This section presents Management's discussion and analysis of and changes to the Company's consolidated financial results of operations and condition and should be read in conjunction with the Company's financial statements and notes thereto included herein.

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

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

GENERAL

Oneida Financial Corp. is the parent company of Oneida Savings Bank ("the Bank"). The Company conducts no business other than holding the common stock of the Bank and general investment activities resulting from the capital it holds. Consequently, the net income of the Company is primarily derived from its investment in the Bank. The Bank's results of operations are primarily dependent on its net interest income, which is the difference between interest income earned on its investments in loans, investment securities and mortgage-backed securities and its cost of funds consisting of interest paid on deposits and borrowings. The Bank's net income is also affected by its provision for loan losses, as well as by the amount of other income, including income from fees and service charges, revenue derived from the insurance agency and employee benefit services provided by subsidiaries of the Bank, net gains and losses on sales of investments and loans, and operating expenses such as employee compensation and benefits, occupancy and equipment costs and income taxes. Earnings of the Bank are also affected significantly by general economic and competitive conditions, particularly changes in market interest rates, which tend to be highly cyclical, and government policies and actions of regulatory authorities, which events are beyond the control of the Bank. The Company has four primary business segments; it's banking franchise, insurance activities, benefit consulting activities and risk management activities. However, only the banking franchise is deemed material to the Bank's financial condition and results of operations. Consequently, segment disclosures are not presented in the Management's Discussion and Analysis. At both December 31, 2008 and March 31, 2009 the Company had 7,745,260 and 7,747,035 respectively of shares outstanding of which 4,309,750 were held by Oneida Financial MHC, the Company's mutual holding company parent.

RECENT DEVELOPMENTS

The Company announced a semi-annual cash dividend as of January 27, 2009 of $0.24 per share which was paid to its shareholders on February 10, 2009. Oneida Financial MHC waived its receipt of dividends.

As an FDIC-insured institution, the Bank is required to pay deposit insurance premiums to the FDIC. Because the FDIC's deposit insurance fund fell below prescribed levels in 2008, the FDIC has announced increased premiums for all insured depository institutions, including the Bank, in order to begin recapitalizing the fund. Insurance assessments range from 0.12% to 0.50% of total deposits for the first calendar quarter 2009 assessment. Effective April 1, 2009, insurance assessments will range from 0.07% to 0.78%, depending on an institution's risk classification and other factors. In addition, under a proposed rule, the FDIC indicated its plans to impose a 20 basis point emergency assessment on insured depository institutions to be paid on September 30, 2009, based on deposits at June 30, 2009. FDIC representatives subsequently indicated the amount of this special assessment could decrease if certain events transpire. The proposed rule would also authorize the FDIC to impose an additional emergency assessment of up to 10 basis points after June 30, 2009, if necessary to maintain public confidence in federal deposit insurance.

These changes would result in increased deposit insurance expense for the Bank in 2009. These increases will be reflected in other expenses in the Bank's income statement in the period of enactment. If the rule stands as currently published, assuming the Company's risk category does not change and the deposit base remains relatively stable, we estimate the total FDIC premium expense incurred during 2009 to be approximately $898,000.

FINANCIAL CONDITION

ASSETS. Total assets at March 31, 2009 were $549.2 million, an increase of $9.1 million from $540.1 million at December 31, 2008. Mortgage-backed securities increased $4.5 million reflecting purchases of $20.0 million of mortgage-backed securities partially offset by the principal collected on and proceeds from sales and maturities of mortgaged-backed securities. Investment securities decreased $2.5 million reflecting a $3.5 million decrease from a change in market value for the first quarter 2009, partially offset by an increase in purchases of investment securities for the quarter. Market rate fluctuations during the quarter have resulted in mortgage-backed securities being a more attractive investment than investments or cash equivalents. Loans receivable, including loans held for sale, decreased $6.7 million to $298.4 million at March 31, 2009 compared with $305.1 million at December 31, 2008. Residential loans decreased by $5.1 million since December 31, 2008, after the sale of $18.1 million of fixed-rate residential real estate loans in the secondary market during the three month period. At March 31, 2009, total commercial real estate loans increased by $2.4 million while commercial business loans decreased by $3.2 million from December 31, 2008. At March 31, 2009 total consumer loans decreased by $826,000 from December 31, 2008. As a result of the decrease in loans receivable and increase in deposit accounts, cash and cash equivalents increased $14.0 million from $13.3 million at December 31, 2008 to $27.3 million at March 31, 2009. Goodwill and other intangibles totaled $25.1 million as of March 31, 2009 and December 31, 2008. Additional goodwill in the amount of $136,000 was recorded for the contingent purchase payment made to Benefit Consulting Group LLC. Under the terms of the agreement, contingent purchase payments based on future performance levels may be made over a five-year period starting with the year ended December 31, 2006. Offsetting this payment was the amortization expense recorded on a monthly basis.

The allowance for loan losses was $2.5 million and $2.6 million at March 31, 2009 and December 31, 2008, respectively. The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance required by using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged off. Quarterly, management evaluates the adequacy of the allowance and determines the appropriate provision for loan losses by applying a range of estimated loss percentages to each category of performing loans and classified loans. The allowance adjustment is based upon the net change in each portfolio category, as well as adjustments related to impaired loans, since the prior quarter. Management monitors and modifies the level of the allowance for loan losses to maintain it at a level which it considers adequate to provide for probable incurred loan losses. A loan is considered impaired, based on current information and events, if it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. The measurement of impaired loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate, except that all collateral-dependent loans are measured for impairment based on the estimated fair value of the collateral. At March 31, 2009 the allowance for loan losses as a percentage of net loans receivable was 0.86% as compared to 0.87% as of December 31, 2008.

LIABILITIES. Total liabilities increased by $11.0 million to $496.3 million at March 31, 2009 from $485.3 million at December 31, 2008. The increase is primarily the result of an increase in interest-bearing deposits of $22.0 million partially offset by a decrease in non-interest bearing deposits of $2.1 million. Contributing to the increase in total deposits has been an increase in municipal deposits offered through Oneida Savings Bank's limited purpose commercial banking subisidiary, State Bank of Chittenango. Municipal deposits increased $13.9 million to $68.8 million at March 31, 2009 from $54.9 million at December 31, 2008. The increase in total deposits also enabled the Bank to reduce borrowings outstanding by $8.8 million to $44.0 million at March 31, 2009 compared with $52.8 million at December 31, 2008.

STOCKHOLDERS' EQUITY. Total stockholders' equity decreased by $1.8 million to $53.0 million at March 31, 2009 as compared $54.8 million at December 31, 2008. Stockholders' equity decreased $2.2 million as a result of the valuation adjustment made for the Company's available for sale investment and mortgage-backed securities. In addition, stockholders' equity decreased by $831,000 due to the payment of semiannual cash dividends of $0.24 partially offset by the addition of after-tax net income of $1.1 million for the three months ended March 31, 2009.

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

AVERAGE BALANCE SHEET. The following tables set forth certain information relating to the Company for the three months ended March 31, 2009 and 2008 and for the year ended December 31, 2008. For the periods indicated, the dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities is expressed in thousands of dollars and percentages. No tax equivalent adjustments were made. The average balance is computed based upon an average daily balance.

      TABLE 1. Average Balance Sheet.

                                                        Three Months Ended March 31,                   Twelve Months Ended Dec. 31,
                                        ------------------------------------------------------------  -----------------------------
                                                     2009                           2008                           2008
                                          Average    Interest            Average    Interest            Average    Interest
                                        Outstanding   Earned/  Yield/  Outstanding   Earned/  Yield/  Outstanding   Earned/  Yield/
                                          Balance      Paid     Rate     Balance      Paid     Rate     Balance      Paid     Rate
                                        -----------  --------  ------  -----------  --------  ------  -----------  --------  ------
                                                                           (Dollars in Thousands)
Assets
Interest-earning Assets:
   Loans Receivable                     $   301,845  $  4,481    5.94% $   285,590  $  4,704    6.59% $   293,499  $ 18,535    6.32%
   Investment and Mortgage-Backed
      Securities                            138,261     1,632    4.72%     129,210     1,680    5.20%     143,987     7,379    5.12%
   Federal Funds                             10,460        14    0.54%       7,711        65    3.37%       7,342       169    2.30%
   Equity Securities                          5,933       105    7.08%      18,674       276    5.91%      12,814       651    5.08%
                                        -----------  --------  ------  -----------  --------  ------  -----------  --------  ------
      Total Interest-earning Assets         456,499     6,232    5.46%     441,185     6,725    6.10%     457,642    26,734    5.84%
                                        -----------  --------  ------  -----------  --------  ------  -----------  --------  ------
Non interest-earning Assets:
   Cash and due from banks                   12,577                         12,850                         11,725
   Other assets                              76,693                         74,219                         74,999
                                        -----------                    -----------                    -----------
         Total assets                   $   545,769                    $   528,254                    $   544,366
                                        ===========                    ===========                    ===========
Liabilities and Stockholders'
   Equity
Interest-bearing Liabilities:
   Money Market Deposits                $    98,386  $    368    1.52% $    71,077  $    431    2.44% $    83,115  $  1,654    1.99%
   Savings Accounts                          76,187       116    0.62%      74,264       145    0.79%      77,266       603    0.78%
   Interest-bearing Checking                 44,348        37    0.34%      39,577        57    0.58%      40,459       238    0.59%
   Time Deposits                            155,162     1,096    2.86%     156,483     1,701    4.37%     159,933     6,020    3.76%
   Borrowings                                47,567       556    4.74%      56,609       666    4.73%      56,194     2,561    4.56%
   Notes Payable                                  3         0    0.00%         142         2    5.66%          88         5    5.68%
                                        -----------  --------  ------  -----------  --------  ------  -----------  --------  ------
      Total Interest-bearing
         Liabilities                        421,653     2,173    2.09%     398,152     3,002    3.03%     417,055    11,081    2.66%
                                        -----------  --------  ------  -----------  --------  ------  -----------  --------  ------
Non-interest-bearing Liabilities:
   Demand deposits                           59,029                         62,549                         63,711
   Other liabilities                          9,859                          8,285                          7,559
                                        -----------                    -----------                    -----------
      Total liabilities                 $   490,541                    $   468,986                    $   488,325
                                        -----------                    -----------                    -----------
Stockholders' equity                         55,228                         59,268                         56,041
                                        -----------                    -----------                    -----------
Total liabilities and stockholders'
   equity                               $   545,769                    $   528,254                    $   544,366
                                        ===========                    ===========                    ===========

   Net Interest Income                               $  4,059                       $  3,723                       $ 15,653
                                                     ========                       ========                       ========
   Net Interest Spread                                           3.37%                          3.07%                          3.18%
                                                                 ====                           ====                           ====
   Net Earning Assets                   $    34,846                    $    43,033                    $    40,587
                                        ===========                    ===========                    ===========
   Net yield on average
      Interest-earning assets                            3.56%                          3.38%                          3.42%
                                                     ========                       ========                       ========
   Average interest-earning
      assets to average
      Interest-bearing liabilities                     108.26%                        110.81%                        109.73%
                                                     ========                       ========                       ========

RESULTS OF OPERATIONS

GENERAL. Net income for the three months ended March 31, 2009 was $1.1 million, an increase of $685,000 or 160% from $429,000 for the three months ended March 31, 2008. The increase in net income was primarily the result of an increase in net interest income, an increase in other income offset by an increase in other expense and the provision for income taxes. Net income from operations for the first quarter, which excludes the FASB 159 change in fair value of $429,000, net of $116,000 income taxes, was $1.4 million or $0.18 per diluted share. This compares to net income from operations for the 2008 first quarter of $870,000, or $0.11 per diluted share. The increase in net interest income reflects the effects of the steepening yield curve as the cost of our interest-bearing liabilities decreases faster than the yield on our interest-earning assets.

INTEREST INCOME. Interest and dividend income decreased by $493,000 or 7.3%, to $6.2 million for the three months ended March 31, 2009 from $6.7 million for three months ended March 31, 2008. The decrease in interest income was the result of a decrease in the yield of 64 basis points on interest earning assets partially offset by an increase in the average balances of interest-earning assets during the current period of $15.3 million. Interest on loans decreased $223,000 to $4.5 million for the three months ended March 31, 2009 from $4.7 million for the three months ended March 31, 2008. The decrease in interest income on loans is a result of a decrease of 65 basis points in the average yield to 5.94% for the three months ended March 31, 2009 from 6.59% for the three months ended March 31, 2008 offset by an increase of $16.3 million in the average balance of loans receivable for the three months ended March 31, 2009 as compared with the same period in 2008. The decrease in yield reflected the decrease in market interest rates during the quarter.

Interest on investments and mortgage-backed securities decreased $48,000 as a result of a decrease in the average yield of 48 basis points from 5.20% for the three months ended March 31, 2008 to 4.72% for the three months ended March 31, 2009. Offsetting the decrease in yield was an increase in the average balance of investment securities and mortgage-backed securities of $9.1 million for the three months period ending March 31, 2009 as compared with the same period in 2008.

Interest income from federal funds decreased during the three months ended March 31, 2009 to $14,000 as compared with $65,000 for the 2008 period. The decrease in interest income is primarily due to a decrease of 283 basis points in the average yield offset by an increase in the average balance of $2.7 million.

Interest income from equity securities decreased $171,000 as a result of a decrease in the average balances of $12.7 million for the three month period ending March 31, 2009 as compared with the same period in 2008. The decrease in the average balance was the result of the continued decline in market values for equity securities during 2008.

INTEREST EXPENSE. Interest expense was $2.2 million for the three months ended March 31, 2009, a decrease of $829,000 or 27.6% from the same period in 2008. The decrease in interest expense is due to a decrease in interest paid on deposit accounts. Interest expense on borrowed funds totaled $556,000 for the first quarter of 2009 compared with $666,000 for the 2008 period. The average balance of borrowings decreased $9.0 million for the three months period ending March 31, 2009 as compared with the same period in 2008. Interest expense on deposits decreased $717,000 and totaled $1.6 million for the three months ended March 31, 2009 as compared to $2.3 million for the three month period in 2008. The average cost of deposits was 1.75% for the three month period ending March 31, 2009 compared with 2.75% for the three month period in 2008. In addition, the average balance of deposit accounts increased $32.7 million from the three months ended March 31, 2008 to the three months ended March 31, 2009.

PROVISION FOR LOAN LOSSES. There were no provisions for possible loan losses made during the first quarters of 2009 and 2008. The allowance for loan losses was $2.5 million for the three months ended March 31, 2009 and March 31, 2008. The ratio of the net loan loss allowance to loans receivable is 0.86% at March 31, 2009 as compared with a ratio of 0.89% of loans receivable at March 31, 2008. Management continues to monitor changes in the loan portfolio mix in response to the redirection of loan asset origination and retention toward consumer and commercial business loans. The method utilized to evaluate the adequacy of the allowance level accounts for the higher relative degree of credit risk associated with this activity as compared with traditional residential real estate lending. Provisions to the allowance are made as management assesses the level of allowance to maintain it at a level which is considers adequate to provide for probable incurred loan losses.

OTHER INCOME. Other operating income increased by $1.3 million for the three-month period ending March 31, 2009 compared with the same period in 2008 to $5.4 million from $4.0 million. The increase in other income was primarily due to increases in commissions and fees on the sale of non-banking products through the Company's subsidiaries for the three months ended March 31, 2009 as compared with the same period during 2008. Commissions and fees on sales of non-banking products was $4.1 million for the three months ended March 31, 2009 as compared to $3.5 million for the same period in 2008. In addition, the non-cash change in fair value as of March 31, 2009 was $429,000 as compared to $604,000 that was recognized as of March 31, 2008 in connection with the adoption of FAS 159 for certain preferred and common equity securities. The Company intends to hold these securities due to the dividend and other features of the securities and therefore does not expect to realize the loss recorded. Net investment gains for the three months ended March 31, 2009 were

$238,000 compared with net investment losses of $4,000 for the three months ended March 31, 2008.

OTHER EXPENSES. Other operating expenses increased by $742,000 or 10.4%, to $7.9 million for the three months ended March 31, 2009 from $7.2 million for the same period in 2008. The increase in non-interest expense is primarily the result of an increase in operating expenses associated with our insurance agency and consulting subsidiaries associated with revenue increases. In addition, an increase in premiums being assessed by the Federal Deposit Insurance Corporation for the current calendar year has resulted in additional non-interest expense of $172,000 for the three months ended March 31, 2009 as compared with the three months ended March 31, 2008.

INCOME TAX. Income tax expense increased to $412,000 for the three months ended March 31, 2009 as compared to $155,000 for the first quarter 2008. Net income increased from $429,000 to $1.1 million for the three month period while the effective tax rate increased to 27.0% for the three months of 2009 from 26.5% for the three months of 2008 to reflect the overall tax rate expected to be in effect for 2009.

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

The primary investing activities of the Company are the origination of residential mortgages, commercial loans and consumer loans, as well as the purchase of mortgage-backed and other debt securities. During the first quarter of 2009, loan originations totaled $31.2 million compared to $22.8 million during the first quarter of 2008. The purchases of mortgage-backed securities totaled $20.0 million during the first quarter of 2009 as compared to $21.0 million during the first quarter of 2008. The purchases of mortgage-backed securities were funded due to additional liquidity provided by increased deposits.

Cash flow from operations, deposit growth, as well as the sales, maturity and principal payments received on loans and investment securities were used to fund the investing activities described above. Additionally, the Company has lines of credit with the Federal Home Loan Bank, Federal Reserve Bank and two commercial banks that provide funding sources for lending, liquidity and asset and liability management as needed. During the first quarter of 2009 cash flows provided by the sale, principal payments and maturity of securities available for sale was $29.2 million compared to $15.8 million for the same period in 2008.

In the ordinary course of business, the Company extends commitments to . . .