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 June 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|

Indicate by check mark whether the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities 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 August 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 June 30, 2006 (unaudited) and December 31, 2005 (audited)

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

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

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

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

             Notes to Consolidated Financial Statements (unaudited)                   8

   Item 2.   Management's Discussion and Analysis of Financial Condition             15
             And Results of Operations

   Item 3.   Quantitative and Qualitative Disclosures about Market Risk              24

   Item 4.   Controls and Procedures                                                 24

PART II. OTHER INFORMATION                                                           25

   Item 1.   Legal Proceedings                                                       25

   Item 1a.  Risk Factors                                                            25

   Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds             25

   Item 3.   Defaults Upon Senior Securities                                         26

   Item 4.   Submission of Matters to a Vote of Security Holders                     26

   Item 5.   Other Information                                                       26

   Item 6.   Exhibits                                                                27
</TABLE>

<PAGE>

PART I. FINANCIAL INFORMATION

                Item I. Financial Statements


                                  Page 1 of 29
<PAGE>

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

<TABLE>
<CAPTION>
                                                             (unaudited)         (audited)
                                                             At June 30,      At December 31,
                                                                 2006               2005
                                                                 ----               ----
ASSETS                                                      (in thousands, except share data)
<S>                                                          <C>               <C>
         Cash and due from banks                             $    11,984       $    12,147
         Federal funds sold                                          233               730
                                                             -----------------------------
  TOTAL CASH AND CASH EQUIVALENTS                                 12,217            12,877

         Investment securities, at fair value                     93,075           106,432
         Mortgage-backed securities, at fair value                27,145            29,097

         Mortgage loans held for sale                              1,010             1,354

         Loans receivable                                        245,831           236,682
         Allowance for loan losses                                (2,089)           (1,959)
                                                             -----------------------------
   LOANS RECEIVABLE, NET                                         243,742           234,723

         Federal Home Loan Bank stock                              3,489             3,858
         Bank premises and equipment, net                         14,684            12,703
         Accrued interest receivable                               2,194             2,194
         Other assets                                              7,784             7,921
         Cash surrender value - life insurance                    11,451            11,238
         Goodwill                                                 18,105            13,491
         Other intangible assets                                   1,926               873
         ---------------------------------------------------------------------------------
         TOTAL ASSETS                                        $   436,822       $   436,761
         =================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
         Interest bearing deposits                           $   255,247       $   250,142
         Non-interest bearing deposits                            52,097            51,044
         Borrowings                                               68,930            77,270
         Other liabilities                                         6,094             4,717
                                                             -----------------------------
TOTAL LIABILITIES                                                382,368           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                               18,345            18,300
         Retained earnings                                        42,942            41,711

         Common shares issued under employee
               stock ownership plans - unearned                     (288)             (288)
         Accumulated other comprehensive loss                     (3,587)           (3,091)
         Treasury stock (at cost, 539,178
                          and 549,412 shares)                     (3,041)           (3,075)
         Unearned stock-based compensation                            --               (51)
         ---------------------------------------------------------------------------------
         TOTAL STOCKHOLDERS' EQUITY                               54,454            53,588
         ---------------------------------------------------------------------------------
         TOTAL LIABILITIES AND
         STOCKHOLDERS' EQUITY                                $   436,822       $   436,761
         =================================================================================
</TABLE>

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


                                  Page 2 of 29
<PAGE>

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

<TABLE>
<CAPTION>
                                                               Three Months Ended              Six Months Ended
                                                             June 30,       June 30,        June 30,       June 30,
                                                               2006           2005            2006          2005
                                                               ----           ----            ----          ----
                                                                        (in thousands, except share data)
<S>                                                         <C>             <C>            <C>            <C>
INTEREST INCOME:
         Interest and fees on loans                         $   4,027       $   3,406      $   7,832      $   6,738
         Interest on investment and mortgage-
              backed securities                                 1,268           1,537          2,596          3,113
         Dividends on equity securities                           219             179            418            337
         Interest on federal funds sold and
              interest-earning deposits                            15              12             28             27
-------------------------------------------------------------------------------------------------------------------
   Total interest and dividend income                           5,529           5,134         10,874         10,215
-------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
         Savings deposits                                         124              85            241            163
         Money market and interest-bearing checking               294             158            574            309
         Time deposits                                            973             810          1,879          1,591
         Borrowings                                               849             757          1,701          1,498
         Notes Payable                                             54               2             56              2
-------------------------------------------------------------------------------------------------------------------
              Total interest expense                            2,294           1,812          4,451          3,563
-------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                             3,235           3,322          6,423          6,652
         Less: Provision for loan losses                           80              80            160            160
-------------------------------------------------------------------------------------------------------------------
   Net interest income after provision for loan losses          3,155           3,242          6,263          6,492
-------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
         Investment security (losses) gains, net                   (9)             41             22             43
         Gain on sale of mortgages, net                            21              36             57             84
         Commissions and fees on sales of
              Non-banking products                              3,942           2,164          6,348          4,293
         Other operating income                                   889             810          1,840          1,564
-------------------------------------------------------------------------------------------------------------------
   Total other income                                           4,843           3,051          8,267          5,984
-------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
         Compensation and employee benefits                     4,311           3,129          7,685          6,241
         Occupancy expenses, net                                  963             793          1,848          1,599
         Other operating expense                                1,323             964          2,360          1,918
-------------------------------------------------------------------------------------------------------------------
   Total other expenses                                         6,597           4,886         11,893          9,758
-------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                                      1,401           1,407          2,637          2,718
-------------------------------------------------------------------------------------------------------------------
   Provision for income taxes                                     354             385            662            721
-------------------------------------------------------------------------------------------------------------------
NET INCOME                                                  $   1,047       $   1,022      $   1,975      $   1,997
===================================================================================================================
EARNINGS PER SHARE - BASIC                                  $    0.14       $    0.13      $    0.26      $    0.26
===================================================================================================================
EARNINGS PER SHARE - DILUTED                                $    0.14       $    0.13      $    0.26      $    0.26
===================================================================================================================
</TABLE>

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


                                  Page 3 of 29
<PAGE>

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

<TABLE>
<CAPTION>
                                                           Three Months Ended                    Six Months Ended
                                                        June 30,         June 30,           June 30,         June 30,
                                                          2006             2005               2006             2005
                                                          ----             ----               ----             ----
                                                                               (In thousands)
<S>                                                   <C>               <C>               <C>               <C>
Net income                                            $     1,047       $     1,022       $     1,975       $     1,997
                                                      -----------       -----------       -----------       -----------

Other comprehensive income (loss), net of tax:
  Unrealized gains on assets available for sale:
      Unrealized holding (losses) gains
        arising during period                              (1,704)              999              (805)           (1,209)
      Less: reclassification adjustment for
        Losses (Gains) included
          in net income                                         9               (41)              (22)              (43)
                                                      -----------       -----------       -----------       -----------
                                                           (1,695)              958              (827)           (1,252)
      Net income tax benefit (effect)                         678              (383)              331               501
                                                      -----------       -----------       -----------       -----------
Other comprehensive (loss) income, net of tax              (1,017)              575              (496)             (751)
Comprehensive income (loss)                           $        30       $     1,597       $     1,479       $     1,246
                                                      ===========       ===========       ===========       ===========
</TABLE>

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


                                  Page 4 of 29
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                                  Common Stock
                                                                         Accumulated             Issued Under    Unearned
                                                  Additional                 Other                  Employee       Stock
                                   Common Stock     Paid-In   Retained  Comprehensive  Treasury  Stock Plans-      Based
                                  Shares   Amount   Capital   Earning    Income(Loss)    Stock     Unearned    Compensation  Total
                                                               (in thousands, except number of shares)
<S>                              <C>        <C>    <C>        <C>          <C>          <C>          <C>           <C>      <C>
Balance as of December 31, 2005  8,242,452  $ 82   $ 18,300   $41,711      $(3,091)     $(3,075)     $(288)        $(51)    $53,588
Net income                                                        928                                                           928
Other comprehensive income,
  net of tax                                                                   521                                              521
Shares issued under
  stock plans                                                                                                                    --
Shares earned under
  stock plans                                                                                                                    --
Common stock dividends:
  $0.22 per share                                                (744)                                                         (744)
Reclassification of unearned
  stock based Compensation
  in accordance with SFAS
  No. 123R                                              (51)                                                         51          --
Treasury stock reissued                                                                      34                                  34
                                ---------------------------------------------------------------------------------------------------

Balance as of March 31, 2006     8,242,452  $ 82   $ 18,249   $41,895      $(2,570)     $(3,041)     $(288)        $ --     $54,327

Net income                                                      1,047                                                         1,047
Other comprehensive income,
  net of tax                                                                (1,017)                                          (1,017)
Shares earned under
  stock plans                                            97                                                                      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)     $(288)        $ --     $54,454
                                ===================================================================================================
</TABLE>

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


                                  Page 5 of 29
<PAGE>

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

<TABLE>
<CAPTION>
                                                                          Three Months Ended                  Six Months Ended
                                                                       June 30,         June 30,         June 30,         June 30,
                                                                         2006             2005             2006             2005
                                                                         ----             ----             ----             ----
Operating Activities:                                                                          (in thousands)
<S>                                                                   <C>              <C>              <C>              <C>
  Net income                                                          $    1,047       $    1,022       $    1,975       $    1,997
  Adjustments to reconcile net income to net
   cash provided by operating activities:
      Depreciation and amortization                                          424              265              720              531
      Amortization of premiums/discounts on securities, net                   26               52               54              116
      Provision for loan losses                                               80               80              160              160
      Stock compensation earned                                               97               22               97               87
      Loss on sale of other real estate                                       17               --               17               --
      Loss (gain) on sale/call of securities, net                              9              (41)             (22)             (43)
      Gain on sale of loans, net                                             (21)             (36)             (57)             (84)
      Income tax payable                                                    (417)            (251)            (130)             (15)
      Accrued interest receivable                                           (290)            (364)              --             (199)
      Other assets                                                        (1,124)          (1,797)             752           (1,000)
      Other liabilities                                                      372              776           (1,215)            (321)
      Origination of loans held for sale                                  (3,268)          (2,653)          (7,448)          (4,825)
      Proceeds from sales of loans                                         2,718            2,668            7,849            6,419
------------------------------------------------------------------------------------------------------------------------------------
          Net cash (used by) provided by operating activities               (330)            (257)           2,752            2,823
------------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
  Purchase of investment securities                                         (184)          (9,492)          (3,128)         (18,766)
  Principal collected on and proceeds of maturities
    sales or calls from investments                                        4,370            2,816           16,183            5,337
  Purchase of mortgage-backed securities                                      --               --             (999)              --
  Principal collected on and proceeds from sales
    of mortgage-backed securities                                          1,254            8,869            2,394           11,625
  Net increase in loans                                                   (9,263)         (11,668)          (9,241)         (16,314)
  Purchase of bank premises and equipment                                 (1,126)          (1,299)          (2,510)          (1,414)
  Proceeds from sale of other real estate                                     45               --               45               --
  Purchase of insurance agency                                            (1,556)              --           (1,782)              --
  Purchase of consulting group                                            (1,482)              --           (1,482)              --
------------------------------------------------------------------------------------------------------------------------------------
          Net cash used in investing activities                           (7,942)         (10,774)            (520)         (19,532)
------------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
  Net increase in demand deposit, savings,
    money market, interest-bearing checking and escrow                       126            9,992            4,399           13,559
  Net increase (decrease) in time deposits                                 2,417             (726)           1,759           (2,414)
  Proceeds from borrowings                                                19,030           25,000           35,530           38,500
  Repayment of borrowings                                                (13,500)         (20,300)         (43,870)         (33,800)
  Cash dividends                                                              --               --             (744)            (672)
  Purchase of treasury stock                                                  --              (93)              --              (93)
  Exercise of stock options (using treasury stock)                            --               33               34               47
------------------------------------------------------------------------------------------------------------------------------------
          Net cash provided by (used in) financing activities              8,073           13,906           (2,892)          15,127
------------------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents                            (199)           2,875             (660)          (1,582)
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period                          12,416           10,576           12,877           15,033
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                            $   12,217       $   13,451       $   12,217       $   13,451
====================================================================================================================================
</TABLE>


                                  Page 6 of 29
<PAGE>

<TABLE>
<S>                                                                        <C>              <C>              <C>              <C>
Supplemental disclosures of cash flow information:
Cash paid for interest                                                     2,284            1,827            4,498            3,577
Cash paid for income taxes                                                   485              636              505              636
Non-cash investing activities:
Transfer of loans to other real estate                                        --               53               62               53
Note payable issued in connection with acquisitions                        2,174               --            2,594               --
====================================================================================================================================
</TABLE>

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


                                  Page 7 of 29
<PAGE>

                             ONEIDA FINANCIAL CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)
                                  JUNE 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
June 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 six-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 years ended June 30:

                                         Income          Shares     Per Share
June 30, 2006:
--------------
Net income (Three Months Ended)        $1,047,218
                                       ----------

Basic Earnings Per Share:              $1,047,218      7,632,762      $0.14
                                                                      -----
Effect of dilutive securities:
         Stock options and awards              --         75,561
                                       -------------------------
Diluted Earnings Per Share             $1,047,218      7,708,323      $0.14
                                                                      -----

June 30, 2005:
--------------
Net income (Three Months Ended)        $1,022,438
                                       ----------

Basic Earnings Per Share:              $1,022,438      7,575,568      $0.13
                                                                      -----
Effect of dilutive securities:
         Stock options and awards              --        100,139
                                       -------------------------
Diluted Earnings Per Share             $1,022,438      7,675,707      $0.13
                                                                      -----

June 30, 2006:
--------------
Net income (Six Months Ended)          $1,975,415
                                       ----------

Basic Earnings Per Share:              $1,975,415      7,631,870      $0.26
                                                                      -----
Effect of dilutive securities:
         Stock options and awards              --         76,591
                                       -------------------------
Diluted Earnings Per Share             $1,975,415      7,708,461      $0.26
                                                                      -----

June 30, 2005:
--------------
Net income (Six Months Ended)          $1,996,974
                                       ----------

Basic Earnings Per Share:              $1,996,974      7,557,766      $0.26
                                                                      -----
Effect of dilutive securities:
         Stock options and awards              --        110,930
                                       -------------------------
Diluted Earnings Per Share             $1,996,974      7,668,696      $0.26
                                                                      -----

Stock options for 54,559 and 37,067  shares of common stock were not  considered
in computing  diluted earnings per common share for the three months ending June
30, 2006 and June 30, 2005 respectively because they were antidilutive.  For the
six months ending June 30, 2006 and June 30, 2005,  stock options for 54,559 and
35,591 shares respectively were not considered.


                                  Page 8 of 29
<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 June 30, 2006
                                   Using          SFAS
                                   Previous       123 (R)          As
                                   Accounting     Adjustments      Reported

Income before income taxes          $  1,404          $(3)          $  1,401
Income taxes                             355            1                354
                                    --------          ---           --------
Net income                          $  1,049          $(2)          $  1,047
                                    ========          ===           ========

Basic earnings per share            $   0.14           --           $   0.14
Diluted earnings per share          $   0.14           --           $   0.14

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

Income before income taxes          $  2,645          $(8)          $  2,637
Income taxes                             664            2                662
                                    --------          ---           --------
Net income                          $  1,981          $(6)          $  1,975
                                    ========          ===           ========

Basic earnings per share            $   0.26           --           $   0.26
Diluted earnings per share          $   0.26           --           $   0.26

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    Six Months Ended
                                                        June 30, 2005        June 30, 2005
                                                        -------------        -------------
Net income:                                             (in thousands, except per share data)
<S>                                                       <C>                  <C>
        As reported                                       $   1,022            $   1,997
Deduct: Total stock-based employee
        Compensation expense determined under
        fair value method, net of related taxes                 (18)                 (36)
                                                          ---------            ---------
Pro forma                                                 $   1,004            $   1,961
                                                          =========            =========

Earnings per share:
  As reported
        Basic                                             $    0.13            $    0.26
        Diluted                                           $    0.13            $    0.26
  Pro forma
        Basic                                             $    0.13            $    0.26
        Diluted                                           $    0.12            $    0.26
</TABLE>


                                  Page 9 of 29
<PAGE>

Note C - Stock-Based Compensation (Continued)

Compensation  expense  charged for the three  months  ended and six months ended
June 30, 2006 for stock options was $6,000 and $8,200 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.

During 2006, the Company issued 80,000 shares of restricted stock under the 2006
Recognition  and Retention  plan.  The market value of the 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  $89,232  and  $21,746  for the three  months  ended June 30, 2006 and 2005
respectively,  and $89,232 and $86,985 for the six month period  ending June 30,
2006 and 2005  respectively.  Shares  unallocated  under the plan  available for
future awards were 12,886 and 10,886 at June 30, 2006 and 2005 respectively.

Activity in the plan for 2006 was as follows:

<TABLE>
<CAPTION>
                                               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         $7.309
Granted                                  2,191       $11.500 - $11.700
Exercised                              (12,425)          $4.722
Forfeited                                 (675)          $4.722
                                       -------
Outstanding at June 30, 2006           187,239       $4.722-$18.167       187,239         $7.541
                                       =======
</TABLE>

The aggregate intrinsic value of all options outstanding and exercisable at June
30, 2006 was $645,800.

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 six months
ended June 30:

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

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

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

            $3.633 - $5.45            128,215      $ 4.722       3.78
            $9.094 - $10.90             4,465      $ 9.419       3.82
            $10.90 - $12.717           18,968      $11.994       3.82
            $12.717 - $14.534          18,689      $14.000       3.82
            $14.534 - $16.350           6,600      $17.247       3.82
            $16.350 - $18.167          10,302      $17.247       3.82
                                    ---------      -------      -----
                 Total average        187,239      $7.5409      3.795
                                    =========      =======      =====


                                 Page 10 of 29
<PAGE>

Note D - Dividend Restrictions

Oneida  Financial MHC, which owns 4,309,750 or 55.95% of the outstanding  shares
as of June 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  subject to the
condition that Oneida Financial  Corp.'s retained  earnings be restricted by the
dollar amount of dividends  waived by Oneida  Financial MHC. As of June 30, 2006
and December  31, 2005,  the retained  earnings  restricted  for cash  dividends
waived was $8,083,176 and $7,135,031, respectively.

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                  Six Months Ended
                                                          June 30,        June 30,         June 30,        June 30,
                                                            2006            2005            2006            2005
                                                            ----            ----            ----            ----
                                                                               (in thousands)
<S>                                                       <C>             <C>             <C>             <C>
Service cost                                              $     --        $     --        $      --       $      --
Interest cost                                               70,986          77,601          141,972         155,202
Expected return on plan assets                             (73,005)        (97,693)        (146,010)       (195,386)
Amortization of unrecognized loss                           18,539          33,903           37,078          67,806
Amortization of unrecognized prior service liability            --              --               --              --
                                                          --------        --------        ---------       ---------
         Net pension and postretirement cost              $ 16,520        $ 13,811        $  33,040       $  27,622
                                                          ========        ========        =========       =========

                                                             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%
</TABLE>

The rate of compensation increase is expected to be 0% as the plan was frozen as
of June 15, 2004. As of June 30, 2006, contributions to the plan totaled $9,950.
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
June 30, 2006 and December 31, 2005:

<TABLE>
<CAPTION>
                                                             June 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                         $   33,599      $       --      $    1,438
         Corporate                                  18,163              73             567
         State and municipals                       24,522              41             482
                                                ----------      ----------      ----------
                                                    76,284             114           2,487
     Equity investments:
         Preferred and other equity stocks          14,077             206             358
         Mutual fund                                 2,714              --              69
                                                ----------      ----------      ----------
                                                $   93,075      $      320      $    2,914
                                                ==========      ==========      ==========
Mortgage-Backed Securities
  Available for sale portfolio:
  -----------------------------
     Fannie Mae                                 $    8,021      $       --      $      384
     Freddie Mac                                    17,169              --             866
     Small Business Administration                      17              --              --
     Collateralized Mortgage Obligations             1,938              --              80
                                                ----------      ----------      ----------
                                                $   27,145      $       --      $    1,330
                                                ==========      ==========      ==========
</TABLE>


                                 Page 11 of 29
<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 June 30, 2006 and December 31, 2005 of $185,000 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 June 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 29
<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           Six Months Ended
                                     June 30,      June 30,     June 30,       June 30,
                                       2006          2005         2006           2005
                                       ----          ----         ----           ----
                                                       (in thousands)
<S>                                  <C>           <C>           <C>           <C>
Balance at beginning of period:      $ 2,063       $ 1,972       $ 1,959       $ 1,982
Net charge-offs:
     Charge-offs                         (83)         (129)         (140)         (237)
     Recoveries                           29            37           110            55
                                     -------       -------       -------       -------
Net charge-offs                          (54)          (92)          (30)         (182)
Provision for loan losses                 80            80           160           160
                                     -------       -------       -------       -------
Balance at end of period             $ 2,089       $ 1,960       $ 2,089       $ 1,960
                                     =======       =======       =======       =======
</TABLE>

<TABLE>
Impaired loans were as follows:                     June 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      $        18          $        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 six months ended June 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
doing business as 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 June 30, 2006
                                                           ----------------------------------------------------------------
                                                             Banking         Insurance      Benefit Consulting
                                                           Activities       Activities          Activities         Total
                                                                          (in thousands)
<S>                                                        <C>              <C>                <C>              <C>
Net interest income                                        $     3,235      $        --        $        --      $     3,235
Provision for loan losses                                           80               --                 --               80
                                                           -----------      -----------        -----------      -----------
  Net interest income after provision for loan losses            3,155               --                 --            3,155
Other income                                                       901            2,407              1,535            4,843
Other expenses                                                   3,287            2,005              1,305            6,597
                                                           -----------      -----------        -----------      -----------
   Income before income taxes                                      769              402                230            1,401
Income tax expense                                                 159              125                 70              354
                                                           -----------      -----------        -----------      -----------
   Net income                                              $       610      $       277        $       160      $     1,047
                                                           ===========      ===========        ===========      ===========
</TABLE>


                                 Page 13 of 29
<PAGE>

Note H - Segment Information (Continued)

<TABLE>
<CAPTION>
                                                                               Three Months Ended June 30, 2005
                                                           ------------------------------------------------------------------
                                                              Banking         Insurance    Benefit Consulting
                                                            Activities        Activities       Activities           Total
                                                                            (in thousands)
<S>                                                        <C>               <C>               <C>               <C>
Net interest income                                        $      3,322      $         --      $         --      $      3,322
Provision for loan losses                                            80                --                --                80
                                                           ------------      ------------      ------------      ------------
  Net interest income after provision for loan losses             3,242                --                --             3,242
Other income                                                        887             2,164                --             3,051
Other expenses                                                    3,087             1,799                --             4,886
                                                           ------------      ------------      ------------      ------------
    Income before income taxes                                    1,042               365                --             1,407
Income tax expense                                                  270               115                --               385
                                                           ------------      ------------      ------------      ------------
    Net income                                             $        772      $        250      $         --      $      1,022
                                                           ============      ============      ============      ============

<CAPTION>
                                                                               Six Months Ended June 30, 2006
                                                           ------------------------------------------------------------------
                                                              Banking         Insurance    Benefit Consulting
                                                            Activities        Activities       Activities           Total
                                                                            (in thousands)
<S>                                                        <C>               <C>               <C>               <C>
Net interest income                                        $      6,423      $         --      $         --      $      6,423
Provision for loan losses                                           160                --                --               160
                                                           ------------      ------------      ------------      ------------
  Net interest income after provision for loan losses             6,263                --                --             6,263
Other income                                                      1,919             4,813             1,535             8,267
Other expenses                                                    6,648             3,940             1,305            11,893
                                                           ------------      ------------      ------------      ------------
    Income before income taxes                                    1,534               873               230             2,637
Income tax expense                                                  317               275                70               662
                                                           ------------      ------------      ------------      ------------
    Net income                                             $      1,217      $        598      $        160      $      1,975
                                                           ============      ============      ============      ============

<CAPTION>
                                                                                Six Months Ended June 30, 2005
                                                           ------------------------------------------------------------------
                                                              Banking         Insurance    Benefit Consulting
                                                            Activities        Activities       Activities           Total
                                                                            (in thousands)
<S>                                                        <C>               <C>               <C>               <C>
Net interest income                                        $      6,652      $         --      $         --      $      6,652
Provision for loan losses                                           160                --                --               160
                                                           ------------      ------------      ------------      ------------
  Net interest income after provision for loan losses             6,492                --                --             6,492
Other income                                                      1,691             4,293                --             5,984
Other expenses                                                    6,182             3,576                --             9,758
                                                           ------------      ------------      ------------      ------------
    Income before income taxes                                    2,001               717                --             2,718
Income tax expense                                                  496               225                --               721
                                                           ------------      ------------      ------------      ------------
    Net income                                             $      1,505      $        492      $         --      $      1,997
                                                           ============      ============      ============      ============
</TABLE>


                                 Page 14 of 29
<PAGE>

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 subsequently 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 doing
business as Benefit Consulting Group, Inc., is a wholly-owned subsidiary of
Oneida Savings Bank.


                                 Page 15 of 29
<PAGE>

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


                                 Page 16 of 29
<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.

      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  activities 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 June 30, 2006 the Company had  7,623,076  shares
and  7,633,310  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 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.  As of June 30, 2006 and December 31, 2005 the
retained  earnings  restricted  for cash  dividends  waived was  $8,083,176  and
$7,135,031.

      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
subsequently  merged  into  Bailey and  Haskell  Associates,  Inc.  Amortization
expense  related to the  acquisition  was $5,700 for the three months ended June
30, 2006 and $9,500 for the six months ended June 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.


                                 Page 17 of 29
<PAGE>

      The resulting company is doing business as Benefit Consulting Group, Inc.,
is a  wholly-owned  subsidiary  of Oneida  Savings  Bank.  The  acquisition  was
effective January 1, 2006.  Amortization  expense related to the acquisition was
approximately $125,000 as of June 20, 2006.

FINANCIAL CONDITION

      ASSETS.  Total assets at June 30, 2006 and at December  31, 2005  remained
stable at $436.8  million.  Investment  securities  decreased  $13.4 million and
mortgage-backed securities decreased $2.0 million due to the principal collected
on and proceeds from sales and  maturities of  investment  and mortgaged  backed
securities.  Investments  were sold during the second quarter 2006 as funds were
redeployed in higher yielding loans. Loans receivable,  including loans held for
sale,  increased  $8.8 million to $246.8  million at June 30, 2006 compared with
$238.0 million at December 31, 2005. At June 30, 2006,  total  commercial  loans
increased by $3.6  million,  residential  mortgages  increased by $3.2  million,
commercial  real estate  loans  increased  by $1.8  million and  consumer  loans
increased  $550,000  from  December  31,  2005.  Mortgage  loans  held  for sale
decreased  $343,000,  after the sale of $7.8 million of  fixed-rate  residential
real estate loans in the  secondary  market during the six months ended June 30,
2006. Goodwill and other intangibles increased to $20.0 million as June 30, 2006
as compared with $14.3 at December 31, 2005 due to the payment of the contingent
purchase consideration payment for 2005 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 June
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 June 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.

      Premises and  equipment  increased  $2.0 million from December 31, 2005 to
June 30, 2006 as a result of the  construction of a 15,000 square foot insurance
office  located  in Clay,  New York  which  will  replace  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 $805,000 to $382.4 million at
June 30,  2006 from  $383.2  million at  December  31,  2005.  The  decrease  is
primarily the result of a decrease in borrowings as the overnight line of credit
of $10.9  million as of December 31, 2005 was reduced to $5.5 million as of June
30, 2006. Total borrowings decreased $8.4 million from $77.3 million at December
31,  2005 to  $68.9  million  at June  30,  2006.  Offsetting  the  decrease  in
borrowings,  interest bearing  deposits  increased $5.1 million and non-interest
bearing  deposits  increased  $1.1 million.  Other  liabilities  increased  $1.4
million 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 June 30,  2006 was
$54.5 million,  an increase of $866,000 from $53.6 million at December 31, 2005.
The increase in  stockholders'  equity was due to the addition of after-tax  net
income of  $1,975,000  for the six months ended June 30, 2006.  Offsetting  this
equity  increase  was a  decrease  in the  valuation  adjustments  made  for the
Company's  available  for  sale  investment  and   mortgage-backed   securities.
Accumulated Other  Comprehensive  Income (Loss) decreased $496,000 from December
31,  2005.  The  payment of the  Company's  semiannual  cash  dividend  of $0.22
resulted in a reduction in stockholders' equity of $744,000.


                                 Page 18 of 29
<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 six months ended June 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 June 30,                      Twelve Months Ended Dec. 31,
                                       -----------------------------------------------------          ------------------------------
                                                       2006                           2005                           2005
                                          Average    Interest            Average    Interest            Average    Interest
                                        Outstanding   Earned/  Yield/  Outstanding  Earned/   Yield/  Outstanding   Earned/   Yield/
Assets                                    Balance      Paid     Rate     Balance      Paid     Rate     Balance      Paid      Rate
------                                    -------      ----     ----     -------      ----     ----     -------      ----      ----
                                                                             (Dollars in Thousands)
<S>                                      <C>         <C>        <C>      <C>         <C>       <C>      <C>         <C>        <C>
Interest-earning Assets:
------------------------
  Loans Receivable*                      $241,738    $  4,027   6.66%    $221,439    $3,406    6.15%    $226,940    $14,197    6.26%
  Investment and Mortgage-Backed
     Securities                           110,794       1,268   4.58%     135,724     1,537    4.53%     132,251      6,026    4.56%
  Federal Funds                             1,270          15   4.72%       1,737        12    2.76%       1,349         49    3.63%
  Equity Securities                        17,012         219   5.15%      19,440       179    3.68%      19,934        740    3.71%
                                         --------    --------  -----     --------    ------   -----     --------    -------   -----
    Total Interest-earning Assets         370,814       5,529   5.96%     378,340     5,134    5.43%     380,474     21,012    5.52%
                                         --------    --------  -----     --------    ------   -----     --------    -------   -----
Non interest-earning assets:
----------------------------
  Cash and due from banks                   9,649                          10,545                         10,781
  Other assets                             51,687                          39,947                         41,566
                                         --------                        --------                       --------
              Total assets               $432,150                        $428,832                       $432,821
                                         ========                        ========                       ========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing Liabilities:
-----------------------------
  Money Market Deposits                  $ 41,219    $    270   2.63%    $ 40,217    $  120    1.20%    $ 44,352    $   706    1.59%
  Savings Accounts                         70,486         124   0.71%      74,299        85    0.46%      73,036        395    0.54%
  Interest-bearing Checking                30,931          24   0.31%      28,633        38    0.53%      29,348        132    0.45%
  Time Deposits                           107,193         973   3.64%     110,599       810    2.94%     109,030      3,313    3.04%
  Borrowings                               68,614         849   4.96%      66,688       757    4.55%      68,335      3,139    4.59%
  Notes Payable                               406          54  53.35%          45         2   17.83%          37          2    5.41%
                                         --------    --------  -----     --------    ------   -----     --------    -------   -----
    Total Interest-bearing Liabilities    318,849       2,294   2.89%     320,481     1,812    2.27%     324,138      7,687    2.37%
                                         --------    --------  -----     --------    ------   -----     --------    -------   -----
Non interest-bearing liabilities:
---------------------------------
  Demand deposits                          51,317                          50,889                         50,490
  Other liabilities                         7,279                           5,428                          5,358
                                         --------                        --------                       --------
      Total liabilities                  $377,445                        $376,798                       $379,986
                                         --------                        --------                       --------
Stockholders' equity                       54,705                          52,034                         52,835
                                         --------                        --------                       --------
Total liabilities and stockholders'
equity                                   $432,150                        $428,832                       $432,821
                                         ========                        ========                       ========
    Net Interest Income                              $  3,235                        $3,322                         $13,325
                                                     ========                        ======                         =======
    Net Interest Spread                                         3.08%                          3.16%                           3.15%
                                                                ====                          =====                           =====
    Net Earning Assets                   $ 51,965                        $ 57,859                       $ 56,336
                                         ========                        ========                       ========
   Net yield on average
      Interest-earning assets                            3.49%                         3.51%                           3.50%
                                                     ========                        ======                         =======
    Average interest-earning
      assets to average
      Interest-bearing liabilities                     116.30%                       118.05%                         117.38%
                                                     ========                        ======                         =======
</TABLE>


                                 Page 19 of 29
<PAGE>

<TABLE>
<CAPTION>
                                                      Six Months Ended June 30,                        Twelve MonthsEnded Dec. 31,
                                      ------------------------------------------------------          -----------------------------
                                                      2006                            2005                           2005
                                         Average   Interest              Average    Interest            Average    Interest
                                      Outstanding   Earned/   Yield/   Outstanding   Earned/  Yield/  Outstanding   Earned/   Yield/
Assets                                   Balance     Paid      Rate      Balance      Paid     Rate     Balance      Paid     Rate
------                                   -------     ----      ----      -------      ----     ----     -------      ----     ----
                                                                           (Dollars in Thousands)
<S>                                     <C>         <C>        <C>      <C>        <C>         <C>      <C>       <C>         <C>
Interest-earning Assets:
------------------------
  Loans Receivable*                     $239,774    $ 7,832    6.53%    $218,691   $  6,738    6.16%    $226,940  $ 14,197    6.26%
  Investment and Mortgage-Backed
      Securities                         113,399      2,596    4.58%     136,578      3,113    4.56%     132,251     6,026    4.56%
  Federal Funds                            1,110         28    5.05%       1,665         27    3.24%       1,349        49    3.63%
  Equity Securities                       18,825        418    4.44%      18,805        337    3.58%      19,934       740    3.71%
                                        --------    -------   -----     --------   --------   -----     --------  --------   -----
    Total Interest-earning Assets        373,108     10,874    5.83%     375,739     10,215    5.44%     380,474    21,012    5.52%
                                        --------    -------   -----     --------   --------   -----     --------  --------   -----
Non interest-earning assets:
----------------------------
  Cash and due from banks                 10,194                          10,827                         10,781
  Other assets                            48,833                          40,030                         41,566
                                        --------                        --------                       --------
         Total assets                   $432,135                        $426,596                       $432,821
                                        ========                        ========                       ========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing Liabilities:
-----------------------------
  Money Market Deposits                 $ 41,986    $   527    2.53%    $ 40,332   $    249    1.24%    $ 44,352  $    706    1.59%
  Savings Accounts                        70,208        241    0.69%      73,672        163    0.45%      73,036       395    0.54%
  Interest-bearing Checking               30,931         47    0.31%      28,737         60    0.42%      29,348       132    0.45%
  Time Deposits                          106,482      1,879    3.56%     110,478      1,591    2.90%     109,030     3,313    3.04%
  Borrowings                              70,385      1,701    4.87%      65,998      1,498    4.58%      68,335     3,139    4.59%
  Notes Payable                              275         56   41.06%          60          2    6.72%          37         2    5.41%
                                        --------    -------   -----     --------   --------   -----     --------  --------   -----
    Total Interest-bearing Liabilities   320,267      4,451    2.80%     319,277      3,563    2.25%     324,138     7,687    2.37%
                                        --------    -------   -----     --------   --------   -----     --------  --------   -----
Non interest-bearing liabilities:
---------------------------------
  Demand deposits                         50,606                          49,636                         50,490
  Other liabilities                        7,081                           5,296                          5,358
                                        --------                        --------                       --------
      Total liabilities                 $377,954                        $374,209                       $379,986
                                        --------                        --------                       --------
Stockholders' equity                      54,181                          52,389                         52,835
                                        --------                        --------                       --------
Total liabilities and stockholders'
equity                                  $432,135                        $426,598                       $432,821
                                        ========                        ========                       ========

  Net Interest Income                               $ 6,423                     $  6,652                       $ 13,325
                                                    =======                     ========                       ========
  Net Interest Spread                                         3.03%                           3.19%                          3.15%
                                                              =====                           =====                          =====
  Net Earning Assets                    $ 52,841                        $ 56,462                       $ 56,336
                                        ========                        ========                       ========
  Net yield on average
    Interest-earning assets                         3.44%                           3.54%                          3.50%
                                                    ======                        =======                          ======
  Average interest-earning
    assets to average
    Interest-bearing liabilities                    116.50%                         117.68%                        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  June  30,  2006  was
$1,047,000,  an increase of $25,000 or 2.4% from $1,022,000 for the three months
ended June 30,  2005.  Net income  for the six  months  ended June 30,  2006 was
$1,975,000,  a decrease  of $22,000 or 1.1% from  $1,997,000  for the six months
ended June 30, 2005.  The fairly  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 $395,000 or
7.7%, to $5.5 million for the three months ended June 30, 2006 from $5.1 million
for three months  ended June 30,  2005.  For the six months ended June 30, 2006,
interest and dividend income increased by $659,000 or 6.5% to $10.9 million from
$10.2  million for the six months ended June 30, 2005.  The increase in interest
income was the result of an increase in the  average  yield of  interest-earning
assets offset by a decrease in the average  balances during the three months and
six months ended June 30, 2006 compared to the same periods in 2005.


                                 Page 20 of 29
<PAGE>

      Interest on loans increased  $621,000 to $4.0 million for the three months
ended June 30, 2006 from $3.4  million for the three months ended June 30, 2005.
The  increase  in  interest  income on loans is a result of an increase of $20.3
million in the average  balance of loans  receivable  for the three months ended
June 30, 2006 as compared with the same period in 2005 as well as an increase of
51 basis  points in the average  yield to 6.66% for the three  months ended June
30, 2006 from 6.15% for the three months ended June 30, 2005. For the six months
ended June 30, 2006, the average  balance of loans increased $21.1 million while
the average yield increased 37 basis points to 6.53% during the 2006 period from
6.16%  during the 2005 period.  The average  balance of  commercial  real estate
loans  increased  $6.7  million  at June 30,  2006 from June 30,  2005 while the
average  balance of commercial  business loans increased $3.0 million during the
six months ended 2006 compared with 2005.  Consumer loans increased $9.4 million
during the 2006 period as compared to 2005.  The average  balance of residential
real  estate  loans  increased  $2.5  million  for the same time  period,  after
recording the sale of $16.3 million in fixed rate one-to-four family residential
real estate loans.

      Investment  income  decreased  $269,000  as a result of a decrease  in the
average balance of investment securities and mortgage-backed securities of $24.9
million for the three months  period  ending June 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 5 basis  points to 4.58% for the three  months
ended June 30, 2006 from 4.53% for the three months ended June 30, 2005. For the
six months ended June 30, 2005, investment income decreased $517,000 as compared
with the same  period  in 2005  due to a  decrease  in the  average  balance  of
investment  and  mortgage-backed  securities  of $23.2 million for the six month
period ending June 30, 2006 as compared with the same period in 2005.

      Interest income from federal funds increased during the three months ended
June 30,  2006 to $15,000 as compared  with  $12,000  for the 2005  period.  The
increase  in interest  income is due to an  increase of 196 basis  points in the
average yield offset by a decrease in the average  balance of $467,000.  For the
six months ended June 30, 2006,  interest income from federal funds increased by
$1,000 due an increase  of 181 basis  points in the  average  yield  offset by a
decrease in the average balance of $555,000.

      INTEREST  EXPENSE.  Interest expense was $2.3 million for the three months
ended June 30,  2006,  an  increase of $482,000 or 26.6% 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
$849,000  for the second  quarter of 2006  compared  with  $757,000 for the 2005
period.  The average cost of borrowed  funds  increased 41 basis points to 4.96%
for the three  months  ended June 30, 2006 from 4.55% for the three months ended
June 30,  2005.  For the six months  ended June 30,  2006,  interest  expense on
borrowed  funds  increased  $203,000  due to an increase in the average  cost of
borrowed funds of 29 basis points from 4.58% to 4.87%. In addition,  the average
balance outstanding of borrowings increased during the six months ended June 30,
2006 to $70.4  million  compared to $66.0  million  for the six month  period in
2006.  Interest expense on deposits  increased $338,000 and totaled $1.4 million
for the three  months  ended June 30, 2006 as  compared to $1.1  million for the
three month period in 2005. The average cost of deposits was 2.23% for the three
month period ending June 30, 2006 compared with 1.66% for the three month period
in 2005. In addition,  the average  balance of deposit  accounts  decreased $3.9
million from June 2005 to June 2006. For the six months ended June 30, 2006, the
average  cost of  deposits  was 2.18% as  compared  with 1.64% for the six month
period in 2005. In addition,  the average balance of deposit accounts  decreased
$3.6  million for the six months  ended June 30,  2006 as compared  with the six
months ended June 30, 2005.

      PROVISION FOR LOAN LOSSES.  Total  provision for loan losses for the three
months ended June 30, 2006 and 2005 were $80,000.  For the six months ended June
30, 2006 and 2005, total provision for loan losses were $160,000.  The allowance
for loan losses was $2.1 million or 0.85% of loans  receivable  at June 30, 2006
as compared  with $2.0  million or 0.87% of loans  receivable  at June 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 $1.8 million for the
three-month period ending June 30, 2006 compared with the same period in 2005 to
$4.8 million from $3.1  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  acquisition  of Benefit
Consulting Group LLC effective January 1, 2006. Commissions and fees on sales of
non-banking  products  was $3.9 million for the three months ended June 30, 2006
as compared to $2.2 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 June 30,  2006 of $9,000 as
compared to net gains of $41,000 for the same period in 2005.

      For the six months ended June 30, 2006,  other operating  income increased
$2.3  million to $8.3  million as of June 30, 2006 from $6.0 million for the six
months  ended June 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 $6.3 million


                                 Page 21 of 29
<PAGE>

for the six months  ended June 30, 2006 as compared to $4.3  million for the six
months ended in 2005. In addition, service charges on deposit accounts increased
$115,000 or 11.4% for the six months ended June 30, 2006  compared  with the six
months ended June 30, 2005.

      OTHER  EXPENSES.  Other  operating  expenses  increased by $1.7 million or
35.0%,  to $6.6  million  for the three  months  ended  June 30,  2006 from $4.9
million  for the same  period  in 2005.  Compensation  expense  increased  $1.2,
million or 37.8% due to expenses  associated with the benefit  consulting  group
acquisition.  Equipment  and  occupancy  increased  $170,000 or 21.4% due to the
completion  of two new banking  facilities in Oneida and  Chittenango,  New York
during the last quarter  2005.  For the six months  ended June 30,  2006,  other
operating  expenses increased by $2.1 million to $11.9 million from $9.8 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 was  $354,000  for the three  months ended
June 30,  2006,  a decrease of $31,000  from the second  quarter 2005 expense of
$385,000.  For the six months  ended June 30,  2006,  the income tax expense was
$662,000,  a decrease of $59,000 from $721,000 for the six months ended June 30,
2005.  The effective tax rate decreased to 25.1% for the six months of 2006 from
26.5% for the six 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 second quarter
of 2006,  loan  originations  totaled  $31.2  million  compared to $32.0 million
during the second  quarter  of 2005.  The  purchases  of  investment  securities
totaled  $184,000  during the second quarter of 2006 as compared to $9.5 million
during the second  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 second quarter of 2006 cash flows
provided by the sale,  principal  payments and maturity of securities  available
for sale were $5.6  million  compared  to $11.7  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 June  30,  2006 the  Company  had
outstanding  commitments to originate loans of approximately $9.6 million, which
generally have an expiration  period of less than 120 days.  Commitments to sell
residential mortgages amounted to $4.6 million at June 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 $38.3 million at June 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 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


                                 Page 22 of 29
<PAGE>

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 June 30, 2006 the total of cash, interest-earnings demand accounts
and federal funds sold was $12.2 million.

At June 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
As of June 30, 2006:                                                   (Dollars in thousands)
<S>                                 <C>                    <C>        <C>                   <C>     <C>                      <C>
     Total Capital
        (to Risk Weighted Assets)   $   35,962             12.36%     $   23,281            8%      $   29,101            10%
     Tier I Capital
        (to Risk Weighted Assets)   $   33,873             11.64%     $   11,640            4%      $   17,461             6%
     Tier I Capital
        (to Average Assets)         $   33,873              8.29%     $   16,340            4%      $   20,425             5%

<CAPTION>
                                                                                                           To Be Well
                                                                                                       Capitalized Under
                                                                             For Capital                Prompt Corrective
                                               Actual                     Adequacy Purposes             Action Provisions
                                    ----------------------------      ------------------------      ------------------------
                                       Amount              Ratio         Amount          Ratio        Amount           Ratio
As of December 31, 2005:                                                (Dollars in thousands)
<S>                                   <C>                  <C>        <C>                   <C>     <C>                   <C>
     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 29
<PAGE>

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

<TABLE>
<CAPTION>
(Annualized where appropriate)                           Three Months Ending              Six Months Ended
                                                              June 30,                         June 30,
                                                        2006            2005            2006            2005
                                                        ----            ----            ----            ----
<S>                                                  <C>             <C>             <C>             <C>
Performance Ratios:
   Return on average assets                              0.97%           0.95%           0.91%           0.94%
   Return on average equity                              7.66%           7.86%           7.29%           7.62%
   Net interest margin                                   3.49%           3.51%           3.44%           3.54%
   Efficiency Ratio                                     79.69%          76.67%          79.66%          77.23%
   Ratio of operating expense
       to average total assets                           6.11%           4.56%           5.50%           4.58%
   Ratio of average interest-earning assets
       to average interest-bearing liabilities         116.30%         118.05%         116.50%         117.68%

Asset Quality Ratios:

   Non-performing assets to total assets                 0.03%           0.01%           0.03%           0.01%
   Allowance for loan losses
       to non-performing loans                       1,632.03%       6,332.58%       1,632.03%       6,322.58%
   Allowance for loan losses
       to loans receivable, net                          0.85%           0.87%           0.85%           0.87%

Capital Ratios:

   Total stockholders' equity to total assets           12.47%          12.14%          12.47%          12.14%
   Average equity to average assets                     12.66%          12.13%          12.54%          12.28%
</TABLE>


                                 Page 24 of 29
<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 June 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 29
<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
six months ended June 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 29
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                                                 Maximum
                                                                                                 Number of
                                                                                                 Shares that
                           Total                                  Total Number of Shares         May Yet Be
                           Number of                              Purchased as Part of           Purchased
                           Shares        Average Price Paid       Publicly Announced             Under the
Period                     Purchased     per Share                Plans                          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 -            --            --                       --                             250,000
April 30, 2006
-------------------------------------------------------------------------------------------------------------
May 1, 2006 -              739           $11.50                   --                             --
May 31, 2006
-------------------------------------------------------------------------------------------------------------
June 1, 2006 -             --            --                       --                             --
June 30, 2006
-------------------------------------------------------------------------------------------------------------
Total                      2,191         $11.63                   --                             250,000
-------------------------------------------------------------------------------------------------------------
</TABLE>

Item 3      Defaults Upon Senior Securities

            Not applicable.

Item 4      Submission of Matters to a Vote of Security Holders

            At the Annual Meeting of Shareholders, held on April 25, 2006,
            shareholders voted on the following matters as follows:

            Proposal No. 1 - Election of Directors

                                                        For          Withheld
                                                        ---          --------
            Patricia D. Caprio                      7,289,491         10,246
            Frank O. White Jr.                      7,286,601         13,136
            Gerald N. Volk                          7,289,814          9,923
            Marlene C. Denney                       7,244,454         55,283
            Michael A. Miravalle                    7,289,873          9,864

            Proposal No.2 - 2006 Recognition and Retention Plan

            For               Against          Abstain
            ---               -------          -------
            6,398,089         35,314           15,398

            Proposal No. 3 - Ratification of Crowe Chizek and Company LLC as
            auditors for the Company for the fiscal year ended December 31,
            2006:

            For               Against          Abstain
            ---               --------         -------
            7,291,552         4,274            8,407

Item 5      Other Information

            None


                                 Page 27 of 29
<PAGE>

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 28 of 29
<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: August 14, 2006                 By: /s/ Michael R. Kallet
                                          --------------------------------------
                                          Michael R. Kallet
                                          President and Chief Executive Officer


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


                                 Page 29 of 29