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

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

      For the quarterly period ended September 30, 2008

                        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 [ ] Non-accelerated filer
                          [X] Smaller reporting company

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:
    Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: There were 7,733,560 shares
      of the Registrant's common stock outstanding as of November 1, 2008.

<PAGE>

                             ONEIDA FINANCIAL CORP.
                                      INDEX

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

   Item 1.    Financial Statements                                                       1

              Consolidated Statements of Condition (unaudited)
              As of September 30, 2008 and December 31, 2007                             2

              Consolidated Statements of Operations (unaudited)
              For the three and nine months ended September 30, 2008 and 2007            3

              Consolidated Statements of Comprehensive Income (unaudited)
              For the three and nine months ended September 30, 2008 and 2007            4

              Consolidated Statements of Changes in Stockholders' Equity (unaudited)
              For the three months ended March 31, June 30, and September 30, 2008       5

              Consolidated Statements of Cash Flows (unaudited)
              For the three and nine months ended September 30, 2008 and 2007            6

              Notes to Consolidated Financial Statements (unaudited)                     7

   Item 2.    Management's Discussion and Analysis of Financial Condition
              And Results of Operations                                                 18

   Item 3.    Quantitative and Qualitative Disclosures about Market Risk                27

   Item 4T.   Controls and Procedures                                                   28

PART II.      OTHER INFORMATION                                                         28

   Item 1.    Legal Proceedings                                                         28

   Item 1a.   Risk Factors                                                              29

   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds               30

   Item 3.    Defaults Upon Senior Securities                                           30

   Item 4.    Submission of Matters to a Vote of Security Holders                       30

   Item 5.    Other Information                                                         30

   Item 6.    Exhibits                                                                  30
</TABLE>

<PAGE>

PART I.       FINANCIAL INFORMATION
                Item I.    Financial Statements

                                  Page 1 of 31

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
At September 30, 2008 and December 31, 2007

<TABLE>
<CAPTION>
                                                                       (unaudited)
                                                                     At September 30,   At December 31,
                                                                           2008              2007
                                                                     ----------------   ---------------
                                                                     (in thousands, except share data)
<S>                                                                  <C>                <C>
ASSETS
       Cash and due from banks                                         $    24,342         $  14,744
       Federal funds sold                                                       20             1,717
                                                                     ----------------------------------
TOTAL CASH AND CASH EQUIVALENTS                                             24,362            16,461

       Trading securities                                                    6,591                --
       Investment securities, at fair value                                 62,650            95,811
       Mortgage-backed securities, at fair value                            75,562            46,583

       Mortgage loans held for sale                                            217             3,593

       Loans receivable                                                    300,974           283,336
       Allowance for loan losses                                            (2,488)           (2,511)
                                                                     ----------------------------------
LOANS RECEIVABLE, NET                                                      298,486           280,825

       Federal Home Loan Bank stock                                          3,640             3,404
       Bank premises and equipment, net                                     21,938            22,532
       Accrued interest receivable                                           2,464             2,658
       Other assets                                                         13,923            10,534
       Cash surrender value - life insurance                                14,876            14,480
       Goodwill                                                             22,963            22,793
       Other intangible assets                                               2,233             2,641
       ------------------------------------------------------------------------------------------------
       TOTAL ASSETS                                                    $   549,905         $ 522,315
       ================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
       Interest bearing deposits                                       $   373,781         $ 334,444
       Non-interest bearing deposits                                        65,896            65,685
       Borrowings                                                           51,900            56,400
       Notes payable                                                            50               158
       Other liabilities                                                     7,489             6,288
                                                                     ----------------------------------
TOTAL LIABILITIES                                                          499,216           462,975
Stockholders' equity:
       Preferred stock, 1,000,000 shares authorized                             --                --
       Common stock ($.01 par value; 20,000,000 shares authorized;
          8,322,452 shares issued)                                              83                83
       Additional paid-in capital                                           19,186            19,053
       Retained earnings                                                    39,909            46,435
       Accumulated other comprehensive (loss)                               (5,419)           (3,161)
       Treasury stock (at cost, 537,156 and 537,256 shares)                 (3,070)           (3,070)
       ------------------------------------------------------------------------------------------------
       TOTAL STOCKHOLDERS' EQUITY                                           50,689            59,340
       ------------------------------------------------------------------------------------------------
       TOTAL LIABILITIES AND
       STOCKHOLDERS' EQUITY                                            $   549,905         $ 522,315
       ================================================================================================
</TABLE>

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

                                  Page 2 of 31

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 2008 (unaudited)
and 2007 (unaudited)

<TABLE>
<CAPTION>
                                                                      Three Months Ended              Nine Months Ended
                                                                September 30,   September 30,   September 30,   September 30,
                                                                    2008            2007            2008            2007
                                                                -------------   -------------   -------------   -------------
                                                                       (in thousands, except share and per share data)
<S>                                                             <C>             <C>             <C>             <C>
INTEREST INCOME:
      Interest and fees on loans                                  $ 4,634          $ 4,816         $ 13,857       $ 13,669
      Interest on investment and mortgage-
         backed securities                                          1,862            1,421            5,410          3,904
      Dividends on equity securities                                  136              206              160            603
      Interest on federal funds sold and interest-earning
         deposits                                                      19              216              668            639
-----------------------------------------------------------------------------------------------------------------------------
   Total interest and dividend income                               6,651            6,659           20,095         18,815
-----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
      Savings deposits                                                161              154              459            423
      Money market and interest-bearing checking                      489              565            1,407          1,468
      Time deposits                                                 1,431            1,696            4,757          4,589
      Borrowings                                                      645              693            1,954          2,233
      Notes Payable                                                     1                9                4             37
-----------------------------------------------------------------------------------------------------------------------------
         Total interest expense                                     2,727            3,117            8,581          8,750
-----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                                 3,924            3,542           11,514         10,065
      Less: Provision for loan losses                                 125               --              275             --
-----------------------------------------------------------------------------------------------------------------------------
   Net interest income after provision for loan losses              3,799            3,542           11,239         10,065
-----------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
      Gain on sale of securities, net                                   5               --               24              1
      (Loss) on impairment of securities                             (831)              --             (832)            --
      Gain on sale of mortgages, net                                   36               24              108             97
      Commissions and fees on sales of non-banking products         3,178            3,486           10,050         10,184
      Other operating income                                        1,254            1,048            3,409          3,053
      Changes in fair value on trading securities                  (6,436)              --           (7,035)            --
-----------------------------------------------------------------------------------------------------------------------------
   Total other income (loss)                                       (2,794)           4,558            5,724         13,335
-----------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
      Compensation and employee benefits                            4,361            4,222           13,656         12,671
      Occupancy expenses, net                                       1,237            1,103            3,520          3,225
      Other operating expense                                       1,449            1,470            4,360          4,128
-----------------------------------------------------------------------------------------------------------------------------
   Total other expenses                                             7,047            6,795           21,536         20,024
-----------------------------------------------------------------------------------------------------------------------------
(LOSS) INCOME BEFORE INCOME TAXES                                  (6,042)           1,305           (4,573)         3,376
-----------------------------------------------------------------------------------------------------------------------------
   Provision (benefit) for income taxes                            (1,614)             374           (1,220)           943
-----------------------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME                                                $ (4,428)         $   931         $ (3,353)      $  2,433
=============================================================================================================================
EARNINGS (LOSS) PER SHARE - BASIC                                $  (0.57)         $  0.12         $  (0.43)      $   0.32
=============================================================================================================================
EARNINGS (LOSS) PER SHARE - DILUTED                              $  (0.57)         $  0.12         $  (0.43)      $   0.31
=============================================================================================================================
</TABLE>

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

                                  Page 3 of 31

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months and Nine Months Ended September 30, 2008 (unaudited) and
2007 (unaudited)

<TABLE>
<CAPTION>
                                                                         Three Months Ended              Nine Months Ended
                                                                   September 30,   September 30,   September 30,   September 30,
                                                                       2008            2007            2008            2007
                                                                   -------------   -------------   -------------   -------------
                                                                         (In thousands)                  (In thousands)
<S>                                                                <C>             <C>             <C>             <C>
Net (loss) income                                                  $      (4,428)  $         931   $      (3,353)  $       2,433
                                                                   -------------   -------------   -------------   -------------
Other comprehensive (loss) income, net of tax:

   Unrealized (losses) gains on securities arising
      during period                                                       (2,580)            653          (7,113)         (1,071)
      Less: reclassification adjustment for (losses)
         gains included in net income                                        826              --             808              (1)
                                                                   -------------   -------------   -------------   -------------
      Net unrealized (losses) gains                                       (1,754)            653          (6,305)         (1,072)
   Change in unrealized loss on pension benefits                              42              --             126              --
                                                                   -------------   -------------   -------------   -------------
Other comprehensive (loss) income before tax                              (1,712)            653          (6,179)         (1,072)
      Net income tax effect                                                  685            (261)          2,471             429
                                                                   -------------   -------------   -------------   -------------
Other comprehensive (loss) income, net of tax                             (1,027)            392          (3,708)           (643)

Comprehensive (loss) income                                        $      (5,455)  $       1,323   $      (7,061)  $       1,790
                                                                   =============   =============   =============   =============
</TABLE>

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

                                  Page 4 of 31

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, June 30, and September 30, 2008 (unaudited)

<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                   Additional                  Other
                                                 Common Stock        Paid-In    Retained   Comprehensive   Treasury
                                                Shares    Amount     Capital    Earnings   Income (Loss)    Stock      Total
                                                                   (in thousands, except number of shares)
<S>                                           <C>         <C>      <C>          <C>        <C>             <C>        <C>
Balance as of December 31, 2007               8,322,452   $   83   $   19,053   $ 46,435   $      (3,161)  $ (3,070)  $  59,340
Net income                                                                           429                                    429
Other comprehensive loss,
   net of tax                                                                                       (146)                  (146)
Shares earned under stock plans                                            44                                                44
Common stock dividends: $0.24 per share                                             (831)                                  (831)
Adjustment to initially apply SFAS No. 159
   net of tax (Note J)                                                            (1,519)          1,519                     --
Adjustment to initially apply measurement
   provisions of SFAS No. 158 (Note I)                                                 8             (69)                   (61)
                                              ----------------------------------------------------------------------------------

Balance as of March 31, 2008                  8,322,452   $   83   $   19,097   $ 44,522   $      (1,857)  $ (3,070)    $58,775
Net income                                                                           646                                    646
Other comprehensive loss,
   net of tax                                                                                     (2,535)                (2,535)
Shares earned under stock plans                                            41                                                41
                                              ----------------------------------------------------------------------------------

Balance as of June 30, 2008                   8,322,452   $   83   $   19,138   $ 45,168   $      (4,392)  $ (3,070)  $  56,927
Net loss                                                                          (4,428)                                (4,428)
Other comprehensive loss,
   net of tax                                                                                     (1,027)                (1,027)
Shares earned under stock plans                                            43                                                43
Tax benefit of stock plans                                                  5                                                 5
Common stock dividends: $0.24 per share                                             (831)                                  (831)
                                              ----------------------------------------------------------------------------------

Balance as of September 30, 2008              8,322,452   $   83   $   19,186   $ 39,909   $      (5,419)  $ (3,070)  $  50,689
                                              ==================================================================================
</TABLE>

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

                                  Page 5 of 31

<PAGE>

ONEIDA FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months and Nine Months Ended September 30, 2008 (unaudited) and
2007 (unaudited)

<TABLE>
<CAPTION>
                                                                        Three Months Ended               Nine Months Ended
                                                                  September 30,   September 30,   September 30,   September 30,
                                                                      2008            2007            2008            2007
                                                                  -------------   -------------   -------------   -------------
                                                                                          (in thousands)
<S>                                                               <C>             <C>             <C>             <C>
Operating Activities:
   Net (loss) income                                              $      (4,428)  $         931   $      (3,353)  $       2,433
   Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization                                         565             534           1,612           1,416
      Amortization of premiums/discounts on securities, net                  20               9              70              56
      Net change in fair value of trading securities                      6,436              --           7,035              --
      Provision for loan losses                                             125              --             275              --
      Stock compensation earned                                              43              44             128             132
      Loss on sale of other real estate                                       6              --              12              --
      Loss (gain) on sale/call of securities, net                           826              --             808              (1)
      Gain on sale of loans, net                                            (36)            (24)           (108)            (97)
      Gain on sale of fixed assets                                         (134)             --            (134)             --
      Income tax payable (receivable)                                      (145)         (2,017)            174          (1,909)
      Accrued interest receivable                                           216             171             194              76
      Other assets                                                          830             (68)            582            (834)
      Other liabilities                                                   2,359            (703)          1,193          (1,152)
      Origination of loans held for sale                                 (4,226)         (3,971)        (10,967)        (15,370)
      Proceeds from sales of loans                                        4,423           4,163          14,452          14,562
--------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by operating activities                        5,008           1,260           9,890           1,076
--------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
   Purchase of investment securities                                     (1,575)        (12,284)        (18,755)        (20,514)
   Principal collected on and proceeds of maturities
      sales or calls from investments                                     8,800           9,087          31,964          22,000
   Purchase of mortgage-backed securities                               (13,276)         (6,832)        (53,296)         (7,424)
   Principal collected on and proceeds from sales
      of mortgage-backed securities                                      16,831           6,307          23,502           9,514
   Net increase in loans                                                 (8,405)         (4,791)        (18,197)         (5,807)
   Purchase of bank premises and equipment                                 (207)         (1,667)           (608)         (4,425)
   Proceeds from sale of bank premises and equipment                        133              --             133              --
   Proceeds from sale of other real estate                                   23              --              92              22
   Purchase of insurance agency                                              --              --             (73)            (66)
   Purchase of consulting group                                              --              --              (8)           (132)
   Purchase of bank (net of cash acquired)                                   --              --            (129)            908
--------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) investing activities              2,324         (10,180)        (35,375)         (5,924)
--------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
   Net increase in demand deposit, savings,
      money market, interest-bearing checking and escrow                 12,535           6,450          34,272          12,507
   Net (decrease) increase in time deposits                                (867)          3,179           5,276          12,374
   Proceeds from borrowings                                              11,000          14,500          47,000          51,680
   Repayment of borrowings                                              (18,000)        (14,500)        (51,500)        (60,680)
   Cash dividends                                                          (831)           (832)         (1,662)         (1,663)
   Exercise of stock options (using treasury stock)                          --               5              --              34
--------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by financing activities                        3,837           8,802          33,386          14,252
--------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                         11,169            (118)          7,901           9,404
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period                         13,193          28,232          16,461          18,710
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                        $      24,362   $      28,114   $      24,362   $      28,114
================================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid for interest                                                    2,723           3,144           8,624           8,717
Cash paid for income taxes                                                   --             200             451             675

Supplemental noncash disclosures:
Transfer of loans to other real estate                                      156              --             260              22
Adoption of fair value option:
   Securities transferred from available for sale to trading                 --              --          16,187              --
   Deferred tax asset related to fair value adjustments                      --              --           1,255              --
================================================================================================================================
</TABLE>

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

                                  Page 6 of 31

<PAGE>

                             ONEIDA FINANCIAL CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)
                               SEPTEMBER 30, 2008

Note A - Basis of Presentation

The accompanying  unaudited  consolidated  financial  statements  include Oneida
Financial Corp. (the "Company") and its wholly owned subsidiary,  Oneida Savings
Bank (the  "Bank") as of  September  30, 2008 and  December 31, 2007 and for the
three  and  nine  month  periods  ended   September  30,  2008  and  2007.   All
inter-company  accounts and transactions  have been eliminated in consolidation.
The accompanying  unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim  financial  information and with the instructions to Form
10-Q.  Accordingly,  they do not include all of the  information  and  footnotes
required by  accounting  principles  generally  accepted in the United States of
America  for  complete  financial  statements.   The  preparation  of  financial
statements in conformity with accounting  principles  generally  accepted in the
United States of America  requires  management to make estimates and assumptions
that affect the reported  amounts of assets and  liabilities  and disclosures of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those  estimates.  In the opinion of  management,  the
unaudited  consolidated  financial statements include all necessary adjustments,
consisting of normal recurring  accruals,  necessary for a fair presentation for
the periods presented.

The Company  believes that the  disclosures are adequate to make the information
presented  not  misleading;  however,  results  of  operations  and  other  data
presented  are not  necessarily  indicative  of results to be  expected  for the
entire year.

The data in the  consolidated  balance  sheet for  December 31, 2007 was derived
from the Company's  2007 Annual Report on Form 10-K.  That data,  along with the
interim  financial  information  presented  in  the  consolidated  statement  of
condition,   statements  of  operations,   comprehensive   income,   changes  in
stockholders'  equity and cash flows should be read in conjunction with the 2007
consolidated  financial statements,  including the notes thereto included in the
Company's Annual Report on Form 10-K.

Amounts in the prior period's consolidated financial statements are reclassified
when necessary to conform with the current period's presentation.

Note B - Earnings per Share

Basic earnings per share is net income divided by the weighted average number of
common  shares  outstanding  during  the  period.  ESOP  shares  are  considered
outstanding for the calculation unless unearned. 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 periods ended
September 30:

                                               Income        Shares    Per Share

September 30, 2008:
-------------------
Net loss (Three Months Ended)                ($4,428,343)
                                             -----------

Basic Earnings Per Share:                    ($4,428,343)  7,726,810   ($  0.57)
                                                                       --------
Effect of dilutive securities:
   Stock options and awards                           --          --
                                             -----------------------
Diluted Earnings Per Share                   ($4,428,343)  7,726,810   ($  0.57)
                                                                       --------

September 30, 2007:
-------------------
Net income (Three Months Ended)              $   930,589
                                             -----------

Basic Earnings Per Share:                    $   930,589   7,684,764   $   0.12
                                                                       --------
Effect of dilutive securities:
   Stock options and awards                           --      80,404
                                             -----------------------
Diluted Earnings Per Share                   $   930,589   7,765,168   $   0.12
                                                                       --------

September 30, 2008:
-------------------
Net loss (Nine Months Ended)                 ($3,353,328)
                                             -----------

Basic Earnings Per Share:                    ($3,353,328)  7,726,753   ($  0.43)
                                                                       --------
Effect of dilutive securities:
   Stock options and awards                           --          --
                                             -----------------------
Diluted Earnings Per Share                   ($3,353,328)  7,726,753   ($  0.43)
                                                                       --------

September 30, 2007:
-------------------
Net income (Nine Months Ended)               $ 2,432,640
                                             -----------

Basic Earnings Per Share:                    $ 2,432,640   7,683,157   $   0.32
                                                                       --------

Effect of dilutive securities:
   Stock options and awards                           --      76,274
                                             -----------------------
Diluted Earnings Per Share                   $ 2,432,640   7,759,431   $   0.31
                                                                       --------

                                  Page 7 of 31

<PAGE>

Stock options for 107,841 and 52,013 shares of common stock were not considered
in computing diluted earnings per common share for the three months ending
September 30, 2008 and September 30, 2007 respectively because they were
antidilutive. For the nine months ending September 30, 2008 and September 30,
2007, stock options for 108,448 and 52,368 shares, respectively, were not
considered.

Note C - Stock-Based Compensation

The Company's 2000 Stock Option Plan, which is shareholder approved, permits the
granting of share options to its Company's directors, officers and key employees
for up to 374,568 shares of common stock. The exercise price of options granted
is equal to the market value of the Company's shares at the date of grant. All
unexercised options granted expire by April 2010 and options vest and become
exercisable ratably over a one to five-year period. The plan also has a reload
feature which entitles the option holder, who has delivered common stock as
payment of the exercise price for option stock, to a new option to acquire
additional shares in the amount equal to the shares traded in. The option period
during which the reload option may be exercised expires at the same time as that
of the original option that the holder has exercised. The Company has a policy
of using shares held as treasury stock to satisfy share option exercises. There
were 9,243 shares available for future grants under the plan described above as
of September 30, 2008 and 2007. There was no unrecognized compensation cost for
this plan as of September 30, 2008 as all shares vested under the terms of the
plan. There were no new grants during the year.

Activity in the plan for 2008 was as follows:

<TABLE>
<CAPTION>
                                               Range of
                                     -----------------------------   Weighted Average
                                                   Option Exercise   Exercise Price
                                       Options          Price        Shares             Intrinsic
                                     Outstanding      Per Share      Outstanding        Value
                                     ------------------------------------------------------------
<S>                                  <C>           <C>               <C>                <C>
Outstanding at December 31, 2007       179,267      $4.722-$18.167   $     7.676        $ 587,508
Granted                                     --
Exercised                                 (100)
Forfeited                               (3,450)     $        12.00
                                       -------
Outstanding at September 30, 2008      175,717      $4.722-$18.167   $     7.592        $ 452,944
                                       =======
</TABLE>

At September 30, 2008, the weighted average information for outstanding and
exercisable shares is as follows:

                         Shares outstanding and Exercisable
      --------------------------------------------------------------------
      Range of                                   Average       Average
      Exercise                                   Exercise   Remaining Life
      Price                             Shares   Price         (Years)
      --------------------------------------------------------------------
      $3.633 - $5.45                   119,890   $  4.722       1.57
      $9.084 - $10.90                    4,465   $  9.419       1.57
      $10.900 - $12.717                 15,771   $ 11.982       1.57
      $12.717 - $14.534                 18,689   $ 14.000       1.57
      $14.534 - $16.350                  6,600   $ 14.794       1.57
      $16.350 - $18.167                 10,302   $ 17.247       1.57
                                       -------   --------       ----
            Total                      175,717   $  7.592       1.57
                                       =======   ========       ====

                                  Page 8 of 31

<PAGE>

Note C - Stock-Based Compensation (Continued)

The Management Recognition and Retention Plans provide for the issuance of
shares of restricted stock to directors, officers and key employees.
Compensation expense equal to the market value of Oneida Financial Corp.'s stock
on the grant date is recognized ratably over the five year vesting period for
shares of restricted stock granted that will be fully vested at December 31,
2010. Compensation expense recorded in conjunction with these plans was $42,558
and $43,701 for the three months ended September 30, 2008 and 2007,
respectively, and $127,672 and $131,103 for the nine month period ending
September 30, 2008 and 2007, respectively. Shares unallocated under the plans
available for future awards were 14,086 and 12,886 at September 30, 2008 and
September 30, 2007 respectively. At September 30, 2008 and December 31, 2007,
there were nonvested shares of 44,400 and 45,600 respectively with unrecognized
compensation cost of $524,469 and $638,414 respectively.

Note D - Dividend Restrictions

Oneida  Financial MHC, which owns 4,309,750 or 55.45% of the outstanding  shares
as of September 30, 2008 of Oneida Financial Corp.,  filed a notice with the OTS
regarding  its intent to waive its right to receive cash  dividends  declared by
Oneida Financial Corp. The OTS did not object to the notice.

Note E - Pension Plan

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

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

<TABLE>
<CAPTION>
                                                              Three Months Ended                      Nine Months Ended
                                                        September 30,   September 30,           September 30,   September 30,
                                                            2008            2007                    2008             2007
                                                        -------------   -------------           -------------   -------------
<S>                                                     <C>             <C>                     <C>             <C>
Service cost                                            $          --   $          --           $          --   $          --
Interest cost                                                  55,000          55,000                 165,000         165,000
Expected return on plan assets                                (72,000)        (87,000)               (216,000)       (261,000)
Net amortization and deferral                                  42,000          14,000                 126,000          42,000
                                                        -------------   -------------           -------------   -------------
   Net periodic pension cost (benefit)                  $      25,000   $     (18,000)          $      75,000   $     (54,000)

Net loss (gain)                                               (25,200)             --                 (75,600)             --
Prior service cost (credit)                                        --              --                      --              --
                                                        -------------   -------------           -------------   -------------
   Total recognized in other comprehensive income             (25,200)             --                 (75,600)             --
                                                        -------------   -------------           -------------   -------------
Total recognized in net periodic benefit cost and
   Other comprehensive income                           $         200   $     (18,000)          $         600   $     (54,000)
                                                        =============   =============           =============   =============
</TABLE>

                                                             2008      2007
                                                            ------    ------
Weighted-average assumptions as of December 31:
   Discount rate                                             5.465%    5.080%
   Expected return on plan assets                            7.500%    9.000%

As of September 30, 2008, contributions to the pension plan totaled $28,000. The
Bank anticipates contributing $55,988 in 2008 to fund its pension plan.

State Bank of Chittenango participated in the New York State Bankers Retirement
System plan which was a noncontributory defined benefit plan covering
substantially all employees. Under the plan, retirement benefits were primarily
a function of the employee's years of service and level of compensation. The
plan was frozen as of May 31, 2002. State Bank of Chittenango used a September
30 measurement date for its pension plan and has transitioned to a December 31
measurement date effective January 1, 2008. See Note I for the impact on the
change in measurement date.

                                  Page 9 of 31

<PAGE>

Note E - Pension Plan (Continued)

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

<TABLE>
<CAPTION>
                                                              Three Months Ended                      Nine Months Ended
                                                        September 30,   September 30,           September 30,   September 30,
                                                            2008            2007                    2008            2007
                                                        -------------   -------------           -------------   -------------
<S>                                                     <C>             <C>                     <C>             <C>
Service cost                                            $       6,800   $       6,100           $      20,400   $      18,300
Interest cost                                                  33,700          33,400                 101,100         100,200
Expected return on plan assets                                (52,000)        (51,000)               (156,000)       (153,000)
                                                        -------------   -------------           -------------   -------------
   Net periodic pension cost (benefit)                  $     (11,500)  $     (11,500)          $     (34,500)  $     (34,500)

Net loss (gain)                                                    --              --                      --              --
Prior service cost (credit)                                        --              --                      --              --
                                                        -------------   -------------           -------------   -------------
   Total recognized in other comprehensive income                  --              --                      --              --
                                                        -------------   -------------           -------------   -------------

Total recognized in net periodic benefit cost and
   Other comprehensive income                           $     (11,500)  $     (11,500)          $     (34,500)  $     (34,500)
                                                        =============   =============           =============   =============
</TABLE>

                                                            2008    2007
                                                            ----    ----
Weighted-average assumptions as of December 31:
   Discount rate                                            6.25%   6.25%
   Expected return on plan assets                           7.50%   7.50%

As of September 30, 2008, there were no contributions to the plan during 2008.
The Bank does not anticipate contributing in 2008 to fund its pension plan.

Note F - Investment Securities and Mortgage-Backed Securities

Investment securities and mortgage-backed securities consist of the following at
September 30, 2008 and December 31, 2007:

                                                    September 30, 2008
                                               -----------------------------
                                                            Gross Unrealized
                                               Fair Value     Gains   Losses
                                               -----------------------------
                                                       (in thousands)
Investment Securities
Available for sale portfolio:
-----------------------------
   Debt securities:
      U. S. Agencies                           $   23,478   $    64   $  264
      Corporate debt and trust preferred           21,511        --    6,487
      State and municipals                         17,661       122      150
                                               ----------   -------   ------
                                               $   62,650   $   186   $6,901
                                               ==========   =======   ======
Mortgage-Backed Securities
Available for sale portfolio:
-----------------------------
   Fannie Mae                                  $   21,445   $    61   $  110
   Freddie Mac                                     26,558        53      128
   Ginnie Mae                                      19,934        34       81
   Small Business Administration                       13        --       --
   Collateralized Mortgage Obligations              7,612         3      671
                                               ----------   -------   ------
                                               $   75,562   $   151   $  990
                                               ==========   =======   ======

                                  Page 10 of 31

<PAGE>

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

                                                    December 31, 2007
                                               -----------------------------
                                                            Gross Unrealized
                                               Fair Value     Gains   Losses
                                               -----------------------------
                                                       (in thousands)

Investment Securities
  Available for sale portfolio:
-------------------------------
     Debt securities:
        U. S. Agencies                         $   37,949   $   146   $  202
        Corporate debt and trust preferred         24,955        45    1,381
        State and municipals                       19,252       148       17
                                               ----------   -------   ------
                                                   82,156       339    1,600
     Equity investments:

        Preferred and other equity stocks          10,459        --    2,196
        Mutual fund                                 3,196        --      336
                                               ----------   -------   ------
                                               $   95,811   $   339   $4,132
                                               ==========   =======   ======
Mortgage-Backed Securities
  Available for sale portfolio:
-------------------------------
     Fannie Mae                                $   15,481   $    98   $   98
     Freddie Mac                                   21,826        47      111
     Ginnie Mae                                     2,467        26       --
     Small Business Administration                     14        --       --
     Collateralized Mortgage Obligations            6,795        32       24
                                               ----------   -------   ------
                                               $   46,583   $   203   $  233
                                               ==========   =======   ======

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.

Unrealized losses on investment and mortgage-backed securities have not been
recognized into income because the issuer(s) securities are of investment grade
(except for General Motors Acceptance Corp. bond and three trust preferred
securities), management has the intent and ability to hold these securities for
the foreseeable future and the decline in fair value is largely due to declines
in market interest rates since the securities were purchased. 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 of $745,000 and $264,000 at September 30, 2008 and December 31,
2007 respectively has not been considered other than temporary in that 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.

The Company currently has a $2.5 million Sallie Mae bond, maturing May 1, 2012
which is rated investment grade. The unrealized loss at September 30, 2008 and
December 31, 2007 of $831,000 and $431,000 respectively has not been considered
other-than-temporary in that 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 that based on credit ratings and assessment of likelihood of
default the Company has concluded that it is probable that payment will be made
at maturity.

The Company currently has $7.8 million of trust preferred securities as of
September 30, 2008. The unrealized loss at September 30, 2008 and December 31,
2007 on the nine securities totaled $4.0 million and $442,000 respectively.
Three of the securities totaling $4.0 million have been rated below investment
grade as of September 30, 2008. These securities have been evaluated in
accordance with EITF 99-20, Recognition of Interest Income and Impairment on
Purchased Beneficial Interests and Beneficial Interests That Continue To Be Held
by a Transferor in Securitized Financial Assets, to determine if any are
considered other than temporarily impaired. As of September 30, 2008, through
review of the current and expected cash flow analysis, underlying collateral and
stress tests performed on the securities, none of the trust preferred securities
is considered impaired as of September 30, 2008.

                                  Page 11 of 31

<PAGE>

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

The Company has a $1.0 million Lehman Brothers Holding Inc. medium term fixed
rate note. The security has been considered other-than-temporarily impaired as a
result of Lehman Brothers having filed a Chapter 11 bankruptcy petition on
September 15, 2008. As a result, the Company recorded a non-cash charge to
earnings of $832,000 during the third quarter 2008.

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 estimates the
allowance required by using past loan loss experience, the nature and volume of
the portfolio, information about specific borrower situations and estimated
collateral values, economic conditions, and other factors. Allocation of the
allowance may be made for specific loans, but the entire allowance is available
for any loan that, in management's judgment, should be charged off. Quarterly,
management evaluates the adequacy of the allowance and determines the
appropriate 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. During the nine months ended September 30, 2007, we
itemized a provision acquired in connection with our acquisition of the Bank of
Vernon.

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. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. The measurement of impaired loans is
generally based on the present value of expected future cash flows discounted at
the historical effective interest rate, except that all collateral-dependent
loans are measured for impairment based on the estimated fair value of the
collateral. At September 30, 2008 the allowance for loan losses as a percentage
of net loans receivable was 0.83% as compared to 0.88% at December 31, 2007.

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

<TABLE>
<CAPTION>
                                      Three Months Ended               Nine Months Ended
                                  September 30,   September 30,   September 30,   September 30,
                                      2008            2007            2008            2007
                                  -------------   -------------   -------------   -------------
                                                         (in thousands)
<S>                               <C>             <C>             <C>             <C>
Balance at beginning of period:   $       2,528   $       2,609   $       2,511   $       2,081
   Charge-offs                             (195)            (88)           (383)           (160)
   Recoveries                                30              27              85             101
   Provision for loan losses                125              --             275              --
   Provision acquired                        --              --              --             526
                                  -------------   -------------   -------------   -------------
Balance at end of period          $       2,488   $       2,548   $       2,488   $       2,548
                                  =============   =============   =============   =============
</TABLE>

There were no impaired loans as of September 30, 2008 or December 31, 2007.

Note H - Segment Information

The Company has determined that it has four primary business segments, its
banking franchise, its insurance activities, its benefit consulting activities
and risk management activities. For the three months and nine months ended
September 30, 2008 and 2007, the Company's insurance activities consisted of
those conducted through its wholly owned subsidiary, Bailey & Haskell
Associates, Inc. The Company's benefit consulting activities consisted of those
conducted through its wholly owned subsidiary Benefit Consulting Group, Inc
which was acquired June 2006. The risk management activities consisted of those
conducted through its wholly owned subsidiary Workplace Health Solutions, Inc.
which was formed in February 2008. Information about the Company's segments is
presented in the following table for the periods indicated:

                                  Page 12 of 31

<PAGE>

Note H - Segment Information (Continued)

<TABLE>
<CAPTION>
                                                                       Three Months Ended September 30, 2008
                                                   --------------------------------------------------------------------------
                                                     Banking     Insurance   Benefit Consulting   Risk Management
                                                   Activities   Activities        Activities         Activities       Total
                                                                               (in thousands)
<S>                                                <C>          <C>          <C>                  <C>               <C>
Net interest income                                $    3,924   $       --       $       --          $       --     $   3,924
Provision for loan losses                                 125           --               --                  --           125
                                                   ----------   ----------       ----------          ----------     ---------
   Net interest income after provision for
      loan losses                                       3,799           --               --                  --         3,799
Other income                                           (5,972)       1,967            1,168                  43        (2,794)
Other expenses                                          3,526        1,890              964                 102         6,482
Depreciation and amortization                             455           62               47                   1           565
                                                   ----------   ----------       ----------          ----------     ---------
      (Loss) Income before income taxes                (6,154)          15              157                 (60)       (6,042)
Income tax (benefit) expense                           (1,685)          18               76                 (23)       (1,614)
                                                   ----------   ----------       ----------          ----------     ---------
         Net (loss) income                         $   (4,469)  $       (3)      $       81          $      (37)    $  (4,428)
                                                   ==========   ==========       ==========          ==========     =========
Total Assets                                       $  534,373   $   17,970       $    4,847          $       52     $ 557,242
                                                   ==========   ==========       ==========          ==========     =========
</TABLE>

<TABLE>
<CAPTION>
                                                                        Three Months Ended September 30, 2008
                                                              --------------------------------------------------------
                                                                Banking     Insurance   Benefit Consulting
                                                              Activities   Activities        Activities        Total
                                                                                   (in thousands)
<S>                                                           <C>          <C>          <C>                  <C>
Net interest income                                           $    3,542   $       --       $       --       $   3,542
Provision for loan losses                                             --           --               --               -
                                                              ----------   ----------       ----------       ---------
   Net interest income after provision for loan losses             3,542           --               --           3,542
Other income                                                       1,029        2,444            1,085           4,558
Other expenses                                                     3,485        2,014              762           6,261
Depreciation and amortization                                        426           51               57             534
                                                              ----------   ----------       ----------       ---------
      Income before income taxes                                     660          379              266           1,305
Income tax expense                                                   142          150               82             374
                                                              ----------   ----------       ----------       ---------
      Net income                                              $      518   $      229       $      184       $     931
                                                              ==========   ==========       ==========       =========
Total Assets                                                  $  501,669   $   14,079       $    4,054       $ 519,802
                                                              ==========   ==========       ==========       =========
</TABLE>

<TABLE>
<CAPTION>
                                                                        Nine Months Ended September 30, 2008
                                                   --------------------------------------------------------------------------
                                                     Banking     Insurance   Benefit Consulting   Risk Management
                                                   Activities   Activities        Activities         Activities       Total
                                                                               (in thousands)
<S>                                                <C>          <C>          <C>                  <C>               <C>
Net interest income                                $   11,514   $       --       $       --          $       --     $  11,514
Provision for loan losses                                 275           --               --                  --           275
                                                   ----------   ----------       ----------          ----------     ---------
   Net interest income after provision
      for loan losses                                  11,239           --               --                  --        11,239
Other income                                           (4,326)       6,308            3,686                  56         5,724
Other expenses                                         10,912        5,789            2,971                 252        19,924
Depreciation and amortization                           1,283          189              139                   1         1,612
                                                   ----------   ----------       ----------          ----------     ---------

      (Loss) income before income taxes                (5,282)         330              576                (197)       (4,573)
Income tax (benefit) expense                           (1,599)         177              277                 (75)       (1,220)
                                                   ----------   ----------       ----------          ----------     ---------
Net (loss) income                                  $   (3,683)  $      153       $      299          $     (122)    $  (3,353)
                                                   ==========   ==========       ==========          ==========     =========
Total Assets                                       $  534,373   $   17,970       $    4,847          $       52     $ 557,242
                                                   ==========   ==========       ==========          ==========     =========
</TABLE>

                                  Page 13 of 31

<PAGE>

<TABLE>
<CAPTION>
                                                                        Nine Months Ended September 30, 2007
                                                              --------------------------------------------------------
                                                                Banking    Insurance    Benefit Consulting
                                                              Activities   Activities       Activities         Total
                                                                                   (in thousands)
<S>                                                           <C>          <C>          <C>                  <C>
Net interest income                                           $   10,065   $       --       $       --       $  10,065
Provision for loan losses                                             --           --               --               -
                                                              ----------   ----------       ----------       ---------
   Net interest income after provision for loan losses            10,065           --               --          10,065
Other income                                                       3,045        7,615            2,675          13,335
Other expenses                                                    10,217        6,205            2,186          18,608
Depreciation and amortization                                      1,080          168              168           1,416
                                                              ----------   ----------       ----------       ---------
      Income before income taxes                                   1,813        1,242              321           3,376
Income tax expense                                                   471          375               97             943
                                                              ----------   ----------       ----------       ---------
      Net income                                              $    1,342   $      867       $      224       $   2,433
                                                              ==========   ==========       ==========       =========
Total Assets                                                  $  501,669   $   14,079       $    4,054       $ 519,802
                                                              ==========   ==========       ==========       =========
</TABLE>

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

                                                           2008         2007
                                                        ----------   ----------
               Assets
Total assets for reportable segments                    $  557,242   $  519,802
Elimination of intercompany cash balances                   (7,337)      (6,240)
                                                        ----------   ----------

Consolidated Total                                      $  549,905   $  513,562
                                                        ==========   ==========

Note I - Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
No. 158, Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans - an amendment of FASB statement No. 87, 88, 106 and
132(R). Effective for fiscal years ending after December 15, 2008, defined
benefit plan assets and obligations are to be measured as of the date of the
employer's fiscal year-end. The Company has elected to use the remeasurement
method for adjusting from a September measurement date to the December
measurement date. Under this method, the plan assets and benefit obligations are
remeasured as of the beginning of the fiscal year that the measurement date
provisions are applied. The Company then uses those new measurements to
determine the effects of the measurement date change as of the beginning of the
fiscal year that the measurement date provisions are applied. Adoption of this
FASB resulted in $13,691, net of tax of $5,476 being recognized as an adjustment
to retained earnings for the net periodic benefit cost for the period October 1,
2007 to December 31, 2007. In addition, the change in fair value of plan assets
and the benefit obligations for the period between October 1, 2007 to December
31, 2007 of $116,423, net of tax of $46,569 was recognized as a separate
adjustment of the opening balance of accumulated other comprehensive income as
of January 1, 2008.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements.
This Statement defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. This Statement
establishes a fair value hierarchy about the assumptions used to measure fair
value and clarifies assumptions about risk and the effect of a restriction on
the sale or use of an asset. The standard is effective for fiscal years
beginning after November 15, 2007. In February 2008, the FASB issued Staff
Position (FSP) 157-2, Effective Date of FASB Statement No. 157.

                                  Page 14 of 31

<PAGE>

Note I - Accounting Pronouncements (Continued)

This FSP delays the effective date of FAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value on a recurring basis (at least annually) to fiscal years beginning after
November 15, 2008 and interim periods within those fiscal years. The impact of
adoption was not material.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. The standard provides companies with
an option to report selected financial assets and liabilities at fair value and
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. The new standard is effective for the
Company on January 1, 2008. As of January 1, 2008, the Company elected the fair
value option for certain preferred and common equity securities. The effect of
the adoption is described in Note J below.

Note J - Fair Value

Fair Value Option

The following table summarizes the impact of adopting the fair value option for
preferred and common equity securities on January 1, 2008. The Company has
elected to adopt this standard for these securities as they do not have stated
maturity values and the fair value fluctuates with market changes and using fair
value appears to be an appropriate measure. Amounts shown represent the carrying
value of the affected instruments before and after the changes in accounting
resulting from the adoption of Statement 159.

<TABLE>
<CAPTION>
                                                                       Balance Sheet
                                              Balance Sheet       Net Gain/     1/1/08 after
                                              1/1/08              (Loss) upon   Adoption of
                                              Prior to Adoption   Adoption      Fair Value Option
                                              ---------------------------------------------------
                                                               (in thousands)
<S>                                           <C>                 <C>           <C>
Assets:
   Investment securities                      $ 11,123            $    (2,532)  $ 11,123
                                                                  -----------

Cumulative effect of adoption (pre-tax)                                (2,532)
Tax impact                                                              1,013
                                                                  -----------
Cumulative effect adjustment (net of tax),
   Decrease to retained earnings                                  $     1,519
</TABLE>

Fair Value Measurement

Statement 157 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. Statement 157 also
establishes a fair value hierarchy which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The standard describes three levels of inputs that may be used to
measure fair value:

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

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

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

The Company used the following methods and significant assumptions used to
estimate the fair value of items:

      Securities: The fair values of trading securities and securities available
      for sale are determined by obtaining quoted prices on nationally
      recognized securities exchanges (Level 1 inputs), matrix pricing, which is
      a mathematical technique widely used in the industry to value debt
      securities without relying exclusively on quoted prices for the specific
      securities, but rather by relying on the securities relationship to other
      benchmark quoted securities (Level 2 inputs) or unobservable inputs that
      represents assumptions such as financial forecasts or projected earnings
      (Level 3).

                                  Page 15 of 31

<PAGE>

Note J - Fair Value (Continued)

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

<TABLE>
<CAPTION>
                                      Fair Value Measurements at September 30, 2008 Using
                                --------------------------------------------------------------
                                                                     Significant
                                                Quoted Prices in     Other        Significant
                                                Active Markets for   Observable   Unobservable
                                September 30,   Identical Assets     Inputs       Inputs
                                     2008       (Level 1)            (Level 2)    (Level 3)
                                --------------------------------------------------------------
                                                      (in thousands)
<S>                             <C>             <C>                  <C>          <C>
Assets:
Trading securities              $       6,591         --             $    4,544   $      2,047
Available for sale securities          62,650         --                 52,833          9,817
</TABLE>

The Level 3 assets include trust preferred securities and corporate debt and
equity securities which are all rated investment grade (except for three trust
preferred securities which totaled $4.0 million). The table below presents a
reconciliation and income statement classification of gains and losses for all
assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) for the three months ended and nine months ended
September 30, 2008:

<TABLE>
<CAPTION>
                                                     Fair Value Measurements Using Significant
                                                                 Unobservable Inputs
                                                                    (Level 3)
                                                     ------------------------------------------
                                                                    Securities
                                                     Trading        Available for
                                                     Securities     Sale                 Total
                                                     ------------------------------------------
                                                                  (in thousands)
<S>                                                  <C>            <C>             <C>
Beginning balance January 1, 2008                    $      1,996   $       8,455   $   10,451
Total gains or losses (realized/unrealized)
   Included in earnings
      Interest income on securities                           (10)             (6)         (16)
      Other changes in fair value                            (158)             --         (158)
   Included in other comprehensive income                      --            (873)        (873)
                                                     ------------------------------------------
Ending balance March 31, 2008                        $      1,828   $       7,576   $    9,404
Total gains or losses (realized/unrealized)
   Included in earnings
      Interest income on securities                           (10)             (6)         (16)
      Other changes in fair value                             229              --          229
   Included in other comprehensive income                      --            (552)        (552)
                                                     ------------------------------------------
Ending balance June 30, 2008                         $      2,047   $       7,018   $    9,065
Total gains or losses (realized/unrealized)
   Included in earnings
      Interest income on securities                           (10)             (6)         (16)
      Other changes in fair value                              10              (4)           6
   Included in other comprehensive income                      --          (1,503)      (1,503)
Transfers in and/or out of Level 3                             --           4,312        4,312
                                                     ------------------------------------------
Ending balance September 30, 2008                    $      2,047   $       9,817   $   11,864
                                                     ==========================================
</TABLE>

For items for which the fair value option has been elected, interest income is
recorded within the consolidated statements of income based on the contractual
amount of interest income earned on financial assets (except any that are in
nonaccrual status). Dividend income is recorded based on cash dividends. Cash
flows from the purchase and sale of securities for which the fair value option
has been elected are shown as investing activities within in the consolidated
statement of cash flows.

                                  Page 16 of 31

<PAGE>

Note J - Fair Value (Continued)

The following table presents the amount of gains and losses from fair value
changes included in income before income taxes for financial assets and
liabilities carried at fair value for the nine months ended September 30, 2008:

<TABLE>
<CAPTION>
                         Changes in Fair Values for the Period ended September 30, 2008, for items
                           Measured at Fair Value Pursuant to Election of the Fair Value Option
                         -------------------------------------------------------------------------
                                                                                    Total Changes
                                                                                    In Fair Values
                              Other                                                 Included in
                              Gains and         Interest         Interest           Current Period
                              Losses            Income           Expense            Earnings
                         -------------------------------------------------------------------------
                                                         (in thousands)
<S>                           <C>               <C>              <C>                <C>
Assets:
   Trading securities        ($7,035)             --               --                  ($7,035)
</TABLE>

Note K - Participation in the Treasury Capital Purchase Program

On October 3, 2008, Congress passed the Emergency Economic Stabilization Act of
2008 (EESA), which provides the U. S. secretary of the Treasury with broad
authority to implement certain actions to help restore stability and liquidity
to U.S. markets. One of the provisions resulting from the Act is the Treasury
Capital Purchase Program (CPP), which provides direct equity investment of
perpetual preferred stock by the Treasury in qualified financial institutions.
The program is voluntary and requires an institution to comply with a number of
restrictions and provisions, including limits on executive compensation, stock
redemptions and declaration of dividends. Applications must be submitted by
November 14, 2008 and are subject to approval by the Treasury. The CPP provides
for a minimum investment of 1% of Risk-Weighted Assets, with a maximum
investment equal to the lesser of 3 percent of Total Risk-Weighted Assets or $25
billion. The perpetual preferred stock investment will have a dividend rate of
5% per year, until the fifth anniversary of the Treasury investment, and a
dividend of 9%, thereafter. The CPP also requires the Treasury to receive
warrants for common stock equal to 15% of the capital invested by the Treasury.
The Company is evaluating whether to apply for participation in the CPP.
Participation in the program is not automatic and subject to review and approval
by the U.S. Treasury.

                                  Page 17 of 31

<PAGE>

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

                                  Page 18 of 31

<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 and employee benefit
services  provided by subsidiaries of the Bank, net gains and losses on sales of
investments and loans, and operating expenses such as employee  compensation and
benefits,  FDIC insurance assessments,  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.  The Company has
four primary business segments;  it's banking franchise,  insurance  activities,
benefit consulting activities and risk management activities.  However, only the
banking  franchise  is deemed  material to the Bank's  financial  condition  and
results of operations.  Consequently,  segment  disclosures are not presented in
the Management's Discussion and Analysis. At December 31, 2007 and September 30,
2008 the Company had 7,726,710 shares and 7,726,810 shares  outstanding of which
4,309,750  were held by Oneida  Financial  MHC,  the  Company's  mutual  holding
company parent.

RECENT DEVELOPMENTS

      The Company announced a semi-annual cash dividend of $0.24 per share which
was paid to its  shareholders  as of July 29, 2008,  on August 12, 2008.  Oneida
Financial MHC waived its receipt of dividends.

      On April 2,  2007,  the Bank  completed  its  acquisition  of Vernon  Bank
Corporation,  the stock holding  company of the National  Bank of Vernon.  Under
terms of the agreement, Oneida Savings Bank paid $11.4 million or $54.00 in cash
for each of the  210,447  outstanding  shares  of common  stock of  Vernon  Bank
Corporation.  The  results  of  Vernon  Bank  Corporation  are  included  in the
consolidated financial statements since April 2, 2007.

      Assets acquired as a result of the  acquisition  totaled $66.9 million and
resulted in additional  goodwill and core deposit  intangibles of  approximately
$5.9 million.  Amortization  expense of the core deposit  intangible was $60,000
for the three months ended  September  30, 2008 and $185,000 for the nine months
ended September 30, 2008.  Amortization expense was $66,000 and $132,000 for the
three  months  and nine  months  ended  September  30,  2007.  The core  deposit
intangible is being amortized using a 10-year  accelerated  method  amortization
term.

                                  Page 19 of 31

<PAGE>

      Effective  January 1, 2008,  the Company  adopted  FASB No. 157 Fair Value
Measurements  and FASB No. 159, The Fair Value Option for  Financial  Assets and
Financial Liabilities.  FASB No. 157 defines fair value, establishes a framework
for measuring fair value and expands  disclosures about fair value measurements.
Footnote J to the  consolidated  financial  statements sets forth the fair value
measurements  using  Level 1,  Level 2 or Level 3 as  defined  in the FASB as of
September 30, 2008. Level 3 assets totaled $11.9 million and $10.5 million as of
September 30, 2008 and December 31, 2007  respectively  and represented 2.2% and
2% of total assets  respectively.  The assets include trust preferred securities
and corporate debt and equity  securities  which are all rated  investment grade
except for three trust  preferred  securities  that  totaled  $4.0 million as of
September 30, 2008. There was $4.3 million of assets  transferred into the Level
3 category during the quarter.  The assets  transferred  represented  additional
trust  preferred  securities  that there  currently is no active  market for. In
addition,  for the Level 3 assets,  $2.0 million  represents  trading securities
whose  change in fair value for the three  months  ended and nine  months  ended
September  30,  2008 of a $10,000  gain and an $81,000  gain  respectively  were
recognized in the  consolidated  statement of operations.  The remaining Level 3
assets of $9.8  million had an  unrealized  loss at  September  30, 2008 of $4.7
million.

      FASB No.  159  provides  companies  with the  option  to  report  selected
financial  assets  and  liabilities  at fair  value and  establishes  disclosure
requirements. Footnote J to the consolidated financial statements sets forth the
assets which  management  has elected to report at fair value.  As of January 1,
2008,  Management  has elected to apply FASB 159 to preferred  and common equity
securities  currently  in the  portfolio.  These  securities  do not have stated
market values and whose fair value  fluctuates  with market  changes.  As of the
three months ended and nine months ended  September 30, 2008, the change in fair
value of $6.4 million loss and $7.0 million loss  respectively was recognized in
the consolidated  statement of operations.  The significant change in fair value
was due to the  significant  decline  in value of  Federal  Home  Loan  Mortgage
Corporation ("Freddie Mac") perpetual preferred stock following the announcement
by the United  States  Treasury  and the Federal  Housing  Finance  Agency ("the
FHFA")   that   the   government   sponsored   enterprise   was   placed   under
conservatorship.  Additionally,  the FHFA eliminated the payment of dividends on
common  stock  and  preferred  stock  and  assumed  the  powers of the Board and
management  of Freddie Mac which  adversely  impacted  the market  value of this
investment.

      The Company has a $1.0 million Lehman  Brothers  Holding Inc.  medium term
fixed  rate  note.  The  security  has  been  considered  other-than-temporarily
impaired as a result of Lehman  Brothers  having  filed a Chapter 11  bankruptcy
petition on September  15, 2008.  As a result,  the Company  recorded a non-cash
charge to earnings of $832,000 during the third quarter 2008.

      During the first quarter 2008 we renamed our  MacDonald/Yando  Agency Inc.
subsidiary  to  "Workplace  Health  Solutions,  Inc."("WHS")  WHS is designed to
develop a series of proactive medical services to help mitigate and prevent work
related  injuries.   This  subsidiary  was  designed  to  complement  our  other
subsidiaries with an overall philosophy of innovative risk management services.

FINANCIAL CONDITION

      ASSETS.  Total  assets at  September  30,  2008 were  $549.9  million,  an
increase  of  $27.6   million   from  $522.3   million  at  December  31,  2007.
Mortgage-backed securities increased $29.0 million reflecting purchases of $53.3
million of mortgage-backed  securities offset by the principal  collected on and
proceeds from sales and maturities of  mortgaged-backed  securities.  Investment
securities  decreased  $26.6 million due to principal  collected on and proceeds
from sales and  maturities of investment  securities of $32.0 million  offset by
purchases of investment securities.  Market rate fluctuations during the quarter
have resulted in mortgage-backed  securities being a more attractive vehicle for
the  investment  of  proceeds  from called  securities  and excess cash and cash
equivalents.  Loans receivable,  including loans held for sale,  increased $14.3
million to $298.7  million at September 30, 2008 compared with $284.4 million at
December 31, 2007. At September 30, 2008 total consumer loans  increased by $2.4
million from  December 31, 2007.  Residential  loans  increased by $14.7 million
since  December  31,  2007,  after  the  sale of  $14.3  million  of  fixed-rate
residential  real estate  loans in the  secondary  market  during the nine month
period.  At September 30, 2008,  total commercial real estate loans decreased by
$4.7 million  while  commercial  business  loans  increased by $1.9 million from
December 31, 2007.  Goodwill and other  intangibles  totaled $25.2 million as of
September 30, 2008 and $25.4 million at December 31, 2007.  Additional  goodwill
in the amount of $129,000 was recorded for the contingent  purchase payment made
to Benefit  Consulting  Group LLC. Under the terms of the agreement,  contingent
purchase  payments  based  on  future  performance  levels  may be  made  over a
five-year period starting with the year ended December 31, 2006. Offsetting this
payment was the amortization expense recorded on a monthly basis.

      The  allowance  for loan losses was $2.5 million at September 30, 2008 and
December 31, 2007.  The allowance  for loan losses is a valuation  allowance for
probable  incurred credit losses.  Loan losses are charged against the allowance
when management  believes the  uncollectibility  of a loan balance is confirmed.
Subsequent  recoveries,  if  any,  are  credited  to the  allowance.  Management
estimates the allowance required by using past loan loss experience,  the nature
and volume of the

                                  Page 20 of 31

<PAGE>

portfolio,   information  about  specific  borrower   situations  and  estimated
collateral values,  economic  conditions,  and other factors.  Allocation of the
allowance may be made for specific loans,  but the entire allowance is available
for any loan that, in management's  judgment,  should be charged off. Quarterly,
management   evaluates  the  adequacy  of  the  allowance  and   determines  the
appropriate  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  management  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. Factors considered by management in
determining  impairment  include  payment  status,  collateral  value,  and  the
probability of collecting  scheduled  principal and interest  payments when due.
The  measurement  of impaired  loans is generally  based on the present value of
expected future cash flows discounted at the historical effective interest rate,
except that all collateral- dependent loans are measured for impairment based on
the estimated fair value of the collateral.  At September 30, 2008 the allowance
for loan losses as a percentage of net loans receivable was 0.83% as compared to
0.88% as of December 31, 2007.

      LIABILITIES.  Total  liabilities  increased  by $36.2  million  to  $499.2
million at September  30, 2008 from $463.0  million at December  31,  2007.  The
increase is primarily the result of an increase in interest-bearing  deposits of
$39.3 million.  Contributing to the increase in deposits has been an increase in
municipal deposits offered through the Bank's limited purpose commercial banking
subsidiary,  State  Bank of  Chittenango.  Municipal  deposits  increased  $31.5
million  from  December 31, 2007 to September  30,  2008.  Non-interest  bearing
deposits  increased  $200,000  from $65.7  million at December 31, 2007 to $65.9
million at September 30, 2008.  Borrowings  decreased $4.5 million from December
31, 2007 to September 30, 2008 reflecting matured borrowings.

      STOCKHOLDERS' EQUITY. Total stockholders' equity decreased by $8.6 million
to $50.7  million at September 30, 2008 as compared to $59.3 million at December
31, 2007.  Stockholders'  equity decreased due to the after-tax net loss of $3.4
million,  the  valuation  adjustments  of $3.7  million  made for the  Company's
available for sale  investment and  mortgage-backed  securities and $1.7 million
due to the payment of semiannual cash dividends of $0.24.

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 and nine months ended  September  30, 2008
and 2007 and for the year ended  December 31, 2007.  For the periods  indicated,
the dollar amount of interest  income from average  interest-earning  assets and
the   resultant   yields,   as  well  as  the   interest   expense   on  average
interest-bearing   liabilities   is   expressed  in  thousands  of  dollars  and
percentages.  No tax equivalent  adjustments  were made. The average  balance is
computed based upon an average daily balance.

      TABLE 1. Average Balance Sheet.

<TABLE>
<CAPTION>
                                                               Three Months Ended September 30,
                                               ---------------------------------------------------------------------------
                                                               2008                               2007
                                                 Average     Interest               Average     Interest
                                               Outstanding    Earned/    Yield/   Outstanding    Earned/    Yield/
Assets                                           Balance       Paid       Rate      Balance       Paid       Rate
------                                         -----------   --------   -------   -----------   --------   -------
<S>                                            <C>           <C>        <C>       <C>           <C>        <C>       <C>
Interest-earning Assets:                                              (Dollars in Thousands)
------------------------
   Loans Receivable                            $   298,448   $  4,634      6.21%  $   280,957   $  4,816      6.86%
   Investment and Mortgage-Backed
      Securities                                   151,614      1,862      4.91%      110,195      1,421      5.16%
   Federal Funds                                     3,216         19      2.36%       14,356        216      6.02%
   Equity Securities                                12,962        136      4.20%       15,328        206      5.38%
                                               -----------   --------   -------   -----------   --------   -------
     Total Interest-earning Assets                 466,240      6,651      5.71%      420,836      6,659      6.33%
                                               -----------   --------   -------   -----------   --------   -------
Non interest-earning Assets:
----------------------------
   Cash and due from banks                          12,020                             15,392
   Other assets                                     75,544                             72,511
                                               -----------                        -----------
      Total assets                             $   553,804                        $   508,739
                                               ===========                        ===========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing Liabilities:
-----------------------------
   Money Market Deposits                       $    88,816   $    433      1.94%  $    60,662   $    493      3.22%  3.14%
   Savings Accounts                                 79,718        161      0.80%       76,648        154      0.80%  0.77%
   Interest-bearing Checking                        40,652         56      0.55%       38,531         72      0.74%  0.74%
   Time Deposits                                   162,388      1,431      3.51%      144,200      1,696      4.67%  4.60%
   Borrowings                                       57,306        645      4.48%       56,400        693      4.87%  4.94%
   Notes Payable                                        70          1      5.68%          681          9      5.24%  5.02%
                                               -----------   --------   -------   -----------   --------   -------   ----
      Total Interest-bearing Liabilities           428,950      2,727      2.53%      377,122      3,117      3.28%  3.27%
                                               -----------   --------   -------   -----------   --------   -------   ----
Non-interest-bearing Liabilities:
---------------------------------
  Demand deposits                                   65,681                             64,816
  Other liabilities                                  4,274                              8,772
                                               -----------                        -----------
      Total liabilities                        $   498,905                        $   450,710
                                               -----------                        -----------
Stockholders' equity                                54,899                             58,029
                                               -----------                        -----------
Total liabilities and stockholders'
   equity                                      $   553,804                        $   508,739
                                               ===========                        ===========
   Net Interest Income                                       $  3,924                           $  3,542
                                                             ========                           ========
   Net Interest Spread                                                     3.18%                              3.05%  3.02%
                                                                        =======                            =======   ====
   Net Earning Assets                          $    37,290                        $    43,714
                                               ===========                        ===========
   Net yield on average
      Interest-earning assets                                    3.37%                              3.37%
                                                             ========                           ========
    Average interest-earning
      assets to average
      Interest-bearing liabilities                             108.69%                            111.59%
                                                             ========                           ========
</TABLE>

                                  Page 21 of 31

<PAGE>

<TABLE>
<CAPTION>
                                                               Nine Months Ended September 30,
                                               -------------------------------------------------------------------
                                                               2008                               2007
                                                 Average     Interest               Average     Interest
                                               Outstanding    Earned/    Yield/   Outstanding    Earned/    Yield/
Assets                                           Balance       Paid       Rate      Balance       Paid       Rate
------                                         -----------   --------   -------   -----------   --------   -------
<S>                                            <C>           <C>        <C>       <C>           <C>        <C>
Interest-earning Assets:                                              (Dollars in Thousands)
------------------------
   Loans Receivable                            $   290,150   $ 13,857      6.37%  $   267,270   $ 13,669      6.82%
   Investment and  Mortgage-Backed
     Securities                                    143,993      5,410      5.01%      103,309      3,904      5.04%
   Federal Funds                                     7,787        160      2.74%       13,706        639      6.22%
   Equity Securities                                14,891        668      5.98%       15,325        603      5.25%
                                               -----------   --------   -------   -----------   --------   -------
      Total Interest-earning Assets                456,821     20,095      5.87%      399,610     18,815      6.28%
                                               -----------   --------   -------   -----------   --------   -------
Non interest-earning Assets:
----------------------------
   Cash and due from banks                          12,408                             14,313
   Other assets                                     74,847                             69,986
                                               -----------                        -----------
               Total assets                    $   544,076                        $   483,909
                                               ===========                        ===========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing Liabilities:
-----------------------------
   Money Market Deposits                       $    79,888   $  1,223      2.04%  $    53,587   $  1,274      3.18%
   Savings Accounts                                 77,097        459      0.80%       74,276        423      0.76%
   Interest-bearing Checking                        40,104        184      0.61%       35,425        194      0.73%
   Time Deposits                                   161,931      4,757      3.92%      134,282      4,589      4.57%
   Borrowings                                       56,781      1,954      4.60%       60,740      2,233      4.92%
   Notes Payable                                       106          4      5.04%          993         37      4.98%
                                               -----------   --------   -------   -----------   --------   -------
      Total Interest-bearing Liabilities           415,907      8,581      2.76%      359,303      8,750      3.26%
                                               -----------   --------   -------   -----------   --------   -------
Non-interest-bearing Liabilities:
---------------------------------
   Demand deposits                                  64,227                             59,870
   Other liabilities                                 6,248                              6,401
                                               -----------                        -----------
      Total liabilities                        $   486,382                        $   425,574
                                               -----------                        -----------
Stockholders' equity                                57,695                             58,335
                                               -----------                        -----------
Total liabilities and stockholders' equity     $   544,077                        $   483,909
                                               ===========                        ===========

   Net Interest Income                                       $ 11,514                           $ 10,065
                                                             ========                           ========
   Net Interest Spread                                                     3.11%                              3.02%
                                                                        =======                            =======
   Net Earning Assets                          $    40,914                        $    40,307
                                               ===========                        ===========
   Net yield on average
      Interest-earning assets                                    3.36%                              3.36%
                                                             ========                           ========
   Average interest-earning
      assets to average
      Interest-bearing liabilities                             109.84%                            111.22%
                                                             ========                           ========
</TABLE>

                                  Page 22 of 31

<PAGE>

RESULTS OF OPERATIONS

      GENERAL.  The net loss for the three months ended  September  30, 2008 was
$4.4 million or ($0.57) per share  compared with net income of $931,000 or $0.12
per  share for the three  months  ended  September  30,  2007.  The net loss was
primarily the result of non-cash investment charges of $7.3 million, an increase
in other  expenses and an increase in the provision for loan losses offset by an
increase  in net  interest  income and a decrease  in the  provision  for income
taxes.  The net loss for the  nine  months  ended  September  30,  2008 was $3.4
million, a decrease of $5.8 million from net income of $2.4 million for the nine
months ended  September  30,  2007.  The net loss from  operations  for the nine
months,  which excludes a non-cash  impairment  charge of a medium term note and
the non-cash  charge to earnings  recognized in the connection with the adoption
of FASB159 (The Fair Value Option of Financial Assets and Financial Liabilities)
$7.9 million, net of $2.1 million in income taxes, was $2.4 million or $0.31 per
basic share.  This  compares to net income from  operations  for the nine months
ending  September  30, 2007 of $2.4 million,  or $0.32 per basic share.  The net
income excluding the non-cash charge to earnings remained stable as other income
remained  stable,  and other  expenses  increased  offsetting an increase in net
interest income.  The Company believes these non-GAAP financial measures provide
a  meaningful  comparison  of  the  underlying  operational  performance  of the
Company,  and  facilitate  investors'  assessments  of business and  performance
trends in comparison to others in the financial services industry.  In addition,
the Company believes the exclusion of these items enables  management to perform
a more effective  evaluation and comparison of the Company's  results and assess
performance in relation to the Company's ongoing operations.  The acquisition of
The National  Bank of Vernon and the opening of a banking,  insurance and retail
center in the  Griffiss  Business  and  Technology  Park in Rome,  New York both
completed  in  the  second  quarter  of  2007  contributed  to the  increase  in
non-interest expense.

      INTEREST  INCOME.  Interest and dividend  income  remained  stable at $6.7
million for the three months ended September 30, 2008 and for three months ended
September 30, 2007. For the nine months ended  September 30, 2008,  interest and
dividend  income  increased by $1.3 million or 6.8% to $20.1  million from $18.8
million for the nine months ended  September 30, 2007.  The increase in interest
income was the result of an increase in the average balances of interest-earning
assets during the current period of $57.0  million.  This increase was partially
offset by a decrease in the yield of 41 basis points on interest earning assets.
The increase in  interest-earning  assets reflects a complete nine month average
balance  during 2008 of assets  acquired in connection  with the  acquisition of
Vernon Bank Corporation on April 2, 2007.

      Interest on loans decreased  $182,000 to $4.6 million for the three months
ended  September 30, 2008 from $4.8 million for the three months ended September
30, 2007. The decrease in interest  income on loans is a result of a decrease of
65 basis  points  in the  average  yield to 6.21%  for the  three  months  ended
September  30, 2008 from 6.86% for the three  months ended  September  30, 2007,
offset  by an  increase  of  $17.5  million  in the  average  balance  of  loans
receivable  for the three months ended  September  30, 2008 as compared with the
same period in 2007.  For the nine months ended  September 30, 2008, the average
balance of loans  increased  $22.9 million while the average yield  decreased 45
basis  points to 6.37% during the 2008 period from 6.82% during the 2007 period.
The average  balance of  commercial  loans  increased  $3.3 million for the nine
months ended  September  30, 2008 from the nine months ended  September 30, 2007
while  commercial real estate loans increased $2.5 million.  The average balance
of  residential  real  estate  loans  increased  $9.4  million for the same time
period,  after  recording  the sale of $17.7  million in fixed rate  one-to-four
family residential real estate loans over the last 12 months.

      Interest on investments and mortgage-backed  securities increased $441,000
as a result of an increase in the average  balance of investment  securities and
mortgage-backed  securities  of $41.4 million for the three months period ending
September  30, 2008 as compared  with the same period in 2007.  Offsetting  this
increase,  the average  yield  decreased  25 basis points to 4.91% for the three
months ended  September 30, 2008 from 5.16% for the three months ended September
30, 2007. For the nine months ended September 30, 2008,  interest on investments
and mortgage-backed  securities increased $1.5 million as compared with the same
period in 2007 due to an  increase  in the average  balance of  investments  and
mortgage-backed  securities of $40.7 million  partially  offset by a decrease in
the average yield of 3 basis points from 5.04% to 5.01%.

                                  Page 23 of 31

<PAGE>

      Interest income from federal funds decreased during the three months ended
September 30, 2008 to $19,000 as compared with $216,000 for the 2007 period. The
decrease  in  interest  income is  primarily  due to a decrease  in the  average
balance  of $11.1  million  as well as a  decrease  of 366  basis  points in the
average yield. For the nine months ended September 30, 2008,  interest income on
federal funds  decreased  $479,000 due to a decrease in the average yield of 348
basis  points of and a  decrease  in the  average  balance  of $5.9  million  as
compared  with the same period in 2007.  The decrease in the average  balance of
federal  funds sold was due to the  liquidity  needed in 2007 to provide for the
cash consideration required for the acquisition of Vernon Bank Corporation.

      INTEREST  EXPENSE.  Interest expense was $2.7 million for the three months
ended  September  30, 2008, a decrease of $390,000 or 12.5% from the same period
in 2007.  The  decrease in interest  expense is due to a decrease in the average
yield on  interest-bearing  liabilities  offset by an  increase  in the  average
balance.  Interest  expense on borrowed  funds  totaled  $645,000  for the third
quarter of 2008 compared with $696,000 for the 2007 period.  The average balance
of borrowings  increased  $906,000 for the three months period ending  September
30, 2008 as compared  with the same period in 2007.  The cost of borrowed  funds
decreased 39 basis points to 4.48% for the three months ended September 30, 2008
from 4.87% for the three months ended  September  30, 2007.  For the nine months
ended September 30, 2008 interest expense on borrowing funds decreased  $279,000
due to a decrease in the average  balance  outstanding  of  borrowings  to $56.8
million as compared to $60.7 million for the nine month period in 2007. Interest
expense on deposits  decreased  $334,000  and totaled $2.1 million for the three
months ended  September 30, 2008 as compared to $2.4 million for the three month
period in 2008.  The  average  cost of  deposits  was 2.23% for the three  month
period ending  September 30, 2008 compared with 2.99% for the three month period
in 2007. In addition,  the average balance of deposit  accounts  increased $51.5
million  from  September  2007 to  September  2008.  For the nine  months  ended
September  30, 2008,  the average  cost of deposits  was 2.46% as compared  with
2.91% for the nine month  period in 2007.  In addition,  the average  balance of
deposit accounts increased $61.4 million for the nine months ended September 30,
2008 as compared with nine months ended September 30, 2007.

      PROVISION  FOR LOAN LOSSES.  The total  provision  for loan losses for the
three months ended September 30, 2008 was $125,000. The total provision for loan
losses for the nine months ended September 30, 2008 was $275,000  compared to no
provision  during the nine months ended  September  30, 2007.  The allowance for
loan losses was $2.5 million for the three months  ended  September  30, 2008, a
decrease of $60,000 from $2.5 million at  September  30, 2007.  The ratio of the
net loan loss  allowance to loans  receivable  is 0.83% at September 30, 2008 as
compared  with a ratio of  0.91% of loans  receivable  at  September  30,  2007.
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  decreased  $7.4  million to $2.8
million expense for the three month period ending September 30, 2008 as compared
to  $4.6  million  for  the  three  month  period  ending  September  30,  2007.
Commissions and fees on sales of non-banking products decreased $308,000 and was
$3.2 million for the three month period ending  September 30, 208 as compared to
the three month period  September 30, 2007. For the nine months ended  September
30, 2008,  other  operating  income  decreased $7.6 million to $5.7 million from
$13.3  million for the same  period in 2007.  The  decrease in other  income was
primarily  due to a change in fair value of $7.0 million that was  recognized in
connection with the adoption of FAS 159 for certain  preferred and common equity
securities  including  Freddie Mac  preferred  securities.  In addition,  to the
noncash charge due to FAS 159, the Company also recorded an other-than-temporary
impairment  charge on a Lehman Brothers medium term note of $831,000 as a result
of their  bankruptcy  announced in September.  Commissions  and fees on sales of
non-banking  products was $10.0 million for the nine months ended  September 30,
2008 as compared to $10.2  million for the same period in 2007.  The decrease in
commission  and  fees is due to a  weakening  insurance  market  during  2008 as
compared to 2007. In addition,  service  charges on deposit  accounts  increased
$222,000 or 12.2% for the nine months ended September 30, 2008 compared with the
nine months ended September 30, 2007.

      OTHER EXPENSES.  Other operating  expenses increased by $252,000 or 3.78%,
to $7.0 million for the three months ended  September 30, 2008 from $6.8 million
for the same period in 2007. For the nine months ended September 30, 2008, other
operating  expenses  increased  $1.5 million to $21.5 million from $20.0 million
for the same period in 2007. The increase in non-interest  expense  primarily is
the result of an increase in equipment and other operating  expenses  associated
with the expansion of our banking  franchise  resulting from the  acquisition of
the Vernon Bank  Corporation  and the  completion of our banking,  insurance and
retail center at the Griffiss  Business and  Technology  Park in Rome, New York.
Compensation  expense  increased  $985,000  or 7.77% for the nine  months  ended
September  30,  2008  from the  same  period  in 2007  largely  associated  with
expansion of the insurance  and  consulting  subsidiaries  as well as due to the
acquisition  of Vernon Bank  Corporation.  It is expected  that our expense will
increase in 2009 as a result of higher FDIC deposit  insurance  assessment being
levied on the Bank.

                                  Page 24 of 31

<PAGE>

      INCOME TAX. Income tax expense  decreased to a benefit of $1.6 million for
the three months ended September 30, 2008 as compared to a provision of $374,000
for the third quarter of 2007. For the nine months ended September 30, 2007, the
income tax benefit was $1.2 million  compared to a provision of $943,000 for the
nine months ended September 30, 2007. Net income  decreased from $5.8 million to
a $3.4 million net loss for the nine month period while the  effective  tax rate
decreased to 26.7% for the nine months of 2008 from 27.8% for the nine months of
2007 to reflect the  overall  tax rate  expected to be in effect for 2008 within
changes in permanent differences.

      LIQUIDITY AND CAPITAL RESOURCES. The Company's primary funding sources are
cash flows from  banking and  insurance  operations  and consist of deposits and
borrowings,  scheduled amortization and prepayments on loans and mortgage-backed
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 and fees from the sales of insurance products. Additionally, the Bank has
lines of credit with the Federal  Home Loan Bank,  Federal  Reserve Bank and two
commercial  banks that provide funding sources for lending,  liquidity and asset
and liability management as needed.  During the third quarter of 2008 cash flows
provided by the sale,  principal  payments and maturity of securities  available
for sale was $25.6  million  compared  to $15.4  million  for the same period in
2007.

      While  maturities and scheduled  amortization  of loans and securities are
predictable sources of funds, deposit balances,  calls of investment  securities
and prepayment of loans and mortgage-backed securities are greatly influenced by
interest  rates,  the general and local economic  environment and competition in
the marketplace.  The overall objective of the Company's liquidity management is
to ensure  the  availability  of  sufficient  cash  funds to meet all  financial
commitments and to take advantage of lending and investment  opportunities.  The
Company manages  liquidity in order to meet deposit  withdrawals on demand or at
contractual  maturity, to repay borrowings as they mature, and to fund new loans
and investments as opportunities arise.

      The  primary  investing  activities  of the  Bank are the  origination  of
residential  mortgages,  commercial  loans and  consumer  loans,  as well as the
purchase of mortgage-backed and other debt securities.  During the third quarter
of 2008,  loan  originations  totaled  $31.6  million  compared to $30.6 million
during the third quarter of 2007.  The purchases of  mortgage-backed  securities
totaled  $13.2  million  during the third  quarter of 2008 as  compared  to $6.8
million  during the third  quarter of 2007.  The  increase in the  purchases  of
mortgage-backed  securities is due to additional liquidity provided by increased
deposits.

      In the  ordinary  course of  business,  the Bank  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 Bank does not expect all of the  commitments  to be funded,
the  total  commitment   amounts  do  not  necessarily   represent  future  cash
requirements.   The  Bank  evaluates  each  customer's   creditworthiness  on  a
case-by-case   basis.   Collateral  may  be  obtained  based  upon  management's
assessment of the particular customer's creditworthiness.  Commitments to extend
credit may be written on a fixed rate basis  exposing the Bank to interest  rate
risk given the  possibility  that market rates may change between the commitment
date and the actual  extension of credit.  As of September 30, 2008 the Bank had
outstanding  commitments to originate loans of approximately $5.2 million, which
generally have an expiration  period of less than 120 days.  Commitments to sell
residential mortgages amounted to $4.4 million at September 30, 2008.

      The Bank 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 $52.0  million at  September  30, 2008 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 Bank's most liquid assets.
The level of these assets are  monitored  daily and are  dependent on operating,
financing,  lending and investing  activities  during any given  period.  Excess
short-term liquidity is usually invested in overnight federal funds sold. In the
event that funds beyond those  generated  internally  are required due to higher
than expected loan commitment  fundings,  deposit outflows or the amount of debt
being  called,  additional  sources of funds are  available  through  the use of
repurchase  agreements,  the sale of loans or  investments or the Bank's various
lines of credit.  As of September 30, 2008 the total of cash,  interest-earnings
demand accounts and federal funds sold was $24.4 million.

                                  Page 25 of 31

<PAGE>

At September 30, 2008,  the Bank exceeded all regulatory  capital  requirements.
The current  requirements and the actual levels for the Bank are detailed in the
following table.

<TABLE>
<CAPTION>
                                                                                  To Be Well
                                                                               Capitalized Under
                                                            For Capital        Prompt Corrective
                                         Actual          Adequacy Purposes     Action Provisions
                                    ----------------     -----------------     -----------------
                                     Amount    Ratio      Amount     Ratio      Amount    Ratio
                                                       (Dollars in thousands)
<S>                                 <C>        <C>       <C>         <C>        <C>       <C>
As of September 30, 2008:
   Total Capital
      (to Risk Weighted Assets)     $ 35,783   10.01%    $ 28,586        8%    $ 35,732      10%
   Tier I Capital
      (to Risk Weighted Assets)     $ 33,295    9.32%    $ 14,293        4%    $ 21,439       6%
   Tier I Capital
      (to Average Assets)           $ 33,295    6.30%    $ 21,145        4%    $ 26,418       5%
</TABLE>

<TABLE>
<CAPTION>
                                                                                  To Be Well
                                                                               Capitalized Under
                                                            For Capital        Prompt Corrective
                                         Actual          Adequacy Purposes     Action Provisions
                                    ----------------     -----------------     -----------------
                                     Amount    Ratio      Amount     Ratio      Amount    Ratio
                                                       (Dollars in thousands)
<S>                                 <C>        <C>       <C>         <C>        <C>       <C>
As of December 31, 2007:
   Total Capital
      (to Risk Weighted Assets)     $ 35,221   10.18%    $ 27,682        8%    $ 34,602      10%
   Tier I Capital
      (to Risk Weighted Assets)     $ 32,710    9.45%    $ 13,841        4%    $ 20,761       6%
   Tier I Capital
      (to Average Assets)           $ 32,710    6.60%    $ 19,830        4%    $ 24,787       5%
</TABLE>

                                  Page 26 of 31

<PAGE>

ONEIDA FINANCIAL CORP.
SELECTED FINANCIAL RATIOS
At and for the Three and Nine Months Ended September 30, 2008 and 2007
(unaudited)

<TABLE>
<CAPTION>
(Annualized where appropriate)                       Three Months Ending    Nine Months Ended
                                                        September 30,         September 30,
                                                     2008         2007       2008        2007
                                                   --------     --------   ------     --------
<S>                                                <C>          <C>        <C>        <C>
Performance Ratios:

   Return on average assets                           (3.20%)       0.73%   (0.82%)       0.67%
   Return on average equity                          (32.26%)       6.42%   (7.75%)       5.56%
   Net interest margin                                 3.37%        3.37%    3.36%        3.36%

   Efficiency Ratio                                   82.38%       83.89%   84.24%       83.89%
   Ratio of operating expense
      to average total assets                          5.09%        5.34%    5.28%        5.52%
   Ratio of average interest-earning assets
      to average interest-bearing liabilities        108.69%      111.59%  109.84%      111.22%

Asset Quality Ratios:

   Non-performing assets to total assets               0.11%        0.05%    0.11%        0.05%

   Allowance for loan losses
      to non-performing loans                        555.36%    1,011.11%  555.36%    1,011.11%
   Allowance for loan losses
      to loans receivable, net                         0.83%        0.91%    0.83%        0.91%

Capital Ratios:

   Total stockholders' equity to total assets          9.22%       11.42%    9.22%       11.42%
   Average equity to average assets                    9.91%       11.41%   10.60%       12.05%
</TABLE>

ITEM 3.     Quantitative and Qualitative Disclosure About Market Risk

      Various forms of market risk are inherent in the business of the Bank
including concentration risk, liquidity management, credit risk and collateral
risk among others. However, the Bank's most significant form of market risk is
interest rate risk, as the majority of the Bank's assets and liabilities are
sensitive to changes in interest rates. Ongoing monitoring and management of
this risk is an important component of the Company's asset and liability
management process. The Bank's interest rate risk management program focuses
primarily on evaluating and managing the composition of the Bank's assets and
liabilities in the context of various interest rate scenarios. Factors beyond
Management's control, such as market interest rates and competition, also have
an impact on interest income and expense. Based on the asset-liability
composition at September 30, 2008, 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 2007 Annual Report to Stockholders.
There has been no material change in the Company's interest rate risk profile
since December 31, 2007.

                                  Page 27 of 31

<PAGE>

ITEM 4T.    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.

                           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.

                                  Page 28 of 31

<PAGE>

Item 1a     Risk Factors

      Other than set forth below,  there has not been any material change in the
risk factors  disclosure from that contained in the Company's 2007 Form 10-K for
the fiscal year ended December 31, 2007.

      Our  Non-Interest  Expense Will  Increase As A Result Of Increases In FDIC
Insurance Premiums

      The Federal Deposit Insurance  Corporation  ("FDIC") imposes an assessment
against institutions for deposit insurance. This assessment is based on the risk
category of the  institution  and currently  ranges from 5 to 43 basis points of
the  institution's  deposits.  Federal law requires that the designated  reserve
ratio for the  deposit  insurance  fund be  established  by the FDIC at 1.15% to
1.50% of estimated insured deposits.  If this reserve ratio drops below 1.15% or
the FDIC  expects that it to do so within six months,  the FDIC must,  within 90
days,  establish and implement a plan to restore the designated reserve ratio to
1.15% of estimated  insured  deposits  within five years  (absent  extraordinary
circumstances).

      Recent bank failures coupled with deteriorating  economic  conditions have
significantly reduced the deposit insurance fund's reserve ratio. As of June 30,
2008, the designated  reserve ratio was 1.01% of estimated  insured  deposits at
March 31, 2008. As a result of this reduced  reserve ratio, on October 16, 2008,
the FDIC  published a proposed rule that would restore the reserve ratios to its
required  level.  The proposed  rule would raise the current  deposit  insurance
assessment  rates  uniformly for all  institutions by 7 basis points (to a range
from 12 to 50 basis  points) for the first  quarter of 2009.  The proposed  rule
would  also  alter  the  way  the  FDIC  calculates  federal  deposit  insurance
assessment rates beginning in the second quarter of 2009 and thereafter.

      Under the proposed rule, the FDIC would first  establish an  institution's
initial base  assessment  rate.  This initial base  assessment rate would range,
depending on the risk category of the  institution,  from 10 to 45 basis points.
The FDIC would then  adjust the  initial  base  assessment  (higher or lower) to
obtain the total base  assessment  rate.  The  adjustments  to the initial  base
assessment rate would be based upon an  institution's  levels of unsecured debt,
secured liabilities, and brokered deposits. The total base assessment rate would
range from 8 to 77.5 basis points of the institution's deposits. There can be no
assurance  that the proposed rule will be implemented by the FDIC or implemented
in its proposed form.

      In  addition,  the  Emergency  Economic  Stabilization  Act of 2008 (EESA)
temporarily  increased  the limit on FDIC  insurance  coverage  for  deposits to
$250,000 through December 31, 2009, and the FDIC took action to provide coverage
for  newly-issued  senior unsecured debt and  non-interest  bearing  transaction
accounts  in excess  of the  $250,000  limit,  for  which  institutions  will be
assessed additional premiums.

      These actions will significantly increase our non-interest expense in 2009
and in future years as long as the increased premiums are in place.

Effects of the Emergency Economic Stabilization Act of 2008 are Unknown

      On October 14, 2008,  the U.S.  Treasury  announced that it would purchase
equity stakes in a number of banks and savings and loan associations.  Under the
Capital  Purchase Program of the Troubled Assets Relief Program  ("TARP"),  $250
billion of the $700 billion authorized by the Emergency  Economic  Stabilization
Act of 2008 will be made  available  to the U.S.  Treasury  to a variety of U.S.
financial  institutions in exchange for preferred  stock. In connection with its
purchase of preferred stock, the U.S. Treasury will receive warrants to purchase
common  stock  with an  aggregate  market  price  equal to 15% of the  preferred
investment.  Financial  institutions that take part in the TARP Capital Purchase
Program will be required to adopt the U.S.  Treasury's  standards  for executive
compensation  and  corporate  governance  for the period  during  which the U.S.
Treasury holds equity issued under the TARP Capital Purchase  Program.  The U.S.
Treasury  also  announced  that nine major  financial  institutions  had already
agreed to participate in the TARP Capital Purchase  Program,  and numerous other
financial institutions have subsequently agreed to take part.

      On October 14, 2008, the FDIC announced the establishment of the Temporary
Liquidity  Guarantee  Program,  which was designed to strengthen  confidence and
encourage  liquidity in the banking system by  guaranteeing  the (1) newly issue
senior  unsecured  debt and (2)  non-interest-bearing  transaction  accounts  of
participating  institutions.  All eligible  entities  will be covered  under the
program  unless they opt out of one or both of these  components  by December 5,
2008 (an  extension  from the  original  opt-out  date of  November  12,  2008).
Following  that  deadline,  institutions  that have  opted out of either or both
components cannot then opt in. Similarly, institutions that have opted in by the
December 5th deadline may not then opt out. The  Temporary  Liquidity  Guarantee
Program will be in effect through December 31, 2009.

                                  Page 29 of 31

<PAGE>

      As of the time of the filing,  we have not applied to the U.S. Treasury to
receive equity  capital  through the TARP Capital  Purchase  Program nor have we
applied  to the  FDIC  to opt in or  out of the  Temporary  Liquidity  Guarantee
Program.  However, as the details and ramifications of these and any other plans
that may be introduced,  are clarified, we will continue to review them in order
to determine whether or not we should participate in them.

Item 2      Unregistered Sales of Equity Securities and Use of Proceeds

      There was no repurchase  activity  during the three months ended September
30, 2008. Our current  repurchase  plan of 250,000 was announced on February 13,
2008  and  represents  3.2% of the  common  stock  outstanding.  The plan has no
expiration date.

Item 3      Defaults Upon Senior Securities

            Not applicable.

Item 4      Submission of Matters to a Vote of Security Holders

            Not applicable

Item 5      Other Information

            None

Item 6      Exhibits

            (a)   All   required   exhibits   are   included  in  Part  I  under
                  Consolidated   Financial   Statements,   Notes  to   Unaudited
                  Consolidated Financial Statements and Management's  Discussion
                  and Analysis of Financial Condition and Results of Operations,
                  and are incorporated by reference, herein.

                  Exhibits

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

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

                  Exhibit  32.1 -  Certification  pursuant to 18 U.S.C.  Section
                  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002

                                  Page 30 of 31

<PAGE>

                                   SIGNATURES

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

                                           ONEIDA FINANCIAL CORP.

Date: November 14, 2008                    By: /s/ Michael R. Kallet
                                           ----------------------------------
                                           Michael R. Kallet
                                           President and Chief Executive Officer

Date: November 14, 2008                    By: /s/ Eric E. Stickels
                                           ----------------------------------
                                           Eric E. Stickels
                                           Executive Vice President and Chief
                                           Financial Officer

                                  Page 31 of 31