SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                     --------------------------------------
                                    FORM 10-Q

{X}   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the quarterly period ended September 30, 2006

                                       OR

{ }   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.
                       ----------------------------------
             (Exact name of registrant as specified in its charter)

            Federal                                            16-1561678
-------------------------------                         ------------------------
(State or other jurisdiction of                              (IRS Employer)
incorporation or organization)                           Identification Number)

                     182 Main Street, Oneida, New York 13421

                    (Address of Principal Executive Offices)
              ----------------------------------------------------

                                 (315) 363-2000
--------------------------------------------------------------------------------
               Registrant's telephone number, including area code

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

      Indicate by check mark whether the Registrant is a large accelerated file,
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  [ ] Accelerated filer [X] Non-accelerated filer

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.). Yes     No X
                                     ---    ---

Indicate by check mark whether the Registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes    No X
                                               ---   ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: There were 7,634,057 shares of
the Registrant's common stock outstanding as of November 1, 2006.

<PAGE>

                             ONEIDA FINANCIAL CORP.
                                      INDEX

<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>                                                                                    <C>
PART I. FINANCIAL INFORMATION

    Item 1. Financial Statements                                                        1

            Consolidated Statements of Condition                                        2
            As of September 30, 2006 (unaudited) and December 31, 2005 (audited)

            Consolidated Statements of Operations (unaudited)                           3
            For the three months and nine months ended September 30, 2006 and 2005

            Consolidated Statements of Comprehensive Income (unaudited)                 4
            For the three months and nine months ended September 30, 2006 and 2005

            Consolidated Statements of Changes in Stockholders' Equity (unaudited)      5
            For the three months and nine months ended September 30, 2006

            Consolidated Statements of Cash Flows (unaudited)                           6
            For the three months and nine months ended September 30, 2006 and 2005

            Notes to Consolidated Financial Statements (unaudited)                      8

   Item 2.  Management's Discussion and Analysis of Financial Condition                16
            And Results of Operations

   Item 3.  Quantitative and Qualitative Disclosures about Market Risk                 25

   Item 4.  Controls and Procedures                                                    25

PART II. OTHER INFORMATION                                                             26

   Item 1.  Legal Proceedings                                                          26

   Item 1a. Risk Factors                                                               26

   Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                26

   Item 3.  Defaults Upon Senior Securities                                            27

   Item 4.  Submission of Matters to a Vote of Security Holders                        27

   Item 5.  Other Information                                                          27

   Item 6.  Exhibits                                                                   27
</TABLE>

<PAGE>

PART I. FINANCIAL INFORMATION

           Item I. Financial Statements


                                  Page 1 of 28

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
At September 30, 2006 and December 31, 2005

<TABLE>
<CAPTION>
                                                           (unaudited)         (audited)
                                                         At September 30,    At December 31,
                                                               2006               2005
                                                               ----               ----
ASSETS                                                    (in thousands, except share data)
<S>                                                         <C>                <C>
          Cash and due from banks                           $  12,255          $  12,147
          Federal funds sold                                      149                730
                                                            ----------------------------
TOTAL CASH AND CASH EQUIVALENTS                                12,404             12,877

          Investment securities, at fair value                 88,902            106,432
          Mortgage-backed securities, at fair value            26,385             29,097

          Mortgage loans held for sale                          1,357              1,354

          Loans receivable                                    247,340            236,682
          Allowance for loan losses                            (2,096)            (1,959)
                                                            ----------------------------
  LOANS RECEIVABLE, NET                                       245,244            234,723

          Federal Home Loan Bank stock                          3,551              3,858
          Bank premises and equipment, net                     15,910             12,703
          Accrued interest receivable                           2,007              2,194
          Other assets                                          6,948              7,921
          Cash surrender value - life insurance                11,561             11,238
          Goodwill                                             18,134             13,491
          Other intangible assets                               1,829                873
          ------------------------------------------------------------------------------
          TOTAL ASSETS                                      $ 434,232          $ 436,761
          ==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
          Interest bearing deposits                         $ 251,088          $ 250,142
          Non-interest bearing deposits                        51,946             51,044
          Borrowings                                           69,800             77,270
          Other liabilities                                     5,587              4,717
                                                            ----------------------------
TOTAL LIABILITIES                                             378,421            383,173
Stockholders' equity:
          Preferred stock, 1,000,000 shares authorized             --                 --
          Common stock ($.01 par value; 20,000,000
             shares authorized; 8,322,452
             and 8,242,452 shares issued)                          83                 82
          Additional paid-in capital                           18,390             18,300
          Retained earnings                                    42,961             41,711
          Common shares issued under employee
              stock ownership plans - unearned                   (288)              (288)
          Accumulated other comprehensive (loss)               (2,296)            (3,091)
          Treasury stock (at cost, 538,431
                             and 549,412 shares)               (3,039)            (3,075)
          Unearned stock-based compensation                        --                (51)
          ------------------------------------------------------------------------------
          TOTAL STOCKHOLDERS' EQUITY                           55,811             53,588
          ------------------------------------------------------------------------------
          TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY                              $ 434,232          $ 436,761
          ==============================================================================
</TABLE>

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

                                                                    Page 2 of 28

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 2006 (unaudited) and
2005 (unaudited)

<TABLE>
<CAPTION>
                                                               Three Months Ended                   Nine Months Ended
                                                          September 30,     September 30,    September 30,     September 30,
                                                               2006              2005             2006              2005
                                                               ----              ----             ----              ----
                                                                          (in thousands, except share data)
<S>                                                       <C>               <C>              <C>               <C>
INTEREST INCOME:
      Interest and fees on loans                          $       4,197     $       3,665    $      12,030     $      10,402
      Interest on investment and mortgage-
            backed securities                                     1,225             1,461            3,819             4,574
Dividends on equity securities                                      221               199              640               536
     Interest on federal funds sold and
            interest-earning deposits                                13                14               41                41
-----------------------------------------------------------------------------------------------------------------------------
   Total interest and dividend income                             5,656             5,339           16,530            15,553
-----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
     Savings deposits                                               125               110              366               273
     Money market and interest-bearing checking                     324               214              898               522
     Time deposits                                                1,085               844            2,964             2,435
     Borrowings                                                     884               801            2,585             2,299
     Notes Payable                                                   24                --               80                 2
-----------------------------------------------------------------------------------------------------------------------------
            Total interest expense                                2,442             1,969            6,893             5,531
-----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                               3,214             3,370            9,637            10,022
     Less: Provision for loan losses                                 80               100              240               260
-----------------------------------------------------------------------------------------------------------------------------
   Net interest income after provision for loan losses            3,134             3,270            9,397             9,762
-----------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
     Investment securities (losses) gains, net                      (24)               10               (1)               53
      Gain on sale of mortgages, net                                 36                53               93               137
      Commissions and fees on sales of
                     Non-banking products                         2,944             1,878            9,292             6,171
           Other operating income                                   919               838            2,759             2,402
-----------------------------------------------------------------------------------------------------------------------------
   Total other income                                             3,875             2,779           12,143             8,763
-----------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
     Compensation and employee benefits                           3,773             3,065           11,458             9,306
     Occupancy expenses, net                                        933               874            2,781             2,473
     Other operating expense                                      1,190               981            3,551             2,899
-----------------------------------------------------------------------------------------------------------------------------
   Total other expenses                                           5,896             4,920           17,790            14,678
-----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                                        1,113             1,129            3,750             3,847
-----------------------------------------------------------------------------------------------------------------------------
   Provision for income taxes                                       298               300              960             1,021
-----------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                $         815     $         829    $       2,790     $       2,826
=============================================================================================================================
EARNINGS PER SHARE - BASIC                                        $0.11             $0.11            $0.37             $0.37
=============================================================================================================================
EARNINGS PER SHARE - DILUTED                                      $0.11             $0.11            $0.36             $0.37
============================================================================================================================-
</TABLE>

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

                                                                    Page 3 of 28

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months and Nine Months Ended September 30, 2006 (unaudited) and
2005 (unaudited)

<TABLE>
<CAPTION>
                                                          Three Months Ended                 Nine Months Ended
                                                   September 30,     September 30,     September 30,     September 30,
                                                        2006              2005              2006              2005
                                                        ----              ----              ----              ----
                                                                               (In thousands)
<S>                                                <C>               <C>               <C>               <C>
Net income                                         $         815     $         829     $       2,790     $       2,826
                                                   -------------     -------------     -------------     -------------
Other comprehensive income (loss), net of tax:
 Unrealized gains on assets available for sale:
           Unrealized holding gains (losses)
           arising during period                           2,128              (707)            1,324            (1,915)
          Less: reclassification adjustment for
             Losses (Gains) included
                              in net income                   24               (10)                1               (53)
                                                   -------------     -------------     -------------     -------------
                                                           2,152              (717)            1,325            (1,968)
          Net income tax benefit (effect)                   (861)              287              (530)              787
                                                   -------------     -------------     -------------     -------------
Other comprehensive income (loss), net of tax              1,291              (430)              795            (1,181)

Comprehensive income                               $       2,106     $         399     $       3,585     $       1,645
                                                   =============     =============     =============     =============
</TABLE>

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

                                  Page 4 of 28

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months and Nine Months Ended September 30, 2006 (unaudited)

<TABLE>
<CAPTION>
                                                                                             Accumulated
                                                                Additional                     Other
                                                Common Stock     Paid-In     Retained       Comprehensive   Treasury
                                            Shares      Amount   Capital      Earning        Income(Loss)     Stock
                                                              (in thousands, except number of shares)
<S>                                        <C>           <C>      <C>         <C>             <C>            <C>
Balance as of December 31, 2005            8,242,452     $ 82     $18,300     $41,711         $  (3,091)     $(3,075)
Net income                                                                        928
Other comprehensive income,
          net of tax                                                                                521
Shares issued under stock plans
Shares earned under stock plans
Common stock dividends: $0.22 per share                                          (744)
Reclassification of unearned stock based
   Compensation in accordance with
   SFAS No. 123R                                                      (51)
Treasury stock reissued                                                                                           34
                                           --------------------------------------------------------------------------

Balance as of March 31, 2006               8,242,452     $ 82     $18,249     $41,895         $  (2,570)     $(3,041)
Net income                                                                      1,047
Other comprehensive income,
          net of tax                                                                             (1,017)
Shares earned under stock plans                                        97
Shares issued under stock plans               80,000        1          (1)
                                           --------------------------------------------------------------------------

Balance as of June 30, 2006                8,322,452     $ 83     $18,345     $42,942         $  (3,587)     $(3,041)
Net income                                                                        815
Other comprehensive income,
          net of tax                                                                              1,291
Shares earned under stock plans                                        45
Treasury stock reissued                                                                                            2
Common stock dividends: $0.23 per share                                          (796)
                                           --------------------------------------------------------------------------

Balance as of September 30, 2006           8,322,452     $ 83     $18,390     $42,961         $  (2,296)     $(3,039)
                                           ==========================================================================

<CAPTION>

                                              Common Stock
                                              Issued Under       Unearned
                                                Employee           Stock
                                              Stock Plans-         Based          Total
                                                Unearned        Compensation
                                             (in thousands, except number of shares)
<S>                                             <C>               <C>           <C>
Balance as of December 31, 2005                 $    (288)        $     (51)    $53,588
Net income                                                                          928
Other comprehensive income,
          net of tax                                                                521
Shares issued under stock plans                                                      --
Shares earned under stock plans                                                      --
Common stock dividends: $0.22 per share                                            (744)
Reclassification of unearned stock based
   Compensation in accordance with
   SFAS No. 123R                                                         51          --
Treasury stock reissued                                                              34
                                              -----------------------------------------

Balance as of March 31, 2006                    $    (288)        $      --     $54,327
Net income                                                                        1,047
Other comprehensive income,
          net of tax                                                             (1,017)
Shares earned under stock plans                                                      97
Shares issued under stock plans                                                      --
                                              -----------------------------------------

Balance as of June 30, 2006                     $    (288)        $      --     $54,454
Net income                                                                          815
Other comprehensive income,
          net of tax                                                              1,291
Shares earned under stock plans                                                      45
Treasury stock reissued                                                               2
Common stock dividends: $0.23 per share                                            (796)
                                              -----------------------------------------

Balance as of September 30, 2006                $    (288)         $      --    $55,811
                                              =========================================
</TABLE>

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

                                  Page 5 of 28

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months and Nine Months Ended September 30, 2006 (unaudited) and
2005 (unaudited)

<TABLE>
<CAPTION>
                                                                     Three Months Ended                 Nine Months Ended
                                                                September 30,    September 30,    September 30,    September 30,
                                                                     2006             2005             2006             2005
                                                                     ----             ----             ----             ----
Operating Activities:                                                                    (in thousands)
<S>                                                               <C>              <C>              <C>              <C>
   Net income                                                     $     815        $     829        $   2,790        $   2,826
   Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                                     374              288            1,094              819
      Amortization of premiums/discounts on securities, net              27               52               80              168
      Provision for loan losses                                          80              100              240              260
      Stock compensation earned                                          45               --              142               87
      Loss on sale of other real estate                                  --               --               17               --
      Loss (gain) on sale/call of securities, net                        24              (10)               1              (53)
      Gain on sale of loans, net                                        (36)             (53)             (93)            (137)
      Income tax payable                                               (181)             (60)            (311)             (75)
      Accrued interest receivable                                       187              296              187               97
      Other assets                                                      (15)             760              737             (240)
      Other liabilities                                                (508)             (38)          (1,723)            (359)
      Origination of loans held for sale                             (4,745)          (3,731)         (12,193)          (8,556)
      Proceeds from sales of loans                                    4,434            3,921           12,283           10,340
------------------------------------------------------------------------------------------------------------------------------
          Net cash provided by operating activities                     501            2,354            3,251            5,177
------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
  Purchase of investment securities                                    (884)         (12,405)          (4,011)         (31,171)
  Principal collected on and proceeds of maturities
      sales or calls from investments                                 6,626           15,641           22,810           20,978
  Purchase of mortgage-backed securities                                 --           (5,525)            (999)          (5,525)
  Principal collected on and proceeds from sales
     of mortgage-backed securities                                    1,292            3,196            3,686           14,821
  Net increase in loans                                              (1,582)          (7,202)         (10,823)         (23,516)
  Purchase of bank premises and equipment                            (1,504)          (1,568)          (4,014)          (2,982)
  Proceeds from sale of other real estate                                --               --               45               --
  Purchase of insurance agency                                           --           (1,196)          (1,782)          (1,196)
  Purchase of consulting group                                          (28)              --           (1,510)              --
------------------------------------------------------------------------------------------------------------------------------
          Net cash provided by (used in) investing activities         3,920           (9,059)           3,402          (28,591)
------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
  Net (decrease) increase in demand deposit, savings,
      money market, interest-bearing checking and escrow             (7,288)           3,589           (2,890)          17,149
  Net increase (decrease) in time deposits                            2,978           (1,775)           4,738           (4,189)
  Proceeds from borrowings                                           27,900           24,597           63,430           63,097
  Repayment of borrowings                                           (27,030)         (18,200)         (70,900)         (52,000)
  Cash dividends                                                       (796)            (708)          (1,540)          (1,380)
  Purchase of treasury stock                                             --               --               --              (93)
  Exercise of stock options (using treasury stock)                        2                1               36               47
------------------------------------------------------------------------------------------------------------------------------
          Net cash (used in) provided by financing activities        (4,234)           7,504           (7,126)          22,631
------------------------------------------------------------------------------------------------------------------------------
Increase (decrease)  in cash and cash equivalents                       187              799             (473)            (783)
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period                     12,217           13,451           12,877           15,033
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                        $  12,404        $  14,250        $  12,404        $  14,250
==============================================================================================================================
</TABLE>


                                  Page 6 of 28

<PAGE>

<TABLE>
<S>                                                           <C>             <C>             <C>             <C>
Supplemental disclosures of cash flow information:
Cash paid for interest                                        2,488           1,994           6,987           5,552
Cash paid for income taxes                                      480             360             985             636
Non-cash investing activities:
Transfer of loans to other real estate                           --              --              62              53
Note payable issued in connection with acquisitions              --              --           2,594              --
===================================================================================================================
</TABLE>

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

                                  Page 7 of 28

<PAGE>

                             ONEIDA FINANCIAL CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)
                               SEPTEMBER 30, 2006
Note A - Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
in accordance  with the  instructions  to Form 10-Q and Rule 10-01 of Regulation
S-X  and,  therefore,  do  not  include  all of the  information  and  footnotes
necessary  for a  complete  presentation  of  financial  condition,  results  of
operations,  and cash flows in conformity  with  generally  accepted  accounting
principles.   Accordingly,   in  the  opinion  of  management,  all  adjustments
(consisting  of normal  recurring  accruals)  necessary  to fairly  present  the
consolidated financial position of the Oneida Financial Corp. (the "Company") at
September 30, 2006 and the results of its consolidated operations and cash flows
for the  period  then  ended  have  been  included.  Operating  results  for the
three-month  period and nine-month period are not necessarily  indicative of the
results that may be expected for the year ended December 31, 2006.

Note B - Earnings per Share

Basic  earnings per share  represents  income  available to common  stockholders
divided by the weighted average number of common shares  outstanding  during the
period.  ESOP  shares are  considered  outstanding  for the  calculation  unless
unearned.  Diluted  earnings per share give effect to weighted  average  shares,
which would be  outstanding  assuming the exercise of issued  options and awards
using the treasury  stock  method.  Earnings per common share have been computed
based on the following for the three months and nine months ended September 30:

                                       Income        Shares       Per Share
September 30, 2006:
-------------------
Net income (Three Months Ended)       $814,725
                                      --------

Basic Earnings Per Share:             $814,725      7,633,903        $0.11
                                                                     -----
Effect of dilutive securities:
           Stock options and awards         --         77,844
                                      -----------------------
Diluted Earnings Per Share            $814,725      7,711,747        $0.11
                                                                     -----

September 30, 2005:
-------------------
Net income (Three Months Ended)       $829,452
                                      --------

Basic Earnings Per Share:             $829,452      7,592,875        $0.11
                                                                     -----
Effect of dilutive securities:
           Stock options and awards         --         86,274
                                      -----------------------
Diluted Earnings Per Share            $829,452      7,679,149        $0.11
                                                                     -----

September 30, 2006:
-------------------
Net income (Nine Months Ended)        $2,790,140
                                      ----------

Basic Earnings Per Share:             $2,790,140    7,632,555        $0.37
                                                                     -----
Effect of dilutive securities:
           Stock options and awards           --       76,601
                                      -----------------------
Diluted Earnings Per Share            $2,790,140    7,709,156        $0.36
                                                                     -----

September 30, 2005:
-------------------
Net income (Nine Months Ended)        $2,826,426
                                      ----------

Basic Earnings Per Share:             $2,826,426    7,569,597        $0.37
                                                                     -----
Effect of dilutive securities:
           Stock options and awards           --      106,343
                                      -----------------------
Diluted Earnings Per Share            $2,826,426    7,675,940        $0.37
                                                                     -----

Stock options for 53,820 and 54,770 shares of common stock were not considered
in computing diluted earnings per common share for the three months ending
September 30, 2006 and September 30, 2005 respectively because they were
antidilutive. For the nine months ending September 30, 2006 and September 30,
2005, stock options for 54,559 and 37,898 shares respectively were not
considered.


                                  Page 8 of 28

<PAGE>

Note C - Stock-Based Compensation

Effective  January  1,  2006,  the  Company  adopted   provisions  of  Financial
Accounting Standards Board (FASB) Statement No. 123R "Share-Based Payment," (FAS
123R) for its share-based  compensation plans. The Company previously  accounted
for these plans under the recognition  and measurement  principles of Accounting
Principles Board (APB) No. 25,  "Accounting for Stock Issued to Employees," (APB
25) and related interpretations and disclosure  requirements  established by FAS
123,  "Accounting  for  Stock-Based  Compensation."  Under APB 25,  because  the
exercise price of the Company's  employee stock options equaled the market price
of the underlying  stock on the date of the grant, no  compensation  expense was
recorded.  The pro forma  effects  on  income  for stock  options  were  instead
disclosed in a footnote to the financial statements. Expense was recorded in the
income statement for restricted stock awards.

Under FAS 123R, all share-based compensation cost is measured at the grant date,
based on the fair value of the  award,  and is  recognized  as an expense in the
income  statement over the vesting period.  The cost for all share-based  awards
granted  subsequent to January 1, 2006,  represented  the grant-date  fair value
that was estimated in accordance with the provisions of FAS 123R.  Prior periods
have not been restated.

The adoption of SFAS No.  123(R) had the  following  impact on reported  amounts
compared  with amounts that would have been reported  using the intrinsic  value
method under previous accounting:

                             Three months ended September 30, 2006
                             Using         SFAS
                             Previous      123 (R)       As
                             Accounting    Adjustments   Reported

Income before income taxes        $1,114           $(1)    $1,113
Income taxes                         298             0        298
                             -----------   -----------   --------
Net income                        $  816           $(1)      $815
                             ===========   ===========   ========

Basic earnings per share           $0.11            --      $0.11
Diluted earnings per share         $0.11            --      $0.11

                            Nine months ended September 30, 2006
                             Using         SFAS
                             Previous      123 (R)       As
                             Accounting    Adjustments   Reported

Income before income taxes       $ 3,759           $(9)    $3,750
Income taxes                         962             2        960
                             -----------   -----------   --------
Net income                       $ 2,797           $(7)    $2,790
                             ===========   ===========   ========

Basic earnings per share           $0.37            --      $0.37
Diluted earnings per share         $0.36            --      $0.36

The  following  table  illustrates  the  effect on net  income  per share if the
Company had applied the fair value recognition  provisions of FASB Statement No.
123,   "Accounting  for  stock-Based   Compensation,"  to  stock-based  employee
compensation.

<TABLE>
<CAPTION>
                                                    Three Months Ended    Nine Months Ended
                                                    September 30, 2005    September 30, 2005
                                                    ------------------    ------------------
Net income:                                   (in thousands, except per share data)

<S>                                                        <C>                  <C>
         As reported                                       $ 829                $ 2,826
Deduct:  Total stock-based employee
         Compensation expense determined under
         fair value method, net of related taxes             (18)                   (55)
                                                           -----                -------
Pro forma                                                  $ 811                $ 2,771
                                                           =====                =======

Earnings per share:
  As reported
         Basic                                             $0.11                $  0.37
         Diluted                                           $0.11                $  0.37
</TABLE>


                                  Page 9 of 28

<PAGE>

Note C - Stock-Based Compensation (Continued)

  Pro forma
           Basic                                          $ 0.11        $0.37
           Diluted                                        $ 0.11        $0.36

Compensation expense charged for the three months ended and nine months ended
September 30, 2006 for stock options was $1,000 and $9,200 respectively. The
options granted were reload options for options exercised during the quarters.
The reloaded options have the same features as the original awarded options. All
original awarded options were vested as of April 2005.

<TABLE>
<CAPTION>
Activity in the plan for 2006 was as follows:             Range of
                                             -------------------------------------       Weighted Average
                                                  Option Exercise                          Exercise Price
                                     Options      Price                  Options           Shares
                                    Outstanding   Per Share              Exercisable       Outstanding
<S>                                  <C>          <C>                      <C>               <C>
Outstanding at December 31, 2005     198,148      $ 4.722 - $18.167        198,148           $7.3093
Granted                                2,444      $11.500 - $11.700
Exercised                            (13,425)           $4.722
Forfeited                               (675)           $4.722
                                     -------
Outstanding at September 30, 2006    186,492        $4.722-$18.167         186,492           $7.5612
                                     =======
</TABLE>

The aggregate  intrinsic  value of all options  outstanding  and  exercisable at
September 30, 2006 was $734,552.

Management  estimated the fair value of options granted using the  Black-Scholes
option-pricing  model. The  Black-Scholes  model requires  several  assumptions,
which  management  developed  based on  historical  trends  and  current  market
observations. The following table details the fair value and assumptions used to
value  stock  options  as of the grant  date that were  granted  during the nine
months ended September 30:

xx                                  January 2006      May 2006      July 2006
                                    -----------    -----------    -----------
Options granted                         1,452            739            253
Fair value, calculated                $3.8178        $3.5498        $3.6431
Exercise price                        $11.700        $11.500        $11.350
Risk-free interest rate                  5.00%          5.00%          5.04%
Expected stock price volatility        43.012%        43.012%        44.454%
Expected dividend rate                   3.00%          3.00%          3.00%
Expected life                         4.25 years    3.92 years     3.76 years

At September 30, 2006, the weighted  average  information  for  outstanding  and
exercisable shares is as follows:

                        Shares outstanding and Exercisable
             ----------------------------------------------------------------
             Range of                            Average      Average
             Exercise                            Exercise  Remaining Life
             Price                   Shares       Price       (Years)
             ----------------------------------------------------------------

             $3.633 - $5.45         127,215       $4.722         3.53
             $9.094 - $10.90          4,465       $9.419         3.57
             $10.90 - $12.717        19,221      $11.985         3.57
             $12.717 - $14.534       18,689      $14.000         3.57
             $14.534 - $16.350        6,600      $14.794         3.57
             $16.350 - $18.167       10,302      $17.247         3.57
                                    -------      -------      -------
                  Total             186,492       $7.561         3.54
                                    =======      =======      =======

During 2006, the Company issued 80,000 shares of restricted stock under the 2006
Recognition and Retention plan. The market value of the 68,000 shares awarded at
the date of grant  approximated  $777,920.  In  addition,  in 2006,  the Company
awarded 10,000 shares of restricted stock from the unallocated  shares under the
2000  Management  Recognition  and  Retention  Plan  having  a  market  value of
approximately $114,400. Compensation expense equal to the market value of Oneida
Financial  Corp.'s stock on the grant date is accrued ratably over the five year
vesting period for shares of restricted stock granted which will be fully vested
at December 31, 2010.  Compensation  expense  recorded in conjunction with these
plans were $44,616 and $0 for the three months ended September 30, 2006 and 2005
respectively,  and  $133,848  and  $86,985  for the  nine  month  period  ending
September  30, 2006 and 2005  respectively.  Shares  unallocated  under the plan
available  for future  awards were 12,886 and 10,886 at  September  30, 2006 and
2005 respectively.

                                  Page 10 of 28

<PAGE>

Note D - Dividend Restrictions

Oneida  Financial MHC, which owns 4,309,750 or 55.94% of the outstanding  shares
as of September 30, 2006 of Oneida Financial Corp.,  filed a notice with the OTS
regarding  its intent to waive its right to receive cash  dividends  declared by
Oneida Financial Corp. The OTS did not object to the notice.

Note E - Pension Plan

Net  pension  and  postretirement  cost  (benefit),  which  is  recorded  within
compensation  and employee  benefits  expenses in the  condensed  statements  of
income, is comprised of the following:

<TABLE>
<CAPTION>
                                                               Three Months Ended                     Nine Months Ended
                                                        September 30,       September 30,       September 30,       September 30,
                                                            2006                2005                2006                2005
                                                            ----                ----                ----                ----
                                                                                   (in thousands)
<S>                                                       <C>                 <C>                 <C>                <C>
Service cost                                              $     --            $     --            $     --           $      --
Interest cost                                               70,986              77,601             212,958             232,803
Expected return on plan assets                             (73,005)            (97,693)           (219,015)           (293,079)
Amortization of unrecognized loss                           18,539              33,903              55,617             101,709
Amortization of unrecognized prior service liability            --                  --                  --                  --
                                                          --------            --------            --------           ---------
           Net pension and postretirement cost            $ 16,520            $ 13,811            $ 49,560           $  41,433
                                                          ========            ========            ========           =========
</TABLE>

                                                         2006          2005
Weighted-average assumptions as of December 31:
           Discount rate                                 5.750%        6.125%
           Expected return on plan assets                7.000%        9.000%
           Rate of compensation increase                 0.000%        0.000%

The rate of compensation increase is expected to be 0% as the plan was frozen as
of June 15, 2004.  As of September 30, 2006,  contributions  to the plan totaled
$29,849.  The Bank anticipates  contributing $39,798 in 2006 to fund its pension
plan.

Note F - Investment Securities and Mortgage-Backed Securities

Investment securities and mortgage-backed securities consist of the following at
September 30, 2006 and December 31, 2005:

<TABLE>
<CAPTION>
                                                            September 30, 2006
                                                  ------------------------------------
                                                             Gross Unrealized
Investment Securities                             Fair Value       Gains        Losses
                                                  ------------------------------------
  Available for sale portfolio:                              (in thousands)
  -----------------------------
<S>                                               <C>           <C>           <C>
      Debt securities:
           U. S. Agencies                         $ 33,951      $      5      $    848
           Corporate                                18,280            92           430
           State and municipals                     18,678            75           117
                                                  --------      --------      --------
                                                    70,909           172         1,395
      Equity investments:
           Preferred and other equity stocks        15,115           249           113
           Mutual fund                               2,878            95            --
                                                  --------      --------      --------
                                                  $ 88,902      $    516      $  1,508
                                                  ========      ========      ========
Mortgage-Backed Securities
  Available for sale portfolio:
  -----------------------------
      Fannie Mae                                  $  7,591      $     --      $    282
      Freddie Mac                                   16,861             1           459
      Small Business Administration                     17            --            --
      Collateralized Mortgage Obligations            1,916            --            40
                                                  --------      --------      --------
                                                  $ 26,385      $      1      $    781
                                                  ========      ========      ========
</TABLE>


                                 Page 11 of 28

<PAGE>

Note F - Investment Securities and Mortgage-Backed Securities (Continued)

<TABLE>
<CAPTION>
                                                           December 31, 2005
                                                  -------------------------------------
                                                                    Gross Unrealized
Investment Securities                             Fair Value       Gains         Losses
                                                  -------------------------------------
  Available for sale portfolio:                              (in thousands)
  -----------------------------
<S>                                               <C>           <C>           <C>
      Debt securities:
           U. S. Agencies                         $ 35,437      $     --      $  1,087
           Corporate                                21,903            75           868
           State and municipals                     32,498           194           187
                                                  --------      --------      --------
                                                    89,838           269         2,142
      Equity investments:
           Preferred and other equity stocks        13,904           132           456
           Mutual fund                               2,690            --            93
                                                  --------      --------      --------
                                                  $106,432      $    401      $  2,691
                                                  ========      ========      ========
Mortgage-Backed Securities
  Available for sale portfolio:
  -----------------------------
      Fannie Mae                                  $  8,937      $     21      $    289
      Freddie Mac                                   18,034         1,749           461
      Small Business Administration                     23            --            --
      Collateralized Mortgage Obligations            2,103            --            58
                                                  --------      --------      --------
                                                  $ 29,097      $  1,770      $    808
                                                  ========      ========      ========
</TABLE>

The Company evaluates securities for other-than-temporary impairment at least on
a quarterly basis, and more frequently when economic or market concerns warrant
such evaluation. Consideration is given to the length of time and the extent to
which fair value has been less than cost, the financial condition and near-term
prospects of the issuer, and the intent and ability of the Company to retain its
investments in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value. In analyzing an issuer's financial
condition, the Company may consider whether the securities are issued by the
federal government or its agencies, whether downgrades by bond rating agencies
have occurred, and the results of reviews of the issuer's financial condition.

The Company currently has a $2.0 million General Motors Acceptance Corp. (GMAC)
bond, maturing October 15, 2010 which has a rating below investment grade. The
unrealized loss at September 30, 2006 and December 31, 2005 of $80,000 and
$399,000 respectively have not been considered other than temporary as GMAC is a
profitable division of General Motors, the Company has the intent and ability to
retain the investment for a period of time sufficient to allow for recovery in
the market value, and management believes that the repayment of the investment
is probable at maturity.

Note G - 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's evaluation of
the adequacy of the allowance is based on the Bank's 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. 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 principal and interest when due according to
the contractual terms of the loan agreement. 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. At September 30, 2006 the allowance for loan losses as a percentage
of net loans receivable was 0.85% as compared to 0.83% at December 31, 2005.


                                  Page 12 of 28

<PAGE>

Note G - Allowance for Loan Losses (Continued)

The following table sets forth the analysis of the allowance for loan losses for
the periods indicated:

<TABLE>
<CAPTION>
                                        Three Months Ended                Nine Months Ended
                                    September 30,   September 30,   September 30,   September 30,
                                         2006            2005            2006            2005
                                         ----            ----            ----            ----
                                                            (in thousands)
<S>                                    <C>             <C>             <C>             <C>
Balance at beginning of period:        $ 2,089         $ 1,960         $ 1,959         $ 1,982
Net charge-offs:
     Charge-offs                          (133)           (113)           (273)           (350)
     Recoveries                             60              54             170             109
                                       -------         -------         -------         -------
Net charge-offs                            (73)            (59)           (103)           (241)
Provision for loan losses                   80             100             240             260
                                       -------         -------         -------         -------
Balance at end of period               $ 2,096         $ 2,001         $ 2,096         $ 2,001
                                       =======         =======         =======         =======
</TABLE>

<TABLE>
<CAPTION>
Impaired loans were as follows:                      September 30, 2006   December 31, 2005
                                                                 (in thousands)
<S>                                                         <C>                <C>
           Impaired loans                                   $   --             $   39
           Allocated allowance for loan losses              $   --             $   14
           Average of impaired loans during the year        $   12             $   55
           Cash-basis interest income recognized            $    1             $    3
</TABLE>

Note H - Segment Information

The Company has determined that it has three primary business segments, its
banking franchise, its insurance activities and its benefit consulting activity.
For the three months and nine months ended September 30, 2006 and 2005, the
Company's insurance activities consisted of those conducted through its wholly
owned subsidiary, Bailey & Haskell Associates, Inc. The Company's benefit
consulting activities consisted of those conducted through its wholly owned
subsidiary Benefit Consulting Group, Inc. Information about the Company's
segments is presented in the following table for the periods indicated:

<TABLE>
<CAPTION>
                                                                         Three Months Ended September 30, 2006
                                                               -----------------------------------------------------------
                                                               Banking           Insurance   Benefit Consulting     Total
                                                               Activities        Activities       Activities
                                                                                      (in thousands)
<S>                                                            <C>               <C>              <C>             <C>
Net interest income                                            $  3,214          $    --          $   --          $  3,214
Provision for loan losses                                            80               --              --                80
                                                               --------          -------          ------          --------
  Net interest income after provision for loan losses             3,134               --              --             3,134
Other income                                                        931            2,244             700             3,875
Other expenses                                                    3,281            1,996             619             5,896
                                                               --------          -------          ------          --------
           Income before income taxes                               784              248              81             1,113
Income tax expense                                                  213               65              20               298
                                                               --------          -------          ------          --------
           Net income                                          $    571          $   183          $   61          $    815
                                                               ========          =======          ======          ========

Total Assets                                                   $422,630          $12,765          $4,073          $439,468
                                                               ========          =======          ======          ========
</TABLE>


                                  Page 13 of 28

<PAGE>

Note H - Segment Information (Continued)

<TABLE>
<CAPTION>
                                                                            Three Months Ended September 30, 2005
                                                               -----------------------------------------------------------------
                                                                Banking         Insurance      Benefit Consulting        Total
                                                               Activities       Activities          Activities
                                                                               (in thousands)
<S>                                                            <C>               <C>                <C>                 <C>
Net interest income                                            $  3,370          $     --           $       --          $  3,370
Provision for loan losses                                           100                --                   --               100
                                                               --------          --------           ----------          --------
  Net interest income after provision for loan losses             3,270                --                   --             3,270
Other income                                                        901             1,878                   --             2,779
Other expenses                                                    3,034             1,886                   --             4,920
                                                               --------          --------           ----------          --------
           Income before income taxes                             1,137                (8)                  --             1,129
Income tax expense                                                  300                --                   --               300
                                                               --------          --------           ----------          --------
           Net income                                          $    837          $     (8)          $       --          $    829
                                                               ========          ========           ==========          ========

Total Assets                                                   $438,897          $ 11,248           $        0          $450,145
                                                               ========          ========           ==========          ========

<CAPTION>

                                                                              Nine Months Ended September 30, 2006
                                                               -----------------------------------------------------------------
                                                                Banking         Insurance      Benefit Consulting        Total
                                                               Activities       Activities          Activities
                                                                               (in thousands)
<S>                                                            <C>               <C>                <C>                 <C>
Net interest income                                            $  9,637          $     --           $       --          $  9,637
Provision for loan losses                                           240                --                   --               240
                                                               --------          --------           ----------          --------
  Net interest income after provision for loan losses             9,397                --                   --             9,397
Other income                                                      2,851             7,056                2,236            12,143
Other expenses                                                    9,930             5,936                1,924            17,790
                                                               --------          --------           ----------          --------
           Income before income taxes                             2,318             1,120                  312             3,750
Income tax expense                                                  530               340                   90               960
                                                               --------          --------           ----------          --------
           Net income                                          $  1,788          $    780           $      222          $  2,790
                                                               ========          ========           ==========          ========

Total Assets                                                   $422,630          $ 12,765           $    4,073          $439,468
                                                               ========          ========           ==========          ========

<CAPTION>

                                                                              Nine Months Ended September 30, 2005
                                                               -----------------------------------------------------------------
                                                                Banking         Insurance      Benefit Consulting        Total
                                                               Activities       Activities          Activities
                                                                               (in thousands)
<S>                                                            <C>               <C>                <C>                 <C>
Net interest income                                            $ 10,022          $     --           $       --          $ 10,022
Provision for loan losses                                           260                --                   --               260
                                                               --------          --------           ----------          --------
  Net interest income after provision for loan losses             9,762                --                   --             9,762
Other income                                                      2,592             6,171                   --             8,763
Other expenses                                                    9,216             5,462                   --            14,678
                                                               --------          --------           ----------          --------
           Income before income taxes                             3,138               709                   --             3,847
Income tax expense                                                  796               225                   --             1,021
                                                               --------          --------           ----------          --------
           Net income                                          $  2,342          $    484           $       --          $  2,826
                                                               ========          ========           ==========          ========

Total Assets                                                   $438,897          $ 11,248           $        0          $450,145
                                                               ========          ========           ==========          ========
</TABLE>


                                  Page 14 of 28

<PAGE>

Note H - Segment Information (Continued)

The following represents a reconciliation of the Company's reported segment
assets to consolidated assets as of September 30:

                       Assets                           2006             2005

Total assets for reportable segments                 $ 439,468        $ 450,145
Elimination of intercompany cash balances               (5,236)          (3,531)
                                                     ---------        ---------

Consolidated Total                                   $ 434,232        $ 446,614
                                                     =========        =========

Note I - Acquisitions

On February 23, 2006, the Bank completed its acquisition of Parsons, Cote & Co.,
Inc., an insurance agency. The Bank paid $214,376 in cash and established a note
payable for $419,570 to be paid over 36 months with interest at 5.00% per annum
for fixed assets and other intangible assets. Goodwill in the amount of $576,000
and intangible assets in the amount of $71,000 was recorded in conjunction with
the transaction. Parsons, Cote & Co., Inc. has been merged into Bailey and
Haskell Associates, Inc.

On June 28, 2006, the Bank completed its acquisition of Benefit Consulting Group
L.L.C., an employee benefits consulting and retirement plan administration firm
for $1.5 million in cash and established a note payable for $2.2 million to be
paid over 24 months with interest at 5.00% per annum for intangible assets.
There were no tangible assets acquired as part of the acquisition. Goodwill in
the amount of $2.5 million and intangible assets in the amount of $1.1 million
was recorded in conjunction with the transaction. The resulting company Benefit
Consulting Group, Inc., is a wholly-owned subsidiary of Oneida Savings Bank.

On September 10, 2006, the Bank announced the signing of an agreement to acquire
the National Bank of Vernon. The acquisition is subject to the approvals of
regulatory authorities and the stockholders of Vernon Bank Corporation, the
stock holding company of the National Bank of Vernon. Under terms of the
agreement, Oneida Savings Bank will pay $54.00 in cash for each of the 210,447
shares of commons stock outstanding in Vernon Bank Corporation. The Bank expects
to complete the merger early in 2007.


                                  Page 15 of 28

<PAGE>

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
        Of Operations


                                  Page 16 of 28

<PAGE>

                     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 results of operations and condition and
should be read in conjunction with the Company's financial  statements and notes
thereto included herein.

      I When used in this  quarterly  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.

GENERAL

      Oneida  Financial Corp. is the parent company of Oneida Savings Bank ("the
Bank").  The Company conducts no business other than holding the common stock of
the Bank and general investment  activities resulting from the capital it holds.
Consequently,  the net  income  of the  Company  is  primary  derived  from  its
investment in the Bank. The Bank's results of operations are primarily dependent
on its net interest  income,  which is the difference  between  interest  income
earned on its investments in loans,  investment  securities and  mortgage-backed
securities  and its cost of funds  consisting  of interest  paid on deposits and
borrowings.  The Bank's net income is also  affected by its  provision  for loan
losses, as well as by the amount of other income, including income from fees and
service charges,  revenue derived from the insurance agency and employee benefit
services  provided by subsidiaries of the Bank, net gains and losses on sales of
investments and loans, and operating expenses such as employee  compensation and
benefits,  occupancy and equipment costs and income taxes.  Earnings of the Bank
are also affected significantly by general economic and competitive  conditions,
particularly changes in market interest rates, which tend to be highly cyclical,
and government policies and actions of regulatory authorities,  which events are
beyond the control of the Bank.  At December 31, 2005 and September 30, 2006 the
Company had 7,623,076 shares and 7,634,057 shares outstanding of which 4,309,750
were held by Oneida Financial MHC, the Company's mutual holding company parent.

RECENT DEVELOPMENTS

      The Company  announced a semi-annual  cash dividend as of July 12, 2006 of
$0.23 per share  which was paid to its  shareholders  on August 8, 2006.  Oneida
Financial MHC waived its receipt of dividends.

      On February 23, 2006, the Bank completed its acquisition of Parsons,  Cote
& Co., Inc., an insurance agency. The Bank paid $214,376 in cash and established
a note payable for $419,570 to be paid over 36 months with interest at 5.00% per
annum for fixed assets and other  intangible  assets.  Goodwill in the amount of
$576,000  and  intangible  assets  in the  amount of  $71,000  was  recorded  in
conjunction with the transaction. Parsons, Cote & Co., Inc. has been merged into
Bailey  and  Haskell  Associates,  Inc.  Amortization  expense  related  to  the
acquisition was $5,700 for the three months ended September 30, 2006 and $15,000
for the nine months ended September 30, 2006.

      On June 28, 2006, the Bank completed its acquisition of Benefit Consulting
Group L.L.C., an employee benefits consulting and retirement plan administration
firm for $1.5 million in cash and established a note payable for $2.2 million to
be paid over 24 months with interest at 5.00% per annum for  intangible  assets.
Goodwill in the amount of $2.5  million and  intangible  assets in the amount of
$1.1 million was recorded in  conjunction  with the  transaction.  The resulting
company is Benefit Consulting Group, Inc. which is a wholly-owned  subsidiary of
Oneida Savings Bank. The acquisition was effective January 1, 2006. Amortization
expense  related to the  acquisition  was  $62,000  for the three  months  ended
September  30, 2006 and $187,000 for the nine months ended  September  30, 2006.


                                 Page 17 of 28
<PAGE>


      On September 10, 2006,  the Bank  announced the signing of an agreement to
acquire the National Bank of Vernon. The acquisition is subject to the approvals
of regulatory  authorities and the stockholders of Vernon Bank Corporation,  the
stock  holding  company  of the  National  Bank of  Vernon.  Under  terms of the
agreement,  Oneida  Savings Bank will pay $54.00 in cash for each of the 210,447
shares of commons stock outstanding in Vernon Bank Corporation. The Bank expects
to complete the merger early in 2007.

FINANCIAL CONDITION

      ASSETS. Total assets at September 30, 2006 were $434.2 million, a decrease
of $2.6 million from $436.8 million at December 31, 2005.  Investment securities
decreased $17.5 million and  mortgage-backed  securities  decreased $2.7 million
due to the  principal  collected on and proceeds  from sales and  maturities  of
investment and mortgaged  backed  securities.  Investments  were sold during the
third  quarter  2006 and the  proceeds  from such sales  were used to  originate
higher  yielding  loans.  Loans  receivable,  including  loans  held  for  sale,
increased  $10.7  million to $248.7  million at September 30, 2006 compared with
$238.0  million at December 31, 2005.  At September 30, 2006,  total  commercial
real estate loans  increased by $3.5 million  while  commercial  business  loans
increased by $2.0 million from  December 31, 2005.  At September  30, 2006 total
consumer  loans  increased by $1.0 million from  December 31, 2005.  Residential
loans increased by $4.2 million since December 31, 2005, after the sale of $12.2
million of  fixed-rate  residential  real estate loans in the  secondary  market
during the nine month period.  Goodwill and other intangibles increased to $20.0
million as of September 30, 2006 as compared with $14.4 at December 31, 2005 due
to the payment of the final contingent purchase  consideration  payment for 2006
as part of the acquisition of Bailey and Haskell Associates, Inc. during 2000 as
well as an insurance agency acquisition during the first quarter of 2006 and the
completion  of the  acquisition  of the benefits  consulting  firm in the second
quarter of 2006.

      The  allowance  for loan  losses  increased  slightly  to $2.1  million at
September  30, 2006 from $2.0 million at December 31, 2005.  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's  evaluation of the adequacy of the
allowance  is based on the  Bank's  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.  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 principal and interest when due according to
the contractual  terms of the loan agreement.  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.  At September 30, 2006 the allowance for loan losses as a percentage
of net loans receivable was 0.85% as compared to 0.83% as of December 31, 2005.

      The book value of premises  and  equipment  increased  $3.2  million  from
December 31, 2005 to  September  30, 2006 as a result of the  construction  of a
15,000 square foot  insurance  office  located in Clay,  New York which replaced
three leased  office  locations.  The Company also began  construction  of a new
banking,  insurance  and retail center at the Griffiss  Business and  Technology
Park in Rome,  New York  which is  expected  to be  completed  during the fourth
quarter of 2006.

      LIABILITIES. Total liabilities decreased by $4.8 million to $378.4 million
at September 30, 2006 from $383.2  million at December 31, 2005. The decrease is
primarily  the result of a decrease in  borrowings  as  repayments of borrowings
exceeded proceeds from borrowings by $7.5 million.  This includes a reduction of
the  overnight  line of credit of $10.9  million as of December 31, 2005 to $8.4
million as of  September  30,  2006.  Offsetting  the  decrease  in  borrowings,
interest  bearing  deposits  increased and  non-interest  bearing  deposits each
increased by $900,000.  Other liabilities  increased $900,000 due to an increase
in notes  payable  in  relation  to the  completion  of the  acquisition  of the
benefits  consulting firm in the second quarter of 2006 and an insurance  agency
acquisition in the first quarter of 2006.

      STOCKHOLDERS' EQUITY. Total stockholders' equity at September 30, 2006 was
$55.8  million,  an increase of $2.2 million from $53.6  million at December 31,
2005. The increase in stockholders'  equity was due to the addition of after-tax
net income of  $2,790,000  for the nine months ended  September  30, 2006 and an
increase in the valuation  adjustments made for the Company's available for sale
investment  and  mortgage-backed  securities.  Accumulated  Other  Comprehensive
Income  (Loss)  increased  $795,000  from  December  31,  2005 to a loss of $2.3
million from a loss of $3.1  million..  The payment of the Company's  semiannual
cash  dividends of $0.22 and $0.23  during the first and third  quarters of 2006
resulted in a reduction in stockholders' equity of $1,540,000.


                                  Page 18 of 28

<PAGE>

ANALYSIS OF NET INTEREST INCOME

      Net  interest   income   represents  the  difference   between  income  on
interest-earning  assets  and  expense  on  interest-bearing   liabilities.  Net
interest income also depends on the relative amounts of interest-earning  assets
and  interest-bearing  liabilities  and the interest rates earned or paid on the
assets or liabilities.

      AVERAGE BALANCE SHEET. The following tables set forth certain  information
relating to the Company for the three months and nine months ended September 30,
2006  and 2005  and for the  year  ended  December  31,  2005.  For the  periods
indicated,  the 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  in  thousands  of  dollars  and
percentages.  No tax equivalent  adjustments  were made. The average  balance is
computed based upon an average daily balance.

      TABLE 1. Average Balance Sheet.

<TABLE>
<CAPTION>
                                                                         Three Months Ended September 30,
                                                -----------------------------------------------------------------------------------
                                                                 2006                          2005
                                                  Average      Interest                      Average      Interest
                                                Outstanding     Earned/        Yield/      Outstanding     Earned/        Yield/
Assets                                            Balance        Paid           Rate         Balance        Paid           Rate
------                                            -------        ----           ----         -------        ----           ----
Interest-earning Assets:                                                      (Dollars in  Thousands)
------------------------
<S>                                             <C>           <C>                   <C>    <C>           <C>                   <C>
  Loans Receivable*                             $   247,337   $     4,197           6.79%  $   232,115   $     3,665           6.32%
  Investment and                                    103,336         1,225           4.74%      129,075         1,461           4.53%
Mortgage-Backed
Securities
  Federal Funds                                         934            13           5.57%        1,188            14           4.71%
  Equity Securities                                  17,666           221           5.00%       21,311           199           3.74%
                                                -----------   -----------    -----------   -----------   -----------    -----------
    Total Interest-earning Assets                   369,273         5,656           6.13%      383,689         5,339           5.57%
                                                -----------   -----------    -----------   -----------   -----------    -----------
Non interest-earning assets:
----------------------------
  Cash and due from banks                             9,769                                     11,309
  Other assets                                       56,732                                     42,299
                                                -----------                                -----------
              Total assets                      $   435,774                                $   437,297
                                                ===========                                ===========

Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing Liabilities:
-----------------------------
  Money Market Deposits                         $    42,464   $       300           2.80%  $    44,617   $       178           1.58%
  Savings Accounts                                   67,935           125           0.73%       73,854           110           0.59%
  Interest-bearing Checking                          30,666            24           0.31%       30,001            36           0.48%
  Time Deposits                                     109,346         1,085           3.94%      108,348           844           3.09%
  Borrowings                                         68,669           884           5.11%       69,531           801           4.57%
  Notes Payable                                       1,908            24           4.99%           10             0           0.00%
                                                -----------   -----------    -----------   -----------   -----------    -----------
    Total Interest-bearing Liabilities              320,988         2,442           3.02%      326,361         1,969           2.39%
                                                -----------   -----------    -----------   -----------   -----------    -----------
Non-interest-bearing liabilities:
---------------------------------
  Demand deposits                                    52,314                                     52,217
  Other liabilities                                   7,914                                      5,412
                                                -----------                                -----------
      Total liabilities                         $   381,216                                    383,990
                                                -----------                                -----------
Stockholders' equity                                 54,558                                     53,307
                                                -----------                                -----------
Total liabilities and stockholders' equity      $   435,774                                $   437,297
                                                ===========                                ===========
    Net Interest Income                                       $     3,214                                $     3,370
                                                              ===========                                ===========
    Net Interest Spread                                                             3.11%                                      3.18%
                                                                                    ====                                       ====
    Net Earning Assets                          $    48,285                                $    57,328
                                                ===========                                ===========
   Net yield on average
      Interest-earning assets                                        3.48%                                      3.51%
                                                              ===========                                ===========
    Average interest-earning
      assets to average
      Interest-bearing liabilities                                 115.04%                                    117.57%
                                                              ===========                                ===========

<CAPTION>

                                                        Twelve Months Ended Dec. 31,
                                                  ----------------------------------------
                                                                   2005
                                                    Average      Interest
                                                  Outstanding     Earned/        Yield/
Assets                                              Balance        Paid           Rate
------                                              -------        ----           ----
Interest-earning Assets:                                 (Dollars in  Thousands)
-----------------------
<S>                                               <C>           <C>                   <C>
  Loans Receivable*                               $   226,940   $    14,197           6.26%
  Investment and                                      132,251         6,026           4.56%
Mortgage-Backed
Securities
  Federal Funds                                         1,349            49           3.63%
  Equity Securities                                    19,934           740           3.71%
                                                  -----------   -----------    -----------
    Total Interest-earning Assets                     380,474        21,012           5.52%
                                                  -----------   -----------    -----------
Non interest-earning assets:
----------------------------
  Cash and due from banks                              10,781
  Other assets                                         41,566
                                                  -----------
              Total assets                        $   432,821
                                                  ===========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing Liabilities:
-----------------------------
  Money Market Deposits                           $    44,352   $       706           1.59%
  Savings Accounts                                     73,036           395           0.54%
  Interest-bearing Checking                            29,348           132           0.45%
  Time Deposits                                       109,030         3,313           3.04%
  Borrowings                                           68,335         3,139           4.59%
  Notes Payable                                            37             2           5.41%
                                                  -----------   -----------    -----------
    Total Interest-bearing Liabilities                324,138         7,687           2.37%
                                                  -----------   -----------    -----------
Non-interest-bearing liabilities:
---------------------------------
  Demand deposits                                      50,490
  Other liabilities                                     5,358
                                                  -----------
      Total liabilities                           $   379,986
                                                  -----------
Stockholders' equity                                   52,835
                                                  -----------
Total liabilities and stockholders' equity        $   432,821
                                                  ===========

   Net Interest Income                                         $    13,325
                                                               ===========
    Net Interest Spread                                                              3.15%
                                                                              ===========
    Net Earning Assets                            $    56,336
                                                  ===========
   Net yield on average
      Interest-earning assets                                         3.50%
                                                               ===========
    Average interest-earning
      assets to average
      Interest-bearing liabilities                                  117.38%
                                                               ===========
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                                                        Nine Months Ended September 30,
                                                -----------------------------------------------------------------------------------
                                                                2006                                       2005
                                                 Average      Interest                      Average      Interest
                                               Outstanding     Earned/        Yield/      Outstanding     Earned/        Yield/
Assets                                           Balance        Paid           Rate         Balance        Paid           Rate
------                                           -------        ----           ----         -------        ----           ----
<S>                                            <C>           <C>                   <C>    <C>           <C>                   <C>
Interest-earning Assets:                                                       (Dollars in  Thousands)
------------------------
  Loans Receivable*                            $   242,295   $    12,030           6.62%  $   223,166   $    10,402           6.21%
  Investment and Mortgage-Backed                   110,044         3,819           4.63%      134,077         4,574           4.55%
        Securities
  Federal Funds                                      1,051            41           5.20%        1,506            41           3.63%
  Equity Securities                                 18,438           640           4.63%       19,641           536           3.64%
                                               -----------   -----------    -----------   -----------   -----------    -----------
    Total Interest-earning Assets                  371,828        16,530           5.93%      378,390        15,553           5.48%
                                               -----------   -----------    -----------   -----------   -----------    -----------
Non interest-earning assets:
----------------------------
  Cash and due from banks                           10,052                                     10,988
  Other assets                                      51,468                                     40,785
                                               -----------                                -----------
              Total assets                     $   433,348                                $   430,163
                                               ===========                                ===========

Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing Liabilities:
-----------------------------
  Money Market Deposits                        $    42,145   $       827           2.62%  $    41,760   $       426           1.36%
  Savings Accounts                                  69,451           366           0.70%       73,733           273           0.50%
  Interest-bearing Checking                         30,842            71           0.31%       29,158            96           0.44%
  Time Deposits                                    107,437         2,964           3.69%      109,768         2,435           2.97%
  Borrowings                                        69,813         2,585           4.95%       67,203         2,299           4.58%
 Notes Payable                                         819            80          13.06%           16             2          16.71%
                                               -----------   -----------    -----------   -----------   -----------    -----------
    Total Interest-bearing Liabilities             320,507         6,893           2.88%      321,638         5,531           2.30%
                                               -----------   -----------    -----------   -----------   -----------    -----------
Non-interest-bearing liabilities:                                                              50,496
---------------------------------
  Demand deposits                                   51,176                                      5,334
                                                                                          -----------
  Other liabilities                                  7,358                                    377,468
                                               -----------                                -----------
      Total liabilities                        $   379,041                                     52,695
                                               -----------                                -----------
Stockholders' equity                                54,307                                $   430,163
                                               ===========                                ===========
Total liabilities and stockholders' equity     $   433,348
                                               ===========
                                                                                                        $    10,022
                                                                                                        ===========
    Net Interest Income                                      $     9,637
                                                             ===========
    Net Interest Spread                                                            3.05%                                      3.18%
                                                                            ===========                                ===========
    Net Earning Assets                         $    51,321                                $    56,752
                                               ===========                                ===========
   Net yield on average
      Interest-earning assets                                       3.46%                                      3.53%
                                                             ===========                                ===========
    Average interest-earning
      assets to average
      Interest-bearing liabilities                                116.01%                                    117.64%
                                                             ===========                                ===========

<CAPTION>

                                                           Twelve Months Ended Dec. 31,
                                                      -----------------------------------------
                                                                      2005
                                                        Average      Interest
                                                      Outstanding     Earned/        Yield/
Assets                                                  Balance        Paid           Rate
------                                                  -------        ----           ----
Interest-earning Assets:                                      (Dollars in  Thousands)
------------------------
<S>                                                   <C>           <C>                   <C>
  Loans Receivable*                                   $   226,940   $    14,197           6.26%
  Investment and Mortgage-Backed                          132,251         6,026           4.56%
        Securities
  Federal Funds                                             1,349            49           3.63%
  Equity Securities                                        19,934           740           3.71%
                                                      -----------   -----------    -----------
    Total Interest-earning Assets                         380,474        21,012           5.52%
                                                      -----------   -----------    -----------
Non interest-earning assets:
----------------------------
  Cash and due from banks                                  10,781
  Other assets                                             41,566
                                                      -----------
              Total assets                            $   432,821
                                                      ===========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing Liabilities:
-----------------------------
  Money Market Deposits                               $    44,352   $       706           1.59%
  Savings Accounts                                         73,036           395           0.54%
  Interest-bearing Checking                                29,348           132           0.45%
  Time Deposits                                           109,030         3,313           3.04%

  Borrowings                                               68,335         3,139           4.59%

 Notes Payable                                                 37             2           5.41%
                                                      -----------   -----------    -----------
    Total Interest-bearing Liabilities                    324,138         7,687           2.37%
                                                      -----------   -----------    -----------
Non-interest-bearing liabilities:
---------------------------------
  Demand deposits                                          50,490
  Other liabilities                                         5,358
                                                      -----------
      Total liabilities                               $   379,986
                                                      -----------
Stockholders' equity                                       52,835
                                                      -----------
Total liabilities and stockholders' equity            $   432,821
                                                      ===========
    Net Interest Income                                             $    13,325
                                                                    ===========
    Net Interest Spread                                                                   3.15%
                                                                                   ===========
    Net Earning Assets                                $    56,336
                                                      ===========
   Net yield on average
      Interest-earning assets                                              3.50%
                                                                    ===========
    Average interest-earning
      assets to average
      Interest-bearing liabilities                                       117.38%
                                                                    ===========
</TABLE>

* Included in average  loans  receivable  balance for the periods  presented  is
Mortgage Loans Held for Sale.

RESULTS OF OPERATIONS

      GENERAL.  Net income for the three  months  ended  September  30, 2006 was
$815,000, a decrease of $14,000 or 1.7% from $829,000 for the three months ended
September 30, 2005. Net income for the nine months ended  September 30, 2006 was
$2,790,000  a decrease  of $36,000 or 1.3% from  $2,826,000  for the nine months
ended  September 30, 2005. The stable net income was due primarily the result of
increases  in  non-interest  income and  decreases in the  provision  for taxes,
partially   offset  by  decreases  in  net  interest  income  and  increases  in
non-interest expenses.

      INTEREST  INCOME.  Interest and dividend  income  increased by $317,000 or
5.9%,  to $5.7 million for the three months ended  September  30, 2006 from $5.3
million for three months  ended  September  30, 2005.  For the nine months ended
September 30, 2006,  interest and dividend income  increased by $977,000 or 6.3%
to $16.5  million  from $15.6  million for the nine months ended  September  30,
2005.  The  increase  in  interest  income was the result of an  increase in the
average yield of

<PAGE>

interest-earning  assets offset by a decrease in the average balances during the
three  months and nine months  ended  September  30,  2006  compared to the same
periods in 2005.

      Interest on loans increased  $532,000 to $4.2 million for the three months
ended  September 30, 2006 from $3.7 million for the three months ended September
30, 2005. The increase in interest income on loans is a result of an increase of
$15.2 million in the average  balance of loans  receivable  for the three months
ended  September 30, 2006 as compared with the same period in 2005 as well as an
increase of 47 basis  points in the average  yield to 6.79% for the three months
ended  September  30, 2006 from 6.32% for the three months ended  September  30,
2005. For the nine months ended September 30, 2006, the average balance of loans
increased  $19.1 million  while the average  yield  increased 41 basis points to
6.62%  during the 2006 period  from 6.21%  during the 2005  period.  The average
balance of commercial  real estate loans increased $5.6 million at September 30,
2006 from  September 30, 2005 while the average  balance of commercial  business
loans  increased  $2.5 million  during the nine months ended 2006  compared with
2005. The average  balance of consumer  loans  increased $7.9 million during the
2006 period as compared to 2005. The average balance of residential  real estate
loans increased $3.1 million for the same time period,  after recording the sale
of $16.8 million in fixed rate one-to-four  family residential real estate loans
over the last 12 months.

      Investment  income  decreased  $236,000  as a result of a decrease  in the
average balance of investment securities and mortgage-backed securities of $25.7
million for the three months period  ending  September 30, 2006 as compared with
the same  period in 2005.  The  decrease in the  average  balance was  partially
offset by an increase in average yield of 21 basis points to 4.74% for the three
months ended  September 30, 2006 from 4.53% for the three months ended September
30,  2005.  For the nine months ended  September  30,  2006,  investment  income
decreased $755,000 as compared with the same period in 2005 due to a decrease in
the  average  balance of  investment  and  mortgage-backed  securities  of $24.0
million for the nine month period ending September 30, 2006 as compared with the
same period in 2005.

      Interest income from federal funds decreased during the three months ended
September 30, 2006 to $13,000 as compared with $14,000 for the 2005 period.  The
decrease  in  interest  income is due to a decrease  in the  average  balance of
$254,000 offset by an increase of 86 basis points in the average yield.  For the
nine months  ended  September  30,  2006,  interest  income from  federal  funds
remained stable at $41,000 due to an increase of 157 basis points in the average
yield offset by a decrease in the average balance of $455,000.

      INTEREST  EXPENSE.  Interest expense was $2.4 million for the three months
ended  September 30, 2006, an increase of $473,000 or 24.0% from the same period
in 2005. The increase in interest expense is due to an increase in interest paid
on  borrowed  funds and deposit  accounts.  Interest  expense on borrowed  funds
totaled  $908,000 for the third  quarter of 2006  compared with $801,000 for the
2005  period.  The average cost of borrowed  funds  increased 53 basis points to
5.10% for the three  months  ended  September  30, 2006 from 4.57% for the three
months ended  September 30, 2005. For the nine months ended  September 30, 2006,
interest expense on borrowed funds increased  $364,000 due to an increase in the
average  cost of  borrowed  funds of 46 basis  points to 5.04%  from  4.58%.  In
addition,  the average balance  outstanding of borrowings  increased  during the
nine months ended September 30, 2006 to $70.6 million  compared to $67.2 million
for the nine  month  period in 2006.  Interest  expense  on  deposits  increased
$366,000 and totaled $1.5 million for the three months ended  September 30, 2006
as compared to $1.2 million for the three month period in 2005. The average cost
of  deposits  was 2.43% for the three month  period  ending  September  30, 2006
compared with 1.80% for the three month period in 2005. In addition, the average
balance of deposit  accounts  decreased  $6.4  million  from  September  2005 to
September  2006. For the nine months ended  September 30, 2006, the average cost
of deposits was 2.26% as compared  with 1.70% for the nine month period in 2005.
In addition,  the average balance of deposit accounts decreased $4.5 million for
the nine months ended  September 30, 2006 as compared with the nine months ended
September 30, 2005.

      PROVISION FOR LOAN LOSSES.  Total  provision for loan losses for the three
months ended September 30, 2006 and 2005 were $80,000. Total provisions for loan
losses for the nine months ended September 30, 2006 were $240,000 as compared to
$260,000  during the same period of 2005. The allowance for loan losses was $2.1
million or 0.85% of loans receivable at September 30, 2006 as compared with $2.0
million or 0.86% of loans receivable at September 30, 2005. Management continues
to monitor  changes in the loan portfolio mix in response to the  redirection of
loan asset  origination and retention  toward  consumer and commercial  business
loans.  The method  utilized to evaluate  the  adequacy of the  allowance  level
accounts  for the higher  relative  degree of credit risk  associated  with this
activity  as  compared  with   traditional   residential  real  estate  lending.
Provisions  to the  allowance  are  made as  management  assesses  the  level of
allowance to maintain it at a level which is  considers  adequate to provide for
probable incurred loan losses.

      OTHER INCOME.  Other  operating  income  increased by $1.1 million for the
three-month  period  ending  September 30, 2006 compared with the same period in
2005 to $3.9  million  from $2.8  million.  The  increase  in other  income  was
primarily  due to increases  in revenue  derived  from the  Company's  insurance
agency subsidiary  activities as well as the income associated with the employee
benefits consulting firm.  Commissions and fees on sales of non-banking products
was $2.9 million for the three months  ended  September  30, 2006 as compared to
$1.9 million for the same period in 2005. Offsetting the increase in commissions
and  fees,  the  Company  recognized  net  losses  on the  sales  of  investment
securities for the three months ended  September 30, 2006 of $24,000 as compared
to net gains of $10,000 for the same period in 2005.

<PAGE>

      For the nine months ended  September  30,  2006,  other  operating  income
increased  $3.4  million to $12.1  million as of  September  30,  2006 from $8.8
million for the nine months ended  September 30, 2005. The increase is primarily
due to  increases  in  revenue  derived  from  the  Company's  insurance  agency
subsidiary  activities as well as the income  associated with the acquisition of
Benefit Consulting Group LLC effective January 1, 2006.  Commissions and fees on
sales of  non-banking  products  was $9.3  million  for the  nine  months  ended
September  30,  2006 as compared  to $6.2  million for the nine months  ended in
2005. In addition,  service charges on deposit  accounts  increased  $169,000 or
10.9% for the nine months ended September 30, 2006 compared with the nine months
ended September 30, 2005.

      OTHER EXPENSES.  Other operating expenses increased by $976,000 million or
19.8%,  to $5.9 million for the three months ended  September 30, 2006 from $4.9
million for the same period in 2005.  Compensation expense increased $709,000 or
23.1% due to expenses  associated with the benefit  consulting group acquisition
and the continual growth of the insurance agency  subsidiary and bank personnel.
Equipment and occupancy  increased  $58,000 or 6.7% due to the completion of two
new  banking  facilities  in Oneida and  Chittenango,  New York  during the last
quarter 2005 and the  completion of a new office  building  consolidating  three
insurance offices and the benefit consulting business  operations.  For the nine
months ended  September 30, 2006,  other  operating  expenses  increased by $3.1
million to $17.8  million  from $14.7  million for the same period in 2005.  The
increase  in  expenses  is  associated  with  the  acquisition  of  the  benefit
consulting group firm in the second quarter of 2006.

      INCOME TAX. Income tax expense  remained fairly stable at $298,000 for the
three  months  ended  September  30, 2006 as compared to $300,000  for the third
quarter  2005.  For the nine months ended  September  30,  2006,  the income tax
expense was $960,000,  a decrease of $61,000 from $1,021,000 for the nine months
ended September 30, 2005. The effective tax rate decreased to 25.6% for the nine
months of 2006 from 26.5% for the nine months of 2005 to reflect the overall tax
rate expected to be in effect for 2006.

      LIQUIDITY  AND CAPITAL  RESOURCES.  In addition to the  Company's  primary
funding sources of cash flow from operations,  deposits and borrowings,  funding
is provided  from the  principal  and  interest  payments  received on loans and
investment  securities,  proceeds  from the  maturities  and sale of  investment
securities,  as well as proceeds from the sale of fixed rate  mortgage  loans in
the secondary market.  While maturities and scheduled  amortization of loans and
securities  are  predictable  sources of funds,  deposit  balances  and mortgage
prepayments  are greatly  influenced  by general  interest  rates,  the economic
environment and local competitive conditions.

      The primary  investing  activities of the Company are the  origination  of
residential  mortgages,  commercial  loans and  consumer  loans,  as well as the
purchase of mortgage-backed and other debt securities.  During the third quarter
of 2006,  loan  originations  totaled  $19.7  million  compared to $27.8 million
during the third quarter of 2005. The purchases of investment securities totaled
$884,000  during the third quarter of 2006 as compared to $17.9  million  during
the  third  quarter  of  2005.  The  decrease  in the  purchases  of  investment
securities is due to liquidity  constraints and use of overnight lines of credit
to fund loan growth.

      Cash flow from operations,  deposit growth, as well as the sales, maturity
and principal payments received on loans and investment  securities were used to
fund the investing  activities  described above.  Additionally,  the Company has
lines of credit with the Federal  Home Loan Bank,  Federal  Reserve Bank and two
commercial  banks that provide funding sources for lending,  liquidity and asset
and liability management as needed.  During the third quarter of 2006 cash flows
provided by the sale,  principal  payments and maturity of securities  available
for sale were $7.9  million  compared  to $18.8  million  for the same period in
2005.

      In the ordinary  course of business,  the Company  extends  commitments to
originate residential and commercial loans and other consumer loans. Commitments
to extend  credit are  agreements  to lend to a customer  as long as there is no
violation of any condition  established in the contract.  Commitments  generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. Since the Company does not expect all of the commitments to be funded,
the  total  commitment   amounts  do  not  necessarily   represent  future  cash
requirements.  The  Company  evaluates  each  customer's  creditworthiness  on a
case-by-case   basis.   Collateral  may  be  obtained  based  upon  management's
assessment of the customers' creditworthiness.  Commitments to extend credit may
be written on a fixed rate basis  exposing  the  Company to  interest  rate risk
given the  possibility  that market rates may change between the commitment date
and the actual  extension of credit.  As of  September  30, 2006 the Company had
outstanding  commitments to originate loans of approximately $6.9 million, which
generally have an expiration  period of less than 120 days.  Commitments to sell
residential mortgages amounted to $5.4 million at September 30, 2006.

      The Company extends credit to consumer and commercial  customers,  up to a
specified amount, through lines of credit. The borrower is able to draw on these
lines as needed,  thus the funding  requirements  are  generally  unpredictable.
Unused  lines of credit  amounted  to $42.4  million at  September  30, 2006 and
generally  have an expiration  period of less than one year.  It is  anticipated
that  there  will be  sufficient  funds  available  to  meet  the  current  loan
commitments and other

<PAGE>

obligations  through the sources  described  above.  The credit risk involved in
issuing these  commitments is essentially the same as that involved in extending
loans to customers and is limited to the  contractual  notional  amount of those
instruments.

      Cash,  interest-earning  demand accounts at correspondent  banks,  federal
funds sold,  and other  short-term  investments  are the  Company's  most liquid
assets.  The level of these  assets are  monitored  daily and are  dependent  on
operating,  financing, lending and investing activities during any given period.
Excess short-term liquidity is usually invested in overnight federal funds sold.
In the event that funds beyond those  generated  internally  are required due to
higher than expected loan commitment fundings, deposit outflows or the amount of
debt being called,  additional sources of funds are available through the use of
repurchase agreements, the sale of loans or investments or the Company's various
lines of credit.  As of September 30, 2006 the total of cash,  interest-earnings
demand accounts and federal funds sold was $12.4 million.

At September 30, 2006,  the Bank exceeded all regulatory  capital  requirements.
The current  requirements and the actual levels for the Bank are detailed in the
following table.

<TABLE>
<CAPTION>
                                                                                                    To Be Well
                                                                                                 Capitalized Under
                                                                        For Capital              Prompt Corrective
                                                Actual               Adequacy Purposes           Action Provisions
                                        ----------------------     ----------------------     -----------------------
                                          Amount        Ratio        Amount        Ratio        Amount        Ratio
                                                                   (Dollars in thousands)
<S>                                      <C>            <C>         <C>                <C>     <C>               <C>
As of September 30, 2006:
      Total Capital
         (to Risk Weighted Assets)       $37,153        12.72%      $23,375            8%      $29,218           10%
      Tier I Capital
         (to Risk Weighted Assets)       $34,923        11.95%      $11,687            4%      $17,531            6%
      Tier I Capital
         (to Average Assets)             $34,923         8.48%      $16,472            4%      $20,590            5%

<CAPTION>

                                                                                                    To Be Well
                                                                                                 Capitalized Under
                                                                        For Capital              Prompt Corrective
                                                Actual               Adequacy Purposes           Action Provisions
                                        ----------------------     ----------------------     -----------------------
                                          Amount        Ratio        Amount        Ratio        Amount        Ratio
                                                                   (Dollars in thousands)
<S>                                      <C>            <C>         <C>                <C>     <C>               <C>
As of December 31, 2005:
      Total Capital
         (to Risk Weighted Assets)        $39,311        13.64%      $23,054            8%      $28,818           10%
      Tier I Capital
         (to Risk Weighted Assets)        $37,352        12.96%      $11,527            4%      $17,291            6%
      Tier I Capital
         (to Average Assets)              $37,352         8.80%      $16,970            4%      $21,213            5%
</TABLE>

                                  Page 23 of 28

<PAGE>

ONEIDA  FINANCIAL CORP.
SELECTED  FINANCIAL  RATIOS
At and for the Three Months Ended and Nine Months Ended  September  30, 2006 and
2005 (unaudited)

<TABLE>
<CAPTION>

(Annualized where appropriate)                            Three Months Ending             Nine Months Ended
                                                              September 30,                  September 30,
                                                           2006           2005           2006           2005
                                                           ----           ----           ----           ----
<S>                                                    <C>            <C>            <C>            <C>
Performance Ratios:

  Return on average assets                                 0.75%          0.76%          0.86%          0.88%
  Return on average equity                                 5.98%          6.22%          6.85%          7.15%
  Net interest margin                                      3.48%          3.51%          3.46%          3.53%
  Efficiency Ratio                                        81.82%         79.56%         80.36%         77.68%
  Ratio of operating expense
          to average total assets                          5.41%          4.47%          5.47%          4.55%
  Ratio of average interest-earning assets
          to average interest-bearing liabilities        115.04%        117.57%        116.01%        117.64%

Asset Quality Ratios:

   Non-performing assets to total assets                   0.01%          0.06%          0.01%          0.06%
   Allowance for loan losses
          to non-performing loans                      3,677.19%      1,010.61%      3,677.19%      1,010.61%
   Allowance for loan losses
          to loans receivable, net                         0.85%          0.86%          0.85%          0.86%

Capital Ratios:

  Total stockholders' equity to total assets              12.85%         11.86%         12.85%         11.86%
  Average equity to average assets                        12.52%         12.19%         12.53%         12.25%
</TABLE>


                                  Page 24 of 28

<PAGE>

ITEM 3. Quantitative and Qualitative Disclosure About Market Risk

      Various forms of market risk are inherent in the business of the Bank
including concentration risk, liquidity management, credit risk and collateral
risk among others. However, the Bank's most significant form of market risk is
interest rate risk, as the majority of the Bank's assets and liabilities are
sensitive to changes in interest rates. Ongoing monitoring and management of
this risk is an important component of the Company's asset and liability
management process. The Bank's interest rate risk management program focuses
primarily on evaluating and managing the composition of the Bank's 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 expense. Based on the asset-liability
composition at September 30, 2006, in a rising interest rate environment,
Management would expect that the Company's cost of shorter-term deposits might
rise faster than its earnings on longer-term loans and investments. Conversely,
as interest rates decrease, the prepayment of principal on loans and investments
tends to increase, causing the Company to invest funds in a lower rate
environment. To mitigate the effect of interest rate changes, Management has
taken steps to emphasize core deposits, monitor certificate of deposit rates to
better match asset changes, and sell substantially all newly originated longer
term fixed rate loans in the secondary market without recourse. Management
believes this approach will help reduce the exposure to interest rate
fluctuations and enhance long-term profitability.

For a discussion of the Company's asset and liability management policies as
well as the potential impact of interest rate changes upon the earnings of the
Company, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's 2005 Annual Report to Stockholders.
There has been no material change in the Company's interest rate risk profile
since December 31, 2005.

ITEM 4. Controls and Procedures

      Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, the Company
has evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a- 15(3) and 15d - 15(e) under the
Exchange Act) as of the end of the period covered by this quarterly report.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the period covered by this quarterly report, the
Company's disclosure controls and procedures are effective to ensure that
information to be disclosed in the reports that the Company files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported, within the time periods or submits specified in the Securities and
Exchange Commission's rules and forms. There has been no change in the Company's
internal control over financial reporting during the most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting


                                  Page 25 of 28

<PAGE>

                             ONEIDA FINANCIAL CORP.
                                AND SUBSIDIARIES

                           Part II - Other Information

Item 1 Legal Proceedings

      Much of the Bank's market area is included in the 270,000-acre land claim
of the Oneida Indian Nation ("Oneidas"). The land claim area is held primarily
by private persons. Over 15 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 over 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, an U.S. 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 U.S. Justice Department
filed motions to amend the long outstanding claim against the State of New York.
The motion attempts 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 the Bank nor
the Company 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 1974 by the Federal Government.

      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 the Mohican Indians have commenced separate actions
in the United State 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 State 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 revert to the ownership of the taxing
authority if assessed property taxes are not paid. The United States Supreme
Court filed their decision in March 2005, ruling in favor of the City of
Sherrill.

      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. The 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. The Company continues to monitor the situation.

      The Company is not involved in any other pending legal proceedings other
than routine legal proceedings occurring in the ordinary course of business
which, in the aggregate, involve amounts which are believed by management to be
immaterial to the financial condition or operations of the Company.

Item 1a Risk Factors

      There has not been any material change in the risk factors disclosure from
that contained in the Company's 2005 Form 10-K for the fiscal year ended
December 31, 2005.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

      The following table summarizes our share repurchase activity during the
nine months ended September 30, 2006 and additional information regarding our
share repurchase program. The shares purchased during the current quarter were
received in exchange for the exercise of options. Our current repurchase plan of
250,000 was announced on June 8, 2004. The plan has no expiration date.


                                  Page 26 of 28

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Period                          Total Number   Average Price Paid per      Total Number of Shares          Maximum Number
                                of Shares      Share                       Purchased as Part of Publicly   of Shares To Be
                                Purchased                                  Announced Plans                 Purchased Under
                                                                                                           the Plan
-----------------------------------------------------------------------------------------------------------------------------
<S>                             <C>            <C>                         <C>                             <C>
January 1, 2006 -               1,452          $11.70                      --
January 31, 2006
-----------------------------------------------------------------------------------------------------------------------------
February 1, 2006 - February     --             --                          --
28, 2006
-----------------------------------------------------------------------------------------------------------------------------
March 1, 2006 -                 --             --                          --
March 31, 2006
-----------------------------------------------------------------------------------------------------------------------------
April 1, 2006 -                 --             --                          --
April 30, 2006
-----------------------------------------------------------------------------------------------------------------------------
May 1, 2006 -                   739            $11.50                      --
May 31, 2006
-----------------------------------------------------------------------------------------------------------------------------
June 1, 2006 -                  --             --                          --
June 30, 2006
-----------------------------------------------------------------------------------------------------------------------------
July 1, 2006 -                  253            $11.35                      --
July 31, 2006
-----------------------------------------------------------------------------------------------------------------------------
August 1, 2006 -                --             --                          --
August 31, 2006
-----------------------------------------------------------------------------------------------------------------------------
September 1, 2006 -             --             --                          --
September 30, 2006
-----------------------------------------------------------------------------------------------------------------------------
Total                           2,444          $11.60                      --                              250,000
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Item 3 Defaults Upon Senior Securities

      Not applicable.

Item 4 Submission of Matters to a Vote of Security Holders

      Not applicable.

Item 5 Other Information

      None

Item 6 Exhibits

      (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.

            Exhibits

            Exhibit 31.1 - Certification of Chief Executive  Officer Pursuant to
            Section 302 of the Sarbanes-Oxley Act of 2002

            Exhibit 31.2 - Certification of Chief Financial  Officer Pursuant to
            Section 302 of the Sarbanes - Oxley Act of 2002

            Exhibit 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 27 of 28

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.

                                          ONEIDA FINANCIAL CORP.


Date:  November 14, 2006                  By: /s/ Michael R. Kallet
                                          --------------------------------------
                                          Michael R. Kallet
                                          President and Chief Executive Officer


Date:  November 14, 2006                  By: /s/ Eric E. Stickels
                                          --------------------------------------
                                          Eric E. Stickels
                                          Executive Vice President and Chief
                                          Financial Officer

                              Page 28 of 28