    12
    
    
    
    Residential mortgage-backed securities
    
    
    45,309
    
    
    
    
    
    
    
    45,309
    
    
    
    Collateralized mortgage obligations
    
    
    5,831
    
    
    
    
    
    
    
    5,831
    
    
    
    Total
    
    $
    135,864
    
    
    $
    
    
    
    $
    126,558
    
    
    $
    9,306
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Fair Value Measurements at December 31, 2009 UsingSignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsDecember 31, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)Assets:Trading securitiesCommon and preferred equities
    
    $
    7,627
    
    
    
    
    
    
    $
    5,568
    
    
    $
    2,059Available-for- sale securitiesU.S. Agency
    
    
    23,884
    
    
    
    
    
    
    
    23,884
    
    
    
    Corporate
    
    
    16,205
    
    
    
    
    
    
    
    13,955
    
    
    
    2,250Trust preferred securities
    
    
    5,921
    
    
    
    
    
    
    
    
    
    
    
    5,921State and municipal
    
    
    17,988
    
    
    
    
    
    
    
    17,988
    
    
    
    Small Business Administration
    
    
    12
    
    
    
    
    
    
    
    12
    
    
    
    Residential mortgage-backed securities
    
    
    44,693
    
    
    
    
    
    
    
    44,693
    
    
    
    Collateralized mortgage obligations
    
    
    5,829
    
    
    
    
    
    
    
    5,829
    
    
    
    Total
    
    $
    122,159
    
    
    $
    
    
    
    $
    111,929
    
    
    $
    10,230
  Fair Value Measurements Using SignificantUnobservable Inputs(Level 3)Trading
    
    
    
    
    
    TrustSecurities
    
    Corporate
    
    Preferreds
    
    Total(in thousands)Beginning balance January 1, 2010
    
    $
    2,059
    
    
    $
    2,250
    
    
    $
    5,921
    
    
    $
    10,230Total gains or losses (realized/unrealized)
Included in earningsInterest income on securities
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Other changes in fair value
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    (24
    )Net impairment losses recognized in earnings
    
    
    
    
    
    
    
    
    
    
    (937
    )
    
    
    (937
    )Included in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    47Ending balance March 31, 2010
    
    $
    2,025
    
    
    $
    2,250
    
    
    $
    5,031
    
    
    $
    9,306
 CollateralizedTrading
    
    
    
    
    
    Trust
    
    MortgageSecurities
    
    Corporate
    
    Preferreds
    
    Obligations
    
    Total(in thousands)Beginning balance January 1, 2009
    
    $
    2,020
    
    
    $
    1,500
    
    
    $
    9,208
    
    
    $
    768
    
    
    $
    13,496Total gains or losses (realized/unrealized)
Included in earningsInterest income on securities
    
    
    (10
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (15
    )Other changes in fair value
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70Included in other comprehensive income
    
    
    
    
    
    
    631
    
    
    
    (3,624
    )
    
    
    (191
    )
    
    
    (3,184
    )Ending balance March 31, 2009
    
    $
    2,080
    
    
    $
    2,131
    
    
    $
    5,579
    
    
    $
    577
    
    
    $
    10,367
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March 31, 2010
    
    December 31, 2009Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmount
    
    Fair Value
    
    Amount
    
    Fair Value(in thousands)Financial assets:Cash and cash equivalents
    
    $
    42,282
    
    
    $
    42,282
    
    
    $
    39,537
    
    
    $
    39,537Investment securities, held to maturity
    
    
    42,697
    
    
    
    43,387
    
    
    
    47,692
    
    
    
    47,966Loans held for sale
    
    
    823
    
    
    
    839
    
    
    
    687
    
    
    
    700Loans receivable, net
    
    
    295,501
    
    
    
    298,816
    
    
    
    295,152
    
    
    
    297,331Federal Home Loan Bank stock
    
    
    2,302
    
    
    
    N/A
    
    
    
    2,665
    
    
    
    N/AAccrued interest receivable
    
    
    2,338
    
    
    
    2,338
    
    
    
    2,469
    
    
    
    2,469Financial liabilities:Deposits
    
    $
    505,516
    
    
    $
    502,904
    
    
    $
    489,364
    
    
    $
    476,171Federal Home Loan Bank advances
    
    
    23,500
    
    
    
    23,790
    
    
    
    31,000
    
    
    
    31,335Accrued interest payable
    
    
    104
    
    
    
    104
    
    
    
    117
    
    
    
    117
   Cash and Cash Equivalents
  Investment Securities
  Loans Held for Sale
  Loans and Leases
  Page 22 of 38




---



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FHLB Stock
  Accrued Interest Receivable
  Deposits
  Borrowings
         Page 23 of 38




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MANAGEMENTS DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    GENERAL
   RECENT DEVELOPMENTS
   FINANCIAL CONDITION
 ASSETS.
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LIABILITIES.
    STOCKHOLDERS EQUITY.
  Page 27 of 38




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ANALYSIS OF NET INTEREST INCOME
  AVERAGE BALANCE SHEET.
 TABLE 1.
 Three Months Ended March 31,
    
    
    Twelve Months Ended Dec. 31,2010
    
    
    
    
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    2009Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(Dollars in Thousands)AssetsInterest-earning Assets:Loans Receivable
    
    $
    298,892
    
    
    $
    4,318
    
    
    
    5.78
    %
    
    $
    301,845
    
    
    $
    4,481
    
    
    
    5.94
    %
    
    $
    298,449
    
    
    $
    17,761
    
    
    
    5.95
    %Investment and Mortgage-Backed
Securities
    
    
    167,730
    
    
    
    1,438
    
    
    
    3.43
    %
    
    
    138,261
    
    
    
    1,632
    
    
    
    4.72
    %
    
    
    154,151
    
    
    
    6,905
    
    
    
    4.48
    %Federal Funds
    
    
    31,249
    
    
    
    7
    
    
    
    0.09
    %
    
    
    10,460
    
    
    
    14
    
    
    
    0.54
    %
    
    
    13,723
    
    
    
    37
    
    
    
    0.27
    %Equity Securities
    
    
    7,625
    
    
    
    74
    
    
    
    3.88
    %
    
    
    5,933
    
    
    
    105
    
    
    
    7.08
    %
    
    
    6,290
    
    
    
    298
    
    
    
    4.74
    %Total Interest-earning Assets
    
    
    505,496
    
    
    
    5,837
    
    
    
    4.62
    %
    
    
    456,499
    
    
    
    6,232
    
    
    
    5.46
    %
    
    
    472,613
    
    
    
    25,001
    
    
    
    5.29
    %Non interest-earning Assets:Cash and due from banks
    
    
    11,905
    
    
    
    
    
    
    
    
    
    
    
    12,577
    
    
    
    
    
    
    
    
    
    
    
    13,188Other assets
    
    
    78,283
    
    
    
    
    
    
    
    
    
    
    
    76,693
    
    
    
    
    
    
    
    
    
    
    
    75,112Total assets
    
    $
    595,684
    
    
    
    
    
    
    
    
    
    
    $
    545,769
    
    
    
    
    
    
    
    
    
    
    $
    560,913Liabilities and Stockholders EquityInterest-bearing Liabilities:Money Market Deposits
    
    $
    146,238
    
    
    $
    378
    
    
    
    1.05
    %
    
    $
    98,386
    
    
    $
    368
    
    
    
    1.52
    %
    
    $
    117,472
    
    
    $
    1,516
    
    
    
    1.29
    %Savings Accounts
    
    
    86,022
    
    
    
    125
    
    
    
    0.59
    %
    
    
    76,187
    
    
    
    116
    
    
    
    0.62
    %
    
    
    80,714
    
    
    
    488
    
    
    
    0.60
    %Interest-bearing Checking
    
    
    51,599
    
    
    
    27
    
    
    
    0.21
    %
    
    
    44,348
    
    
    
    37
    
    
    
    0.34
    %
    
    
    46,359
    
    
    
    139
    
    
    
    0.30
    %Time Deposits
    
    
    154,596
    
    
    
    697
    
    
    
    1.83
    %
    
    
    155,162
    
    
    
    1,096
    
    
    
    2.86
    %
    
    
    153,870
    
    
    
    3,734
    
    
    
    2.43
    %Borrowings
    
    
    27,403
    
    
    
    329
    
    
    
    4.87
    %
    
    
    47,567
    
    
    
    556
    
    
    
    4.74
    %
    
    
    36,235
    
    
    
    1,697
    
    
    
    4.68
    %Notes Payable
    
    
    0
    
    
    
    0
    
    
    
    0.00
    %
    
    
    3
    
    
    
    0
    
    
    
    0.00
    %
    
    
    1
    
    
    
    0
    
    
    
    0.00
    %Total Interest-bearing Liabilities
    
    
    465,858
    
    
    
    1,556
    
    
    
    1.35
    %
    
    
    421,653
    
    
    
    2,173
    
    
    
    2.09
    %
    
    
    434,651
    
    
    
    7,574
    
    
    
    1.74
    %Non-interest-bearing Liabilities:Demand deposits
    
    
    59,996
    
    
    
    
    
    
    
    
    
    
    
    59,029
    
    
    
    
    
    
    
    
    
    
    
    60,024Other liabilities
    
    
    10,315
    
    
    
    
    
    
    
    
    
    
    
    9,859
    
    
    
    
    
    
    
    
    
    
    
    10,740Total liabilities
    
    $
    536,169
    
    
    
    
    
    
    
    
    
    
    $
    490,541
    
    
    
    
    
    
    
    
    
    
    $
    505,415Stockholders equity
    
    
    59,515
    
    
    
    
    
    
    
    
    
    
    
    55,228
    
    
    
    
    
    
    
    
    
    
    
    55,498Total liabilities and stockholders
equity
    
    $
    595,684
    
    
    
    
    
    
    
    
    
    
    $
    545,769
    
    
    
    
    
    
    
    
    
    
    $
    560,913Net Interest Income
    
    
    
    
    
    $
    4,281
    
    
    
    
    
    
    
    
    
    
    $
    4,059
    
    
    
    
    
    
    
    
    
    
    $
    17,427Net Interest Spread
    
    
    
    
    
    
    
    
    
    
    3.27
    %
    
    
    
    
    
    
    
    
    
    
    3.37
    %
    
    
    
    
    
    
    
    
    
    
    3.55
    %Net Earning Assets
    
    $
    39,638
    
    
    
    
    
    
    
    
    
    
    $
    34,846
    
    
    
    
    
    
    
    
    
    
    $
    37,962Net yield on average
Interest-earning assets
    
    
    
    
    
    
    3.39
    %
    
    
    
    
    
    
    
    
    
    
    3.56
    %
    
    
    
    
    
    
    
    
    
    
    3.69
    %Average interest-earning
assets to average
Interest-bearing liabilities
    
    
    
    
    
    
    108.51
    %
    
    
    
    
    
    
    
    
    
    
    108.26
    %
    
    
    
    
    
    
    
    
    
    
    108.73
    %
 Page 28 of 38




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RESULTS OF OPERATIONS
 General .
  Interest and Dividend Income.
     Interest Expense .
 Page 29 of 38




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Provision for Loan Losses.
   Non-interest Income.
  Page 30 of 38




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Non-interest Expense.
   Provision for Income Taxes .
 Liquidity and Capital Resources.
 Page 31 of 38




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To Be WellCapitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)As of March 31, 2010:Total Capital
(to Risk Weighted
Assets)
    
    $
    43,750
    
    
    
    11.04
    %
    
    $
    31,704
    
    
    
    8
    %
    
    $
    39,630
    
    
    
    10
    %Tier I Capital
(to Risk Weighted
Assets)
    
    $
    40,450
    
    
    
    10.21
    %
    
    $
    15,852
    
    
    
    4
    %
    
    $
    23,778
    
    
    
    6
    %Tier I Capital
(to Average Assets)
    
    $
    40,450
    
    
    
    7.08
    %
    
    $
    22,853
    
    
    
    4
    %
    
    $
    28,567
    
    
    
    5
    %
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To Be WellCapitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)As of December 31, 2009:Total Capital
(to Risk Weighted Assets)
    
    $
    42,634
    
    
    
    10.73
    %
    
    $
    31,799
    
    
    
    8
    %
    
    $
    39,749
    
    
    
    10
    %Tier I Capital
(to Risk Weighted Assets)
    
    $
    39,734
    
    
    
    10.00
    %
    
    $
    15,900
    
    
    
    4
    %
    
    $
    23,850
    
    
    
    6
    %Tier I Capital
(to Average Assets)
    
    $
    39,734
    
    
    
    7.19
    %
    
    $
    22,101
    
    
    
    4
    %
    
    $
    27,626
    
    
    
    5
    %
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Three Months EndingMarch 31,2010
    
    2009Performance Ratios:Return on average assets
    
    
    0.42
    %
    
    
    0.82
    %Return on average equity
    
    
    4.21
    %
    
    
    8.07
    %Interest rate spread
    
    
    3.26
    %
    
    
    3.37
    %Net interest margin
    
    
    3.39
    %
    
    
    3.56
    %Efficiency Ratio
    
    
    86.09
    %
    
    
    82.50
    %Non-interest income to average total assets
    
    
    3.55
    %
    
    
    3.93
    %Non-interest expense to average total assets
    
    
    5.60
    %
    
    
    5.79
    %Average interest-earning assets as a ratio to
average interest-bearing liabilities
    
    
    108.51
    %
    
    
    108.26
    %Asset Quality Ratios:Non-performing assets to total assets
    
    
    0.90
    %
    
    
    0.10
    %Non-performing loans to total loans
    
    
    0.11
    %
    
    
    0.19
    %Net charge-offs to average loans
    
    
    0.00
    %
    
    
    0.02
    %Allowance for loan losses to non-performing loans
    
    
    1,041.01
    %
    
    
    433.40
    %Allowance for loan losses to loans receivable, net
    
    
    1.13
    %
    
    
    0.86
    %Capital Ratios:Equity to total assets (end of period)
    
    
    10.01
    %
    
    
    9.64
    %Tangible equity to tangible assets (end of period)
    
    
    6.10
    %
    
    
    5.33
    %Average equity to average assets
    
    
    9.99
    %
    
    
    10.12
    %
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Total
    
    
    
    
    
    
    
    
    
    Maximum Number ofNumber
    
    Average
    
    Total Number of Shares
    
    Shares that May Yet Beof Shares
    
    Price Paid
    
    Purchased as Part of
    
    Purchased Under thePeriod
    
    Purchased
    
    per Share
    
    Publicly Announced Plans
    
    PlanJanuary 1, 2010  January 31, 2010
    
    
    3,726
    
    
    $
    9.50
    
    
    
    
    
    
    
    February 1, 2010 February 28,
2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 1, 2010  March 31, 2010
    
    
    10,920
    
    
    $
    9.22
    
    
    
    
    
    
    
    Total
    
    
    14,646
    
    
    $
    9.29
    
    
    
    
    
    
    
    250,000
 
   
  
   
  (a)
    
    All required exhibits are included in Part I under Consolidated
Financial Statements, Notes to Unaudited Consolidated Financial Statements and
Managements Discussion and Analysis of Financial Condition and Results of
Operations, and are incorporated by reference, herein.ExhibitsExhibit 31.1  Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002Exhibit 31.2  Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes  Oxley Act of 2002Exhibit 32.1  Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 Page 37 of 38




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##### Table of Contents



ONEIDA FINANCIAL CORP.Date: May 17, 2010
    By:
    /s/ Michael R. KalletMichael R. KalletPresident and Chief Executive OfficerDate: May 17, 2010
    By:
    /s/ Eric E. StickelsEric E. StickelsExecutive Vice President and Chief
Financial Officer Page 38 of 38