EXHIBIT 13

                       2006 ANNUAL REPORT TO STOCKHOLDERS

<PAGE>


Oneida Financial Corp.

Consolidated Financial Statements

December 31, 2006 and 2005

<PAGE>

             Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying  consolidated statements of condition of Oneida
Financial  Corp.  as of December 31, 2006 and 2005 and the related  consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the  three  years  in the  period  ended  December  31,  2006.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted  our audits in  accordance  with  auditing  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Oneida Financial
Corp. as of December 31, 2006 and 2005 and the results of its operations and its
cash flows for each of the three years in the period ended  December 31, 2006 in
conformity with U.S. accounting principles.

As discussed in Note 1, the Company  adopted  Staff  Accounting  Bulleting  108,
"Considering   the  Effects  of  Prior  Year   Misstatements   when  Quantifying
Misstatements  in Current Year Financial  Statements" and  accordingly  adjusted
assets and liabilities at the beginning of 2006 with an offsetting adjustment to
the opening balance of retained earnings.

/s/ Crowe Chizek and Company LLC

Crowe Chizek and Company LLC
March 27, 2007
Cleveland, Ohio

<PAGE>

Oneida Financial Corp.

Consolidated Statements of Condition
December 31, 2006 and 2005
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                 2006            2005
<S>                                                                         <C>             <C>
Assets
Cash and due from banks                                                     $  12,513,825   $  12,146,694
Federal funds sold                                                              6,196,350         730,323
                                                                            -------------   -------------
       Total cash and cash equivalents                                         18,710,175      12,877,017

Investment securities, at fair value                                           85,716,934     106,432,297
Mortgage-backed securities, at fair value                                      29,081,093      29,097,460

Mortgage loans held for sale                                                    1,581,354       1,353,732

Loans receivable                                                              247,940,422     236,682,247
Allowance for loan losses                                                      (2,080,913)     (1,958,974)
                                                                            -------------   -------------
       Net loans receivable                                                   245,859,509     234,723,273

Federal Home Loan Bank stock                                                    3,227,600       3,857,900
Premises and equipment, net                                                    17,427,771      12,703,422
Accrued interest receivable                                                     2,088,005       2,193,742
Cash surrender value - life insurance                                          11,675,590      11,238,009
Other assets                                                                    7,698,857       7,920,643
Goodwill                                                                       18,137,040      13,490,997
Other intangible assets                                                         1,733,011         872,643
                                                                            -------------   -------------

       Total Assets                                                         $ 442,936,939   $ 436,761,135
                                                                            =============   =============

Liabilities and Stockholders' Equity

Interest bearing deposits                                                   $ 260,172,614   $ 250,142,113
Non-interest bearing deposits                                                  53,097,399      51,044,371
Federal funds purchased                                                         4,000,000              --
Borrowings                                                                     61,400,000      77,270,000
Notes payable                                                                   1,410,959              --
Other liabilities                                                               4,456,181       4,716,361
                                                                            -------------   -------------
       Total liabilities                                                      384,537,153     383,172,845
                                                                            -------------   -------------

Stockholders' equity:
   Preferred stock, 1,000,000 shares authorized                                        --              --
   Common stock, $.01 par value, 20,000,000 shares authorized;
     8,322,452 and 8,242,452 shares issued                                         83,225          82,425
   Additional paid-in capital                                                  18,704,350      18,300,012
   Retained earnings                                                           44,579,507      41,710,740
   Accumulated other comprehensive loss                                        (1,786,692)     (3,091,015)
   Treasury stock (at cost, 541,621 and 549,412 shares)                        (3,038,926)     (3,074,292)
   Common shares issued under employee stock plans - unearned                    (141,678)       (288,176)
   Unearned stock-based compensation                                                   --         (51,404)
                                                                            -------------   -------------
       Total stockholders' equity                                              58,399,786      53,588,290
                                                                            -------------   -------------

       Total Liabilities and Stockholders' Equity                           $ 442,936,939   $ 436,761,135
                                                                            =============   =============
</TABLE>

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

<PAGE>

Oneida Financial Corp.

Consolidated Statements of Income
Years Ended December 31, 2006, 2005 and 2004
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                               2006           2005            2004
<S>                                                        <C>            <C>            <C>
Interest and dividend income:
   Interest and fees on loans                              $ 16,164,799   $ 14,197,105   $  12,907,040
   Interest and dividends on investment securities:
     U.S. Government and agency obligations                   1,436,634      1,465,414       1,758,334
     Corporate debt and equity obligations                    2,038,255      2,387,865       2,312,948
     Mortgage-backed securities                               1,278,233      1,585,572       1,512,351
     Tax exempt securities                                      916,936      1,171,125       1,114,856
     Other                                                      248,205        155,257          15,132
   Interest on federal funds sold
     and interest-earning deposits                              177,568         49,112          43,198
                                                           ------------   ------------   -------------

       Total interest and dividend income                    22,260,630     21,011,450      19,663,859
                                                           ------------   ------------   -------------

Interest expense:
   Savings deposits                                             483,296        395,480         328,094
   Money market and interest-bearing checking                 1,278,245        836,691         420,915
   Time deposits                                              4,202,134      3,313,306       3,227,095
   Federal funds purchased                                       35,799             --              --
   Short-term borrowings                                        673,905        339,640         110,101
   Long-term borrowings                                       2,772,769      2,801,648       2,751,003
                                                           ------------   ------------   -------------

       Total interest expense                                 9,446,148      7,686,765       6,837,208
                                                           ------------   ------------   -------------

       Net interest income                                   12,814,482     13,324,685      12,826,651

Provision for loan losses                                       280,000        360,000         450,000
                                                           ------------   ------------   -------------

       Net interest income after
         provision for loan losses                           12,534,482     12,964,685      12,376,651

Loss on impairment of securities                                     --             --      (1,050,000)
Net investment security gains                                   307,546        274,934          88,579
Other income                                                 16,671,167     11,617,476      11,200,937
Other expenses                                               23,789,303     19,609,518      18,315,593
                                                           ------------   ------------   -------------

       Income before income taxes                             5,723,892      5,247,577       4,300,574

Provision for income taxes                                    1,525,900      1,390,000       1,009,000
                                                           ------------   ------------   -------------

       Net Income                                          $  4,197,992   $  3,857,577   $   3,291,574
                                                           ============   ============   =============

Earnings per share - basic                                 $       0.55   $       0.51   $        0.44
                                                           ============   ============   =============

Earnings per share - diluted                               $       0.54   $       0.50   $        0.43
                                                           ============   ============   =============
</TABLE>

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

<PAGE>

Oneida Financial Corp.

Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2006, 2005 and 2004
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         Additional
                                                    Common Stock           Paid-In        Retained     Comprehensive
                                                 Shares      Amount        Capital        Earnings         Income
<S>                                            <C>         <C>          <C>            <C>             <C>
Balance at December 31, 2003                   5,495,069   $   54,951   $ 17,551,620   $  37,143,624
Net income                                                                                 3,291,574   $   3,291,574
                                                                                                       -------------
   Other comprehensive income, net of tax
   Unrealized losses on securities arising
         during period                                                                                    (1,921,767)
   Reclassification adjustment for losses
      included in net income                                                                                 961,421
                                                                                                       -------------
      Net unrealized holding losses                                                                         (960,346)
      Minimum pension liability adjustment                                                                  (731,454)
                                                                                                       -------------
   Other comprehensive loss before tax                                                                    (1,691,800)
   Income tax benefit                                                                                        676,720
                                                                                                       -------------
   Other comprehensive loss, net of tax                                                                   (1,015,080)
                                                                                                       -------------
Comprehensive income                                                                                   $   2,276,494
                                                                                                       =============
Three-for-two stock split effected in the
   form of a 50% stock dividend                2,747,383       27,474                        (27,474)
Shares issued under stock plans                                               18,092
Shares issued under ESOP plan                                                226,858
Shares earned under stock plans
Tax benefit from stock plans                                                 134,888
Common stock cash dividends: $.377 per share                                               (1,211,226)
Treasury stock purchased
Treasury stock reissued                                                       14,544
                                               -----------------------------------------------------

Balance at December 31, 2004                   8,242,452   $   82,425   $ 17,946,002   $  39,196,498
Net income                                                                                 3,857,577   $   3,857,577
                                                                                                       -------------
   Other comprehensive income, net of tax
   Unrealized losses on securities arising
         during period                                                                                    (3,109,267)
   Reclassification adjustment for gains
      included in net income                                                                                (274,934)
                                                                                                       -------------
      Net unrealized holding losses                                                                       (3,384,201)
      Minimum pension liability adjustment                                                                  (111,339)
                                                                                                       -------------
   Other comprehensive loss before tax                                                                    (3,495,540)
   Income tax benefit                                                                                      1,398,216
                                                                                                       -------------
   Other comprehensive loss, net of tax                                                                   (2,097,324)
                                                                                                       -------------
Comprehensive income                                                                                   $   1,760,253
                                                                                                       =============
Shares issued under stock plans                                               16,160
Shares issued under ESOP plan                                                211,567
Shares earned under stock plans
Tax benefit from stock plans                                                 127,497
Common stock cash dividends: $.41 per share                                               (1,343,335)
Treasury stock purchased
Treasury stock reissued                                                       (1,214)
                                               -----------------------------------------------------

Balance at December 31, 2005                   8,242,452   $   82,425   $ 18,300,012   $  41,710,740              --
                                               =========   ==========   ============   =============

<CAPTION>
                                                                                Common Stock
                                                Accumulated                     Issued Under     Unearned
                                                   Other                          Employee         Stock
                                               Comprehensive      Treasury     Stock Plans -       Based
                                                Income(Loss)       Stock          Unearned     Compensation       Total
<S>                                            <C>             <C>             <C>             <C>            <C>
Balance at December 31, 2003                   $      21,389   $ (3,038,570)   $   (581,172)   $   (316,613)  $  50,835,229
Net income                                                                                                        3,291,574
   Other comprehensive income, net of tax
   Unrealized losses on securities arising
        during period
   Reclassification adjustment for losses
     included in net income
      Net unrealized holding losses
      Minimum pension liability adjustment
   Other comprehensive loss before tax
   Income tax benefit
   Other comprehensive loss, net of tax           (1,015,080)                                                    (1,015,080)
Comprehensive income
Three-for-two stock split effected in the
   form of a 50% stock dividend                                                                                          --
Shares issued under stock plans                                                                     (18,092)             --
Shares issued under ESOP plan                                                        146,498                        373,356
Shares earned under stock plans                                                                     212,476         212,476
Tax benefit from stock plans                                                                                        134,888
Common stock cash dividends: $.377 per share                                                                     (1,211,226)
Treasury stock purchased                                             (95,047)                                       (95,047)
Treasury stock reissued                                              103,737                                        118,281
                                               ----------------------------------------------------------------------------

Balance at December 31, 2004                   $    (993,691)  $  (3,029,880)  $    (434,674)  $   (122,229)  $  52,644,451
Net income                                                                                                        3,857,577
   Other comprehensive income, net of tax
   Unrealized losses on securities arising
        during period
   Reclassification adjustment for gains
     included in net income
      Net unrealized holding losses
      Minimum pension liability adjustment
   Other comprehensive loss before tax
   Income tax benefit
   Other comprehensive loss, net of tax           (2,097,324)                                                    (2,097,324)
Comprehensive income
Shares issued under stock plans                                                                     (16,160)             --
Shares issued under ESOP plan                                                        146,498                        358,065
Shares earned under stock plans                                                                      86,985          86,985
Tax benefit from stock plans                                                                                        127,497
Common stock cash dividends: $.41 per share                                                                      (1,343,335)
Treasury stock purchased                                             (93,000)                                       (93,000)
Treasury stock reissued                                               48,588                                         47,374
                                               -------------   ------------------------------------------------------------

Balance at December 31, 2005                   $  (3,091,015)  $  (3,074,292)  $    (288,176)  $    (51,404)  $  53,588,290
                                               =============   =============   =============   ============   =============
</TABLE>

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

<PAGE>

Oneida Financial Corp.

Consolidated Statements of Stockholders' Equity (Continued)
Years Ended December 31, 2006, 2005 and 2004
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                 Additional
                                                            Common Stock           Paid-In        Retained     Comprehensive
                                                        Shares       Amount        Capital        Earnings         Income
<S>                                                    <C>         <C>          <C>            <C>             <C>
Balance at December 31, 2005 (continued)               8,242,452   $   82,425   $ 18,300,012   $  41,710,740
Reclassification of unearned stock based
   compensation in accordance with SFAS No. 123R                                     (51,404)
Cumulative adjustment related to SAB 108 adoption                                                    184,253
Net income                                                                                         4,197,992   $   4,197,992
                                                                                                               -------------
   Other comprehensive income, net of tax
   Unrealized gains on securities arising
         during period                                                                                             2,101,309
   Reclassification adjustment for gains
      included in net income                                                                                        (307,546)
                                                                                                               -------------
      Net unrealized holding gains                                                                                 1,793,763
      Minimum pension liability adjustment                                                                           414,385
                                                                                                               -------------
   Other comprehensive income before tax                                                                           2,208,148
   Income tax provision                                                                                             (883,259)
                                                                                                               -------------
   Other comprehensive income, net of tax                                                                          1,324,889
                                                                                                               -------------
Comprehensive income                                                                                           $   5,522,881
                                                                                                               =============
Adjustment to initially apply SFAS No. 158
   net of tax, (Note 1)
Shares issued under stock plans                           80,000          800           (800)
Shares issued under ESOP plan                                                        195,141
Shares earned under stock plans                                                      229,779
Tax benefit from stock plans                                                          31,950
Common stock cash dividends: $.45 per share                                                       (1,513,478)
Treasury stock reissued                                                                 (328)
                                                       -----------------------------------------------------

Balance at December 31, 2006                           8,322,452   $   83,225   $ 18,704,350   $  44,579,507              --
                                                       =========   ==========   ============   =============

<CAPTION>
                                                Accumulated                     Issued Under     Unearned
                                                   Other                          Employee         Stock
                                               Comprehensive      Treasury     Stock Plans -       Based
                                                Income(Loss)       Stock          Unearned     Compensation       Total
<S>                                            <C>             <C>             <C>             <C>            <C>
Balance at December 31, 2005 (continued)       $  (3,091,015)  $  (3,074,292)  $    (288,176)  $    (51,404)  $  53,588,290
Reclassification of unearned stock based
   compensation in accordance with SFAS
      No. 123R                                                                                       51,404              --
Cumulative adjustment related to SAB 108
   adoption                                                                                                         184,253
Net income                                                                                                        4,197,992
   Other comprehensive income, net of tax
   Unrealized gains on securities arising
         during period
   Reclassification adjustment for gains
      included in net income
      Net unrealized holding gains
      Minimum pension liability adjustment
   Other comprehensive income before tax
   Income tax provision
   Other comprehensive income, net of tax          1,324,889                                                      1,324,889
Comprehensive income
Adjustment to initially apply SFAS No. 158
   net of tax, (Note 1)                              (20,566)                                                       (20,566)
Shares issued under stock plans                                                                                          --
Shares issued under ESOP plan                                                        146,498                        341,639
Shares earned under stock plans                                                                                     229,779
Tax benefit from stock plans                                                                                         31,950
Common stock cash dividends: $.45 per share                                                                      (1,513,478)
Treasury stock reissued                                               35,366                                         35,038
                                               -------------   ------------------------------------------------------------

Balance at December 31, 2006                   $  (1,786,692)  $  (3,038,926)  $    (141,678)  $         --   $  58,399,786
                                               =============   =============   =============   ============   =============
</TABLE>

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

<PAGE>

Oneida Financial Corp.

Consolidated Statements of Cash Flows
Years Ended December 31, 2006, 2005 and 2004
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      2006           2005           2004
<S>                                                               <C>            <C>            <C>
Operating activities:
   Net income                                                     $  4,197,992   $  3,857,577   $  3,291,574
   Adjustments to reconcile net income to
      net cash provided by operating activities:
         Depreciation and amortization                               1,476,978      1,106,754      1,077,723
         Amortization of premiums and
            (accretion of discounts) on securities, net                 81,758        208,509        475,458
         Provision for loan losses                                     280,000        360,000        450,000
         Provision for deferred income taxes                           285,229        (98,000)       219,213
         (Gain) Loss on sale of premises and equipment                (132,027)        15,396        (15,249)
         (Gain) Loss on available for sale securities, net            (307,546)      (274,934)       961,421
         ESOP shares earned                                            341,639        358,065        373,356
         Stock compensation earned                                     229,779         86,985        212,476
         Loss (Gain) on sale of foreclosed assets                       17,185              -        (21,689)
         Gain on sale of loans                                        (142,469)      (161,132)      (229,045)
         Income taxes payable                                         (192,145)        79,203       (148,344)
         Accrued interest receivable                                   105,737        (89,608)        86,469
         Other assets                                                  (43,736)    (1,363,202)      (367,173)
         Other liabilities                                          (1,352,519)       798,158       (335,161)
         Origination of loans held for sale                        (17,242,456)   (13,304,521)   (19,520,127)
         Proceeds from sale of loans                                17,157,303     15,005,972     18,814,918
                                                                  ------------   ------------   ------------

         Net cash provided by operating activities                   4,760,702      6,585,222      5,325,820
                                                                  ------------   ------------   ------------

Investing activities:
   Purchase of investment securities                                (9,259,208)   (32,625,847)   (53,996,964)
   Proceeds of maturities, sales or calls
      from investment securities                                    31,883,800     29,724,694     64,439,643
   Purchase of mortgage-backed securities                           (5,086,281)    (8,531,200)   (10,741,755)
   Principal collected on and proceeds from
      sales of mortgage-backed securities                            5,212,971     22,834,766     17,631,723
   Net increase in loans                                           (11,506,154)   (26,152,104)   (10,976,996)
   Purchase of bank premises and equipment                          (6,418,547)    (3,858,181)      (617,287)
   Proceeds from sale of bank premises and equipment                   732,429              -         71,854
   Proceeds from sale of foreclosed assets                              72,733         53,382        316,021
   Purchase of insurance agency                                     (1,781,617)    (1,207,206)      (651,599)
   Purchase of employee benefits company                            (1,512,759)             -              -
                                                                  ------------   ------------   ------------

         Net cash provided (used in) by investing activities         2,337,367    (19,761,696)    (5,474,640)
                                                                  ------------   ------------   ------------
</TABLE>

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

<PAGE>

Oneida Financial Corp.

Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 2006, 2005 and 2004
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      2006           2005           2004
<S>                                                               <C>            <C>            <C>
Financing activities:
   Net increase in demand deposits,
      savings, money market, interest-bearing checking and
      mortgagor's escrow accounts                                 $  2,708,805   $  5,859,639   $  7,911,751
   Net increase (decrease) in time deposits                          9,374,724     (6,319,867)   (11,780,247)
   Proceeds from borrowings                                         80,930,000     89,467,000     63,000,000
   Repayment of borrowings                                         (92,800,000)   (76,597,000)   (66,000,000)
   Cash dividends                                                   (1,513,478)    (1,343,335)    (1,211,226)
   Exercise of stock options (using treasury stock)                     35,038         47,374        118,281
   Purchase of treasury stock                                                -        (93,000)       (95,047)
                                                                  ------------   ------------   ------------

         Net cash (used in) provided by financing activities        (1,264,911)    11,020,811     (8,056,488)
                                                                  ------------   ------------   ------------

         Increase (decrease) in cash and cash equivalents            5,833,158     (2,155,663)     2,743,972

Cash and cash equivalents at beginning of year                      12,877,017     15,032,680     12,288,708
                                                                  ------------   ------------   ------------

         Cash and Cash Equivalents at End of Year                 $ 18,710,175   $ 12,877,017   $ 15,032,680
                                                                  ------------   ------------   ------------

Supplemental disclosures of cash flow information:
   Cash paid during the year for:
      Interest on deposits and obligations                        $  9,524,670   $  7,695,565   $  6,835,184
      Income taxes                                                   1,105,000      1,171,285        970,800
   Non-cash operating activities:
      Minimum pension liability adjustment                             414,385       (111,339)      (731,454)
   Non-cash investing activities:
      Transfer of loans to foreclosed assets                            89,918         53,382        179,051
      Notes payable issued in connection with acquisition            2,593,325              -              -
</TABLE>

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

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies

      Nature of Operations

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

      The Bank is located in Central New York with offices in the City of Oneida
      and the Villages of Cazenovia,  Hamilton,  Canastota, Camden, Chittenango,
      and Bridgeport and owns two banking related subsidiaries; Oneida Preferred
      Funding  Corporation  (OPFC) and State Bank of Chittenango (SBC). The Bank
      is engaged primarily in accepting  deposits and providing various types of
      loans to the  community.  The  Bank  also  provides  trust  and  brokerage
      services.  OPFC,  a Real Estate  Investment  Trust,  primarily  engages in
      investing  activities of residential and commercial real estate mortgages.
      SBC is a special purpose  commercial bank subsidiary which is permitted to
      accept  municipal  deposit  accounts from various  municipalities,  school
      districts and other public sources; a source of funds not available to the
      Bank under New York Law. The Bank also owns one  insurance  and  financial
      services subsidiary; Bailey & Haskell Associates, Inc. (B&H) which has six
      central New York  offices.  During  2006,  the Bank  purchased an employee
      benefits  consulting  and retirement  plan  administration  firm,  Benefit
      Consulting Group Inc. (BCG) which has an office in central New York.

      Oneida  Financial MHC, (the "Holding  Company") a mutual  holding  company
      whose activity is not included in the  accompanying  financial  statement,
      owns approximately 55.4% of the outstanding common stock of the Company at
      December  31, 2006.  Salaries,  employee  benefits and rent  approximating
      $21,000 were allocated  from the Company to the MHC during 2006,  2005 and
      2004.

      Use of Estimates

      To prepare financial  statements in conformity with accounting  principles
      generally  accepted  in the United  States of  America,  management  makes
      estimates and assumptions based on available information.  These estimates
      and assumptions  affect the amounts  reported in the financial  statements
      and the  disclosures  provided,  and  actual  results  could  differ.  The
      allowance  for loan  losses,  loan  servicing  rights,  and fair values of
      financial instruments are particularly subject to change.

      Cash and Cash Equivalents

      Cash and cash  equivalents  include cash on hand,  amounts due from banks,
      interest-earning  deposits in other financial  institutions (with original
      maturity  of three  months or less) and  federal  funds  sold.  Generally,
      federal funds are purchased and sold for one-day periods.

      Investment Securities (including Mortgage-Backed Securities)

      Securities  available-for-sale  are carried at fair value, with unrealized
      holding gains and losses reported in other  comprehensive  income,  net of
      the applicable income tax effect. Interest income includes amortization of
      purchase  premium or discount.  Premiums and discounts on  securities  are
      amortized on the  level-yield  method  without  anticipating  prepayments.
      Gains and losses on sales are  recorded  on the trade date and  determined
      using the specific identification method, except for mutual funds which is
      based on the average cost method. Declines in the fair value of securities
      below their cost that are other than  temporary  are reflected as realized
      losses. In estimating  other-than-temporary  losses, management considers:
      (1) length of time and extent that fair value has been less than cost, (2)
      the financial condition and near term prospects of the issuer, and (3) the

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      Investment Securities (including Mortgage-Backed Securities) (Continued)

      Company's  ability and intent to hold the security for a period sufficient
      to allow for any anticipated recovery in fair value.

      Federal Home Loan Bank (FHLB) Stock

      The Bank is a member of the FHLB  system.  Members  are  required to own a
      certain  amount  of stock  based  on the  level of  borrowings  and  other
      factors, and may invest additional amounts.  FHLB stock is carried at cost
      and periodically  evaluated for impairment based on the ultimate  recovery
      of par value. Both cash and stock dividends are reported as income.

      Loans Held for Sale

      Mortgage loans  originated  and intended for sale in the secondary  market
      are carried at the lower of aggregate  cost or market,  as  determined  by
      outstanding commitments from investors. Net unrealized losses, if any, are
      recorded as a valuation allowance and charged to earnings.

      As of December  31, 2006,  the Company has $1.6  million of mortgage  loan
      forward  sale  commitments.  The fair  value of these  commitments  is not
      material.

      Loans

      Loans  that  management  has  the  intent  and  ability  to  hold  for the
      foreseeable  future  or until  maturity  or  payoff  are  reported  at the
      principal balance outstanding,  net of deferred origination fees and costs
      and the  allowance  for loan  losses.  Interest  income is  accrued on the
      unpaid principle  balance.  Loan  origination  fees, net of certain direct
      origination  costs,  are deferred and recognized in interest  income using
      the level-yield method without anticipating prepayments.

      Interest  income on loans is  discontinued at the time the loan is 90 days
      delinquent  unless the loan is well-secured  and in process of collection.
      Past due  status is based on the  contractual  terms of the  loan.  In all
      cases, loans are placed on nonaccrual or charged-off at an earlier date if
      collection or principal or interest is considered doubtful.

      All interest  accrued but not received for loans placed on  nonaccrual  is
      reversed  against  interest  income.  Interest  received  on such loans is
      accounted for on the  cash-basis  until  qualifying for return to accrual.
      Loans are returned to accrual  status when all the  principal and interest
      amounts  contractually  due are brought  current and future  payments  are
      reasonably assured.

      Allowance for Loan Losses

      The  allowance  for loan  losses is a  valuation  allowance  for  probable
      incurred credit losses. Loan losses are charged against the allowance when
      management  believes the  uncollectibility of a loan balance is confirmed.
      Subsequent recoveries,  if any, are credited to the allowance.  Management
      estimates the allowance  balance required using past loan loss experience,
      the  nature  and  volume  of the  portfolio,  information  about  specific
      borrower situations and estimated collateral values,  economic conditions,
      and other  factors.  Allocations of the allowance may be made for specific
      loans,  but the  entire  allowance  is  available  for any loan  that,  in
      management's  judgment,  should  be  charged  off.  Quarterly,  management
      evaluates  the adequacy of the allowance and  determines  the  appropriate
      level of provision  for loan losses by applying a range of estimated  loss
      percentages to each category of performing loans and classified loans. The
      allowance  adjustment  is based  upon  the net  change  in each  portfolio
      category, as well as adjustments related to impaired loans, since the

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      Allowance for Loan Losses (Continued)

      prior quarter. Management monitors and modifies the level of the allowance
      for loan losses to maintain it at a level which it  considers  adequate to
      provide for probable incurred loan losses.

      A loan is considered impaired, based on current information and events, if
      it is  probable  that the Bank  will be unable to  collect  the  scheduled
      payments of principal or interest  when due  according to the  contractual
      terms  of  the  loan  agreement.   Factors  considered  by  management  in
      determining  impairment include payment status,  collateral value, and the
      probability of collecting  scheduled  principal and interest payments when
      due. The  measurement of impaired loans is generally  based on the present
      value of expected future cash flows discounted at the historical effective
      interest rate, except that all collateral dependent loans are measured for
      impairment based on the estimated fair value of the collateral.

      Premises and Equipment

      Land is carried at cost.  Premises and equipment are stated at cost,  less
      accumulated depreciation. Buildings and related components are depreciated
      using the  straight-line  method with useful  lives  ranging  from 5 to 39
      years.  Furniture,  fixtures  and  equipment  are  depreciated  using  the
      straight-line  method  with  useful  lives  ranging  from  3 to 10  years.
      Maintenance and repairs are charged to operating expense as incurred.

      Goodwill and Other Intangible Assets

      Goodwill  results from business  acquisitions and represents the excess of
      the  purchase  price over the fair value of acquired  tangible  assets and
      liabilities and identifiable  intangible  assets.  Goodwill is assessed at
      least annually for impairment and any such  impairment  will be recognized
      in the period identified.

      Other  intangible  assets  consist of core deposit and  acquired  customer
      relationship   intangible   assets  arising  from  whole  bank  and  other
      acquisitions. They are initially measured at fair value and then amortized
      over their  estimated  useful lives.  Core deposit  intangibles  are being
      amortized over 11.5 years and acquired  customer  relationship  intangible
      over 5 years.

      Mortgage Servicing Rights

      Originated  mortgage  servicing  rights  represent the allocated  value of
      retained servicing rights on loans sold.  Servicing assets are expensed in
      proportion to, and over the period of,  estimated net servicing  revenues.
      Impairment  is  evaluated  based on the fair  value of the  assets,  using
      groupings  of  the  underlying  loans  as  to  interest  rates  and  then,
      secondarily,  as to loan type and investor. Fair value is determined based
      upon discounted cash flows using market-based assumptions.  Any impairment
      of a grouping is reported  as a  valuation  allowance,  to the extent that
      fair value is less than the capitalized amount for the grouping.

      Servicing assets are evaluated for impairment based upon the fair value of
      the rights as compared to amortized  costs.  Impairment  is  determined by
      stratifying    rights   into   groupings   based   on   predominant   risk
      characteristics,  such as  interest  rate,  loan type and  investor  type.
      Impairment is recognized  through a valuation  allowance for an individual
      grouping,  to the  extent  that fair  value is less  than the  capitalized
      amount.  If the  Company  later  determines  that all or a portion  of the
      impairment no longer exists for a particular  grouping, a reduction of the
      allowance may be recorded as an increase in income.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      Mortgage Servicing Rights (Continued)

      Servicing fee income is recorded for fees earned for servicing  loans. The
      fees are based on a contractual  percentage of the outstanding  principal;
      or a fixed  amount per loan and are  recorded as income when  earned.  The
      amortization of mortgage servicing rights is netted against loan servicing
      fee income.

      Foreclosed Assets

      Assets  acquired  through  or instead of loan  foreclosure  are  initially
      recorded at fair value when acquired,  establishing  a new cost basis.  If
      fair value declines  subsequent to foreclosure,  a valuation  allowance is
      recorded through expense. Operating costs after acquisition are expensed.

      Bank Owned Life Insurance

      The Company has purchased life insurance policies on certain key officers.
      Bank owned life insurance is recorded at its cash surrender  value, or the
      amount that can be realized.

      Insurance

      Commissions  from sales of insurance  products are recorded as income when
      earned.

      Income Taxes

      Income tax  expense  is the total of the  current  year  income tax due or
      refundable and the change in deferred tax assets and liabilities. Deferred
      tax assets and  liabilities  are the  expected  future tax amounts for the
      temporary differences between carrying amounts and tax basis of assets and
      liabilities,  computed using enacted tax rates. A valuation allowance,  if
      needed, reduces deferred tax assets to the amount expected to be realized.

      Trust Department Assets

      Assets  held in  fiduciary  or agency  capacities  for  customers  are not
      included in the accompanying  consolidated statements of condition,  since
      such items are not assets of the Company.  Fees  associated with providing
      trust  management  services  are recorded on the accrual  method,  and are
      included in Other Income.  At December 31, 2006,  the Bank  maintained 538
      trust/fiduciary  accounts,  with  total  assets  of $110.5  million  under
      management as compared to 489 trust/fiduciary  accounts with $98.5 million
      total assets at December 31, 2005.

      Employee Benefits

      Pension  expense is the net of service and interest  cost,  return on plan
      assets and  amortization of gains and losses not  immediately  recognized.
      Employee 401(k) expense is the amount of matching contributions.

      Fair Value of Financial Instruments

      Fair values of financial  instruments  are estimated using relevant market
      information and other  assumptions,  as more fully disclosed in a separate
      note.  Fair  value  estimates   involve   uncertainties   and  matters  of
      significant  judgment regarding interest rates, credit risk,  prepayments,
      and  other  factors,  especially  in the  absence  of  broad  markets  for
      particular  items.  Changes in assumptions or in market  conditions  could
      significantly affect the estimates.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      Loan Commitments

      Financial  instruments include off-balance sheet credit instruments,  such
      as commitments to make loans and commercial  letters of credit,  issued to
      meet customer  financing needs. The face amount for these items represents
      exposure to loss,  before  considering  customer  collateral or ability to
      repay. Such financial instruments are recorded when they are funded.

      Operating Segment

      Internal  financial  information  is primarily  reported and aggregated in
      three  lines  of  business;   banking,   insurance  and  employee  benefit
      consulting.

      Reclassification

      Some items in the prior year financial  statements  were  reclassified  to
      conform to the current presentation.

      Equity

      Common stock has $0.01 par and 20,000,000 shares authorized.  In addition,
      one million shares of serial preferred stock were authorized.  There is no
      serial preferred stock outstanding as of December 31, 2006.

      Employee Stock Ownership Plan

      The  cost  of  shares  issued  to the  ESOP,  but  not  yet  allocated  to
      participants,   is  shown  as  a  reduction   of   stockholders'   equity.
      Compensation  expense is based on the  market  price of shares as they are
      committed to be released to participant  accounts.  Dividends on allocated
      ESOP shares reduce  retained  earnings;  dividends on unearned ESOP shares
      reduce debt and accrued interest.

      Stock-Based Compensation

      Effective  January 1, 2006,  the Company  adopted  Statement  of Financial
      Accounting Standards ("SFAS") No. 123R,  Share-Based Payment (FAS123R) for
      its share-based  compensation plans. The Company previously  accounted for
      these plans under the recognition and measurement principles of Accounting
      Principles Board (APB) No. 25, "Accounting for Stock Issued to Employees,"
      (APB  25)  and  related   interpretations   and  disclosure   requirements
      established by FAS 123,  "Accounting for Stock-Based  Compensation." Under
      APB 25, because the exercise price of the Company's employee stock options
      equaled the market price of the underlying  stock on the date of grant, no
      compensation  expense was  recorded.  The pro forma  effects on income for
      stock  options  were  instead  disclosed  in a footnote  to the  financial
      statements.  Expense was recorded in the income  statement for  restricted
      stock awards.

      Under FAS 123R, all share-based compensation cost is measured at the grant
      date,  based  on the fair  value of the  award,  and is  recognized  as an
      expense in the income  statement  over the  vesting  period.  The  Company
      adopted FAS 123R using the modified  prospective  method. The cost for all
      share- based awards granted subsequent to January 1, 2006, represented the
      grant-date fair value that was estimated in accordance with the provisions
      of FAS 123R. Prior periods have not been restated. For 2006, adopting this
      standard  resulted in a reduction of income before income taxes of $9,200,
      a  reduction  of net income of $6,800  and no change in basic and  diluted
      earnings per share.  The options  granted were reload  options for options
      exercised  during the year. The reloaded options have the same features as
      the original awarded options.  All original awarded options were vested as
      of April 2005.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      Stock-Based Compensation (Continued)

      The following table  illustrates the effect on net income and earnings per
      share if expense was measured using the fair value recognition  provisions
      of FASB Statement No. 123, "Accounting for Stock-Based Compensation."

<TABLE>
<CAPTION>
                                                            2005             2004
<S>                                                    <C>              <C>
      Net income:
         As reported                                   $   3,857,577    $   3,291,574
      Deduct: Total stock-based compensation
         expense determined under fair value
         based method, net of related tax effects            (78,298)         (58,348)
                                                       -------------    -------------
         Pro forma                                     $   3,779,279    $   3,233,226
                                                       =============    =============
      Earnings per share:
         As reported
            Basic                                      $        0.51    $        0.44
            Diluted                                    $        0.50    $        0.43
         Pro forma
            Basic                                      $        0.50    $        0.43
            Diluted                                    $        0.49    $        0.42
</TABLE>

      Earnings per Share

      Basic   earnings  per  share   represents   income   available  to  common
      stockholders  divided  by the  weighted  average  number of common  shares
      outstanding during the period. ESOP shares are considered  outstanding for
      the calculation unless unearned. Diluted earnings per share give effect to
      weighted average shares,  which would be outstanding assuming the exercise
      of issued options and awards using the treasury stock method.  The Company
      declared a three-for-two  stock dividend to all  shareholders of record as
      of February 10, 2004. The weighted average shares outstanding and earnings
      per  share  and  dividends  per  share   information  have  been  adjusted
      retroactively to reflect the three-for-two stock split declared.  Earnings
      per common share have been  computed  based on the following for the years
      ended December 31:

<TABLE>
<CAPTION>
      Twelve Months Ended December 31, 2006      Income          Shares      Per Share
<S>                                           <C>              <C>          <C>
      Net income                              $ 4,197,992
                                              ===========
      Basic earnings per share                  4,197,992      7,633,365    $      0.55
                                                                            ===========
      Effect of dilutive securities:
         Stock options and awards                                 70,917
                                              -----------      ---------    -----------
            Diluted earnings per share        $ 4,197,992      7,704,282    $      0.54
                                              ===========      =========    ===========
</TABLE>

<TABLE>
<CAPTION>
      Twelve Months Ended December 31, 2005      Income          Shares      Per Share
<S>                                           <C>              <C>          <C>
      Net income                              $ 3,857,577
                                              ===========
      Basic earnings per share                  3,857,577      7,575,836    $      0.51
                                                                            ===========
      Effect of dilutive securities:
         Stock options and awards                                 98,909
                                              -----------      ---------    -----------
            Diluted earnings per share        $ 3,857,577      7,674,745    $      0.50
                                              ===========      =========    ===========
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      Earnings Per Share (Continued)

<TABLE>
<CAPTION>
      Twelve Months Ended December 31, 2004      Income          Shares      Per Share
<S>                                           <C>              <C>          <C>
      Net income                              $ 3,291,574
                                              ===========
      Basic earnings per share                  3,291,574      7,476,137    $      0.44
                                                                            ===========
      Effect of dilutive securities:
         Stock options and awards                                156,907
                                              -----------      ---------    -----------
            Diluted earnings per share        $ 3,291,574      7,633,044    $      0.43
                                              ===========      =========    ===========
</TABLE>

      Stock  options for 54,559,  52,368 and 17,135  shares of common stock were
      not  considered in computing  diluted  earnings per common share for 2006,
      2005 and 2004 respectively because they were anti-dilutive.

      Treasury Stock

      Common  stock  that upon  purchase  is  classified  as  treasury  stock is
      recorded at cost.  During 2006 and 2005, the Company  purchased  5,634 and
      23,640 shares  classified  as treasury  stock at an average cost of $11.72
      and $13.16 per share respectively. During 2006 and 2005, 13,425 and 57,055
      shares of treasury  stock were  reissued  at an average  cost of $4.75 and
      $4.75, respectively.  The shares reissued during 2006 and 2005 were issued
      on the exercise of stock options.

      Other Comprehensive Income (Loss)

      Comprehensive  income  consists  of net  income  and  other  comprehensive
      income. Other comprehensive income includes unrealized gains and losses on
      securities  available  for sale and changes in minimum  pension  liability
      which are also recognized as separate components of equity.

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

<TABLE>
<CAPTION>
                                                   2006           2005           2004
<S>                                            <C>            <C>            <C>
Unrealized gains (losses) on securities
   Unrealized holding gains (losses) arising
      during period                            $ 2,101,309    $(3,109,267)   $(1,921,767)
   Less: reclassification adjustment for
      (gains) losses realized in income           (307,546)      (274,934)       961,421
                                               -----------------------------------------
   Net unrealized gains (losses)                 1,793,763     (3,384,201)      (960,346)
   Tax effect                                     (717,505)     1,353,680        384,138
                                               -----------------------------------------
      Net-of-tax amount                          1,076,258     (2,030,521)      (576,208)
                                               -----------------------------------------
   Minimum pension liability                       414,385       (111,339)      (731,454)
   Tax effect                                     (165,754)        44,536        292,582
                                               -----------------------------------------
      Net-of-tax amount                            248,631        (66,803)      (438,872)
                                               -----------------------------------------
                                               $ 1,324,889    $(2,097,324)   $(1,015,080)
                                               =========================================
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      New Pronouncements

      FASB Statement No. 158:

      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 Statements No. 87, 88, 106 and
      132( R). This Statement  requires an employer  recognize the overfunded or
      underfunded status of a defined benefit postretirement plan as an asset or
      liability  in its  balance  sheet,  beginning  with year end 2006,  and to
      recognize  changes in the funded  status in the year in which the  changes
      occur  through  comprehensive  income  beginning  in  2007.  Additionally,
      defined  benefit plan assets and  obligations are to be measured as of the
      date of the employer's fiscal year-end,  starting in 2008. Adoption of the
      FASB did not have a material impact on the financial  statements of Oneida
      Financial Corp.

      SAB 108:

      In September 2006, the Securities and Exchange  Commission  (SEC) released
      Staff Accounting  Bulletin No. 108,  Considering the Effects of Prior Year
      Misstatements when Quantifying Misstatements in the Current Year Financial
      Statements  (SAB 108),  which is  effective  for fiscal years ending on or
      after November 15, 2006.  SAB 108 provides  guidance on how the effects of
      prior  year  uncorrected  financial  statement   misstatements  should  be
      considered in  quantifying a current year  misstatement.  SAB 108 requires
      public companies to quantify  misstatements using both an income statement
      (rollover) and balance sheet (iron curtain)  approach and evaluate whether
      either  approach  results  in  a  misstatement  that,  when  all  relevant
      quantitative and qualitative factors are considered, is material. If prior
      year  errors  that  had  been  previously  considered  immaterial  now are
      considered  material based on either approach,  no restatement is required
      so long as  management  properly  applied its  previous  approach  and all
      relevant facts and circumstances were considered.  Adjustments  considered
      immaterial  in prior  years  under the  method  previously  used,  but now
      considered material under the dual approach required by SAB 108, are to be
      recorded upon initial adoption of SAB 108. The amount so recorded is shown
      as a  cumulative  effect  adjustment  and is recorded in opening  retained
      earnings as of January 1, 2006. The Company applied the SAB 108 cumulative
      catch-up  treatment for certain  direct loan  origination  costs which had
      previously  been  expensed  as  incurred  rather  than  deferred  and then
      amortized over the life of the loan. The adjustment had accumulated  since
      2001 and management  determined that no prior period's net income had been
      materially misstated. The cumulative adjustment resulted in an increase to
      loans for the estimated deferred loan origination costs of $307,089,  with
      an $184,253 increase to beginning retained earnings,  net of a decrease to
      deferred federal income taxes included in other assets of $122,836.

      Effect of Newly Issued But Not Yet Effective Accounting Standards

      In February 2006, the Financial  Accounting  Standards Board (FASB) issued
      Statement No. 155,  Accounting for Certain Hybrid Financial  Instruments -
      an amendment to FASB  Statement  No. 133 and 140. This  Statement  permits
      fair value re-measurement for any hybrid financial instruments,  clarifies
      which  instruments  are subject to the  requirements of Statement No. 133,
      and  establishes  a  requirement  to  evaluate   interest  in  securitized
      financial  assets and other  items.  The new  standard  is  effective  for
      financial  assets  acquired or issued after the  beginning of the entity's
      first fiscal year that begins after  September 15, 2006.  Management  does
      not expect the adoption of this statement to have a material impact on its
      consolidated financial position or results of operations.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      Effect of Newly Issued But Not Yet Effective Accounting Standards
      (Continued)

      In March 2006, The FASB issued Statement No. 156, Accounting for Servicing
      of  Financial  Assets - an  amendment  of FASB  Statement  No.  140.  This
      Statement provides the following:  1) revised guidance on when a servicing
      asset and  servicing  liability  should be  recognized;  2)  requires  all
      separately  recognized  servicing  assets and servicing  liabilities to be
      initially measured at fair value, if practicable;  3) permits an entity to
      elect to measure servicing assets and servicing  liabilities at fair value
      each  reporting  date and report  changes in fair value in earnings in the
      period in which the changes  occur;  4) upon initial  adoption,  permits a
      onetime  reclassification  of  available-for-sale  securities  to  trading
      securities for securities  which are identified as offsetting the entity's
      exposure to changes in the fair value of servicing  assets or  liabilities
      that a  servicer  elects to  subsequently  measure at fair  value;  and 5)
      requires   separate   presentation  of  servicing   assets  and  servicing
      liabilities  subsequently  measured  at fair  value  in the  statement  of
      financial position and additional footnote  disclosures.  This standard is
      effective as of the beginning of an entity's first fiscal year that begins
      after  September  15,  2006 with the  effects  of initial  adoption  being
      reported  as  a   cumulative-effect   adjustment  to  retained   earnings.
      Management  does not expect the  adoption  of this  statement  will have a
      material  impact on its  consolidated  financial  position  or  results of
      operations.

      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.
      The Company has not completed its evaluation of the impact of the adoption
      of this standard.

      In July 2006, the FASB issued FASB  Interpretation  No. 48, Accounting for
      Uncertainty in Income Taxes - an  interpretation of FASB Statement No. 109
      (FIN  48),  which  prescribes  a  recognition  threshold  and  measurement
      attribute  for a tax  position  taken  or  expected  to be  taken in a tax
      return.  FIN 48 also provides guidance on  derecognition,  classification,
      interest and  penalties,  accounting in interim  periods,  disclosure  and
      transition.  FIN 48 is effective for fiscal years beginning after December
      15, 2006. The Company has determined  that the adoption of FIN 48 will not
      have a material effect on the financial statements.

      In September  2006, the FASB Emerging Tax Force  finalized Issue No. 06-4,
      Accounting for Deferred Compensation and Postretirement Benefit Aspects of
      Endorsement Split-Dollar Life Insurance Arrangements.  This issue requires
      that a liability be recorded during the service period when a split-dollar
      life  insurance  agreement  continues  after  participants'  employment or
      retirement.  The required  accrued  liability  will be based on either the
      post-employment  or cost for the continuing life insurance or based on the
      future death benefit  depending on the contractual terms of the underlying
      agreement.  This issue is  effective  for  fiscal  years  beginning  after
      December 15, 2007.  The Company has not  completed  its  evaluation of the
      impact of adoption of EITF 06-4.

      In September 2006, the FASB Emerging Issues Task Force finalized Issue No.
      06-5,  Accounting for Purchases of Life Insurance - Determining the Amount
      That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4
      (Accounting for Purchases of Life  Insurance).  This issue requires that a
      policy holder  consider  contractual  terms of a life insurance  policy in
      determining  the  amount  that  could  be  realized  under  the  insurance
      contract. It also requires that if the contract

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.    Summary of Significant Accounting Policies (Continued)

      Effect of Newly Issued But Not Yet Effective Accounting Standards
      (Continued)

      provides for a greater  surrender  value if all  individual  policies in a
      group  are  surrendered  at the  same  time  that the  surrender  value be
      determined based on the assumption that policies will be surrendered on an
      individual basis.  Lastly,  the issue discusses whether the cash surrender
      value should be discounted when the policyholder is contractually  limited
      in its ability to surrender the policy. This issue is effective for fiscal
      years  beginning after December 15, 2006. The Company does not believe the
      adoption  of this  issue  will have a  material  impact  on the  financial
      statements.

2.    Investment Securities and Mortgage-Backed Securities

      Investment  securities  and  mortgage-backed  securities  consist  of  the
      following at December 31:

<TABLE>
<CAPTION>
                                                                  2006
                                                   ---------------------------------------
                                                                     Gross Unrealized
                                                    Fair Value      Gains        Losses
<S>                                                <C>           <C>           <C>
      Investment Securities
         Available for sale portfolio:
         -----------------------------
           Debt securities:
             U.S. Agencies                         $36,245,166   $    13,321   $   659,172
             Corporate                              18,067,131        93,610       387,802
             State and municipals                   15,705,832        75,160       116,710
                                                   -----------   -----------   -----------
                                                    70,018,129       182,091     1,163,684
           Equity investments:
             Preferred and other equity stocks      12,942,822       378,739        45,417
             Mutual fund                             2,755,983            --        26,856
                                                   -----------   -----------   -----------
                                                   $85,716,934   $   560,830   $ 1,235,957
                                                   ===========   ===========   ===========
      Mortgage-Backed Securities
         Available for sale portfolio:
         -----------------------------
           Federal National Mortgage Association   $10,008,173   $    16,299   $   232,163
           Federal Home Loan Mortgage Corp.         16,196,889         2,310       376,608
           Government National Mortgage                988,709            --         5,110
           Small Business Administration                16,599            --            83
           Collateralized Mortgage Obligations       1,870,723            --        32,011
                                                   -----------   -----------   -----------
                                                   $29,081,093   $    18,609   $   645,975
                                                   ===========   ===========   ===========
       </TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
                                                                        2005
                                                      -----------------------------------------
                                                                          Gross Unrealized
                                                        Fair Value      Gains         Losses
<S>                                                   <C>             <C>          <C>
   Investment Securities
      Available for sale portfolio:
      -----------------------------
        Debt securities:
          U.S. Agencies                               $  35,436,303   $       --   $  1,086,589
          Corporate                                      21,903,291       75,562        868,093
          State and municipals                           32,497,981      193,909        187,156
                                                      -------------   ----------   ------------
                                                         89,837,575      269,471      2,141,838
        Equity investments:
          Preferred and other equity stocks              13,904,717      132,006        456,790
          Mutual fund                                     2,690,005           --         92,834
                                                      -------------   ----------   ------------
                                                      $ 106,432,297   $  401,477   $  2,691,462
                                                      =============   ==========   ============
   Mortgage-Backed Securities
      Available for sale portfolio:
      -----------------------------
        Federal National Mortgage Association         $   8,937,483   $       21   $    288,686
        Federal Home Loan Mortgage Corp.                 18,034,265        1,749        461,522
        Small Business Administration                        22,958           --             --
        Collateralized Mortgage Obligations               2,102,754           --         57,835
                                                      -------------   ----------   ------------
                                                      $  29,097,460   $    1,770   $    808,043
                                                      =============   ==========   ============
</TABLE>

      The fair value of available-for-sale  debt securities at December 31, 2006
      by contractual  maturity are shown below.  Expected maturities will differ
      from contractual  maturities  because borrowers may have the right to call
      or  prepay  obligations  with or  without  call or  prepayment  penalties.
      Securities not due at a single  maturity date,  primarily  mortgage-backed
      securities, are shown separately.

                                                                     Fair Value

      Due within one year                                           $11,739,100
      Due after one year through five years                          23,085,458
      Due after five years through ten years                         13,826,707
      Due after ten years                                            21,366,864
                                                                    -----------
         Total                                                       70,018,129
      Mortgage-backed securities                                     29,081,093
                                                                    -----------
         Total                                                      $99,099,222
                                                                    ===========

      Sales of available for sale securites were as follows

<TABLE>
<CAPTION>
                                                   2006           2005          2004
<S>                                             <C>           <C>           <C>
            Proceeds                            $26,402,866   $36,948,055   $62,684,221
            Gross Gains                         $   379,215   $   603,656   $   453,487
            Gross Losses                        $    71,669   $   328,722   $ 1,414,908
</TABLE>

      Investment securities with a carrying value of $61,842,457 and $61,595,468
      at December 31, 2006 and 2005  respectively  were pledged to collateralize
      borrowing  arrangements,  secure  public  deposits and for other  purposes
      required or  permitted  by law. At year-end  2006 and 2005,  there were no
      holdings of securities of any one issuer,  other than the U.S.  Government
      and its agencies, in an amount greater than 10% of stockholders' equity.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

      Securities with unrealized losses at year end 2006 and 2005, aggregated by
      investment  category and length of time that  individual  securities  have
      been in a continuous unrealized loss position, are as follows:

<TABLE>
<CAPTION>
December 31, 2006                         Less than 12 Months           More than 12 Months                  Total
                                          Fair        Unrealized        Fair        Unrealized        Fair        Unrealized
Description of Securities                 Value          Loss           Value          Loss          Value           Loss
--------------------------------------------------   ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>            <C>
U.S. Agencies                         $    289,536   $        464   $ 28,355,474   $    658,708   $ 28,645,010   $    659,172
Corporate                                2,427,103         72,898     13,320,801        314,904     15,747,904        387,802
State and municipals                     1,170,122          6,575      5,668,785        110,135      6,838,907        116,710
Mutual funds and other stocks            7,648,067         72,273             --             --      7,648,067         72,273
Federal National Mortgage Assoc.           296,163          1,047      7,169,352        231,116      7,465,515        232,163
Government National Mortgage               988,709          5,110             --             --        988,709          5,110
Federal Home Loan Mortgage Corp.            49,728             73     15,091,177        376,535     15,140,905        376,608
Small Business Administration               16,599             83             --             --         16,599             83
Collateralized Mortgage Obligations             --             --      1,870,722         32,011      1,870,722         32,011
                                      ------------   ------------   ------------   ------------   ------------   ------------
Total temporarily impaired            $ 12,886,027   $    158,523   $ 71,476,311   $  1,723,409   $ 84,362,338   $  1,881,932
                                      ============   ============   ============   ============   ============   ============
</TABLE>

<TABLE>
<CAPTION>
December 31, 2005                         Less than 12 Months           More than 12 Months                  Total
                                          Fair        Unrealized        Fair       Unrealized         Fair        Unrealized
Description of Securities                 Value          Loss           Value         Loss           Value          Loss
--------------------------------------------------   ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>            <C>
U.S. Agencies                         $ 10,672,241   $    172,623   $ 24,764,062   $    913,966   $ 35,436,303   $  1,086,589
Corporate                                8,279,784        219,848     10,558,187        648,245     18,837,971        868,093
State and municipals                     6,647,580         57,230      4,855,154        129,926     11,502,734        187,156
Mutual funds and other stocks            7,454,159        266,180      3,666,556        283,444     11,120,715        549,624
Federal National Mortgage Assoc.         1,180,962         27,688      7,751,036        260,998      8,931,998        288,686
Federal Home Loan Mortgage Corp.        13,465,565        327,429      4,341,997        134,093     17,807,562        461,522
Collateralized Mortgage Obligations      1,530,919         42,922        571,836         14,913      2,102,755         57,835
                                      ------------   ------------   ------------   ------------   ------------   ------------
Total temporarily impaired            $ 49,231,210   $  1,113,920   $ 56,508,828   $  2,385,585   $105,740,038   $  3,499,505
                                      ============   ============   ============   ============   ============   ============
</TABLE>

      The Company evaluates  securities for  other-than-temporary  impairment at
      least on a quarterly  basis,  and more  frequently when economic or market
      concerns warrant such evaluation.  Consideration is given to the length of
      time and the extent to which the 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.

      During 2004,  the company had a non-cash  charge of $1.1 million to record
      the  other-than-temporary  impairment of certain perpetual preferred stock
      investments in two government sponsored

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

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

      enterprises  ("GSE");  the Federal National Mortgage  Association ("Fannie
      Mae") and the Federal Home Loan Mortgage Corporation  ("Freddie Mac") with
      a book value of $5.0 million. During 2006, the Fannie Mae stock investment
      of $2.4 million was sold with a gain of $43,000 realized on the sale.

      Unrealized  losses  on other  investments  have not been  recognized  into
      income because the issuer(s)  securities  are of investment  grade (except
      for a General Motors Acceptance Corp. bond), management has the intent and
      ability to hold 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 fair value is expected to recover as the securities(s)
      approach their maturity  dates.  The Company  currently has a $2.0 million
      General Motors  Acceptance  Corp.  (GMAC) bond,  maturing October 15, 2010
      which has a rating below investment grade. The unrealized loss at December
      31,  2006 and  2005 of  $20,000  and  $399,000  respectively  has not been
      considered  other  than  temporary  as GMAC is a  profitable  division  of
      General  Motors,  and 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 the  repayment  of the  investment  is  probable at
      maturity.

3.    Loans Receivable

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

                                                     2006             2005

      Residential                               $ 109,370,423    $ 103,836,529
      Consumer loans                               44,041,481       44,894,132
      Commercial real estate                       59,236,381       54,318,438
      Commercial loans                             35,292,137       33,633,148
                                                -------------    -------------
                                                  247,940,422      236,682,247
      Allowance for loan losses                    (2,080,913)      (1,958,974)
                                                -------------    -------------
         Net loans                              $ 245,859,509    $ 234,723,273
                                                =============    =============

      The Bank grants  commercial,  consumer  and  residential  loans  primarily
      throughout   Madison  and  Oneida  counties.   Although  the  Bank  has  a
      diversified loan portfolio,  a substantial portion of its debtors' ability
      to honor their  contracts is dependent  upon the  employment  and economic
      conditions within the counties.

      At  December  31,  2006 and 2005  loans to  officers  and  directors  were
      approximately $3.1 million and $2.7 million respectively.  During 2006 and
      2005,  $922,000  and  $542,000  of new  loans  were made to  officers  and
      directors respectively.  Net paydowns and repayments in aggregate on loans
      to officers and directors were  approximately  $646,000 and $74,000 during
      2006 and 2005  respectively.  Effect  of  changes  in the  composition  of
      related  parties was  approximately  $117,000  and $0 during 2006 and 2005
      respectively.

      At December 31, 2006,  FHLB  advances are  collateralized  by  residential
      mortgages in the amount of $48,164,979  pledged under a blanket collateral
      agreement.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

3.    Loans Receivable (Continued)

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

<TABLE>
<CAPTION>
                                                          2006          2005           2004
<S>                                                  <C>            <C>            <C>
      Balance at beginning of year                   $  1,958,974   $  1,981,504   $ 2,115,387
      Loans charged off                                  (426,567)      (520,714)     (697,827)
      Recoveries                                          268,506        138,184       113,944
      Provision for loan losses                           280,000        360,000       450,000
                                                     ------------   ------------   -----------
         Balance at end of year                      $  2,080,913   $  1,958,974   $ 1,981,504
                                                     ============   ============   ===========
</TABLE>

      Impaired loans were as follows:

                                                         2006           2005

      Impaired loans                                 $         --   $     38,559
      Allocated allowance for loan losses            $         --   $     13,559

      Average of impaired loans during the year      $      7,712   $     54,708
      Cash-basis interest income recognized          $      1,366   $      3,228

      Nonperforming loans were as follows:

                                                          2006          2005

      Loans past due over 90 days still on accrual   $         --   $         --
      Nonaccrual loans                               $     51,093   $    225,192

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

      Loans having  carrying  values of $89,918 and $53,382 were  transferred to
      foreclosed assets in 2006 and 2005, respectively.

4.    Secondary Mortgage Market Activities

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

                                                         2006           2005
      Mortgage loan portfolios serviced for:
         FHLMC                                       $ 97,958,591   $ 96,612,105
         FHLB                                        $  1,285,842   $         --

      Custodial  escrow  balances  maintained in connection  with serviced loans
      were approximately  $1,146,000 and $992,700 at December 31, 2006 and 2005,
      respectively.

      The  balance of mortgage  servicing  rights  included  in other  assets at
      December 31, 2006 and 2005 was $326,081 and $336,628 respectively. For the
      year ended  December  31,  2006 and 2005,  $98,629 and $96,223 of mortgage
      servicing rights were capitalized, offset by amortization of the rights of
      $109,176  during  2006  and  $113,392  during  2005.  The  fair  value  of
      capitalized  mortgage  servicing  rights  approximated  book  value  as of
      year-end 2006 and 2005.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

5.    Premises and Equipment

      Premises and equipment consist of the following at December 31:

                                                        2006           2005

      Land                                          $  1,650,303   $  1,498,204
      Buildings                                       14,691,424     13,741,968
      Equipment and fixtures                           6,871,858      6,466,382
      Construction in progress                         3,745,455        546,937
                                                    ------------   ------------
                                                      26,959,040     22,253,491
      Accumulated depreciation                        (9,531,269)    (9,550,069)
                                                    ------------   ------------
         Net book value                             $ 17,427,771   $ 12,703,422
                                                    ============   ============

      Depreciation  expense was $1,093,796,  $993,655 and $964,624 in 2006, 2005
      and 2004 respectively.

6.    Goodwill and Other Intangible Assets

      Other intangible assets consist of the following at December 31:

<TABLE>
<CAPTION>
                                                             As of December 31, 2006
                                                    -----------------------------------------
                                                        Gross
                                                      Carrying      Accumulated
                                                        Value      Amortization       Net
                                                    ------------   ------------   -----------
<S>                                                 <C>            <C>            <C>
      Core deposit intangible                       $  1,250,057   $   (498,211)  $   751,846
      Customer relationship intangible                 1,265,543       (284,378)      981,165
                                                    ------------   ------------   -----------
         Total                                      $  2,515,600   $   (782,589)  $ 1,733,011
                                                    ============   ============   ===========
</TABLE>

<TABLE>
<CAPTION>
                                                            As of December 31, 2005
                                                    -----------------------------------------
                                                        Gross
                                                       Carrying     Accumulated
                                                        Value      Amortization       Net
                                                    ------------   ------------   -----------
<S>                                                 <C>            <C>            <C>
      Core deposit intangible                       $  1,250,057   $   (389,510)  $   860,547
      Customer relationship intangible                    21,993         (9,897)       12,096
                                                    ------------   ------------   -----------
         Total                                      $  1,272,050   $   (399,407)  $   872,643
                                                    ============   ============   ===========
</TABLE>

      Aggregate  amortization expense was $383,182,  $113,099,  and $113,099 for
      2006, 2005 and 2004.

      Estimated amortization expense for each of the next five years:

         2007                            $ 349,304
         2008                              295,824
         2009                              251,770
         2010                              220,151
         2011                              195,928

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

6.    Goodwill and Other Intangible Assets (Continued)

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

<TABLE>
<CAPTION>
                                             Banking       Insurance   Benefit Consulting
                                            Activities    Activities       Activities          Total
<S>                                        <C>           <C>           <C>                  <C>
      Balance as of December 31, 2003      $ 5,577,913   $ 6,054,279   $               --   $ 11,632,192
      Goodwill acquired                             --       651,599                   --        651,599
                                           -----------   -----------   ------------------   ------------
      Balance as of December 31, 2004        5,577,913     6,705,878                   --     12,283,791
      Goodwill acquired                             --     1,207,206                   --      1,207,206
                                           -----------   -----------   ------------------   ------------
      Balance as of December 31, 2005        5,577,913     7,913,084                   --     13,490,997
      Goodwill acquired                             --     2,132,217            2,513,826      4,646,043
                                           -----------   -----------   ------------------   ------------
      Balance as of December 31, 2006      $ 5,577,913   $10,045,301   $        2,513,826   $ 18,137,040
                                           ===========   ===========   ==================   ============
</TABLE>

      During 2000, the Company  completed its  acquisition of Bailey and Haskell
      Associates,  Inc.  Under the terms of the agreement,  contingent  purchase
      payments based on future  performance  levels may be made over a five-year
      period  ending  December  31, 2005.  Additional  goodwill in the amount of
      $1,556,070,  $1,196,035  and  $651,599  was  recorded  for the  contingent
      purchase payments made in 2006, 2005 and 2004 respectively.

      During 2006,  the Company  completed its  acquisition  of Parsons,  Cote &
      Company  and  Benefit  Consulting  Group  LLC.  Goodwill  in the amount of
      $576,000  and  intangible  assets in the amount of $71,000 was recorded as
      part of the Parsons, Cote & Company acquisition. Goodwill in the amount of
      $2.5  million  and  intangible  assets in the amount of $1.1  million  was
      recorded as part of the acquisition of Benefit Consulting Group LLC.

7.    Due to Depositors

      Amounts due to depositors at December 31 are as follows:

                                                        2006           2005

      Non-interest bearing demand                  $  53,097,399   $  51,044,371
      Savings                                         63,482,406      67,202,340
      Money market and interest-bearing checking      77,771,403      73,457,169
      Time deposits                                  118,023,875     108,649,151
      Mortgage escrow funds                              894,930         833,453
                                                   -------------   -------------
         Total due to depositors                   $ 313,270,013   $ 301,186,484
                                                   =============   =============

      At December 31, 2006 and 2005,  time  deposits  with balances in excess of
      $100,000 totaled $30,178,140 and $27,382,273, respectively.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

7.    Due to Depositors (Continued)

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

                                      2006                     2005
                            -----------------------   -----------------------
          Maturity             Amount       Percent      Amount       Percent

      One year or less      $ 80,337,097       68.1%  $ 64,756,566       59.6%
      One to two years        22,001,622       18.7     23,877,508       22.0
      Two to three years       6,373,324        5.4      8,212,184        7.6
      Three to four years      5,684,762        4.8      4,300,169        4.0
      Four to five years       3,565,469        3.0      7,425,853        6.8
      Over five years             61,601        0.0         76,871        0.0
                            ------------   --------   ------------   --------
                            $118,023,875      100.0%  $108,649,151      100.0%
                            ============   ========   ============   ========

8.    Borrowings and Notes Payable

      Outstanding borrowings as of December 31 are as follows:

<TABLE>
<CAPTION>
                                                                 2006           2005
<S>                                                          <C>            <C>
      Short-term borrowings:
         Federal Home Loan Bank outstanding line of credit   $         --   $  10,870,000
         Federal Home Loan Bank advances                        7,500,000      23,000,000
      Long-term borrowings:
         Federal Home Loan Bank advances                       53,900,000      43,400,000
                                                             ------------   -------------
                                                             $ 61,400,000   $  77,270,000
                                                             ============   =============
</TABLE>

      Borrowings at December 31, 2006 have maturity dates as follows:

                                         Range of      Average
                                           Rates        Rate

      2007                             5.00% - 6.36%    5.48%    $  7,500,000
      2008                             3.75% - 5.73%    4.83%      14,400,000
      2009                             4.31% - 5.71%    5.01%      16,000,000
      2010                             4.40% - 6.74%    5.73%      12,500,000
      2011                                 5.74%        5.74%       1,000,000
      Thereafter                       3.34% - 5.00%    4.17%      10,000,000
                                                                 ------------
                                                                 $ 61,400,000
                                                                 ============

      The Bank has available a $84,819,600  line of credit with the Federal Home
      Loan Bank of which $0 is outstanding at December 31, 2006. At December 31,
      2006,  borrowings are  collateralized by pledged  securities,  which had a
      carrying value of $42,143,009 and  residential  mortgages in the amount of
      $48,164,979  pledged under a blanket collateral  agreement.  The Bank also
      has available a $5,000,000 unsecured line of credit with Key Bank of which
      $0 is  outstanding  at December 31, 2006.  In addition,  the Bank also has
      available a $5,000,000  unsecured line of credit with M&T Bank of which $0
      is outstanding at December 31, 2006.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

8.    Borrowings and Notes Payable (Continued)

      The Bank  currently  has notes payable  outstanding  of $1.4 million as of
      December  31,  2006.  The  balance as of December  31, 2005 was $0.  Notes
      payable  in  the  amount  of  $419,570  was  established  as  part  of the
      acquisition  of  Parsons,  Cote & Company  to be paid over 36 months  with
      interest  at  5.00%  per  annum.  A  note  payable  of  $2.2  million  was
      established as part of the acquisition of Benefit  Consulting Group LLC to
      be paid over 24 months with interest to be paid at 5.00% per annum.

9.    Income Taxes

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

                                         2006           2005           2004
      Current:
         Federal                     $  1,060,886   $  1,336,269   $    823,433
         State                            179,785        151,731        (33,646)
      Deferred:
         Federal                          240,014        (96,269)       174,567
         State                             45,215         (1,731)        44,646
                                     ------------   ------------   ------------
                                     $  1,525,900   $  1,390,000   $  1,009,000
                                     ============   ============   ============

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

                                                        2006     2005     2004

      Federal statutory income tax rate                   34%      34%      34%
      State tax, net of federal benefit                    2%       2%       1%
      Tax exempt investment income                        (9)%    (10)%    (12)%
                                                        ----     ----     ----
         Effective tax rate                               27%      26%      23%
                                                        ====     ====     ====

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

                                                         2006          2005
                                                          Asset (Liability)

      Allowance for loan losses                       $   802,000   $   784,000
      Depreciation                                         38,000       (74,000)
      Investment securities                               695,000     1,683,000
      Pension benefits                                     14,000       132,000
      Core deposit intangible                            (343,000)     (349,000)
      Mortgage related fees                              (381,000)     (260,000)
      Other                                               (14,000)        8,000
      Deferred compensation                                74,000            --
      Prepaid expenses                                   (116,000)           --
                                                      -----------   -----------
         Total deferred income tax asset, net         $   769,000   $ 1,924,000
                                                      ===========   ===========

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

10.   Benefit Plans

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

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

<TABLE>
<CAPTION>
                                                                 2006            2005
<S>                                                         <C>             <C>
      Change in benefit obligation:
         Benefit obligation at beginning of year            $  5,129,826    $   5,156,585
         Service cost                                                 --               --
         Interest cost                                           239,998          305,661
         Actuarial loss                                         (178,815)              --
         Benefits paid                                          (622,988)        (332,420)
                                                            ------------    -------------
            Benefit obligation at end of year               $  4,568,021    $   5,129,826
                                                            ============    =============
      Change in plan assets, at fair value:
         Beginning plan assets                              $  4,253,487    $   4,382,395
         Actual return                                           340,404          107,896
         Benefits paid                                          (622,988)        (332,420)
         Employer contributions                                   35,626           95,616
         Settlements                                                  --               --
                                                            ------------    -------------
            Ending plan assets                              $  4,006,529    $   4,253,487
                                                            ============    =============
</TABLE>

<TABLE>
<CAPTION>
                                                                 2006            2005
<S>                                                         <C>             <C>
      Funded status (plan assets less benefit obligation)   $   (561,492)   $    (876,339)
      Unrecognized loss                                               --        2,055,432
      Additional minimum liability recognized                         --       (2,055,432)
                                                            ------------    -------------
            Net amount recognized                           $   (561,492)   $    (876,339)
                                                            ============    =============
</TABLE>

      The accumulated benefit obligation for the pension plan was $4,568,021 and
      $5,129,826 at year-end 2006 and 2005 respectively.

      The net periodic pension cost for the years ended December 31 includes the
      following components:

<TABLE>
<CAPTION>
                                                                2006           2005           2004
<S>                                                         <C>            <C>            <C>
      Service cost benefits earned during the period        $        --    $        --    $   129,279
      Interest cost on projected benefit obligation             239,998        305,660        310,053
      Expected return on plan assets                           (356,383)      (383,759)      (381,737)
      Net amortization and deferral                             251,549        135,613         98,003
      Curtailment credit                                             --             --       (357,195)
                                                            -----------    -----------    -----------
         Net periodic pension cost (benefit)                $   135,164    $    57,514    $  (201,597)
                                                            ===========    ===========    ===========
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements

--------------------------------------------------------------------------------

10.   Benefit Plans (Continued)

<TABLE>
<CAPTION>
      Additional Information                                    2006         2005
<S>                                                          <C>           <C>
         (Decrease) Increase in minimum liability included
            in other comprehensive income                    $ (414,385)   $  111,339

      Assumptions

      Weighted-average assumptions used to determine
         benefit obligation at year-end
      Discount rate                                                5.08%         6.13%
      Rate of compensation increase                                0.00%         0.00%

      Weighted-average assumptions used to determine
         net cost
      Discount rate                                                5.08%         6.13%
      Expected return on plan assets                               9.00%         9.00%
      Rate of compensation increase                                0.00%         0.00%
</TABLE>

      The  Company's  pension plan asset  allocation  at year-end 2006 and 2005,
      target allocation for 2007, and expected long-term rate of return by asset
      category are as follows:

                                                Percentage of       Weighted-
                                    Target       Plan Assets    Average Expected
                                  Allocation   at December 31    Long Term Rate
      Asset Category                 2007        2006    2005    of Return 2007

         Equity Securities                70%      65%     20%      5% - 10%
         Debt Securities                  30%      35%     80%      2% - 6%
         Real Estate                       0%       0%      0%
         Other                             0%       0%      0%
                                  ----------   ---------------
            Total                        100%     100%    100%       6-10%
                                  ==========   ===============

      Plan assets are  invested in twelve  diversified  investment  funds at ING
      Life  Insurance  and Annuity  Company.  The  investment  funds are offered
      through a MAP Plus Group Annuity. There are eight equity mutual funds, two
      bond mutual funds,  one fixed account and one money market fund  currently
      used for  Plan  investments;  each  with  its own  investment  objectives,
      investment  strategies and risks,  as detailed in each fund's  prospectus.
      The Advisor,  Benefit  Consulting  Group Inc. has been given discretion by
      the Plan Sponsor to determine the appropriate  strategic asset  allocation
      versus  plan  liabilities,   as  governed  by  the  Trust's  Statement  of
      Investment  Objectives and  Guidelines.  The investment goal is to achieve
      investment  results  that will  contribute  to the  proper  funding of the
      pension plan by exceeding the rate of inflation  over the  long-term.

      The Company expects to contribute  $91,793 to the Plan for the year ending
      December 31, 2007.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

10.   Benefit Plans (Continued)

      The following benefit payments are expected to be paid:

      Fiscal year ending December 31:

      2007                     $    300,000
      2008                          315,000
      2009                          331,000
      2010                          347,000
      2011                          365,000
      Years 2012 - 2016           2,116,000

      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  uses a September 30th  measurement date for its pension plan.

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

<TABLE>
<CAPTION>
                                                                2006             2005
<S>                                                         <C>             <C>
      Change in benefit obligation:
         Beginning benefit obligation                       $  2,400,487    $  2,277,725
         Service cost                                             22,100          19,700
         Interest cost                                           127,479         131,747
         Actuarial loss                                         (138,420)        157,027
         Benefits paid                                          (191,941)       (185,712)
                                                            ------------    ------------
           Ending benefit obligation                        $  2,219,705    $  2,400,487
                                                            ============    ============
      Change in plan assets, at fair value:
         Beginning plan assets                              $  2,680,805    $  2,565,487
         Actual return on plan assets                            302,217         301,030
         Benefits paid                                          (191,941)       (185,712)
                                                            ------------    ------------
           Ending plan assets                               $  2,791,081    $  2,680,805
                                                            ============    ============
      Funded status (plan assets less benefit obligation)   $    571,376    $    280,318
      Unrecognized (gain)/loss                                        --         267,063
                                                            ------------    ------------
           Net amount recognized                            $    571,376    $    547,381
                                                            ============    ============
</TABLE>

      The accumulated benefit obligation for the pension plan was $2,219,705 and
      $2,400,487  at  year-end  2006 and  2005  respectively.

      The net periodic pension cost for the years ended December 31 includes the
      following components:

<TABLE>
<CAPTION>
                                                               2006          2005
<S>                                                         <C>           <C>
      Service cost benefits earned during the period        $   22,100    $   19,700
      Interest cost on projected benefit obligation            127,479       131,747
      Expected return on plan assets                          (207,850)     (198,683)
                                                            ----------    ----------
         Net periodic pension benefit                       $  (58,271)   $  (47,236)
                                                            ==========    ==========
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

10.   Benefit Plans (Continued)

      Assumptions                                                 2006    2005

      Weighted-average assumptions used to determine
         benefit obligation at year-end
      Discount rate                                               6.25%   5.50%
      Rate of compensation increase                               0.00%   0.00%

      Weighted-average assumptions used to determine
         net cost
      Discount rate                                               6.25%   5.50%
      Expected return on plan assets                              7.50%   8.00%
      Rate of compensation increase                               0.00%   0.00%

      The  Company's  pension plan asset  allocation  at year-end 2006 and 2005,
      target allocation for 2007 and expected  long-term rate of return by asset
      category are as follows:

<TABLE>
<CAPTION>
                                               Percentage of         Weighted-
                                 Target         Plan Assets      Average Expected
                               Allocation    at September 30,     Long Term Rate
      Asset Category              2007        2006       2005     of Return 2006
<S>                            <C>           <C>         <C>     <C>
         Equity Securities             60%    59.8%      58.8%         8%
         Debt Securities               40%    39.9%      41.2%         6%
         Other                          0%     0.3%       0.0%
                               ----------    ------------------
            Total                     100%     100%       100%         8%
                               ==========    ==================
</TABLE>

      The  New  York  State  Bankers   Retirement   System  (the  "System")  was
      established in 1938 to provide for the payment of benefits to employees of
      participating  banks. The System utilizes two investment  management firms
      each  investing  to achieve an  allocation  approximating  60% invested in
      equity securities and 40% invested in debt securities.  Firm 1 is employed
      for  expertise as a Value  Manager and is allowed to invest  approximately
      68% of the  portfolio  in a certain  amount  of the  equity  portfolio  in
      international   securities  while  the  equities  managed  by  Firm  2  of
      approximately  32% are in a commingled  Large Cap Equity Fund. The Fund is
      invested in a diversified  portfolio of common or capital  stocks,  bonds,
      debentures,  or  preferred  stocks or in other types of equity  investment
      whether  foreign or domestic.  For the debt  securities,  Firm 1 manages a
      fixed income  portfolio  while Firm 2 manages a fixed  income  fund.  Both
      portfolios'  guidelines are set forth in the System's  investment  policy.

      The Company  expects to  contribute  $0 for the year ending  December  31,
      2007.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

10.   Benefit Plans (Continued)

      The following benefit payments are expected to be paid:

      Fiscal year ending December 31:

               2007                                                  $  171,808
               2008                                                     167,972
               2009                                                     164,092
               2010                                                     159,956
               2011                                                     155,167
               Years 2012 - 2016                                        832,162

      In addition to the retirement  plan, the Company sponsors a 401(k) savings
      plan which enables employees who meet the plan's eligibility  requirements
      to defer income on a pre-tax basis.  Effective January 2005, employees may
      elect to  contribute  a portion of their  compensation,  with the  Company
      matching the contribution up to 5% of compensation. Prior to January 2005,
      the  Company  matched  employee  contributions  up to 3% of  compensation.
      Employer  contributions  associated  with the plan  amounted to  $378,526,
      $350,227  and $196,672  for the years ended  December  31, 2006,  2005 and
      2004, respectively.

      The Bank provides The Oneida  Savings Bank Employee  Stock  Ownership Plan
      with all employees  meeting the age and service  requirements  eligible to
      participate  in the Plan.  Employees are eligible for the Plan if they are
      twenty-one  years of age and have one year of service  with at least 1,000
      hours. The ESOP purchased  299,655 shares of common stock which was funded
      by a loan from the Company payable in ten equal installments over 10 years
      bearing a variable  interest  rate of prime at the  beginning  of the year
      which was 7.25% and 5.25% for 2006 and 2005,  respectively.  Loan payments
      are to be funded  by cash  contributions  from the  Bank.  The loan can be
      prepaid without penalty.  Shares purchased by the ESOP are maintained in a
      suspense account and held for allocation among the  participants.  As loan
      payments are made,  shares are  committed to be released and  subsequently
      allocated to employee  accounts at each  calendar  year end.  Compensation
      expense is recognized related to the shares committed to be released based
      on the average market price during the period.  Cash dividends received on
      unallocated  shares  are  used to pay debt  service.  For the  purpose  of
      computing  earnings per share,  unallocated ESOP shares are not considered
      outstanding.

      Compensation expense approximated $342,000,  $358,000 and $373,000 for the
      years  ended 2006,  2005 and 2004,  respectively.  Of the  299,655  shares
      acquired on behalf of the ESOP 30,034 were  released in December 31, 2006,
      2005 and 2004.  The estimated  fair value of the  remaining  29,045 shares
      held in suspense at December 31, 2006 is approximately $343,000.

11.   Stock Based Compensation Plans

      The Company has two share based  compensation  plans as  described  below.
      Total  compensation  cost that has been charged  against  income for those
      plans was  $229,779,  $86,985 and  $212,476 for 2006,  2005 and 2004.  The
      total income tax benefit was $61,259, $23,042, and $49,847.

      Stock Option Plan

      The  Company's  2000 Stock Option  Plan,  which is  shareholder  approved,
      permits the granting of share  options to its  directors,  officer and key
      employees for up to 374,568 share of common stock.  The exercise  price of
      options  granted is equal to the market value of the  Company's  shares at
      the date of grant.  All options  granted  expire by April 2010 and options
      vest and become exercisable

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

11.   Stock Based Compensation Plans (Continued)

      ratably over a one to five-year period. The plan also has a reload feature
      which  entitles  the option  holder,  who has  delivered  common  stock as
      payment of the exercise price for option stock, to a new option to acquire
      additional  shares in the amount equal to the shares traded in. The option
      period during which the reload option may be exercised expires at the same
      time as that of the  original  option that the holder has  exercised.  The
      Company has a policy of using  shares  held as  treasury  stock to satisfy
      share  option  exercises.  There were 9,243  shares  available  for future
      grants under the plan described above as of December 31, 2006 and 2005.

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

                                            2006          2005          2004
                                        -----------   -----------   -----------
      Risk-free interest rate                 5.00%         4.27%         3.31%
      Expected stock price volatility        43.16%        43.01%        43.01%
      Expected dividend rate                  3.00%         3.00%         3.00%
      Expected life                     4.10 years    5.00 years    5.50 years

      A summary of the activity in the stock option plan for 2006 follows:

<TABLE>
<CAPTION>
                                            Options          Range of       Weighted Average
                                          Outstanding         Option         Exercise Price
                                              and             Price              Shares         Intrinisc
                                          Exercisable       Per Share         Outstanding         Value
<S>                                       <C>           <C>                 <C>                <C>
      Outstanding at December 31, 2005        198,148   $ 4.722 - $18.167   $          7.309   $ 1,012,316
         Granted                                2,444   $11.350 - $11.700
         Exercised                            (13,425)             $4.722
         Forfeited                               (675)             $4.722
                                          -----------
      Outstanding at December 31, 2006        186,492   $ 4.722 - $18.167   $          7.561   $   912,880
                                          ===========
</TABLE>

      There was no unrecognized  compensation  cost for this plan as of December
      31, 2006 as all shares are vested under the terms of the plan.  New grants
      are for the reload option feature which are expensed at date of grant.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

11.   Stock Based Compensation Plans (Continued)

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

<TABLE>
<CAPTION>
                                                         2006        2005       2004
                                                       --------   ---------   ---------
<S>                                                    <C>        <C>         <C>
      Intrinsic value of options exercised             $ 88,238   $ 501,879   $ 145,293
      Cash received from option exercises                35,038      47,374     118,281
      Tax benefit realized from option exercises         31,950     127,497     134,888
      Weighted average fair value of options granted      3.719       4.817       4.750
</TABLE>

      At December 31, 2006, the weighted average information for outstanding and
      exercisable shares is as follows:

<TABLE>
<CAPTION>
                       Options Outstanding                    Options Exercisable
                                        Weighted Average                 Weighted
          Range of                                Remaining               Average
          Exercise                  Exercise        Life                 Exercise
            Price          Shares    Price         (Years)     Shares     Price
<S>   <C>                 <C>       <C>           <C>         <C>        <C>
      $3.633 - $5.45      127,215   $  4.722         3.32     127,215    $  4.722
      $9.084 - $10.90       4,465   $  9.419         3.32       4,465    $  9.419
      $10.90 - $12.717     19,221   $ 11.985         3.32      19,221    $ 11.985
      $12.717 - $14.534    18,689   $ 14.000         3.32      18,689    $ 14.000
      $14.534 - $16.350     6,600   $ 14.794         3.32       6,600    $ 14.794
      $16.350 - $18.167    10,302   $ 17.247         3.32      10,302    $ 17.247
                          -------   --------                  -------    --------
         Total/Average    186,492   $  7.561         3.32     186,492    $  7.561
                          -------   --------                  -------    --------
</TABLE>

      Recognition  Plan

      The Management Recognition and Retention Plan provides for the issuance of
      shares of  restricted  stock to  directors,  officers  and key  employees.
      Compensation expense equal to the market value of Oneida Financial Corp.'s
      stock on the grant date is  recognized  ratably over the five year vesting
      period for shares of restricted stock granted that will be fully vested at
      December 31, 2010.  Compensation  recorded in conjunction with these plans
      was $220,566, $86,985 and $212,476 for 2006, 2005, and 2004, respectively.
      Shares unallocated under the plan available for future awards were 12,886,
      10,886 and 12,686 as of December 31, 2006, 2005 and 2004 respectively.

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

                                                               Weighted Average
                                                                  Grant-Date
             Nonvested Shares                        Shares       Fair Value

      Nonvested at January 1, 2006                    10,886   $         51,407
         Granted                                      80,000
         Vested                                      (15,600)
         Forfeited                                        --
                                                    --------
      Nonvested at December 31, 2006                  75,286   $        855,320
                                                    ========

      As of December  31,  2006,  there was a total of $813,218 of  unrecognized
      compensation  cost related to nonvested shares granted under the Plan. The
      cost is expected to be recognized over a weighted  average of 4 years. The
      total fair value of shares vested during the years ended December 31, 2006
      was $184,236.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

12.   Other Income and Expenses

      Other income and other expenses for the years ended December 31 consist of
      the following:

<TABLE>
<CAPTION>
                                                         2006          2005         2004
<S>                                                  <C>           <C>           <C>
            Other income:
               Service charges on deposit accounts   $ 2,362,258   $ 2,145,412   $ 2,021,276
               Commissions and fees on sales
                 of non-banking products              12,661,490     8,163,291     7,724,357
               Cash surrender value increase             494,472       472,568       497,096
               Other                                   1,152,947       836,205       958,208
                                                     -----------   -----------   -----------
                 Total other income                  $16,671,167   $11,617,476   $11,200,937
                                                     ===========   ===========   ===========

            Other expenses:
               Salaries and employee benefits        $15,491,443   $12,413,494   $11,430,202
               Building occupancy and equipment        3,646,718     3,314,952     3,265,054
               FDIC and N.Y.S. assessment                 90,869        85,571        59,011
               Advertising                               508,062       482,180       494,610
               Postage and telephone                     631,297       618,281       585,236
               Director compensation                     180,600       179,300       198,500
               Professional fees                         313,121       207,760       220,457
               Travel and meetings                       804,335       626,589       465,957
               Insurance                                 258,052       269,939       287,456
               Dues and subscriptions                    211,634       190,463       184,042
               Service fees                              469,390       452,627       434,200
               ORE expenses                               18,983        26,014        15,942
               Contributions                              67,928        64,850        52,155
               Sales tax                                  29,521        12,665        20,258
               Other                                     684,168       551,734       489,414
               Intangible amortization                   383,182       113,099       113,099
                                                     -----------   -----------   -----------
                 Total other expenses                $23,789,303   $19,609,518   $18,315,593
                                                     ===========   ===========   ===========
</TABLE>

13.   Disclosures about Fair Value of Financial Instruments

      The following methods and assumptions were used to estimate the fair value
      of each class of  financial  instruments  for which it is  practicable  to
      estimate that value:

      Carrying   amounts  is  the  estimated   fair  value  for  cash  and  cash
      equivalents,  interest  bearing  deposits,  Federal  Home Loan Bank stock,
      accrued interest receivable and payable, demand deposits,  short-term debt
      and variable  rate loans or deposits  that reprice  frequently  and fully.
      Security fair values are based on market prices or dealer  quotes,  and if
      no such information is available, on the rate and term of the security and
      information  on the  issuer.  For fixed  rate  loans or  deposits  and for
      variable  rate loans or deposits  with  infrequent  repricing or repricing
      limits,  fair value is based on discounted cash flows using current market
      rates  applied to the  estimated  life and  credit  risk.  Fair  values of
      impaired loans are estimated using  discounted  cash flows.  Fair value of
      debt is based on current  rates for similar  financing.  The fair value of
      off-balance-sheet  items is not considered material.  The carrying amounts
      reported in the statements of condition for cash and cash  equivalents are
      a reasonable estimate of fair value.

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

13.   Disclosures about Fair Value of Financial Instruments (Continued)

      The  estimated  fair  values of the  Company's  financial  instruments  at
      December 31:

<TABLE>
<CAPTION>
                                                          (Amounts in thousands)
                                                        2006                    2005
                                               ----------------------   ----------------------
                                                Carrying    Estimated    Carrying    Estimated
                                                 Amount    Fair Value     Amount    Fair Value
<S>                                            <C>         <C>          <C>         <C>
            Financial assets:
               Cash and cash equivalents       $  18,710   $   18,710   $  12,877   $   12,877
               Investment securities              85,717       85,717     110,290      110,290
               Mortgage-backed securities         29,081       29,081      29,097       29,097
               Mortgage loans held for sale        1,581        1,584       1,354        1,354

               Loans receivable                  247,940      261,838     236,682      234,509
               Allowance for loan losses          (2,081)      (2,081)     (1,959)      (1,959)
                                               ---------   ----------   ---------   ----------
                 Net loans                       245,859      259,757     234,723      232,550

               Accrued interest receivable         2,088        2,088       2,194        2,194
                                               ---------   ----------   ---------   ----------
                 Total financial assets        $ 383,036   $  396,937   $ 390,535   $  388,362
                                               =========   ==========   =========   ==========

            Financial liabilities:
               Due to depositors               $ 313,270   $  316,517   $ 301,196   $  282,511
               Borrowings                         61,400       67,499      77,270       77,054
               Federal funds purchased             4,000        4,000          --           --
               Notes payable                       1,411        1,411          --           --
               Accrued interest payable              315          315         393          393
                                               ---------   ----------   ---------   ----------
                 Total financial liabilities   $ 380,396   $  389,742   $ 378,859   $  359,958
                                               =========   ==========   =========   ==========
</TABLE>

14.   Commitments

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

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

<TABLE>
<CAPTION>
                                                               2006                        2005
                                                     -------------------------   -------------------------
                                                        Fixed       Variable       Fixed        Variable
                                                         Rate         Rate          Rate          Rate
                                                     -----------   -----------   -----------   -----------
<S>                                                  <C>           <C>           <C>           <C>
      Financial instruments whose contract amounts
         represent credit risk:
           Commitments to extend credit              $ 6,895,008   $   105,000   $ 8,322,242   $   220,000
           Unused lines of credit                      4,076,967    35,380,140     4,877,594    32,771,220
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

14.   Commitments (Continued)

      Commitments  to make loans are  generally  made for  periods of 60 days or
      less.  The fixed rate loan  commitments  have interest  rates ranging from
      4.75%  to  7.00%  and  maturities  ranging  from  15  years  to 30  years.
      Commitments  to extend credit are agreements to lend to a customer as long
      as there is no violation of any  condition  established  in the  contract.
      Commitments  generally have fixed  expiration  dates or other  termination
      clauses and may require payment of a fee. The commitments for equity lines
      of credit  may expire  without  being  drawn  upon.  Therefore,  the total
      commitment amounts do not necessarily  represent future cash requirements.
      The Bank  evaluates  each  customer's  creditworthiness  on a case-by-case
      basis. The amount of collateral obtained,  if deemed necessary by the Bank
      upon extension of credit,  is based on management's  credit  evaluation of
      the  counterparty.  Collateral held varies,  but includes  residential and
      commercial real estate.

      The Bank is required to maintain a reserve balance,  as established by the
      Federal  Reserve Bank of New York. The required  average total reserve for
      the 14-day  maintenance period including December 31, 2006 and 2005 was $0
      and $3,866,000  respectively,  which was represented by cash on hand or on
      deposit with the Federal Reserve Bank.

15.   Dividends and Restrictions

      The  Company's  ability to pay  dividends to its  shareholders  is largely
      dependent  on the  Bank's  ability to pay  dividends  to the  Company.  In
      addition to state law requirements and the capital requirements  discussed
      below,  the  circumstances  under  which  the Bank may pay  dividends  are
      limited by federal statutes,  regulations, and policies. Retained earnings
      of the Bank are  subject  to  certain  restrictions  under New York  State
      Banking regulations. The amount of retained earnings legally available for
      dividends  under these  regulations  was  $7,279,104  and $6,563,976 as of
      December 31, 2006 and 2005 respectively.

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

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

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

16.   Regulatory Matters

      The Bank is subject to regulatory capital requirements administered by the
      federal banking agencies.  Capital adequacy  guidelines and,  additionally
      for banks,  prompt  corrective  action  regulations  involve  quantitative
      measures  of assets,  liabilities,  and  certain  off-balance-sheet  items
      calculated  under  regulatory  accounting  practices.  Capital amounts and
      classifications  are also subject to qualitative  judgments by regulators.
      Failure to meet capital requirements can initiate regulatory action.

      Prompt corrective action regulations  provide five  classifications:  well
      capitalized,  adequately  capitalized,  under  capitalized,  significantly
      undercapitalized,  and critically  undercapitalized,  although these terms
      are not used to  represent  overall  financial  condition.  If  adequately
      capitalized,  regulatory approval is required to accept brokered deposits.
      If undercapitalized, capital distributions are limited, as is asset growth
      and expansion,  and capital  restoration  plans are required.  At year-end
      2006 and 2005, the most recent  regulatory  notifications  categorized the
      Bank as  well  capitalized  under  the  regulatory  framework  for  prompt
      corrective   action.   There  are  no  conditions  or  events  since  that
      notification  that  management  believes  have  changed the  institution's
      category.

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

<TABLE>
<CAPTION>
                                                                                         To Be Well
                                                                                      Capitalized Under
                                                                  For Capital         Prompt Corrective
                                              Actual           Adequacy Purposes      Action Provisions
                                       --------------------   -------------------    -------------------
                                          Amount      Ratio      Amount     Ratio      Amount      Ratio
<S>                                    <C>           <C>      <C>           <C>      <C>           <C>
      As of December 31, 2006:
         Total Capital
           (to Risk Weighted Assets)   $39,203,925   13.36%   $23,521,967     8%     $29,402,459    10%
         Tier I Capital
           (to Risk Weighted Assets)   $37,045,402   12.63%   $11,760,984     4%     $17,641,576     6%
         Tier I Capital
           (to Average Assets)         $37,045,402    8.89%   $16,706,429     4%     $20,883,037     5%

      As of December 31, 2005:
         Total Capital
           (to Risk Weighted Assets)   $39,310,675   13.64%   $23,054,157     8%     $28,817,696    10%
         Tier I Capital
           (to Risk Weighted Assets)   $37,351,702   12.96%   $11,527,079     4%     $17,290,618     6%
         Tier I Capital
           (to Average Assets)         $37,351,702    8.80%   $16,970,157     4%     $21,212,696     5%
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

17.   Parent Company Statements

                            Condensed Balance Sheets

                                                            December 31,
                                                         2006          2005
Assets:
   Cash                                             $    613,087   $  1,530,025
   Investments, fair value                               426,000        320,000
   Investments in and advances to subsidiary          56,005,598     50,082,321
   Premises and equipment                              3,039,220      1,637,112
   Other assets                                           35,640        279,530
                                                    ------------   ------------
       Total assets                                 $ 60,119,545   $ 53,848,988
                                                    ============   ============

Liabilities and shareholders' equity:
   Other liabilities                                $    188,600   $    114,200
   Due to related parties                              1,531,159        146,498
   Shareholders' equity                               58,399,786     53,588,290
                                                    ------------   ------------
       Total liabilities and shareholders' equity   $ 60,119,545   $ 53,848,988
                                                    ============   ============

                         Condensed Statements of Income

<TABLE>
<CAPTION>
                                                          Years Ended December 31,
                                                        2006         2005        2004
<S>                                                 <C>          <C>          <C>
Revenue:
   Dividends from subsidiary                        $        --  $        --  $        --
   Interest on investments and deposits                  46,857       46,316       48,041
   Gain on sale of securities                                --           --           --
   Rental income                                        192,025       90,000       90,000
                                                    -----------  -----------  -----------
       Total revenue                                    238,882      136,316      138,041
                                                    -----------  -----------  -----------

Expenses:
   Compensations and benefits                           134,880      112,045       80,000
   Other expenses                                       166,794      158,796      139,104
                                                    -----------  -----------  -----------
       Total expenses                                   301,674      270,841      219,104
                                                    -----------  -----------  -----------

       Income before taxes and equity
         in undistributed net income of subsidiary      (62,792)    (134,525)     (81,063)

Benefit for income taxes                                (15,000)     (30,000)      (9,000)
                                                    -----------  -----------  -----------
       Loss before equity in undistributed
         net income of subsidiary                       (47,792)    (104,525)     (72,063)

Equity in undistributed net income:
   Subsidiary bank                                    4,245,784    3,962,102    3,363,637
                                                    -----------  -----------  -----------

       Net income                                   $ 4,197,992  $ 3,857,577  $ 3,291,574
                                                    ===========  ===========  ===========
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

17.   Parent Company Statements (Continued)

                       Condensed Statements of Cash Flow

<TABLE>
<CAPTION>
                                                                       Years Ended December 31,
                                                                   2006           2005          2004
<S>                                                            <C>            <C>            <C>
Operating activities:
   Net income                                                  $ 4,197,992    $ 3,857,577    $ 3,291,574
   Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation expense                                         73,325         54,993         54,992
       ESOP shares earned                                          341,639        358,065        373,356
       Other assets/liabilities, net                               275,890       (128,649)     1,032,481
       Equity in undistributed net income of subsidiary bank    (4,245,784)    (3,962,102)    (3,363,637)
                                                               -----------    -----------    -----------

       Net cash provided by operating activities                   643,062        179,884      1,388,766
                                                               -----------    -----------    -----------
Investing activities:
   Purchase of investments                                              --       (292,000)            --
   Proceeds from sales of investment securities                         --             --        500,000
   Purchase of premises and equipment                           (1,475,433)      (460,547)            --
   Change in loans to Bank                                       1,393,873        281,495      1,124,171
                                                               -----------    -----------    -----------

       Net cash (used by) provided by investing activities         (81,560)      (471,052)     1,624,171
                                                               -----------    -----------    -----------
Financing activities:
   Purchase of treasury stock                                           --        (93,000)       (95,047)
   Dividends paid                                               (1,513,478)    (1,343,335)    (1,211,226)
   Exercise of stock options (using treasury stock)                 35,038         47,374        118,281
                                                               -----------    -----------    -----------

       Net cash used in financing activities                    (1,478,440)    (1,388,961)    (1,187,992)
                                                               -----------    -----------    -----------

       Net (decrease) increase in cash and cash equivalents       (916,938)    (1,680,129)     1,824,945

Cash and cash equivalents at beginning of year                   1,530,025      3,210,154      2,498,169
                                                               -----------    -----------    -----------

       Cash and cash equivalents at end of year                $   613,087    $ 1,530,025    $ 4,323,114
                                                               ===========    ===========    ===========
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

18.   Segment Information

      The Company has determined  that it has three primary  business  segments,
      its banking  franchise,  its  insurance  activities  and employee  benefit
      consulting  activities.  For the years ended  December 31, 2006,  2005 and
      2004,  the Company's  insurance  activities  consisted of those  conducted
      through its wholly owned subsidiary, Bailey & Haskell Associates, Inc. For
      the year ended  December  31,  2006,  the  benefit  consulting  activities
      consisted of those conducted through its wholly owned subsidiary,  Benefit
      Consulting  Group Inc.  Information  about the Company is presented in the
      following table for the periods indicated:

<TABLE>
<CAPTION>
                                                                         2006
                                                  Banking      Insurance     Consulting
                                                Activities     Activities     Activities        Total
<S>                                            <C>            <C>            <C>            <C>
Net interest income                            $ 12,814,482   $         --   $         --   $ 12,814,482
Provision for loan losses                           280,000             --             --        280,000
                                               ------------   ------------   ------------   ------------
   Net interest income after provision for
     loan losses                                 12,534,482             --             --     12,534,482

Other income                                      4,317,223      9,597,394      3,064,096     16,978,713
Other expenses                                   12,005,792      7,912,277      2,394,256     22,312,325
Depreciation and amortization                     1,024,948        200,036        251,994      1,476,978
                                               ------------   ------------   ------------   ------------

     Income before taxes                          3,820,965      1,485,081        417,846      5,723,892

Income tax expense                                  918,000        480,000        127,900      1,525,900
                                               ------------   ------------   ------------   ------------

     Net income                                $  2,902,965   $  1,005,081   $    289,946   $  4,197,992
                                               ============   ============   ============   ============

Total Assets                                   $430,462,154   $ 13,798,385   $  4,102,303   $448,362,842
                                               ============   ============   ============   ============
</TABLE>

<TABLE>
<CAPTION>
                                                                         2005
                                                  Banking       Insurance     Consulting
                                                Activities     Activities     Activities       Total
<S>                                            <C>            <C>            <C>            <C>
Net interest income                            $ 13,324,685   $         --   $         --   $ 13,324,685
Provision for loan losses                           360,000             --             --        360,000
                                               ------------   ------------   ------------   ------------
   Net interest income after provision
     for loan losses                             12,964,685             --             --     12,964,685

Other income                                      3,729,119      8,163,291             --     11,892,410
Other expenses                                   11,449,477      7,053,287             --     18,502,764
Depreciation and amortization                       897,651        209,103             --      1,106,754
                                               ------------   ------------   ------------   ------------

     Income before taxes                          4,346,676        900,901             --      5,247,577

Income tax expense                                1,105,000        285,000             --      1,390,000
                                               ------------   ------------   ------------   ------------

     Net income                                $  3,241,676   $    615,901   $         --   $  3,857,577
                                               ============   ============   ============   ============

Total Assets                                   $427,717,128   $ 12,531,750   $         --   $440,248,878
                                               ============   ============   ============   ============
</TABLE>

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

18.   Segment Information (Continued)

<TABLE>
<CAPTION>
                                                                        2004
                                                  Banking      Insurance      Consulting
                                                Activities     Activities     Activities       Total
<S>                                            <C>            <C>            <C>            <C>
Net interest income                            $ 12,826,651   $         --   $         --   $ 12,826,651
Provision for loan losses                           450,000             --             --        450,000
                                               ------------   ------------   ------------   ------------
   Net interest income after provision
     for loan losses                             12,376,651             --             --     12,376,651

Other income                                      2,515,159      7,724,357             --     10,239,516
Other expenses                                   10,948,078      6,289,792             --     17,237,870
Depreciation and amortization                       922,805        154,918             --      1,077,723
                                               ------------   ------------   ------------   ------------

     Income before taxes                          3,020,927      1,279,647             --      4,300,574

Income tax expense                                  624,000        385,000             --      1,009,000
                                               ------------   ------------   ------------   ------------

     Net income                                $  2,396,927   $    894,647   $         --   $  3,291,574
                                               ============   ============   ============   ============

Total Assets                                   $412,696,363   $ 11,237,890   $         --   $423,934,253
                                               ============   ============   ============   ============
</TABLE>

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

                                                       2006           2005
                 Assets

Total assets for reportable segments              $ 448,362,842   $ 440,248,878
Elimination of intercompany cash balances            (5,425,903)     (3,487,743)
                                                  -------------   -------------

   Consolidated total                             $ 442,936,939   $ 436,761,135
                                                  -------------   -------------

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

<PAGE>

Oneida Financial Corp.

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

19.   Quarterly Financial Data (Unaudited)

                         Interest   Net Interest      Net
          2006            Income       Income       Income     Basic    Diluted

      First Quarter      $  5,345   $      3,188   $    928   $  0.12   $  0.12
      Second Quarter        5,529          3,235      1,047      0.14      0.14
      Third Quarter         5,656          3,214        815      0.11      0.11
      Fourth Quarter        5,731          3,178      1,408      0.18      0.17

          2005

      First Quarter      $  5,081   $      3,330   $    975   $  0.13   $  0.13
      Second Quarter        5,134          3,322      1,022      0.13      0.13
      Third Quarter         5,339          3,370        829      0.11      0.11
      Fourth Quarter        5,458          3,303      1,032      0.14      0.13

20.   Acquisitions

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

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

      On September 10, 2006,  the Bank  announced the signing of an agreement to
      acquire the Vernon Bank Corporation and its wholly owned  subsidiary,  the
      National Bank of Vernon.  The  acquisition  is subject to the approvals of
      regulatory  authorities.  The stockholders of Vernon Bank Corporation have
      already  approved  the merger.  Under the terms of the  agreement,  Oneida
      Savings  Bank will pay  $54.00 in cash for each of the  210,477  shares of
      common stock outstanding in Vernon Bank  Corporation.  The Bank expects to
      complete the merger in the second quarter 2007.

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

      The Company does not undertake,  and specifically declines any obligation,
to  publicly  release  the  result  of any  revisions  which  may be made to any
forward-looking  statements to reflect events or circumstances after the date of
such  statements or to reflect the occurrence of  anticipated  or  unanticipated
events.

Operating Strategy

      In guiding  the Bank's  operations,  management  has  implemented  various
strategies designed to enhance the institution's  profitability  consistent with
safety and soundness considerations.  These strategies include: (i) operating as
a community  bank that provides  quality  service by monitoring the needs of its
customers  and  offering  customers   personalized   service;  (ii)  originating
fixed-rate  residential  real estate loans primarily for resale in the secondary
market and  originating  adjustable  rate mortgage  ("ARM") loans and hybrid ARM
loans for retention by the Bank;  (iii)  increasing the level of higher yielding
consumer, commercial real estate and commercial business loans; (iv) maintaining
asset quality; and (v) increasing fee income and diversifying income sources.

      Community Banking. The Oneida Savings Bank, the wholly owned subsidiary of
Oneida Financial Corp., was established in Oneida, New York in 1866 and has been
operating  continuously  since that time.  Throughout its history,  the Bank has
been committed to meeting the financial  needs of the  communities it serves and
providing  quality service to its customers.  Management  believes that the Bank
can be more  effective  than many of its  competitors  in serving its  customers
because of its ability to promptly and effectively respond to customer needs and
inquiries.  The Bank's ability to succeed in its service area is enhanced by the
stability of senior management. The group has an average tenure with the Bank of
fifteen years and each  individual  who  comprises  senior  management  has over
twenty years experience in the banking industry.

      In recent  years  management  has  increased  the  services  and  products
provided by the Bank to the communities it serves by offering  services  through
its insurance agency subsidiary,  offering trust services, offering new loan and
deposit products,  and seeking to expand into markets desiring the services of a
community  bank. Our special purpose  commercial bank subsidiary  ("SBC") allows
the  combined  banking  enterprise  to solicit  and  service  municipal  deposit
accounts  from the various  municipalities,  school  districts  and other public
funding sources  throughout the market area. During 2006, the Bank completed its
acquisition of Benefit Consulting Group LLC, an employee benefits consulting and
retirement plan administration firm located in Syracuse,  New York. This type of
service was not offered  prior to 2006.  In  addition,  the Company is finishing
completion  of a new  banking,  insurance  and  retail  center  at the  Griffiss
Business and  Technology  Park in Rome,  New York. In September  2006,  the Bank
announced the signing of an agreement to acquire the Vernon Bank Corporation and
its wholly owned  subsidiary,  the National Bank of Vernon.  The Bank expects to
complete the merger during the second quarter of 2007.

      Originating  One-to-Four  Family Loans for Resale in the Secondary  Market
and Retaining ARM Loans.  Historically,  the Bank has emphasized the origination
of  one-to-four   family   residential  loans  within  Madison  County  and  the
surrounding counties.  As of December 31, 2006,  approximately $85.9 million, or
34.4% of the loan portfolio consisted of one-to-four family residential mortgage
loans, of which $60.0 million were  adjustable  rate mortgage  ("ARM") loans and
$25.9  million had fixed rates of interest.  During the year ended  December 31,
2006 and the year ended December 31, 2005, the Bank originated $30.5 million and
$30.7 million,  respectively,  of one-to-four family mortgage loans.  During the
past year, and as a result of the continuation of relatively low market interest
rates throughout the year, the Bank's  one-to-four family loan originations have
been  primarily  fixed-rate  loans.  The Bank  generally  sells  its  fixed-rate
one-to-four  family loans.  Such loans are sold without recourse to the Bank and
on a  servicing  retained  basis.  During the year ended  December  31, 2006 and
December 31, 2005, the Bank sold $17.0 million and $14.8 million,  respectively,
in fixed-rate one-to-four family loans. ARM loans and hybrid ARM loans,

<PAGE>

which have a fixed rate of interest for the first three to five years  adjusting
annually  thereafter,  represented a lower percentage of total originations.  Of
the $30.5  million in  one-to-four  family  loans  originated  during the twelve
months ended December 31, 2006, $21.9 million had fixed rates of interest.  Loan
origination volume has remained relatively stable during 2006 and 2005.

      Complementing  the  Bank's  Traditional  Mortgage  Lending  by  Increasing
Consumer,  Commercial Business and Commercial Real Estate Lending. To complement
the Bank's  traditional  emphasis on one-to-four  family residential real estate
lending,  management  has sought to  increase  the Bank's  consumer,  commercial
business and  commercial  real estate  lending in a  controlled,  safe and sound
manner. At December 31, 2006, the Bank's portfolio of consumer,  commercial real
estate and commercial  business  loans totaled $44.0 million,  $59.2 million and
$35.3  million,  respectively.  In the  aggregate,  these loans  totaled  $138.6
million,  or 55.5%, of the Bank's total loan portfolio,  as compared with $132.8
million or 55.8% of the total loan  portfolio at December 31, 2005.  Because the
yields on these loans are generally higher than the yields on one-to-four family
residential real estate loans, the Bank's goal over the next several years is to
increase the  origination  of these loans  consistent  with safety and soundness
considerations.   Although  consumer,  commercial  real  estate  and  commercial
business loans offer higher yields than single-family  mortgage loans, they also
involve greater credit risk.

      Maintaining   Asset  Quality.   The  Bank's  asset  quality  reflects  our
conservative  underwriting  standards,  the  diligence  of its  loan  collection
personnel and the stability of the local economy. In addition,  the Bank invests
in mortgage-backed  securities issued by federal  government  agencies and other
investment  securities,  including U.S. Government securities and federal agency
obligations.  The Bank  also  invests  in  corporate  debt and  trust  preferred
securities.  The Bank will only purchase  investment  securities which are rated
investment grade or higher by Moody's Investment Rating Service.

      At December 31, 2006,  the Bank's  ratio of  nonperforming  loans to total
assets was 0.01%  compared  to 0.05% and 0.14% at  December  31,  2005 and 2004,
respectively.  At December  31, 2006,  the Bank's  ratio of  allowance  for loan
losses to net loans was 0.84%  compared  to 0.83% and 0.94% for the years  ended
December 31, 2005 and 2004. The Bank's ratio of net charge-offs to average loans
for the year ended  December 31, 2006 was 0.06%  compared  with a ratio of 0.17%
and 0.28% during 2005 and 2004 respectively.

      Increasing Fee Income and Diversifying Income Sources. The Bank has sought
to  increase  its  income  by  increasing   fee  income  and  other  sources  of
non-interest  income. In this regard, the Bank continues to expand the insurance
and financial services business of Bailey & Haskell Associates, Inc. ("B&H"), an
insurance agency  subsidiary of the Bank with six Central New York offices.  The
expansion of the Bank's financial  services business has continued to provide an
increasing revenue source for the Company. Total revenue earned from the sale of
financial  products was $9.6 million  during 2006 as compared  with $8.2 million
for 2005 and $7.7 million during 2004. In February  2006, the Company  completed
its acquisition of Parsons,  Cote & Company,  Inc. an insurance  agency in North
Syracuse,  NY. Subsequently,  Parsons, Cote & Company, Inc. has been merged into
B&H. In addition, in June 2006, the Company completed its acquisition of Benefit
Consulting  Group LLC, an  employee  benefits  consulting  and  retirement  plan
administration  firm. The resulting  company Benefit  Consulting Group Inc. is a
wholly-owned  subsidiary of Oneida Savings Bank.  Benefit  Consulting Group Inc.
contributed $3.1 million in revenue during 2006.

      During  2006 the  Bank  continued  a  marketing  program  to  attract  new
fee-based deposit accounts as well as the continued implementation of a checking
account overdraft program for new and existing customers.  This program allows a
customer to occasionally  overdraw their account with the Bank honoring  payment
of the overdraft based upon a variety of account  information and prior customer
spending  experience.  The  combination  of new account  generation and the fees
derived from the  overdraft  program has resulted in a  significant  increase in
deposit account service fee revenue. The Bank also offers its customers internet
banking and e-commerce  capabilities as well as debit cards.  These products and
services  represent growing sources of fee income and customer  retention tools.
Service  charges on deposit  accounts  totaled  $2.4  million for the year ended
December 31, 2006 compared with $2.1 million and $2.0 million for the comparable
periods in 2005 and 2004, respectively.

      The  Bank  continues  to grow  and  expand  the  visibility  of its  Trust
Department.  Management expects that fees generated by the Trust Department will
increase as the assets under  management  grow. At December 31, 2006,  the Trust
Department  had $110.5  million in assets under  management  compared with $98.5
million at December 31, 2005. In addition, the Bank receives fee income from the
servicing of loans sold in the  secondary  market.  At December 31, 2006,  loans
serviced  by the Bank for  others  totaled  $99.2  million  compared  with $96.6
million at December 31, 2005.

Financial Condition

      Assets. Total assets at December 31, 2006 were $442.9 million, an increase
of $6.1 million or 1.4%,  from $436.8 million at December 31, 2005. The increase
in  total  assets  was  primarily  attributable  to an  increase  in  net  loans
receivable  of $11.1  million,  an increase in premises  and  equipment  of $4.7
million, an increase of $5.5 million in goodwill and other intangible assets and
an increase in cash and cash  equivalents  of $5.8 million.  The increases  were
partially offset by a decrease in investment securities of $20.7 million.

<PAGE>

      Management   continues  to  seek  to  increase  the  Bank's  consumer  and
commercial  business loan  portfolios  with the intent of increasing the average
yield on the Bank's interest-earning  assets. This strategy is supported through
the  origination for sale in the secondary  market of lower yielding  fixed-rate
one-to-four  family  residential real estate loans.  Total consumer,  commercial
business and commercial real estate loans increased by $5.7 million during 2006.
Residential  real estate loans  increased $5.5 million  during 2006.  During the
period of January 1, 2006 through  December 31, 2006 a total of $17.0 million in
fixed-rate  residential  mortgage  loans were sold,  compared with loan sales of
$14.8 million during 2005.

      The increase in premises and  equipment is the result of the  construction
of a 15,000 square foot insurance  office in Clay, New York which replaced three
leased office  locations.  This building was completed in July 2006. The Company
also began  construction  of a new banking,  insurance  and retail center at the
Griffiss  Business and Technology Park in Rome, New York which is expected to be
completed  during the first quarter of 2007. The estimated cost of  constructing
the  facility  is $6.0  million  of which $3.7  million  was  capitalized  as of
December 31, 2006.

      The  increase in goodwill  is the result of the  acquisitions  of Parsons,
Cote & Company and Benefit  Consulting  Group LLC which  resulted in  additional
goodwill and other intangible assets of $5.5 million. In addition,  the increase
in goodwill is also due to the final contingent purchase  consideration  payment
made relative to the acquisition of Bailey & Haskell  Associates,  Inc. Goodwill
in the amount of $1.6  million,  $1.2  million and $652,000 was recorded for the
contingent purchase payments during 2006, 2005 and 2004 respectively.

      The  increase in cash and cash  equivalents  of $5.8 million is due to the
decrease in investment  securities of $20.7 million offset by the decline in the
borrowings from 2005 to 2006 of $15.9 million.  The increase in cash was made in
order  to have  on hand  the  acquisition  price  associated  with  the  pending
acquisition of Vernon Bank Corporation.

      The Bank reinvests loan sale and investment sale and maturity  proceeds in
other  loan  assets as new loan  origination  volume  warrants.  Investment  and
mortgage-backed   securities   provide  improved   liquidity  as  compared  with
individual  mortgage loans thereby  allowing the Bank to accommodate  periods of
increased loan demand.

      Liabilities. Total liabilities increased by $1.4 million or 0.4% to $384.5
million at December  31, 2006 from $383.2  million at  December  31,  2005.  The
increase was primarily  the result of an increase in deposits of $12.1  million,
an increase in federal funds  purchased of $4.0 million and an increase in other
liabilities of $1.2 million offset by a decrease in borrowings of $15.9 million.

      Deposit  accounts  increased  to $313.3  million at December 31, 2006 from
$301.2 million at December 31, 2005. Interest-bearing deposit accounts decreased
by $10.0 million or 4.0% and  non-interest  bearing deposit  accounts  increased
$2.1 million or 4.0%,  to $53.1  million at December 31, 2006 from $51.0 million
at December 31, 2005. Core deposit accounts which include checking,  savings and
money market  accounts  increased  $2.6 million.  Time deposits  increased  $9.4
million or 8.6%.

      The decrease in  borrowings  is a result of not  utilizing  the  overnight
advances on the Bank's  line of credit  with the  Federal  Home Loan Bank of New
York.  At December 31, 2006 there was no  outstanding  overnight  line of credit
whereas the balance was $10.9  million as of December  31, 2005.  The  overnight
advances are accessed from time to time to fund loan originations and short-term
deposit outflows. Absent the overnight line of credit, borrowings decreased $5.0
million or 7.5% to $61.4 million at December 31, 2006 from the level outstanding
at December 31, 2005.

      Other  liabilities  increased $1.2 million to $5.9 million at December 31,
2006 from $4.7 million at December 31, 2005.  Notes payable of $2.6 million were
established during 2006 relating to the acquisitions of Parsons,  Cote & Company
and  Benefit  Consulting  Group LLC and pay  interest at 5% per annum over 24-26
months. As of December 31, 2006, notes payable outstanding was $1.4 million.

      Stockholders'  Equity. Total stockholders' equity at December 31, 2006 was
$58.4 million,  an increase of $4.8 from $53.6 million at December 31, 2005. The
increase  in  stockholders'  equity  reflects  net  income of $4.2  million.  In
addition,  accumulated  other  comprehensive  loss  decreased  $1.3  million  at
December   31,  2006   resulting   from  a  increase  in  the  market  value  of
mortgage-backed  and  investment  securities  and an adjustment of the Company's
minimum pension  liability.  Changes in interest rates resulted in a decrease in
the net  unrealized  loss on the  Bank's  available  for  sale  securities.  The
Company's  minimum  pension  liability  at December 31, 2006 was $1.6 million as
compared with $2.1 million at December 31, 2005. Share based compensation earned
under the Company's  stock plans was $230,000 during 2006 as compared to $87,000
during  2005.  Unearned  common  shares  issued  under the Bank's ESOP plan were
reduced by $146,000  representing ESOP stock earned by plan participants  during
2006.  In addition,  stockholders'  equity also  increased due to a reduction in
treasury  stock of 10,981  shares used to fund the exercise of stock  options by
plan participants in connection with the Company's 2000 Stock Option Plan.

      Partially offsetting the increases in stockholders' equity was the payment
of cash dividends to stockholders.  Stockholders were paid dividends during 2006
of $0.45 per share  resulting  in a reduction  in  stockholders'  equity of $1.3
million.

<PAGE>

Analysis of Net Interest Income

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

      Net Margin  Analysis.  The following table sets forth certain  information
relating to the Bank for the years ending  December 31, 2006, 2005 and 2004. For
the periods  indicated,  the total dollar amount of interest income from average
interest-earning  assets  and the  resultant  yields,  as  well as the  interest
expense on average interest-bearing liabilities is expressed both in dollars and
rates.  No tax  equivalent  adjustments  were made.  The  average  balance is an
average daily balance.  Income on non-accruing  loans has been excluded from the
yield calculations in this table.

<TABLE>
<CAPTION>
                                                        2006                        2005                         2004
                                           ---------------------------  ---------------------------  ----------------------------
                                            Average             Yield/   Average             Yield/   Average             Yield/
                                            Balance   Interest   Rate    Balance   Interest   Rate    Balance   Interest   Rate
                                           ---------  --------  ------  ---------  --------  ------  ---------  --------  -------
                                                                          ( dollars in thousands )
<S>                                        <C>        <C>       <C>     <C>        <C>       <C>     <C>        <C>       <C>
Interest-earning assets:
   Loans receivable                        $ 243,661  $ 16,165    6.63% $ 226,940  $ 14,197    6.26% $ 208,417  $ 12,907     6.19%
   Investment and MBS securities             107,479     5,080    4.73%   132,251     6,026    4.56%   147,553     6,043     4.10%
   Federal funds                               3,014       178    5.91%     1,349        49    3.63%     2,424        43     1.77%
   Equity securities                          17,677       838    4.74%    19,934       740    3.71%    18,422       671     3.64%
----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                371,831    22,261    5.99%   380,474    21,012    5.52%   376,816    19,664     5.22%
----------------------------------------------------------------------------------------------------------------------------------
Non interest-earning assets:
   Cash and due from banks                    10,440                       10,781                       10,389
   Other assets                               53,147                       41,566                       40,882
                                           ---------                    ---------                    ---------
      Total Assets                         $ 435,418                    $ 432,821                    $ 428,087
                                           =========                    =========                    =========
Interest-bearing liabilities:
   Money market deposits                   $  43,664  $  1,135    2.60% $  44,352  $    706    1.59% $  39,041  $    324     0.83%
   Savings accounts                           68,165       483    0.71%    73,036       395    0.54%    74,203       328     0.44%
   Interest-bearing checking                  30,979       143    0.46%    29,348       132    0.45%    24,952        97     0.39%
   Time deposits                             109,711     4,202    3.83%   109,030     3,313    3.04%   117,203     3,227     2.75%
   Borrowings                                 67,749     3,383    4.99%    68,372     3,139    4.59%    65,795     2,861     4.35%
   Notes payable                               1,016       100    9.84%        37         2    5.41%         0         0     0.00%
----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities           321,284     9,446    2.94%   324,175     7,687    2.37%   321,194     6,837     2.13%
----------------------------------------------------------------------------------------------------------------------------------
Non interest-bearing liabilities:
   Demand deposits                            51,737                       50,490                       50,497
   Other liabilities                           7,629                        5,321                        5,693
                                           ---------                    ---------                    ---------
      Total liabilities                      380,650                      379,986                      377,384
                                           ---------                    ---------                    ---------
   Stockholders' equity                       54,768                       52,835                       50,703
                                           ---------                    ---------                    ---------
      Total Liabilities and
         Stockholders' Equity              $ 435,418                    $ 432,821                    $ 428,087
                                           =========                    =========                    =========

      Net interest income                             $ 12,815                     $ 13,325                     $ 12,827
                                                      --------                     --------                     --------
      Net interest spread                                         3.05%                        3.15%                         3.09%
                                                                ------                       ------                       -------
      Net earning assets                   $  50,547                    $  56,299                    $  55,622
                                           ---------                    ---------                    ---------
      Net interest margin                                 3.45%                        3.50%                        3.40%
                                                      --------                     --------                     --------
      Ratio of interest-earning
         assets to interest-bearing
         liabilities                                    115.73%                      117.37%                      117.32%
                                                      --------                     --------                     --------
</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
                                                                 2006 vs. 2005                         2005 vs. 2004
                                                       --------------------------------------------------------------------------
                                                        Increase / (Decrease)                 Increase / (Decrease)
                                                               Due to              Total              Due to             Total
                                                       ----------------------    Increase/   -----------------------   Increase/
                                                         Volume       Rate      (Decrease)     Volume       Rate       (Decrease)
                                                       --------------------------------------------------------------------------

                                                                                     (In Thousands)
<S>                                                    <C>          <C>         <C>          <C>          <C>          <C>
Interest-earning assets:
   Loans receivable                                    $    1,109   $     859   $    1,968   $    1,159   $      131   $   1,290
   Investment and mortgage-backed securities               (1,171)        225         (946)        (697)         680         (17)
   Federal funds                                               98          31          129          (39)          45           6
   Equity securities                                         (107)        205           98           56           13          69
---------------------------------------------------------------------------------------------------------------------------------
      Total interest-earning assets                    $      (71)  $   1,320   $    1,249   $      479   $      869   $   1,348
---------------------------------------------------------------------------------------------------------------------------------

Interest-bearing liabilities:
   Money market deposits                               $      (18)  $     447   $      429   $       85   $      297   $     382
   Savings accounts                                           (35)        123           88           (6)          73          67
   Interest-bearing checking                                    8           3           11           20           15          35
   Time deposits                                               26         863          889         (248)         334          86
   Borrowings                                                 (31)        275          244          118          162         280
   Notes payable                                               96           2           98          118          162         280
---------------------------------------------------------------------------------------------------------------------------------
      Total interest-bearing liabilities               $       46   $   1,713   $    1,759   $       87   $    1,043   $   1,130
---------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
      Net (decrease) increase in net interest income                            $     (510)                            $     218
=================================================================================================================================
</TABLE>

Comparison  of  Operating  Results  for the Years  Ended  December  31, 2006 and
December 31, 2005.

      General.  Net income for the year ended  December  31, 2006  increased  by
$340,000,  to $4.2  million  from $3.9  million for the year ended  December 31,
2005.  Basic  earnings  per share  increased  7.8%,  to $0.55 for the year ended
December 31, 2006 as compared with the 2005 reported basic earnings per share of
$0.51.  The  increase  in net income was due  primarily  to an increase in other
income and a decrease in the provision for loan losses. Partially offsetting the
increases  in income was a decrease  in net  interest  income and  increases  in
non-interest  expense and the provision  for income  taxes.  The decrease in net
interest  income is due  primarily  to a decrease  in net  earning  assets and a
decrease in net  interest  margin  given the impact  caused by rising short term
rates and the inverted yield curve.

      Interest and Dividend  Income.  Interest and dividend income  increased by
$1.3 million or 5.9%, to $22.3 million for the year ended December 31, 2006 from
$21.0 million for the year ended  December 31, 2005.  Interest and fees on loans
increased by $2.0 million for the year ended  December 31, 2006 as compared with
the same period in 2005.  Interest income earned on federal funds sold increased
$129,000  during  2006 as  compared  with  the year  ended  December  31,  2005.
Offsetting  these  increases  in income  was  interest  and  dividend  income on
mortgage-backed and other investment securities which decreased $848,000 to $5.9
million  for the year ended  December  31,  2006 from $6.8  million for the year
ended December 31, 2005.

      The increase in income on loans resulted from an increase of $16.7 million
in the average balance of loans to $243.7 million in 2006 from $226.9 million in
2005 as well as a 37 basis point increase in the average yield on loans to 6.63%
from 6.26%.  The increase in loans reflects

<PAGE>

management's  strategy to emphasize the  origination  of consumer and commercial
business  loans for  retention  in the  Bank's  portfolio  while  maintaining  a
consistent  level of  residential  real estate loans with excess  production  of
longer-term  fixed-rate  residential  real  estate  loans sold in the  secondary
market on a servicing  retained basis. As of December 31, 2006  residential real
estate loans totaled $109.4  million,  an increase of $5.5 million from December
31,  2005.  During  the  2006  year a  total  of  $17.0  million  in  fixed-rate
residential  real estate loans were sold in the secondary  market.  In addition,
commercial real estate loans increased $4.9 million to $59.2 million at December
31, 2006 from $54.3  million at December  31,  2005.  At December 31, 2006 total
loans receivable were $249.5 million as compared with $238.0 million at December
31, 2005, an increase of 4.8%. The increase in the yield on loans is a result of
the higher  market  interest  rates  during 2006 as  compared  with 2005 and the
changes in the composition of the loan portfolio to higher yielding loans.

      The  decrease  in  interest  income from  investment  and  mortgage-backed
securities was the result of a decrease of $24.8 million in the average  balance
of investment and  mortgage-backed  securities to $107.5 million at December 31,
2006 from $132.3  million at December 31, 2005 offset by an increase of 17 basis
points in the average yield on investments and mortgage-backed  securities.  The
decrease in the average balance on investment and mortgage-backed  securities is
the result of sales,  maturities and  repayments  throughout the year to provide
liquidity  during periods of increased loan demand and deposit  outflows as well
as provide liquidity for the acquisition of Vernon Bank Corporation.

      Interest income on federal funds sold increased as a result of an increase
of 228 basis  points in the  average  yield  earned on  federal  funds sold as a
result of the Federal  Reserve's  actions to increase short term interest rates.
Contributing to the increase in interest income on federal funds was an increase
in the average  balance of federal funds sold during the 2006 period as compared
with 2005. The increase in the average  balance of federal funds sold reflects a
decision to reallocate assets from investment securities during the year.

      Income from equity securities  increased $98,000 due to an increase in the
average yield of 103 basis points. The increase in average yield was offset by a
decrease  in the  average  balance  of $2.3  million  from  $19.9  million as of
December  31, 2005 to $17.7  million as of December 31, 2006 due to sales during
the year.

      Interest  Expense.  Interest  expense was $9.4  million for the year ended
December  31, 2006 an increase of $1.8  million,  or 22.9% from $7.7 million for
the year ended December 31, 2005. The increase in interest expense was primarily
due to an  increase  in interest  paid on deposit  accounts  during 2006 of $1.4
million,  increasing to $6.0 million  during 2006 from $4.5 million during 2005.
In addition,  borrowing expense increased to $3.4 million for 2006 compared with
$3.1 million for 2005.

      The increase in interest  expense paid on deposits was primarily due to an
increase in the average rate paid on deposits.  Core deposits,  including  money
market  accounts,  savings  accounts  and  interest-bearing  checking  accounts,
decreased on average $3.9 million, or 2.7%, to $142.8 million at an average cost
of 1.23%  during 2006 from  $146.7  million at an average  cost of 0.84%  during
2005.  During the same period the  average  balance of time  deposits  increased
$681,000 or 0.6%, to $109.7  million in 2006 from $109.0 million during 2005 and
the average rate paid on time deposits increased 79 basis points.

      The increase in the cost of retail  deposits was  primarily a result of an
increase in market  interest rates during 2006  resulting in increased  rates of
interest paid on retail  deposits,  particularly  short-term,  core deposits and
variable rate deposit accounts. Time deposit accounts are typically offered at a
fixed rate of interest for a fixed maturity  period.  The increase in short term
market interest rates during 2006 are expected to continue to result in a higher
cost of funds for deposits during 2007.

      The  increase in  borrowing  expense  was due to the  increase of 40 basis
points in the average  rate paid on borrowed  funds  offset by a decrease in the
average balance of borrowings outstanding in the 2006 period to $67.7 million as
compared with $68.4 million during the 2005 period.  The increase in the average
rate paid on borrowed  funds was due to higher  short term rates  during 2006 as
compared with 2005.

      The increase in notes  payable  expense was due to the increase in average
balance of $979,000 as well as an increase in the average yield outstanding. The
notes  payable  represent  balances  owed to both  Parsons,  Cote & Company  and
Benefit  Consulting  Group  LLC as part of the  acquisition  of those  companies
during the year.

      Provision  for Loan  Losses.  The  Bank  establishes  provisions  for loan
losses, which are charged to operations,  in order to maintain the allowance for
loan losses at a level deemed  appropriate to absorb  probable  incurred  credit
losses. Management estimates the allowance balance required using past loan loss
experience,  the nature and volume of the portfolio,  information about specific
borrower  situations and estimated  collateral values,  economic  conditions and
other factors.  Allocations of the allowance may be made for specific loans, but
the entire  allowance is available for any loan that, in management's  judgment,
should be charged off.  Management  evaluates  the adequacy of the allowance and
determines  the  appropriate  level of  provision  for loan losses by applying a
range  of  estimated  loss  percentages  to  each  category  of  performing  and
classified loans. The evaluation  considers volume changes in the loan portfolio
mix in response  to the  redirection  of

<PAGE>

loan asset  origination and retention  toward  consumer and commercial  business
loan assets,  and provides within the allowance  adequacy formula for the higher
relative  degree of credit risk  associated  with this activity as compared with
traditional  residential real estate lending.  Management assesses the allowance
for loan losses on a quarterly basis and makes  appropriate  provisions for loan
losses.

      Provisions  of $280,000 and $360,000  were made to the  allowance for loan
losses  during the years ended  December  31, 2006 and 2005,  respectively.  The
additions  made to the allowance for loan losses during 2006 were deemed prudent
due to the continued  origination  for retention in the Bank's loan portfolio of
commercial  real estate  loans,  commercial  business  loans and consumer  loans
during 2006 and 2005.  During 2006 a total of $57.4 million of  commercial  real
estate loans,  commercial  business loans and consumer loans were  originated as
compared with $74.1 million  during 2005. At December 31, 2006  commercial  real
estate  loans,  commercial  business  loans and consumer  loans  totaled  $138.6
million as compared  with $132.8  million at December 31,  2005,  an increase of
4.3%. Nonperforming loans remained at low levels during the years ended December
31, 2006 and 2005, totaling $51,000 or 0.01% of total loans at December 31, 2006
compared  with  $225,000  or 0.05% of total  loans at  December  31,  2005.  Net
charge-off  activity  for the year  ended  December  31,  2006 was  $158,000  as
compared  with  $383,000  in net  charge-offs  during  2005.  The balance of the
allowance  for loan  losses  was $2.1  million or 0.84% of loans  receivable  at
December 31, 2006  compared  with $2.0 million or 0.83% of loans  receivable  at
December 31, 2005.

      Non-interest  Income.  Non-interest  income increased by $5.1 million,  or
42.8%,  to $17.0 million for the year ended December 31, 2006 from $11.9 million
for the year ended December 31, 2005. The increase in other non-interest  income
was the  result  of  increases  in  commissions  and fees  earned on the sale of
non-banking products and an increase in service charges on deposit accounts.

      Revenue derived from the Company's insurance agency subsidiary  activities
increased  $1.4  million or 17.6% to $9.6 million  during 2006 as compared  with
2005 due in part to the February 2006 acquisition of a Syracuse,  New York based
insurance  agency.  During 2006, the Company also acquired a financial  services
and employee benefit  consulting firm operating as Benefit Consulting Group Inc.
This acquired business provided non-interest income of $3.1 million during 2006,
a revenue source and business  activity that did not exist for the Company prior
to 2006.

      Deposit  account  service  fees also  contributed  to the  improvement  in
non-interest  income,  increasing to $2.4 million in income during  December 31,
2006 from $2.1 million during  December 31, 2005. The combination of new account
generation  and the fees  derived  from the  overdraft  program  resulted in the
increase in deposit account service fee revenue.

      The Company  experienced an increase in income from the sale and servicing
of fixed-rate  residential real estate loans.  Such income increased to $419,000
during 2006 compared with  $369,000  during 2005.  The increase is primarily the
result of an  increase in the volume of loan  activity in 2006 as compared  with
2005.  Revenue  in the  amount  of  $494,000  was  recognized  as a result of an
increase in the cash  surrender  value of  Bank-Owned  Life  Insurance  ("BOLI")
during 2006 as compared with  $473,000 in revenue  recognized  during 2005.  The
increase  in revenue is the result of an increase  in the  variable  rate earned
during 2006 on the insurance policies owned.

      Net investment securities gains realized increased $33,000 during the year
ended December 31, 2006 as compared with the year ended December 31, 2005.

      Non-interest  Expense.  Non-interest  expense increased by $4.2 million to
$23.8  million for the year ended  December 31, 2006 from $19.6  million for the
year ended  December 31, 2005.  The  increase  was  primarily  due to salary and
employee  benefits expense which increased $3.1 million to $15.5 million for the
year ended  December 31, 2006 from $12.4 million for the year ended December 31,
2005.

      Salaries,  wages and other  compensation  paid to employees of the Company
during 2006 was $11.9 million, an increase of $2.4 million or 25.0%, as compared
with  compensation  expense  of  $9.5  million  during  2005.  The  increase  in
compensation  expense was  primarily  the result of an increase in  compensation
expense paid to insurance  sales  representatives  consistent with the increased
level of commissions  earned by the Company from the sale of financial  products
and the addition of employees  following the  acquisition of Benefit  Consulting
Group.  In addition,  the Company  approved a 2006  Management  Recognition  and
Retention Plan for directors,  officers and key employees. The implementation of
this plan  resulted  in benefit  expense of $221,000  for 2006 as compared  with
$87,000  in 2005 which was for the 2000  Management  Recognition  and  Retention
Plan.

      Building  occupancy  and  equipment  expense  increased  $332,000  to $3.6
million for the year ended  December 31, 2006 as compared to $3.3 million during
2005. The increase was largely due to the addition of Benefit  Consulting  Group
Inc. which incurred $227,000 of expense during 2006.

      Provision  for Income  Taxes.  Income tax expense was $1.5 million for the
year ended  December  31, 2006 an increase of $136,000  from the 2005 income tax
provisions of $1.4  million.  The increase in income tax provision is due to the
decrease in tax exempt and tax preferred  investment income of the Company which
qualifies for dividends  received  deductions.  The effective tax rate was 26.7%
during 2006 as compared with 26.5% during 2005.


<PAGE>

Comparison  of  Operating  Results  for the Years  Ended  December  31, 2005 and
December 31, 2004.

      General.  Net income for the year ended  December  31, 2005  increased  by
$566,000,  to $3.9  million  from $3.3  million for the year ended  December 31,
2004.  Basic  earnings per share  increased  15.9%,  to $0.51 for the year ended
December 31, 2005 as compared with the 2004 reported basic earnings per share of
$0.44.  The  increase  in net income was due  primarily  to an  increase  in net
interest  income,  an increase in other income, a decrease in the provisions for
loan  losses  and the loss on  impairment  of  securities  that  impacted  2004.
Partially  offsetting  the  increases in income were  increases in  non-interest
expense and the provision for income taxes.

      Interest and Dividend  Income.  Interest and dividend income  increased by
$1.3 million or 6.9%, to $21.0 million for the year ended December 31, 2005 from
$19.7  million for the year ended  December 31,  2004.  The increase in interest
income was due to increased  market interest rates during the period,  resulting
in an increase in yield on interest earning assets. Interest and dividend income
on  mortgage-backed  and other investment  securities  increased $52,000 to $6.8
million  for the year ended  December  31,  2005 from $6.7  million for the year
ended  December 31, 2004.  Interest and fees on loans  increased by $1.3 million
for the year ended  December 31, 2005 as compared  with the same period in 2004.
Interest  income  earned on federal funds sold  increased  $6,000 during 2005 as
compared with the year ended December 31, 2004.

      The increase in income on loans resulted from an increase of $18.5 million
in the average balance of loans to $226.9 million in 2005 from $208.4 million in
2004 as well as a 7 basis point  increase in the average yield on loans to 6.26%
from 6.19%.  The increase in loans reflects  management's  strategy to emphasize
the  origination of consumer and commercial  business loans for retention in the
Bank's portfolio while maintaining a consistent level of residential real estate
loans with excess production of longer-term  fixed-rate  residential real estate
loans sold in the secondary market on a servicing retained basis. As of December
31, 2005  residential  real estate loans totaled $103.8 million,  an increase of
$4.8  million  from  December  31,  2004.  During the 2005 year a total of $14.8
million in fixed-rate  residential  real estate loans were sold in the secondary
market.  In addition,  commercial  real estate loans  increased  $9.6 million to
$54.3  million at December 31, 2005 from $44.7  million at December 31, 2004. At
December 31, 2005 total loans  receivable were $238.0 million,  as compared with
$213.9  million at December 31, 2004, an increase of 11.3%.  The increase in the
yield on loans is a result of the higher  market  interest  rates during 2005 as
compared with 2004,  notwithstanding  the changes in the composition of the loan
portfolio to higher yielding loans.

      The  decrease  in  interest  income from  investment  and  mortgage-backed
securities was the result of a decrease of $15.3 million in the average  balance
of investment and  mortgage-backed  securities to $132.3 million at December 31,
2005 from $147.6  million at December 31, 2004 offset by an increase of 46 basis
points in the average yield on investments and mortgage-backed  securities.  The
decrease in the average balance on investment and mortgage-backed  securities is
the result of sales,  maturities and  repayments  throughout the year to provide
liquidity during periods of increased loan demand and deposit outflows.

      Interest income on federal funds sold increased as a result of an increase
of 186 basis  points in the  average  yield  earned on  federal  funds sold as a
result of the Federal  Reserve's  actions  during  2005 to  increase  short term
interest rates.  The increase in interest income on federal funds resulting from
the increase in average yield earned was  partially  offset by a decrease in the
average  balance of federal  funds sold during the 2005 period as compared  with
2004.  The  decrease  in the  average  balance  of  federal  funds  sold was due
primarily to the increase in loans receivable during the year.

      Income from equity securities  increased $69,000 due to an increase in the
average  balance of $1.5 million  from $18.4  million as of December 31, 2004 to
$19.9  million as of December  31, 2005 due to purchases  during the year.  Also
contributing to the increase in income from equity securities was an increase in
the average yield of 7 basis points.  The increase in yield on equity securities
was primarily the result of higher market interest rates available during 2005.

      Interest  Expense.  Interest  expense was $7.7  million for the year ended
December 31, 2005;  an increase of $850,000,  or 12.4% from $6.8 million for the
year ended December 31, 2004. The increase in interest expense was primarily due
to an increase in interest  paid on deposit  accounts  during 2005 of  $570,000,
increasing  to $4.5  million  during  2005 from $4.0  million  during  2004.  In
addition,  borrowing  expense  increased to $3.1 million for 2005  compared with
$2.9 million for 2004.

      The increase in interest  expense paid on deposits was primarily due to an
increase  in the  average  rate paid on  deposits  as well as an increase in the
average balance of  interest-bearing  deposits.  Core deposits,  including money
market  accounts,  savings  accounts  and  interest-bearing  checking  accounts,
increased on average $8.5 million, or 6.2%, to $146.7 million at an average cost
of 0.84%  during 2005 from  $138.2  million at an average  cost of 0.54%  during
2004. During the same period the average balance of time deposits decreased $8.2
million,  or 7.0%, to $109.0 million in 2005 from $117.2 million during 2004 and
the average rate paid on time deposits increased 29 basis points.

      The increase in the cost of retail  deposits was  primarily a result of an
increase in market  interest rates

<PAGE>

during 2005  resulting in increased  rates of interest paid on retail  deposits,
particularly short-term,  core deposits and variable rate deposit accounts. Time
deposit  accounts are typically  offered at a fixed rate of interest for a fixed
maturity  period.  The increase in market interest rates during 2005 is expected
to result in a higher cost of funds for deposits during 2006.

      The  increase in  borrowing  expense  was due to the  increase of 24 basis
points in the average rate paid on borrowed funds and an increase in the average
balance  of  borrowings  outstanding  in the 2005  period  to $68.4  million  as
compared with $65.8 million during the 2004 period.  The increase in the average
rate paid on borrowed funds was due to higher rates on new advances  during 2005
as compared with 2004.

      Provision  for Loan  Losses.  The  Bank  establishes  provisions  for loan
losses, which are charged to operations,  in order to maintain the allowance for
loan losses at a level deemed appropriate to absorb probable incurred losses. In
determining the appropriate  level of the allowance for loan losses,  management
considers  past loan loss  experience,  the nature and volume of the  portfolio,
information about specific borrower situations and estimated  collateral values,
current  economic  conditions,  volume  and type of lending  activities  and the
levels of  non-performing  and other classified loans. The allowance is based on
estimates and the ultimate  losses that may occur may vary from such  estimates.
The evaluation considers volume changes in the loan portfolio mix in response to
the  redirection of loan asset  origination  and retention  toward  consumer and
commercial  business loan assets,  and provides  within the  allowance  adequacy
formula  for the higher  relative  degree of credit  risk  associated  with this
activity  as  compared  with   traditional   residential  real  estate  lending.
Management assesses the allowance for loan losses on a quarterly basis and makes
appropriate provisions for loan losses.

      The  additions  made to the  allowance  for loan  losses  during 2005 were
deemed prudent due to the continued origination for retention in the Bank's loan
portfolio  of  commercial  real  estate  loans,  commercial  business  loans and
consumer  loans  during 2005 and 2004.  During 2005 a total of $74.1  million of
commercial real estate loans,  commercial business loans and consumer loans were
originated  as compared  with $61.1  million  during 2004.  At December 31, 2005
commercial  real estate  loans,  commercial  business  loans and consumer  loans
totaled  $132.8 million as compared with $111.9 million at December 31, 2004, an
increase of 18.7%.  Nonperforming  loans remained at low levels during the years
ended  December  31,  2005 and 2004,  totaling  $225,000  at  December  31, 2005
compared with  $595,000 at December 31, 2004.  Net  charge-off  activity for the
year ended  December  31, 2005 was  $383,000 as  compared  with  $583,000 in net
charge-offs  during 2004.  The balance of the allowance for loan losses was $2.0
million or 0.83% of loans  receivable  at December 31, 2005  compared  with $2.0
million or 0.94% of loans receivable at December 31, 2004.

      Non-interest  Income.  Non-interest  income increased by $1.7 million,  or
16.1%,  to $11.9 million for the year ended December 31, 2005 from $10.2 million
for the year ended December 31, 2004. The increase in other non-interest  income
was the result of an increase in net gains  realized upon the sale of investment
securities,  primarily the result of a non-cash charge of $1.1 million to record
the  other-than-temporary   impairment  of  certain  perpetual  preferred  stock
investments  in  Fannie  Mae and  Freddie  Mac with a total  book  value of $5.0
million in 2004. Absent the non-cash impairment charge during 2004, non-interest
income increased $602,000 or 5.3%.

      The  increase in other  non-interest  income was also  attributable  to an
increase in revenue  derived  from the sale of  financial  products  through the
Company's insurance agency subsidiary,  increasing $439,000 or 5.7% during 2005,
and an  increased  level of  service  charges on  deposit  accounts,  increasing
$124,000, or 6.1% for the year ended December 31, 2005 compared with 2004.

      Commissions  earned  from the sale of  financial  products  provided  $8.2
million in revenue during 2005 compared with revenue  derived from the insurance
subsidiary of $7.7 million  during 2004.  The increase in revenue is a result of
an increase in sales volume  during 2005 as well as the  establishment  of a new
Health Care Division  during 2004 that  contributed  to the revenue  increase in
2005.

      Deposit  account  service  fees also  contributed  to the  improvement  in
non-interest  income,  increasing to $2.1 million in income through December 31,
2005 from $2.0 million for the twelve  months  ending  December  31,  2004.  The
combination  of new account  generation  and the fees derived from the overdraft
program resulted in the increase in deposit account service fee revenue.

      The Company  experienced  a decrease in income from the sale and servicing
of fixed-rate  residential real estate loans, which decreased to $369,000 during
2005 compared with $518,000  during 2004.  The reduction is primarily the result
of a reduction  in the volume of loan  refinancing  activity in 2005 as compared
with 2004.  Revenue in the amount of $473,000 was  recognized  as a result of an
increase in the cash  surrender  value of  Bank-Owned  Life  Insurance  ("BOLI")
during 2005 as compared with  $497,000 in revenue  recognized  during 2004.  The
reduction  in revenue is the result of a decrease  in the  variable  rate earned
during the first half of 2005 on the insurance policies owned.

      Net investment  security gains realized  increased $1.2 million during the
year ended  December 31, 2005 as compared with the year ended December 31, 2004.
The increase in net security  gains was  primarily  due to a non-cash  charge of
$1.1 million to record the other-than-


<PAGE>

temporary  impairment of certain perpetual preferred stock investments in Fannie
Mae and  Freddie Mac with a book value of $5.0  million  during  fourth  quarter
2004.  This  non-cash  impairment  charge  resulted in a net loss on  investment
securities of $961,000  during 2004 compared with $275,000 in net security gains
during 2005.

      Non-interest  Expense.  Non-interest  expense increased by $1.3 million to
$19.6  million for the year ended  December 31, 2005 from $18.3  million for the
year ended  December 31, 2004.  The  increase  was  primarily  due to salary and
employee benefits expense which increased $983,000 to $12.4 million for the year
ended December 31, 2005 from $11.4 million for the year ended December 31, 2004.

      Salaries,  wages and other  compensation  paid to employees of the Company
during 2005 was $9.5 million,  an increase of $555,000 or 6.2%, as compared with
compensation  expense of $8.9 million during 2004. The increase in  compensation
expense was primarily the result of an increase in compensation  expense paid to
insurance  sales   representatives   consistent  with  the  increased  level  of
commissions  earned  by the  Company  from the sale of  financial  products.  In
addition,  employee  benefit  expenses of the  Company  increased  during  2005,
primarily the result of the  curtailment of future  benefits under the Company's
defined  benefit pension plan. The defined benefit pension plan was frozen as of
June  15,  2004.  The  defined  benefit  pension  plan  freeze  resulted  in the
recognition  of pension  income of $202,000 for the year ended December 31, 2004
as compared  with  pension  expense of $37,000 for the 2005 plan year.  With the
defined  benefit pension plan being frozen,  the Company  increased the employer
match  under  the  401(k)  plan  during  2005 from up to 3% of  compensation  to
matching  up to 5% of  compensation.  This  change  resulted  in an  increase in
employer matching contributions of $350,000 for the year ended December 31, 2005
compared to $197,000 for the year ended December 31, 2004.

      Travel  expense  increased  $165,000 to  $589,000  for  December  31, 2005
compared to $424,000 for the year ended  December 31, 2004.  The increase is due
to  increased  travel for both the Bank and  insurance  companies  as well as an
increase in the mileage rate and associated  expenses during 2005.  Amortization
expense was  $113,000  for both years ended  December  31, 2005 and 2004.  Other
non-interest  expense categories  represent year over year variances  consistent
with the expansion of the Company's market, business lines and other factors.

      Provision  for Income  Taxes.  Income tax expense was $1.4 million for the
year ended  December  31, 2005 an increase of $381,000  from the 2004 income tax
provisions of $1.0  million.  The increase in income tax provision is due to the
decrease in tax exempt and tax preferred  investment income of the Company which
qualifies  for  dividends  received  deductions.  The effective tax rate was 26%
during 2005 as compared with 23% during 2004.

Application of Critical Accounting Policies

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

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

      The allowance for loan losses represents management's estimate of probable
incurred  credit  losses in the loan  portfolio.  Determining  the amount of the
allowance

<PAGE>

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

      Mortgage  servicing  assets,  are  recorded  and  accounted  for  based on
discounted  cash flow  modeling  techniques  which  require  management  to make
estimates  regarding  the amount  and  timing of  expected  future  cash  flows,
including  assumptions about loan repayment rates,  credit loss experience,  and
costs to service,  as well as discount  rates that  consider the risk  involved.
Because the values of these assets are sensitive to changes in assumptions,  the
valuation  of mortgage  servicing  assets is  considered  a critical  accounting
estimate.

Management of Market Risk

      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 does
not own any trading  assets.  The Bank does not engage in hedging  transactions,
such as interest  rate swaps and caps,  other than forward sale  commitments  on
certain  committed  mortgage  loans.  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 interest expense.

      Interest  Rate  Risk.  In recent  years,  the Bank has used the  following
strategies to manage  interest rate risk: (i)  emphasizing  the  origination and
retention   of   residential    adjustable-rate   mortgage   loans,   commercial
adjustable-rate  mortgage loans, other business purpose loans and consumer loans
consisting  primarily  of auto  loans;  (ii)  selling  substantially  all  newly
originated  longer-term fixed rate one-to-four family residential mortgage loans
into the secondary  market without  recourse and on a servicing  retained basis;
(iii)  seeking to  increase  and  diversify  the  Company's  sources of revenue,
particularly  non-interest  income and (iv)  managing the  Company's  investment
activities  in a  prudent  manner  in  the  context  of  overall  balance  sheet
asset/liability management.  Investing in shorter-term securities will generally
bear lower  yields as  compared to  longer-term  investments,  but which  better
position the Bank for increases in market  interest rates and better matches the
maturities  of the Bank's  certificate  of  deposit  accounts.  Certificates  of
deposit  that mature in one year or less,  at December  31, 2006  totaled  $80.3
million,  or 25.0% of total  interest-bearing  liabilities.  As a result  of the
inverted yield curve we expect that the cost of retaining maturing  certificates
of deposit  during 2007 will  significantly  increase our  interest  expense and
pressure  our  interest  rate  spread and net  interest  margin.  The  wholesale
arbitrage  strategy of  investing  allows the  Company to invest in  longer-term
assets while  managing the  additional  interest rate risk with  liabilities  of
similar maturity or repricing characteristics. Borrowed funds that mature in one
year or less at  December  31,  2006  totaled  $7.5  million,  or 2.3% of  total
interest-bearing liabilities. Management believes that this balanced approach to
investing  will  reduce the  exposure  to interest  rate  fluctuations  and will
enhance long-term profitability.

      The  Company  uses a  computer  simulation  model to assist in  monitoring
interest rate risk. As of December 31, 2006 a 200 basis point increase in market
interest  rates was estimated to have a positive  impact of 0.3% on net interest
income  during  2007  while a 100 basis  point  decline  in rates  would  have a
negative  impact of 1.1% on net interest  income  during 2007.  This analysis is
based on numerous  assumptions  including the nature and timing of interest rate
levels,  prepayment  on loans  and  securities,  deposit  decay  rates,  pricing
decisions on loans and deposits and other assumptions,  and should not be relied
upon as being indicative of expected operating results.

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

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

      While  management  considers  the allowance for loan losses to be adequate
based on information  currently


<PAGE>

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

      The securities investment policy is established by the Board of Directors.
This policy dictates that investment  decisions will be made based on the safety
of the investment, liquidity requirements,  potential returns, cash flow targets
and desired risk parameters. In pursuing these objectives,  management considers
the ability of an  investment  to provide  earnings  consistent  with factors of
quality,  maturity,  marketability and risk diversification.  The Bank will only
purchase  securities  rated  as  investment  grade  by a  nationally  recognized
investment  rating  agency.  The  ability  of  an  issuer  of a  corporate  debt
instrument  to  repay  the  obligation  is  influenced  by a number  of  factors
including general economic conditions, cash flow, events in specific industries,
regional  crisis,  bankruptcy  and many other factors.  Corporate  bonds are not
typically  guaranteed  beyond the  Company's  ability to repay and therefore may
result in a loss to the Bank if  conditions  change  from  those in place at the
time the investment was acquired.

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

      Much of the Bank's market area is included in the 250,000-acre  land claim
of the Oneida Indian Nation  ("Oneidas").  The land claim area is held primarily
by private  persons.  Over 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 for 200 years.

      In June 1998,  the United  States  Justice  Department  intervened  in the
action on behalf of the Oneidas  against Madison County and Oneida County in New
York  State.  In  September  1998,  a 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 1794 by the Federal  Government.  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 February  2002, a joint  statement was issued by the Oneidas,  State of
New York and the counties of Madison and Oneida,  indicating  that the framework
for a  settlement  had been  agreed  upon  subject to the  approval by the State
legislature  and the  federal  government.  The  Oneidas  of  Wisconsin  and the
Stockbridge-Munsee  Band of Mohican Indians have commenced  separate  actions in
the  United  States  District  Court for the  Northern  District  of New York to
dispute and interrupt any settlement pending.

      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.

      Liquidity  Risk.  The  objective of liquidity  management is to ensure the
cash flow  requirements  of depositors and  borrowers,  as well as the operating
cash needs of the Company,  are met, taking into account all on- and off-balance
sheet funding  demands.  Liquidity  management also includes  ensuring cash flow
needs are met at a reasonable  cost.  Liquidity risk arises from the possibility


<PAGE>

the Company may not be able to satisfy current or future financial  commitments,
or the Company may become unduly reliant on  alternative  funding  sources.  The
Company  maintains a liquidity risk management policy to address and manage this
risk.  The policy  identifies  the  primary  sources of  liquidity,  establishes
procedures for  monitoring  and measuring  liquidity,  and  establishes  minimum
liquidity  requirements which comply with regulatory  guidance.  The policy also
includes a contingency  funding plan to address  liquidity needs in the event of
an  institution-specific  or a systemic  financial market crisis.  The liquidity
position is continually monitored and reported on monthly to the Asset/Liability
Management Committee.

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

      Liquidity management is both a short-term and long-term  responsibility of
Management.  The Bank  adjusts  its  investments  in liquid  assets  based  upon
Management's assessment of (i) expected loan demand, (ii) projected purchases of
investment and mortgage-backed  securities,  (iii) acquisition activities,  (iv)
expected deposit flows, (v) yields available on interest-bearing  deposits,  and
(vi) liquidity of its asset/liability  management  program.  Excess liquidity is
generally invested in interest-earning  overnight  deposits,  federal funds sold
and other  short-term  U.S. agency  obligations.  At December 31, 2006, cash and
interest-bearing deposits totaled $18.7 million, or 4.2% of total assets.

      If the Bank requires funds beyond its ability to generate them internally,
it has the ability to borrow  funds from the FHLB.  The Bank may borrow from the
FHLB under a blanket  agreement,  which assigns all investments in FHLB stock as
well as qualifying first mortgage loans equal to 150% of the outstanding balance
as collateral to secure the amounts borrowed. At December 31, 2006, the Bank has
available  an $84.8  million  line of credit with the Federal  Home Loan Bank of
which $0 million was outstanding.  In addition,  the Bank can utilize investment
and mortgage-backed securities as collateral for repurchase agreements. The Bank
also maintains  lines of credit with various  commercial  banks as an additional
source of short-term borrowing.  At December 31, 2006 the Bank had approximately
$10.0 million available to it under these borrowing arrangements.

      The Bank must also maintain  adequate  levels of liquidity to satisfy loan
commitments.  At December  31, 2006,  the Bank had  outstanding  commitments  to
originate  loans  of  $46.5  million.  The Bank  anticipates  that it will  have
sufficient funds to meet current loan commitments.

      Certificates of deposit, which are scheduled to mature in one year or less
from December 31, 2006, totaled $80.3 million.  Based upon the Bank's experience
and current pricing strategy,  Management believes that a significant portion of
such deposits will remain with the Bank.

      In 2007,  the Company is completing  the  renovation  and expansion of the
Bank's retail banking franchise. The construction costs and equipment of this is
expected  to cost  approximately  $6.0  million of which $3.7  million  has been
capitalized  as of  December  31,  2006.  Management  anticipates  it will  have
sufficient funds available to meet its planned capital  expenditures  throughout
2007.

      Management believes the Company maintains effective liquidity policies and
sources to satisfy current and anticipated financial commitments.

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

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


<PAGE>

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

                                          MINIMUM
                                          REQUIRED   ACTUAL
                                          --------   ------
Tier I Capital to Average Assets             4%       8.89%
Tier I Capital to Risk-Weighted Assets       4%      12.63%
Total Capital to Risk-Weighted Assets        8%      13.36%

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

      Contractual  Obligations:  The following table presents as of December 31,
2006,  significant  fixed  and  determinable  contractual  obligations  to third
parties by payment date.  Further discussion of the nature of each obligation is
included in the referenced note to the consolidated financial statements.

<TABLE>
<CAPTION>
        (Dollars in thousands)                                   Payments Due In
--------------------------------------   ---------------------------------------------------------------
                                Note     One Year   One to Three   Three to Five   Over Five
Contractual Obligation       Reference    or Less       Years          Years         Years       Total
-----------------------      ---------   --------   ------------   -------------   ---------   ---------
<S>                          <C>         <C>        <C>            <C>             <C>         <C>
Certificates of Deposit          7       $ 80,337     $ 28,375       $   9,250     $      62   $ 118,024
Federal Funds Purchased          1       $  4,000                                              $   4,000
Borrowings                       8       $  7,500     $ 30,400       $  13,500     $  10,000   $  61,400
Notes payable                    8       $  1,411                                              $   1,411
</TABLE>

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

<PAGE>

The following  table details the amounts and expected  maturities of significant
commitments and off-balance sheet  arrangements as of December 31, 2006. Further
discussion of these commitments and off-balance  sheet  arrangements is included
in Note 14 to the consolidated financial statements.

<TABLE>
<CAPTION>
In thousands)
                                   One        One to                 Over
                                   Year       Three     Three To     Five
Commitments to extend credit:      Or Less    years     Five years   years     Total
<S>                                <C>        <C>       <C>          <C>       <C>
Commercial                         $ 31,335   $   --    $       --   $    --   $ 31,335
Residential real estate               2,939       --            --        --      2,939
Revolving home equity lines             389      383           714     8,889     10,375
Consumer revolving credit             1,228       --            --        --      1,228
Standby letters of credit               573        7            --        --        580
</TABLE>

Impact of New Accounting Standards

      FASB  Statement  No. 158. 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 Statements
No. 87, 88, 106 and 132( R). This Statement  requires an employer  recognize the
overfunded or underfunded status of a defined benefit  postretirement plan as an
asset or liability in its balance  sheet,  beginning  with year end 2006, and to
recognize  changes in the funded  status in the year in which the changes  occur
through  comprehensive income beginning in 2007.  Additionally,  defined benefit
plan assets and  obligations are to be measured as of the date of the employer's
fiscal year-end,  starting in 2008. Adoption of the FASB did not have a material
impact on the financial statements of Oneida Financial Corp.

      SAB 108. In September 2006, the Securities and Exchange  Commission  (SEC)
released Staff  Accounting  Bulletin No. 108,  Considering  the Effects of Prior
Year Misstatements when Quantifying  Misstatements in the Current Year Financial
Statements  (SAB 108),  which is  effective  for fiscal years ending on or after
November  15, 2006.  SAB 108 provides  guidance on how the effects of prior year
uncorrected   financial   statement   misstatements   should  be  considered  in
quantifying a current year  misstatement.  SAB 108 requires public  companies to
quantify  misstatements  using both an income  statement  (rollover) and balance
sheet (iron curtain)  approach and evaluate whether either approach results in a
misstatement  that, when all relevant  quantitative and qualitative  factors are
considered,  is  material.  If  prior  year  errors  that  had  been  previously
considered  immaterial now are considered material based on either approach,  no
restatement  is required so long as  management  properly  applied its  previous
approach and all relevant facts and circumstances  were considered.  Adjustments
considered  immaterial in prior years under the method  previously used, but now
considered  material  under the dual  approach  required  by SAB 108,  are to be
recorded upon initial  adoption of SAB 108. The amount so recorded is shown as a
cumulative  effect adjustment and is recorded in opening retained earnings as of
January 1, 2006. The Company applied the SAB 108 cumulative  catch-up  treatment
for certain direct loan origination  costs which had previously been expensed as
incurred  rather than deferred and then amortized over the life of the loan. The
adjustment had  accumulated  since 2001 and management  determined that no prior
period's net income had been  materially  misstated.  The cumulative  adjustment
resulted in an increase to loans for the  estimated  deferred  loan  origination
costs of $307,089, with an $184,253 increase to beginning retained earnings, net
of a decrease to  deferred  federal  income  taxes  included in other  assets of
$122,836.

Effect of Newly Issued But Not Yet Effective Accounting Standards

      In February 2006, the Financial  Accounting  Standards Board (FASB) issued
Statement No. 155,  Accounting  for Certain  Hybrid  Financial  Instruments - an
amendment to FASB Statement No. 133 and 140. This  Statement  permits fair value
re-measurement for any hybrid financial instruments, clarifies which instruments
are  subject to the  requirements  of  Statement  No.  133,  and  establishes  a
requirement  to evaluate  interest  in  securitized  financial  assets and other
items.  The new standard is effective  for financial  assets  acquired or issued
after  the  beginning  of the  entity's  first  fiscal  year that  begins  after
September 15, 2006. Management does not expect the adoption of this statement to
have a material  impact on its  consolidated  financial  position  or results of
operations.


<PAGE>

      In March 2006, The FASB issued Statement No. 156, Accounting for Servicing
of Financial  Assets - an amendment of FASB  Statement No. 140.  This  Statement
provides  the  following:  1) revised  guidance  on when a  servicing  asset and
servicing liability should be recognized;  2) requires all separately recognized
servicing  assets and  servicing  liabilities  to be initially  measured at fair
value, if practicable; 3) permits an entity to elect to measure servicing assets
and servicing  liabilities  at fair value each reporting date and report changes
in fair value in  earnings  in the period in which the  changes  occur;  4) upon
initial  adoption,  permits a  onetime  reclassification  of  available-for-sale
securities  to  trading  securities  for  securities  which  are  identified  as
offsetting  the  entity's  exposure  to changes  in the fair value of  servicing
assets or liabilities  that a servicer  elects to  subsequently  measure at fair
value; and 5) requires  separate  presentation of servicing assets and servicing
liabilities  subsequently  measured at fair value in the  statement of financial
position and additional footnote  disclosures.  This standard is effective as of
the beginning of an entity's  first fiscal year that begins after  September 15,
2006 with the effects of initial adoption being reported as a  cumulative-effect
adjustment to retained earnings. Management does not expect the adoption of this
statement will have a material impact on its consolidated  financial position or
results of operations.

      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.  The Company has not  completed  its
evaluation of the impact of the adoption of this standard.

      In July 2006, the FASB issued FASB  Interpretation  No. 48, Accounting for
Uncertainty in Income Taxes - an  interpretation  of FASB Statement No. 109 (FIN
48), which  prescribes a recognition  threshold and measurement  attribute for a
tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. FIN 48 is effective for fiscal years
beginning  after December 15, 2006. The Company has determined that the adoption
of FIN 48 will not have a material effect on the financial statements.

      In September  2006, the FASB Emerging Tax Force  finalized Issue No. 06-4,
Accounting  for Deferred  Compensation  and  Postretirement  Benefit  Aspects of
Endorsement Split-Dollar Life Insurance Arrangements. This issue requires that a
liability  be  recorded  during the  service  period  when a  split-dollar  life
insurance agreement continues after participants' employment or retirement.  The
required accrued liability will be based on either the  post-employment  or cost
for the continuing life insurance or based on the future death benefit depending
on the contractual  terms of the underlying  agreement.  This issue is effective
for fiscal  years  beginning  after  December  15,  2007.  The  Company  has not
completed its evaluation of the impact of adoption of EITF 06-4.

      In September 2006, the FASB Emerging Issues Task Force finalized Issue No.
06-5,  Accounting for Purchases of Life Insurance - Determining  the Amount That
Could  Be  Realized  in  Accordance  with  FASB  Technical   Bulletin  No.  85-4
(Accounting for Purchases of Life Insurance).  This issue requires that a policy
holder consider  contractual terms of a life insurance policy in determining the
amount that could be realized  under the  insurance  contract.  It also requires
that if the contract  provides for a greater  surrender  value if all individual
policies in a group are  surrendered at the same time,  that the surrender value
be determined  based on the  assumption  that policies will be surrendered on an
individual basis.  Lastly,  the issue discusses whether the cash surrender value
should be  discounted  when the  policyholder  is  contractually  limited in its
ability to  surrender  the  policy.  This issue is  effective  for fiscal  years
beginning  after December 15, 2006. The Company does not believe the adoption of
this issue will have a material impact on the financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
          Quarter                       Dividends             Quarter                       Dividends
Year      Ending       High     Low        Paid     Year      Ending       High      Low       Paid
----   ------------   ------   ------   ---------   ----   ------------   ------   ------   ---------
<S>    <C>            <C>      <C>      <C>         <C>    <C>            <C>      <C>      <C>
2005   March 31       $14.30   $11.37     $0.20     2006   March 31       $12.10   $10.21     $0.22
       June 30        $17.20   $10.66     $0.00            June 30        $12.18   $ 9.75     $0.00
       September 30   $14.00   $10.85     $0.21            September 30   $12.86   $10.76     $0.23
       December 31    $11.90   $ 9.82     $0.00            December 31    $12.10   $11.05     $0.00
</TABLE>

      As of December  31, 2006,  there were  8,322,452  shares of the  Company's
common  stock  issued  and  approximately   741  shareholders  of  record.   The
shareholders  of record  include banks and brokers who act as nominees,  each of
whom may represent more than one shareholder.

      The  Board of  Directors  of the  Company  declared  two  semiannual  cash
dividends  during the year ended December 31, 2006, as shown in the table above.
The Board will review the dividend  regularly  and expects to maintain a regular
semiannual dividend in the future, based upon the Company's earnings,  financial
condition and other factors.

<PAGE>

Stock Performance Graph

      Set  forth  hereunder  is a  stock  performance  graph  comparing  (a) the
cumulative  total return on the Common Stock for the period  beginning  December
31, 2001, as reported by the Nasdaq Market,  through  December 31, 2006, (b) the
cumulative  total  return on  stocks  included  in the S&P 500  Index  over such
period, (c) the  cumulative  total return on stocks  included in the Nasdaq Bank
Index over such period,  and (d) the cumulative  total return of publicly traded
thrifts or thrift holding companies in the mutual holding company structure over
such period.  Cumulative  return assumes the  reinvestment of dividends,  and is
expressed in dollars based on an assumed investment of $100.

                           [PERFORMANCE GRAPH OMITTED]

<TABLE>
<CAPTION>
                                                  Period Ending
                         ---------------------------------------------------------------
Index                    12/31/01   12/31/02   12/31/03   12/31/04   12/31/05   12/31/06
----------------------------------------------------------------------------------------
<S>                      <C>        <C>        <C>        <C>        <C>        <C>
Oneida Financial Corp.    100.00     126.10     159.00     153.07     114.83     141.03
S&P 500                   100.00      76.63      96.85     105.56     108.73     123.54
MHC Thrifts               100.00     138.66     227.24     249.93     248.49     330.59
Nasdaq Bank Index         100.00     104.42     141.57     150.58     144.06     159.92
</TABLE>

      Assuming an initial  investment  in the Common  Stock of Oneida  Financial
Corp. of $100.00 at December 31, 2001, the cumulative total value with dividends
reinvested would be $141.03 at December 31, 2006.