ONFC-06.30.2015-10Q



	June 30, 2015			December 31, 2014
	(In thousands, except share data)
ASSETS
Cash and due from banks	$	47,317		$	19,062
Federal funds sold	37,121			12,013
TOTAL CASH AND CASH EQUIVALENTS	84,438			31,075
Trading securities	3,922			3,900
Securities, available-for-sale	155,539			176,314
Securities, held-to-maturity (fair value $125,544 and $133,897 respectively)	122,384			129,415

Mortgage loans held for sale	75			839
Loans receivable	392,585			369,039
Deferred fees	1,818			1,483
Allowance for loan losses	(3,459		)	(3,502		)
LOANS RECEIVABLE, NET	390,944			367,020
Federal Home Loan Bank stock	1,440			1,391
Bank premises and equipment, net	22,178			20,382
Assets held for sale	63			63
Accrued interest receivable	2,206			2,342
Bank owned life insurance	18,073			17,842
Other assets	22,143			21,298
Goodwill	25,480			25,480
Other intangible assets	685			808
TOTAL ASSETS	$	849,570		$	798,169
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Interest bearing deposits	$	645,415		$	603,482
Non-interest bearing deposits	95,983			85,688
Other liabilities	11,763			13,226
TOTAL LIABILITIES	753,161			702,396
Oneida Financial Corp. Stockholders’ equity:
Preferred stock, 10,000,000 shares authorized; 0 issued and outstanding	—			—
Common stock ($0.01 par value; 30,000,000 shares authorized; 7,041,747 issued at June 30, 2015; 7,025,444 issued at December 31, 2014)	70			70
Additional paid-in capital	44,442			44,121
Retained earnings	54,940			54,185
Accumulated other comprehensive loss	(3,043		)	(2,603		)
TOTAL STOCKHOLDERS’ EQUITY	96,409			95,773
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	849,570		$	798,169



	Three Months Ended					Six Months Ended
	June 30, 2015			June 30, 2014		June 30, 2015		June 30, 2014
	(In thousands, except per share data)
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans	$	3,967		$	3,693	$	7,798	$	7,350
Interest on investment securities	1,712			1,988		3,621		3,738
Dividends on equity securities	26			24		47		48
Interest on federal funds sold and interest-earning deposits	27			6		37		12
Total interest and dividend income	5,732			5,711		11,503		11,148
INTEREST EXPENSE:
Core deposits	274			323		537		607
Time deposits	321			349		656		700
Borrowings	—			13		1		26
Note payable	—			3		—		7
Total interest expense	595			688		1,194		1,340
NET INTEREST INCOME	5,137			5,023		10,309		9,808
Less: Provision for loan losses	—			100		—		200
Net interest income after provision for loan losses	5,137			4,923		10,309		9,608
INVESTMENT GAINS:
Net gains on sales of securities	76			27		222		73
Changes in fair value of trading securities	(220		)	13		22		823
Total investment (losses) gains	(144		)	40		244		896
NON-INTEREST INCOME:
Commissions and fees on sales of non-banking products	6,946			6,455		13,968		13,391
Other operating income	1,183			1,819		2,656		2,943
Total non-interest income	8,129			8,274		16,624		16,334
NON-INTEREST EXPENSES:
Compensation and employee benefits	7,117			7,322		14,584		14,500
Occupancy expenses, net	1,210			1,329		2,609		2,729
Merger related expenses	1,257			—		1,257		—
Other operating expense	2,767			2,649		5,322		5,008
Total non-interest expenses	12,351			11,300		23,772		22,237
INCOME BEFORE INCOME TAXES	771			1,937		3,405		4,601
Provision for income taxes	298			508		961		1,228
NET INCOME	$	473		$	1,429	$	2,444	$	3,373
EARNINGS PER SHARE — BASIC	$	0.07		$	0.20	$	0.35	$	0.48
EARNINGS PER SHARE — DILUTED	$	0.07		$	0.20	$	0.34	$	0.48



	Three Months Ended						Six Months Ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
	(In thousands)
Net income	$	473		$	1,429		$	2,444		$	3,373
Other comprehensive income (loss), net of tax:

Net change in unrealized gains (losses):
Securities transferred from available-for-sale to held-to-maturity:
Amortization of unrealized gains on securities arising during period	181			132			320			274
Reclassification adjustment for gains realized included in income	—			—			—			—
Net unrealized gains	181			132			320			274
Income tax effect	(68		)	(53		)	(120		)	(110		)
Net change in securities transferred to held-to-maturity	113			79			200			164
Securities available-for-sale:
Unrealized holding (losses) gains on securities arising during period	(1,816		)	1,260			(806		)	2,999
Reclassification adjustment for gains realized in income	(76		)	(27		)	(222		)	(73		)
Net unrealized (losses) gains	(1,892		)	1,233			(1,028		)	2,926
Income tax effect	714			(493		)	388			(1,170		)
Net change in securities available-for-sale	(1,178		)	740			(640		)	1,756
Unrealized holding (losses) gains on securities, net of tax	(1,065		)	819			(440		)	1,920

Defined benefit pension plans:
Change in unrealized loss on pension benefits	—			—			—			24
Income tax effect	—			—			—			(10		)
Net change in pension benefits	—			—			—			14
Other comprehensive (loss) income, net of tax	(1,065		)	819			(440		)	1,934
Comprehensive (loss) income	$	(592	)	$	2,248		$	2,004		$	5,307



	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	Common Stock
	Shares	Amount
	(In thousands, except number of shares)
Balance as of January 1, 2015	7,025,444	$	70	$	44,121	$	54,185		$	(2,603	)	$	95,773
Net income	—	—		—		2,444			—			2,444
Other comprehensive loss, net of tax	—	—		—		—			(440		)	(440		)
Common stock dividends: $0.24 per share	—	—		—		(1,689		)	—			(1,689		)
Shares issued under stock plan	16,303	—		169		—			—			169
Shares earned under stock plan	—	—		152		—			—			152
Balance as of June 30, 2015	7,041,747	$	70	$	44,442	$	54,940		$	(3,043	)	$	96,409



	Six Months Ended June 30,
	2015			2014
	(In thousands)
Operating Activities:
Net income	$	2,444		$	3,373
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	869			850
Amortization of premiums/discounts on securities, net	361			175
Net change in fair value of trading securities	(22		)	(823		)
Provision for loan losses	—			200
ESOP shares earned	—			116
Stock compensation earned	152			286
Loss on sale of foreclosed assets	6			10
Gain on securities, net	(222		)	(73		)
Gain on sale of loans, net	(119		)	(83		)
Income tax payable	109			1,284
Accrued interest receivable	136			27
Other assets	(904		)	3,756
Other liabilities	(1,466		)	(3,101		)
Earnings on bank owned life insurance	(231		)	(826		)
Origination of loans held for sale	(3,810		)	(3,310		)
Proceeds from sales of loans	4,693			3,454
Net cash provided by operating activities	1,996			5,315
Investing Activities:
Purchase of securities available-for-sale	(26,020		)	(47,674		)
Proceeds from sale of securities available-for-sale	23,368			2,649
Maturities and calls of securities available-for-sale	16,620			5,902
Principal collected on securities available-for-sale	5,741			5,647
Purchase of securities held-to-maturity	(426		)	(894		)
Maturities and call of securities held-to-maturity	2,456			1,386
Principal collected on securities held-to-maturity	5,221			4,522
Purchase of FHLB stock	(959		)	(93		)
Redemption of FHLB stock	910			79
Net increase in loans	(23,924		)	(8,592		)
Purchase of bank premises and equipment	(2,542		)	(1,065		)
Proceeds from the sale of foreclosed property	212			22
Settlement of bank owned life insurance	—			1,423
Net cash provided by (used in) investing activities	657			(36,688		)
Financing Activities:
Net increase in demand deposit, savings, money market, super now and escrow	59,493			32,247
Net (decrease) increase in time deposits	(7,265		)	1,709
Shares issued under stock plan	169			57
Cash dividends	(1,687		)	(1,677		)
Net cash provided by financing activities	50,710			32,336



Increase in cash and cash equivalents	53,363		963
Cash and cash equivalents at beginning of period	31,075		42,183
Cash and cash equivalents at end of period	$	84,438	$	43,146
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,196	$	1,340
Cash paid for income taxes	850		—
Supplemental noncash disclosures:
Transfer of loans to other real estate	—		81
Dividends declared and unpaid at period end	845		843

The accompanying unaudited consolidated financial statements include Oneida Financial Corp. (the “Company”), a Maryland corporation, and its wholly owned subsidiary, Oneida Savings Bank (the “Bank”), as of June 30, 2015 and December 31, 2014 and for the three month and six month periods ended June 30, 2015 and 2014. All inter-company accounts and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, 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 through the date of the filing 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. Actual results could differ from those estimates. In the opinion of management, the unaudited consolidated financial statements include all necessary adjustments, consisting of normal recurring accruals, necessary for a fair presentation for the periods presented. The results of operations for the three months and six months ended June 30, 2015 are not necessarily indicative of the results to be achieved for the remainder of 2015.

The data in the consolidated statements of condition for December 31, 2014 was derived from the audited financial statements included in the Company’s 2014 Annual Report on Form 10-K. That data, along with the interim financial information presented in the consolidated statements of condition, statements of operations, comprehensive income, changes in stockholders’ equity and cash flows should be read in conjunction with the 2014 consolidated financial statements, including the notes thereto included in the Company’s Annual Report on Form 10-K.

Basic earnings per share is net income available to common shareholders divided by the weighted average number of common shares outstanding during the period excluding participating securities. ESOP shares are considered outstanding for the calculation unless unearned. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock plans. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Company has determined that 78,000 of its 153,000 outstanding non-vested stock awards are participating securities. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuance of the financial statements.



	Three Months Ended						Six Months Ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
	(In thousands, except per share data)
Net income	$	473		$	1,429		$	2,444		$	3,373
Net earnings allocated to participating securities	(6		)	(19		)	(25		)	(44		)
Net earnings allocated to common stock	$	467		$	1,410		$	2,419		$	3,329

Basic
Distributed earnings allocated to common stock	$	836		$	830		$	1,670		$	1,653
Undistributed earnings allocated to common stock	(369		)	580			749			1,676
Net earnings allocated to common stock	$	467		$	1,410		$	2,419		$	3,329



	Three Months Ended						Six Months Ended
	June 30, 2015			June 30, 2014			June 30, 2015			June 30, 2014
	(In thousands, except per share data)
Weighted average common shares outstanding including shares considered participating securities	7,012			6,986			7,006			6,982
Less: Average unallocated ESOP shares	—			(14		)	—			(16		)
Less: Average participating securities	(57		)	(78		)	(60		)	(83		)
Weighted average shares	6,955			6,894			6,946			6,883
Basic earnings per share	$	0.07		$	0.20		$	0.35		$	0.48

Diluted
Net earnings allocated to common stock	$	467		$	1,410		$	2,419		$	3,329

Weighted average common shares outstanding for basic earnings per common share	6,955			6,894			6,946			6,883
Add: Dilutive effects of assumed exercise of stock options and nonparticipating shares	105			65			99			62
Weighted average shares and dilutive potential common shares	7,060			6,959			7,045			6,945
Diluted earnings per common share	$	0.07		$	0.20		$	0.34		$	0.48



Available-for-sale portfolio:	June 30, 2015
	Amortized Cost		Unrealized					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
	(In thousands)
Investment Securities
Debt securities:
U.S. Agencies	$	28,453	$	36	$	(214	)	$	28,275
U.S. Treasury	1,999		—		(5		)	1,994
Corporate	28,810		89		(1,494		)	27,405
State and municipal	31,823		843		(35		)	32,631
Small Business Administration	3,653		88		—			3,741
	$	94,738	$	1,056	$	(1,748	)	$	94,046
Mortgage-Backed Securities
Fannie Mae	$	25,128	$	269	$	(79	)	$	25,318
Freddie Mac	25,708		160		(44		)	25,824
Government National Mortgage Assoc.	10,227		148		(24		)	10,351
	$	61,063	$	577	$	(147	)	$	61,493
Total available-for-sale	$	155,801	$	1,633	$	(1,895	)	$	155,539



Held-to-maturity portfolio:	June 30, 2015
	Amortized Cost		Unrecognized					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
	(In thousands)
Investment Securities
Debt securities:
U.S. Agencies	$	40,008	$	1,818	$	(28	)	$	41,798
State and municipal	26,937		1,011		(84		)	27,864
Small Business Administration	8,743		210		—			8,953
	$	75,688	$	3,039	$	(112	)	$	78,615
Mortgage-Backed Securities
Fannie Mae	$	24,766	$	424	$	(334	)	$	24,856
Freddie Mac	13,771		169		(36		)	13,904
Government National Mortgage Assoc.	8,159		81		(71		)	8,169
	$	46,696	$	674	$	(441	)	$	46,929
Total held-to-maturity	$	122,384	$	3,713	$	(553	)	$	125,544



Available-for-sale portfolio:	December 31, 2014
	Amortized Cost		Unrealized					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
	(In thousands)
Investment Securities
Debt securities:
U.S. Agencies	$	27,255	$	120	$	(143	)	$	27,232
Corporate	35,345		260		(1,508		)	34,097
Agency asset backed securities	8,734		91		(35		)	8,790
State and municipal	33,004		1,215		(1		)	34,218
Small Business Administration	6,835		135		—			6,970
	$	111,173	$	1,821	$	(1,687	)	$	111,307
Mortgage-Backed Securities
Fannie Mae	$	24,666	$	306	$	(39	)	$	24,933
Freddie Mac	25,659		207		(33		)	25,833
Government National Mortgage Assoc.	12,624		198		(58		)	12,764
Private placement mortgage obligation	1,426		51		—			1,477
	$	64,375	$	762	$	(130	)	$	65,007
Total available-for-sale	$	175,548	$	2,583	$	(1,817	)	$	176,314



Held-to-maturity portfolio:	December 31, 2014
	Amortized Cost		Unrecognized					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
	(In thousands)
Investment Securities
Debt securities:
U.S. Agencies	$	41,703	$	2,274	$	—		$	43,977
State and municipal	27,506		1,504		(7		)	29,003
Small Business Administration	9,302		239		—			9,541
	$	78,511	$	4,017	$	(7	)	$	82,521
Mortgage-Backed Securities
Fannie Mae	$	26,602	$	533	$	(271	)	$	26,864
Freddie Mac	15,192		257		(53		)	15,396
Government National Mortgage Assoc.	9,110		101		(95		)	9,116
	$	50,904	$	891	$	(419	)	$	51,376
Total held-to-maturity	$	129,415	$	4,908	$	(426	)	$	133,897



	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Within one year	$	3,946	$	3,953	$	473	$	475
After one year through five years	24,181		24,507		12,765		13,175
After five years through ten years	51,619		51,748		35,910		37,245
After ten years	14,992		13,838		26,540		27,720
Mortgage-backed securities	61,063		61,493		46,696		46,929
Total	$	155,801	$	155,539	$	122,384	$	125,544



	Less than 12 Months					More than 12 Months					Total
June 30, 2015	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale	(In thousands)
U.S. Agencies	$	16,063	$	(156	)	$	1,942	$	(58	)	$	18,005	$	(214	)
U.S. Treasury	1,994		(5		)	—		—			1,994		(5		)
Corporate	10,887		(236		)	10,907		(1,258		)	21,794		(1,494		)
State and municipal	1,807		(35		)	—		—			1,807		(35		)
Small Business Administration	—		—			4		—			4		—
Fannie Mae	6,017		(72		)	1,951		(7		)	7,968		(79		)
Freddie Mac	6,611		(23		)	1,703		(21		)	8,314		(44		)
Government National Mortgage Assoc.	—		—			3,608		(24		)	3,608		(24		)
Total securities available-for-sale in an unrealized loss position	$	43,379	$	(527	)	$	20,115	$	(1,368	)	$	63,494	$	(1,895	)
Held-to-maturity
U.S. Agencies	$	1,915	$	(28	)	$	—	$	—		$	1,915	$	(28	)
State and municipal	4,895		(84		)	—		—			4,895		(84		)
Fannie Mae	2,321		(11		)	8,689		(323		)	11,010		(334		)
Freddie Mac	—		—			2,030		(36		)	2,030		(36		)
Government National Mortgage Assoc.	—		—			3,407		(71		)	3,407		(71		)
Total securities held-to-maturity in an unrecognized loss position	$	9,131	$	(123	)	$	14,126	$	(430	)	$	23,257	$	(553	)



	Less than 12 Months					More than 12 Months					Total
December 31, 2014	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale	(In thousands)
U.S. Agencies	$	999	$	(1	)	$	6,858	$	(142	)	$	7,857	$	(143	)
Corporate	9,237		(49		)	10,552		(1,459		)	19,789		(1,508		)
Agency asset backed securities	3,789		(35		)	—		—			3,789		(35		)
State and municipal	563		(1		)	—		—			563		(1		)
Small Business Administration	—		—			4		—			4		—
Fannie Mae	5,393		(16		)	2,002		(23		)	7,395		(39		)
Freddie Mac	5,567		(33		)	—		—			5,567		(33		)
Government National Mortgage Assoc.	2,084		(11		)	3,028		(47		)	5,112		(58		)
Total securities available-for-sale in an unrealized loss position	$	27,632	$	(146	)	$	22,444	$	(1,671	)	$	50,076	$	(1,817	)
Held-to-maturity
State and municipal	2,285		(4		)	822		(3		)	3,107		(7		)
Fannie Mae	2,361		(23		)	9,459		(248		)	11,820		(271		)
Freddie Mac	734		(3		)	2,238		(50		)	2,972		(53		)
Government National Mortgage Assoc.	3,631		(95		)	—		—			3,631		(95		)
Total securities held-to-maturity in an unrecognized loss position	$	9,011	$	(125	)	$	12,519	$	(301	)	$	21,530	$	(426	)

Declines in the fair value of securities below their cost that are other-than-temporary are reflected as realized losses. The Company evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss

position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of the impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

Fannie Mae, Freddie Mac, Ginnie Mae and the Small Business Administration guarantee the contractual cash flows of our agency and mortgage-backed securities. Fannie Mae and Freddie Mac are institutions which the government has affirmed its commitment to support. Our Ginnie Mae mortgage-backed securities are backed by the full faith and credit of the U.S. Government. All of the agency mortgage-backed securities are residential mortgage-backed securities. At June 30, 2015, of the 43 U.S. Government sponsored enterprise agency and mortgage-backed securities in an unrealized loss position, eighteen were in a continuous unrealized loss position for 12 months or more. The unrealized losses at June 30, 2015 were primarily attributable to changes in interest rates and illiquidity, and not credit quality. The Company does not have the intent to sell these agency and mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The Company does not consider these securities to be other-than-temporarily impaired at June 30, 2015.

At June 30, 2015, of the 40 corporate debt and municipal securities in an unrealized loss position, eight were in a continuous unrealized loss position of 12 months or more. We have assessed these securities and determined that the decline in fair value was temporary. In making this determination, we considered the period of time the securities were in a loss position, the percentage decline in comparison with the securities’ amortized cost, the financial condition of the issuer, and the delinquency or default rates based on the applicable bond ratings. In addition, we do not have the intent to sell these securities and it is likely that we will not be required to sell these securities before the recovery of their amortized cost basis, which may be at maturity. Included in the eight securities whose unrealized loss position exceeds 12 months was a $2.5 million Strats-Goldman Sachs Corporation obligation, maturing February 15, 2034 which is a variable rate note based on the 6 month libor. The current rate on the security is 1.44%. The unrealized loss was $891,796 and $1,004,076 at June 30, 2015 and December 31, 2014, respectively. In addition to the items noted above, we reviewed capital ratios, public filings of the issuer and related trust documents in the review of the unrealized loss. The Strats-Goldman Sachs Corporation obligation is paying as agreed. The other seven securities in a continuous unrealized loss position were finance sector corporate debt securities and municipal securities all rated above investment grade at June 30, 2015, that have maturities ranging from 2021 to 2033. The Company does not consider these securities to be other-than-temporarily impaired at June 30, 2015.

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. 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.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired, when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or the fair value of collateral if repayment is expected solely from collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

Troubled debt restructurings are individually evaluated for impairment and included in the separately identified impairment disclosures. Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan's effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of allowance on the loan in accordance with the accounting policy for the allowance for loan losses on loans individually identified as impaired. The Company incorporates recent historical experience related to troubled debt restructurings that subsequently default into the calculation of the allowance by loan portfolio segment.

The general allowance covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent three years. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans (including troubled debt restructurings); levels of and trends in charge-offs and recoveries; migration of loans to the classification of special mention, substandard, or doubtful; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. The following portfolio segments have been identified: commercial loans, commercial real estate loans, consumer loans, home equity loans and residential mortgages.

Commercial business lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with residential and commercial real estate lending. Real estate lending is generally considered to be collateral based, with loan amounts based on predetermined loan to collateral values and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial business loans may be collateralized by equipment or other business assets, the liquidation of collateral in the event of a borrower default is often an insufficient source of repayment because equipment and other business assets may be obsolete or of limited use, among other things. Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment.

Loans secured by commercial real estate and multi-family residential properties generally are larger than one-to-four family residential loans and involve a greater degree of risk. Commercial and multi-family residential mortgage loans often involve large loan balances to single borrowers or groups of related borrowers. Payments on these loans depend to a large degree on the results of operations and management of the properties or underlying businesses, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of commercial real estate loans makes them more difficult for management to monitor and evaluate.

Consumer loans generally have shorter terms and higher interest rates than one-to-four family mortgage loans. In addition, consumer loans expand the products and services we offer to meet the financial services needs of our customers. Consumer loans generally involve greater credit risk than residential mortgage loans because of the difference in the underlying collateral. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage to, loss of, or depreciation in the underlying collateral. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections depend on the borrower’s personal financial stability. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Home equity loans are secured by a borrower’s primary residence. Home equity loans are underwritten under the same criteria that we use to underwrite one-to-four family fixed-rate loans. Home equity loans may be underwritten with a loan to value ratio of 90% when combined with the principal balance of an existing mortgage loan. Home equity loans generally involve greater credit risk than the primary residential mortgage loans due to the potential of declines in collateral values, collectability as a result of foreclosure processes if the Bank is considered to be in a secondary position as well as the amount of expenses incurred during the process.

Residential real estate loans have as collateral a borrower’s primary residence. The risk of loss on these loans would be due to collateral deficiencies due to market deterioration or location and condition of the property. The foreclosure process of a primary residence is usually the final course of action on these types of loans. Given our underwriting criteria and the volume and balance of the loans as compared to collateral, the risk in this portfolio segment is lower than that of the other segments.



For the Three Months Ended	Commercial Loans		Commercial Real Estate			Consumer Loans			Home Equity			Residential Mortgages		Total
June 30, 2015	Commercial Loans		Commercial Real Estate			Consumer Loans			Home Equity			Residential Mortgages		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	887	$	1,247		$	551		$	296		$	516	$	3,497
Charge-offs	—		—			(36		)	(19		)	—		(55		)
Recoveries	—		—			16			—			1		17
Provision for loan losses	65		(250		)	117			40			28		—
Ending balance	$	952	$	997		$	648		$	317		$	545	$	3,459



For the Six Months Ended	Commercial Loans			Commercial Real Estate			Consumer Loans			Home Equity			Residential Mortgages		Total
June 30, 2015	Commercial Loans			Commercial Real Estate			Consumer Loans			Home Equity			Residential Mortgages		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	1,175		$	1,085		$	445		$	295		$	502	$	3,502
Charge-offs	—			—			(57		)	(19		)	—		(76		)
Recoveries	—			—			32			—			1		33
Provision for loan losses	(223		)	(88		)	228			41			42		—
Ending balance	$	952		$	997		$	648		$	317		$	545	$	3,459



For the Three Months Ended	Commercial Loans		Commercial Real Estate			Consumer Loans			Home Equity			Residential Mortgages			Total
June 30, 2014	Commercial Loans		Commercial Real Estate			Consumer Loans			Home Equity			Residential Mortgages			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	954	$	993		$	264		$	302		$	678		$	3,191
Charge-offs	—		—			(16		)	—			(11		)	(27		)
Recoveries	—		1			7			—			1			9
Provision for loan losses	232		(1		)	49			(15		)	(165		)	100
Ending balance	$	1,186	$	993		$	304		$	287		$	503		$	3,273



For the Six Months Ended	Commercial Loans		Commercial Real Estate			Consumer Loans			Home Equity			Residential Mortgages			Total
June 30, 2014	Commercial Loans		Commercial Real Estate			Consumer Loans			Home Equity			Residential Mortgages			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	871	$	1,000		$	261		$	300		$	678		$	3,110
Charge-offs	—		—			(41		)	—			(11		)	(52		)
Recoveries	—		2			11			—			2			15
Provision for loan losses	315		(9		)	73			(13		)	(166		)	200
Ending balance	$	1,186	$	993		$	304		$	287		$	503		$	3,273



June 30, 2015	Commercial Loans		Commercial Real Estate		Consumer Loans		Home Equity		Residential Mortgages		Total
June 30, 2015	Commercial Loans		Commercial Real Estate		Consumer Loans		Home Equity		Residential Mortgages		Total
	(In thousands)
Allowance for loan losses attributable to loans:	0
Individually evaluated for impairment	$	153	$	15	$	—	$	—	$	—	$	168
Collectively evaluated for impairment	799		982		648		317		545		3,291
Total	$	952	$	997	$	648	$	317	$	545	$	3,459
Loans:
Individually evaluated for impairment	$	1,376	$	448	$	—	$	—	$	—	$	1,824
Collectively evaluated for impairment	55,669		95,511		59,471		53,496		126,614		390,761
Total	$	57,045	$	95,959	$	59,471	$	53,496	$	126,614	$	392,585



December 31, 2014	Commercial Loans		Commercial Real Estate		Consumer Loans		Home Equity		Residential Mortgages		Total
December 31, 2014	Commercial Loans		Commercial Real Estate		Consumer Loans		Home Equity		Residential Mortgages		Total
	(In thousands)
Allowance for loan losses attributable to loans:
Individually evaluated for impairment	$	115	$	21	$	—	$	—	$	—	$	136
Collectively evaluated for impairment	1,060		1,064		445		295		502		3,366
Total	$	1,175	$	1,085	$	445	$	295	$	502	$	3,502
Loans:
Individually evaluated for impairment	$	1,048	$	462	$	—	$	—	$	—	$	1,510
Collectively evaluated for impairment	52,621		92,965		46,883		53,150		121,910		367,529
Total	$	53,669	$	93,427	$	46,883	$	53,150	$	121,910	$	369,039



	June 30, 2015						December 31, 2014
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Commercial loans	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		—		—		—
With an allowance recorded:
Commercial loans	1,376		1,376		153		1,048		1,048		115
Commercial real estate	448		448		15		462		462		21
Total	$	1,824	$	1,824	$	168	$	1,510	$	1,510	$	136

At June 30, 2015, impaired commercial real estate loans are represented by three loans. At June 30, 2015, impaired commercial loans are represented by eleven loans. Nine of the commercial loans were considered troubled debt restructurings and totaled $984,000 as of June 30, 2015. The remaining two commercial loans and the three commercial real estate loans were for customers who had commercial loans considered to be troubled debt restructurings. Cash basis interest income of $29,000 and $60,000 was recognized for the three months and six months ended June 30, 2015, respectively. Cash basis interest income of $23,000 and $44,000 was recognized for the three months and six months ended June 30, 2014, respectively.

At June 30, 2014, impaired commercial real estate loans are represented by three loans. At June 30, 2014, impaired commercial loans are represented by nine loans. Seven of the commercial loans were considered trouble debt restructurings and totaled $839,000 as of June 30, 2014. The remaining two commercial loans and three commercial real estate loans were for customers who had commercial loans considered to be troubled debt restructurings.



	June 30, 2015
	Total		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due
	Total		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due
	(In thousands)
Commercial loans	$	57,045	$	187	$	—	$	—	$	187	$	56,858
Commercial real estate	95,959		84		—		—		84		95,875
Consumer loans	59,471		82		2		—		84		59,387
Home equity	53,496		153		—		4		157		53,339
Residential mortgages	126,614		71		10		328		409		126,205
Total	$	392,585	$	577	$	12	$	332	$	921	$	391,664



	December 31, 2014
	Total		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due


	(In thousands)
Commercial loans	$	53,669	$	—	$	56	$	—	$	56	$	53,613
Commercial real estate	93,427		39		—		—		39		93,388
Consumer loans	46,883		70		11		—		81		46,802
Home equity	53,150		118		—		—		118		53,032
Residential mortgages	121,910		233		—		267		500		121,410
Total	$	369,039	$	460	$	67	$	267	$	794	$	368,245



	June 30, 2015					December 31, 2014
	Number of Loans	Recorded Investment		Allowance for Loan Losses Allocated		Number of Loans	Recorded Investment		Allowance for Loan Losses Allocated
	Number of Loans	Recorded Investment		Allowance for Loan Losses Allocated		Number of Loans	Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands except number of loans)

Commercial loans	9	$	984	$	104	7	$	804	$	58
Commercial real estate	—	—		—		—	—		—
Consumer loans	—	—		—		—	—		—
Home equity	—	—		—		—	—		—
Residential mortgages	—	—		—		—	—		—
Total	9	$	984	$	104	7	$	804	$	58

There was one new troubled debt restructurings recorded during the three months ended June 30, 2015. There were no new troubled debt restructurings recorded during the three months ended June 30, 2014. During the six months ended June 30, 2015, there were three new troubled debt restructurings recorded compared to one new troubled debt restructuring recorded during the same period in 2014. The Company has not committed to lend additional amounts as of June 30, 2015 to customers with outstanding loans that are classified as troubled debt restructurings.

The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. Certain troubled debt restructurings are classified as nonperforming at the time of the restructuring and may only be returned to performing status after considering the borrower's sustained repayment performance for a reasonable period.

Each of the commercial loans represented a line of credit or fixed rate loan which was not paid in full at the time of maturity. Each loan maturity date was extended for terms ranging from ten years to twenty years and the reduction in interest rates were to below market rates. The nine loans considered troubled debt restructurings as of June 30, 2015 represented six commercial relationships. Two of the commercial loans representing one relationship with a principal balance of $35,000 and $39,000 as of June 30, 2015 and December 31, 2014, respectively, were considered nonaccrual.

For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. There were no charge-offs or defaults during the three months and six months ended June 30, 2015 and 2014. All of the troubled debt restructurings were considered impaired as of June 30, 2015 and December 31, 2014. The allocated allowance for loan losses was based on the present value of estimated future cash flows. All of the loans are currently performing in accordance with their modified terms.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate with an outstanding relationship greater than $250,000. Homogeneous loans are reviewed when appropriate given foreclosures, bankruptcies or relationships that include non-homogeneous loans. For homogeneous loan pools, such as residential mortgages, home equity and consumer loans, the Company uses the payment status to identify the credit risk in these loan portfolios. Payment status is reviewed on at least a monthly basis by the Company’s personnel and on a quarterly basis with respect to determining the adequacy of the allowance for loan losses. This analysis is performed on at least an annual basis. The Company uses the following definitions for risk ratings:

The Bank has determined that it has three primary business segments; its banking franchise, its insurance, risk management and employee benefits activities and its financial and investment advisory activities. For the three months and six months ended June 30, 2015 and 2014, the Bank's insurance, risk management and employee benefit activities consisted of those conducted through its wholly owned subsidiary One Group NY, Inc. (formerly Bailey & Haskell Associates, Inc). The Bank's financial and investment advisory activities consisted of those conducted through its wholly owned subsidiary Oneida Wealth Management, Inc., which was approved as a broker-dealer by FINRA in April 2014.



	Three Months Ended June 30, 2015
	Banking Activities			Insurance, Risk Management and Employee Benefits Activities		Financial/Investment Advisory Activities		Total
	Banking Activities			Insurance, Risk Management and Employee Benefits Activities		Financial/Investment Advisory Activities		Total
	(In thousands)
Net interest income	$	5,137		$	—	$	—	$	5,137
Provision for loan losses	—			—		—		—
Net interest income after provision for loan losses	5,137			—		—		5,137
Investment losses, net	(144		)	—		—		(144		)
Commissions and fees on sales of non-banking products	89			5,870		987		6,946
Non-interest income	1,183			—		—		1,183
Non-interest expenses	6,194			4,733		966		11,893
Depreciation and amortization	327			125		6		458
(Loss) income before income taxes	(256		)	1,012		15		771
Income tax (benefit) expense	(114		)	400		12		298
Net (loss) income	$	(142	)	$	612	$	3	$	473
Total Assets	$	822,361		$	30,897	$	4,276	$	857,534



	Three Months Ended June 30, 2014
	Banking Activities		Insurance, Risk Management and Employee Benefit Activities		Financial/Investment Advisory Activities			Total
	Banking Activities		Insurance, Risk Management and Employee Benefit Activities		Financial/Investment Advisory Activities			Total
	(In thousands)
Net interest income	$	5,023	$	—	$	—		$	5,023
Provision for loan losses	100		—		—			100
Net interest income after provision for loan losses	4,923		—		—			4,923
Investment gains, net	40		—		—			40
Commissions and fees on sales of non-banking products	511		5,215		729			6,455
Non-interest income	1,819		—		—			1,819
Non-interest expenses	5,607		4,406		880			10,893
Depreciation and amortization	324		76		7			407
Income (loss) before income taxes	1,362		733		(158		)	1,937
Income tax expense (benefit)	237		322		(51		)	508
Net income (loss)	$	1,125	$	411	$	(107	)	$	1,429
Total Assets	$	753,357	$	29,369	$	4,919		$	787,645



	Six Months Ended June 30, 2015
	Banking Activities		Insurance, Risk Management and Employee Benefit Activities		Financial/Investment Advisory Activities		Total
	Banking Activities		Insurance, Risk Management and Employee Benefit Activities		Financial/Investment Advisory Activities		Total
	(In thousands)
Net interest income	$	10,309	$	—	$	—	$	10,309
Provision for loan losses	—		—		—		—
Net interest income after provision for loan losses	10,309		—		—		10,309
Investment gains, net	244		—		—		244
Commissions and fees on sales of non banking products	452		11,590		1,926		13,968
Non-interest income	2,656		—		—		2,656
Non-interest expenses	11,407		9,700		1,796		22,903
Depreciation and amortization	661		195		13		869
Income before income taxes	1,593		1,695		117		3,405
Income tax expense	230		682		49		961
Net income	$	1,363	$	1,013	$	68	$	2,444
Total Assets	$	822,361	$	30,897	$	4,276	$	857,534



	Six Months Ended June 30, 2014
	Banking Activities		Insurance, Risk Management and Employee Benefit Activities		Financial/Investment Advisory Activities			Total
	Banking Activities		Insurance, Risk Management and Employee Benefit Activities		Financial/Investment Advisory Activities			Total
	(In thousands)
Net interest income	$	9,808	$	—	$	—		$	9,808
Provision for loan losses	200		—		—			200
Net interest income after provision for loan losses	9,608		—		—			9,608
Investment gains, net	896		—		—			896
Commissions and fees on sales of non banking products	1,025		10,884		1,482			13,391
Non-interest income	2,943		—		—			2,943
Non-interest expenses	10,725		8,870		1,792			21,387
Depreciation and amortization	687		149		14			850
Income (loss) before income taxes	3,060		1,865		(324		)	4,601
Income tax expense (benefit)	518		819		(109		)	1,228
Net income (loss)	$	2,542	$	1,046	$	(215	)	$	3,373
Total Assets	$	753,357	$	29,369	$	4,919		$	787,645

Securities: The fair values of trading securities and investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). The fair value of level 3 investment securities are determined by the Company’s Finance Department, which reports to the Chief Financial Officer (CFO). The CFO reviews the values and these are reported to the Investment Committee on a

quarterly basis. Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.



	Fair Value Measurements at June 30, 2015 Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Trading securities
Common and preferred equities	$	3,922	$	1,041	$	2,881	$	—
Available-for-sale securities
U.S. Agencies	28,275		—		28,275		—
U.S. Treasury	1,994		—		1,994		—
Corporate	27,405		—		27,405		—
State and municipal	32,631		—		32,564		67
Small Business Administration	3,741		—		3,741		—
Residential mortgage-backed securities	61,493		—		61,493		—
Total	$	159,461	$	1,041	$	158,353	$	67



	Fair Value Measurement at December 31, 2014 Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)




	(In thousands)
Assets:
Trading securities
Common and preferred equities	$	3,900	$	1,083	$	2,817	$	—
Available-for-sale securities
U.S. Agencies	27,232		—		27,232		—
Corporate	34,097		—		34,097		—
Agency asset backed securities	8,790		—		8,790		—
State and municipal	34,218		—		34,150		68
Small Business Administration	6,970		—		6,970		—
Residential mortgage-backed securities	63,530		—		63,530		—
Private placement mortgage obligation	1,477		—		1,477		—
Total	$	180,214	$	1,083	$	179,063	$	68



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Municipal Securities			Total
	Municipal Securities			Total
	(In thousands)
Beginning balance January 1, 2015	$	68		$	68
Total gains or losses (realized/unrealized)
Included in earnings
Interest income on securities	—			—
Other changes in fair value	—			—
Net impairment losses recognized in earnings	—			—
Interest payments applied to principal	—			—
Pay downs on securities	—			—
Included in other comprehensive income	—			—
Ending balance March 31, 2015	$	68		$	68
Total gains or losses (realized/unrealized)
Included in earnings
Interest income on securities	—			—
Other changes in fair value	—			—
Net impairment losses recognized in earnings	—			—
Interest payments applied to principal	—			—
Pay downs on securities	—			—
Included in other comprehensive income	(1		)	(1		)
Ending balance June 30, 2015	$	67		$	67



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Municipal Securities			Total
	Municipal Securities			Total
	(In thousands)
Beginning balance January 1, 2014	$	101		$	101
Total gains or losses (realized/unrealized)
Included in earnings
Interest income on securities	—			—
Other changes in fair value	—			—
Net impairment losses recognized in earnings	—			—
Interest payments applied to principal	—			—
Pay downs on securities	—			—
Included in other comprehensive income	—			—
Ending balance March 31, 2014	$	101		$	101
Total gains or losses (realized/unrealized)
Included in earnings
Interest income on securities	—			—
Other changes in fair value	—			—
Net impairment losses recognized in earnings	—			—
Interest payments applied to principal	—			—
Pay downs on securities	—			—
Included in other comprehensive income	(1		)	(1		)
Ending balance June 30, 2014	$	100		$	100

The Company’s Level 3 state and local municipal securities valuations were supported by analysis prepared by an independent third party. The third party’s approach to determining fair value involves using recently executed transactions for similar securities and market quotations for similar securities. As these securities are not rated by the rating agencies and are localized to our market area, it was determined that these were valued using Level 3 inputs. In addition, the Company reviews past history of the contractual payments and financial condition of the municipalities in determining an appropriate market value for this type of security.

The Company has elected the fair value option for certain preferred and common equity securities as they do not have stated maturity values and the fair value fluctuates with market changes. The decision to elect the fair value option is made individually for each instrument and is irrevocable once made. Changes in fair value for the selected instruments are recorded in earnings. Interest income is recorded based on the contractual amount of interest income earned on financial assets (except any that are in nonaccrual status). Dividend income is recorded based on cash dividends. Cash flows from the purchase and sale of securities for which the fair value option has been elected are shown as operating activities in the consolidated statement of cash flows.



June 30, 2015	Carrying Value		Fair Value Measurements Using
June 30, 2015	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial assets:
Cash and cash equivalents	$	84,438	$	84,438	$	—	$	—	$	84,438
Trading securities	3,922		1,041		2,881		—		3,922
Investment securities, available-for-sale	155,539		—		155,472		67		155,539
Investment securities, held-to-maturity	122,384		—		122,179		3,365		125,544
Loans held for sale	75		—		76		—		76
Loans receivable, net	390,944		—		—		403,311		403,311
Federal Home Loan Bank stock	1,440		N/A		N/A		N/A		N/A
Accrued interest receivable	2,206		—		1,148		1,058		2,206
Financial liabilities:	0
Deposits	$	741,398	$	602,753	$	140,524	$	—	$	743,277
Accrued interest payable	4		2		2		—		4



December 31, 2014	Carrying Value		Fair Value Measurement Using
December 31, 2014	Carrying Value		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial assets:
Cash and cash equivalents	$	31,075	$	31,075	$	—	$	—	$	31,075
Trading securities	3,900		1,083		2,817		—		3,900
Investment securities, available-for-sale	176,314		—		176,246		68		176,314
Investment securities, held-to-maturity	129,415		—		130,053		3,844		133,897
Loans held for sale	839		—		865		—		865
Loans receivable, net	367,020		—		—		381,084		381,084
Federal Home Loan Bank stock	1,391		N/A		N/A		N/A		N/A
Accrued interest receivable	2,342		—		1,339		1,003		2,342
Financial liabilities:
Deposits	$	689,170	$	543,262	$	148,115	$	—	$	691,377
Accrued interest payable	7		2		5		—		7

Fair value of loans, excluding loans held for sale, are estimated as follows: for variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

The fair value disclosed for demand deposits (e.g., interest and non-interest checking, savings and money market accounts)are, by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying value) resulting in a Level 1 classification. The carrying amounts of variable rate certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

The Company has one share based compensation plan as described below. Total compensation cost that has been charged against income for the plan was $76,748 and $152,304 for the three months ended June 30, 2015 and 2014, respectively. Total compensation cost that has been charged against income for the plan was $152,775 and $286,164 for the six months ended June 30, 2015 and 2014, respectively. The total income tax benefit was $28,972 and $57,673 for the three months and six months ended June 30, 2015, respectively. The total income tax benefit was $58,637 and $110,173 for the three months and six months ended June 30, 2014, respectively.

The Company’s 2012 Equity Incentive Plan, which is shareholder approved, permits the granting of share options to its directors, officers and key employees for up to 216,750 shares of common stock. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. All options granted expire by July 2022 and options vest and become exercisable ratably over a one to five year period. There were 25,750 shares available for future grants under the plan described above as of June 30, 2015. Compensation recorded in conjunction with the option awards was $8,984 and $17,874 for the three months and six months ended June 30, 2015, respectively. Compensation recorded in conjunction with the option awards was $14,695 and $23,832 for the three months and six months ended June 30, 2014, respectively.

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 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.



	Shares		Average Exercise Price		Weighted Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2015	172,348		$	10.44	7.06	$	443,550
Granted	364		$	19.61	—	$	306
Exercised	(18,848	)	$	11.10	—	$	144,025
Forfeited or expired	—		$	—	—	$	—
Outstanding at June 30, 2015	153,864		$	10.38	6.89	$	1,548,746
Fully vested and expected to vest	108,000		$	10.39	7.32	$	1,086,615
Exercisable as of June 30, 2015	45,864		$	10.37	6.13	$	462,131

The 2012 Equity Incentive Plan provides for the issuance of shares of restricted stock ("RRP") to directors, officers and key employees. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock was determined using the grant date fair value of $10.30 for shares awarded in July 2012 and $12.43 for shares awarded in June 2014. RRP shares vest ratably over the five year vesting period on the anniversary date for shares awarded in July 2012 and over the four year vesting period on the anniversary date for those shares awarded in June 2014. The shares have voting rights and are eligible to receive nonforfeitable dividends on the unvested shares. These shares are considered to be participating securities in the earnings per share calculation. Total shares issuable under the plan are 131,500 at June 30, 2015 and 130,000 shares have been issued. A summary of changes in the Company’s nonvested shares for the years follows:

As of June 30, 2015, there was $562,055 of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted average period of 2.1 years. Compensation expense recorded in conjunction with the RRP awards was $67,764 and $134,901 for the three months and six months ended June 30, 2015, respectively. Compensation expense recorded in conjunction with the RRP awards was $73,183 and $134,180 for the three months and six months ended June 30, 2014, respectively.

The 2012 Equity Incentive Plan provides for the issuance of shares of performance award restricted stock to directors, officers and key employees. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock was determined using the grant date fair value of $10.30. Performance shares cliff vest as of July 24, 2015 based on the performance results for the three year period ending December 31, 2014. There were two

sets of performance criteria based on the individual award: (1) based on a three year cumulative earnings per share, return on average assets and return on tangible equity metrics weighted at 33% and (2) average revenue and profit margin weighted at 50%. As of December 31, 2014, the compensation cost expensed ranged from 50% - 100% payout under the terms of the plan for the different performance sets. The shares have voting rights. Upon vesting of the performance shares, any dividends declared during the vesting period will be paid based on the shares vested. Total shares issuable under the plan are 75,000 at June 30, 2015 and all shares were issued in 2012. A summary of changes in the Company’s nonvested shares for the years follows:

The following table represents the detail of comprehensive income (loss) for the three months and six months ended:



	For the Three Months Ended June 30, 2015
	Pre-tax			Tax			After-tax
	(In thousands)
Unrealized holding losses on available-for-sale securities during the period	$	(1,816	)	$	685		$	(1,131	)
Reclassification adjustment for gains included in net income (1)	(76		)	29			(47		)
Net unrealized losses on available-for-sale securities	(1,892		)	714			(1,178		)

Amortization of unrealized gains on transfer of securities to held-to-maturity (3)	181			(68		)	113
Net unrealized gains	181			(68		)	113

Net pension gain arising during period (2)	—			—			—
Net unrecognized postretirement benefit obligation	—			—			—
Other comprehensive loss	$	(1,711	)	$	646		$	(1,065	)



	For the Six Months Ended June 30, 2015
	Pre-tax			Tax			After-tax
	(In thousands)
Unrealized holding losses on available-for-sale securities during the period	$	(806	)	$	304		$	(502	)
Reclassification adjustment for gains included in net income (1)	(222		)	84			(138		)
Net unrealized losses on available-for-sale securities	(1,028		)	388			(640		)

Amortization of unrealized gains on transfer of securities to held-to-maturity (3)	320			(120		)	200
Net unrealized gains	320			(120		)	200

Net pension gain arising during period (2)	—			—			—
Net unrecognized postretirement benefit obligation	—			—			—
Other comprehensive loss	$	(708	)	$	268		$	(440	)



	For the Three Months Ended June 30, 2014
	Pre-tax			Tax			After-tax
	(In thousands)
Unrealized holding gains on available-for-sale securities during the period	$	1,260		$	(504	)	$	756
Reclassification adjustment for gains included in net income (1)	(27		)	11			(16		)
Net unrealized gains on available-for-sale securities	1,233			(493		)	740

Amortization of unrealized gains on transfer of securities to held-to-maturity (3)	132			(53		)	79
Net unrealized gains	132			(53		)	79

Net pension gain arising during period (2)	—			—			—
Net unrecognized postretirement benefit obligation	—			—			—
Other comprehensive income	$	1,365		$	(546	)	$	819



	For the Six Months Ended June 30, 2014
	Pre-tax			Tax			After-tax
	(In thousands)
Unrealized holding gains on available-for-sale securities during the period	$	2,999		$	(1,200	)	$	1,799
Reclassification adjustment for gains included in net income (1)	(73		)	30			(43		)
Net unrealized gains on available-for-sale securities	2,926			(1,170		)	1,756

Amortization of unrealized gains on transfer of securities to held-to-maturity (3)	274			(110		)	164
Net unrealized gains	274			(110		)	164

Net pension gain arising during period (2)	24			(10		)	14
Net unrecognized postretirement benefit obligation	24			(10		)	14
Other comprehensive income	$	3,224		$	(1,290	)	$	1,934



	Net unrealized gains (losses) on available-for-sale securities			Net unrealized gains (losses) on transfer of securities to held-to-maturity			Unrecognized postretirement benefit obligation			Accumulated other comprehensive income (loss)
	(In thousands)
Balance at January 1, 2015	$	477		$	(2,328	)	$	(752	)	$	(2,603	)
Other comprehensive (loss) income, during the period, net of adjustments	(502		)	200			—			(302		)
Amounts reclassified from AOCI	(138		)	—			—			(138		)
Other comprehensive (loss) income	(640		)	200			—			(440		)
Balance at June 30, 2015	$	(163	)	$	(2,128	)	$	(752	)	$	(3,043	)



	Net unrealized gains (losses) on available-for-sale securities			Net unrealized gains (losses) on transfer of securities to held-to-maturity			Unrecognized postretirement benefit obligation			Accumulated other comprehensive income (loss)
	(In thousands)
Balance at January 1, 2014	$	(1,007	)	$	(2,579	)	$	(1,556	)	$	(5,142	)
Other comprehensive income, during the period, net of adjustments	1,799			164			14			1,977
Amounts reclassified from AOCI	(43		)	—			—			(43		)
Other comprehensive income	1,756			164			14			1,934
Balance at June 30, 2014	$	749		$	(2,415	)	$	(1,542	)	$	(3,208	)

In June 2014, the FASB amended existing guidance and created a new Topic 606, Revenue from Contracts with Customers which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized that consists of: 1) identify the contract with the customer; 2) identify the performance obligation in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when or as each performance obligation is satisfied. The amendments in this guidance are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Companies can transition to the requirement of this guidance either retrospectively or as a cumulative-effect adjustment as of the date of adoption, which is January 1, 2018 for the Company. The impact of this guidance on the Company's operating results or financial condition is not known at this time.

In January 2014, the FASB amended existing guidance by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. The amendments clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. In addition, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this guidance are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this guidance using either a modified retrospective transition method or a prospective transition method. The adoption of this guidance did not have a material effect on the Company's operating results or financial condition.

On March 3, 2015, Paul Parshall (the "Plaintiff") filed a stockholder class action lawsuit in the Supreme Court of the State of New York, County of Oneida, against the Company, the directors of the Company and Community Bank System, Inc. The lawsuit purports to be brought on behalf of all of the Company’s public stockholders, excluding the directors of the Company. The complaint alleges that the directors of the Company breached their fiduciary duties to the stockholders by failing to take adequate steps to ensure that the Company’s stockholders receive adequate, fair and maximum consideration under the circumstances and by engineering the merger to the benefit of themselves and/or Community Bank System, Inc. without regard to the Company’s stockholders. The complaint further alleges that Community Bank System, Inc. aided and abetted the alleged breaches of fiduciary

On March 12, 2015, John Solak (the "Second Plaintiff") filed a stockholder class action lawsuit in the Supreme Court of the State of New York, County of Oneida, against the Company, the directors of the Company and Community Bank System, Inc. Similar to the Plaintiff’s lawsuit, the Second Plaintiff’s lawsuit purports to be brought on behalf of all of the Company’s public stockholders, excluding the directors of the Company. The complaint alleges that the directors of the Company breached their fiduciary duties to the stockholders by failing to take adequate steps to ensure that the Company’s stockholders receive adequate, fair and maximum consideration under the circumstances and by engineering the merger to the benefit of themselves and/or Community Bank System, Inc. without regard to the Company’s stockholders. The complaint further alleges that Community Bank System, Inc. aided and abetted the alleged breaches of fiduciary duty by the Company’s directors. The lawsuit seeks to enjoin the proposed merger from proceeding and seeks unspecified compensatory damages on behalf of the Company’s stockholders and/or rescission of the proposed merger transaction.

On March 13, 2015, the Company filed a complaint in the Supreme Court of the State of New York, County of Madison, against FinPro, Inc. (“FinPro”). The Company’s complaint alleges that FinPro has wrongfully demanded a $1.42 million services fee as a result of the Company's entering into the merger even though FinPro has provided no services in connection with the merger and has no right, contractual or otherwise, to such a fee. As a result, the Company is seeking declaratory judgment nullifying the improper demand made by FinPro, and any purported agreement on which the demand is allegedly based.

On April 24, 2015, Linda Colvin (the "Third Plaintiff") filed a stockholder class action lawsuit in the Circuit Court for Baltimore City, Maryland, against the Company, the directors of the Company and Community Bank System, Inc. Similar to the lawsuits by the Plaintiff and the Second Plaintiff, the Third Plaintiff’s lawsuit purports to be brought on behalf of all of the Company’s public stockholders, excluding the directors of the Company. The complaint alleges that the directors of the Company breached their fiduciary duties to the stockholders by agreeing to a merger transaction that fails to maximize shareholder value and by putting their personal interests ahead of the interests of the Company’s stockholders. The complaint further alleges that Community Bank System, Inc. aided and abetted the alleged breaches of fiduciary duty by the Company’s directors. The lawsuit seeks to enjoin the proposed merger from proceeding and seeks unspecified compensatory damages on behalf of the Company’s stockholders and/or rescission of the proposed merger transaction.

On June 9, 2015, the Company, Community Bank System, Inc., and the other defendants entered into a memorandum of understanding (the “MOU”) with the Plaintiff, Second Plaintiff and Third Plaintiff regarding the settlement of the lawsuits. Pursuant to the MOU, the Company agreed to provide additional information to Oneida Financial Corp. stockholders in the Proxy Statement/Prospectus of Oneida Financial Corp. and Community Bank System, Inc. dated May 6, 2015 (the “Proxy Statement/Prospectus”). The Company, Community Bank System, Inc. and the other defendants deny all of the allegations in the lawsuits. The Company, Community Bank System, Inc. and the individual director defendants believe the disclosures in the Proxy Statement/Prospectus were adequate under the law. Nevertheless, the Company, Community Bank System, Inc. and the other defendants have agreed to settle the lawsuits in order to avoid the costs, disruption, and distraction of further litigation. Any costs associated with settling the lawsuits was paid by the Company’s insurance carrier and the Company did not incur a loss on the settlement.

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.

Oneida Financial Corp. is the parent company of Oneida Savings Bank (the "Bank”). The Company is a Maryland corporation. The Company conducts no business other than holding the common stock of the Bank and general passive investment activities resulting from the capital it holds. Consequently, the net income of the Company is primarily derived from its investment in the Bank. Our results of operations depend primarily on our net interest income. Net interest income is the difference between interest income we earn on our interest-earning assets, consisting primarily of loans, investment securities, mortgage-backed securities and other interest-earning assets (primarily cash and cash equivalents), and the interest we pay on our interest-bearing liabilities, consisting primarily of deposits and Federal Home Loan Bank advances and other borrowings. Net interest income is a function of our interest rate spread, which is the difference between the average yield earned on our interest-earning assets and the average rate paid on our interest-bearing liabilities, as well as a function of the average balance of interest-earning assets compared to interest-bearing liabilities. Also contributing to our earnings is non-interest income, which consists primarily of service charges and fees on loan and deposit products and services, fees from our insurance, risk management and employee benefits and financial investment and advisory subsidiaries and fees from trust services, and net gains and losses on sale of investments. Interest income and non-interest income are offset by provisions for loan losses, general administrative and other expenses, including employee compensation and benefits and occupancy and equipment costs, as well as by state and federal income tax expense.

On February 24, 2015, the Company entered into a definitive merger agreement to be acquired by Community Bank System, Inc. for approximately $142 million in Community Bank System, Inc. stock and cash. The merger agreement has been unanimously approved by the board of directors of both companies and by the stockholders of Oneida Financial Corp. The merger is expected to close in the fourth quarter of 2015, subject to required regulatory approvals.

Mortgage-backed securities decreased $7.7 million, or 6.6%, to $108.2 million at June 30, 2015 as compared with $115.9 million at December 31, 2014. Investment securities decreased $20.1 million, or 10.6%, to $169.7 million at June 30, 2015 as compared to $189.8 million at December 31, 2014. The decrease in mortgage-backed securities and investment securities was due to maintaining a higher liquidity position as well as investing excess funds in loans receivable.

Loans receivable, including loans held for sale, increased $23.1 million, or 6.3%, to $391.0 million at June 30, 2015 as compared with $367.9 million at December 31, 2014. We continue to maintain a diversified loan portfolio. The increase in net loan balances reflect the Company's continued loan origination efforts partially offset by loan sales activity. Loan originations during the first six months of 2015 totaled $66.1 million as compared to total loan originations during the six months ended June 30, 2014 of $45.4 million. We sold $4.6 million in newly originated fixed rate residential loans with terms exceeding 15 years during the six months ended June 30, 2015 compared to $3.4 million during the same period in 2014.

Deposit accounts increased $52.2 million, or 7.6%, to $741.4 million at June 30, 2015 from $689.2 million at December 31, 2014. Interest-bearing deposit accounts increased by $41.9 million, or 6.9%, to $645.4 million at June 30, 2015 from $603.5 million at December 31, 2014. Non-interest bearing deposit accounts increased $10.3 million, or 12.0%, to $96.0 million at June 30, 2015 from $85.7 million at December 31, 2014. The increase in deposit accounts was primarily a result of increases in both our retail deposits and municipal deposits offered through our limited purpose commercial banking subsidiary, State Bank of Chittenango. Retail deposits increased $23.3 million, or 4.5%, to $542.0 million at June 30, 2015 from $518.7 million at December 31, 2014. Municipal deposits increased $28.9 million, or 17.0%, to $199.4 million at June 30, 2015 from $170.5 million at December 31, 2014. The Bank believes the increase in municipal deposits is related to a continuing trend of local towns, villages, cities and school districts seeking a locally-based financial institution partner.

STOCKHOLDERS’ EQUITY. Total stockholders’ equity at June 30, 2015 was $96.4 million, an increase of $636,000, or 0.7%, from $95.8 million at December 31, 2014. The increase in stockholders’ equity was a result of net income of $2.4 million for the six months ended June 30, 2015. Offsetting this increase in stockholders' equity was a decrease resulting from the payment of a quarterly dividend during the first six months of 2015 totaling $0.24 per share as well as a decrease in accumulated other comprehensive income of $440,000 at June 30, 2015 as a result of a decrease in the fair value of mortgage-backed and investment securities reflecting the recent changes in interest rates.

Oneida Savings 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. Oneida Savings Bank also invests a significant portion of its assets in investment securities and mortgage-backed securities both of which have classifications of available-for-sale and held-to-maturity. Our results of operations depends primarily upon 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 or liabilities.

AVERAGE BALANCE SHEET. The following table sets forth certain information relating to our average balance sheet, average yields and costs, and certain other information for the three months and six months ended June 30, 2015 and 2014 and for the year ended December 31, 2014. 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 in thousands of dollars and rates. No tax equivalent adjustments were made. The average balance is computed based upon an average daily balance. Non-accrual loans and investments have been included in the average balances.



	Three Months Ended June 30,														Twelve Months Ended Dec. 31,
	2015							2014							2014
	Average Outstanding Balance		Interest Earned/Paid			Yield/Rate		Average Outstanding Balance		Interest Earned/Paid			Yield/Rate		Average Outstanding Balance		Interest Earned/Paid			Yield/Rate
	Average Outstanding Balance		Interest Earned/Paid			Yield/Rate		Average Outstanding Balance		Interest Earned/Paid			Yield/Rate		Average Outstanding Balance		Interest Earned/Paid			Yield/Rate
	(Dollars in thousands)
Assets
Interest-earning Assets:
Loans receivable	$	388,382	$	3,967		4.09	%	$	343,618	$	3,693		4.30	%	$	348,136	$	14,928		4.29	%
Investment and mortgage-backed securities	289,973		1,712			2.36	%	296,874		1,988			2.68	%	292,039		7,508			2.57	%
Federal funds	82,351		27			0.13	%	37,840		6			0.06	%	28,811		25			0.09	%
Equity securities	4,139		26			2.51	%	5,873		24			1.63	%	5,297		95			1.79	%
Total interest-earning assets	764,845		5,732			3.00	%	684,205		5,711			3.34	%	674,283		22,556			3.35	%
Non interest-earning Assets:
Cash and due from banks	13,612							15,435							14,905
Other assets	91,445							89,134							89,160
Total assets	$	869,902						$	788,774						$	778,348
Liabilities and Stockholders’ Equity
Interest-bearing Liabilities:
Money market deposits	$	291,037	$	167		0.23	%	$	233,467	$	216		0.37	%	$	222,110	$	783		0.35	%
Savings accounts	146,168		99			0.27	%	137,468		92			0.27	%	136,520		363			0.27	%
Interest-bearing checking	81,944		8			0.04	%	77,625		15			0.08	%	77,503		58			0.07	%
Time deposits	141,489		321			0.91	%	143,358		349			0.98	%	142,210		1,386			0.97	%
Borrowings	184		—			—		1,000		13			5.21	%	796		35			4.40	%
Notes payable	—		—			—		338		3			3.56	%	274		9			3.28	%
Total interest-bearing liabilities	660,822		595			0.36	%	593,256		688			0.47	%	579,413		2,634			0.45	%
Non-interest-bearing Liabilities:
Demand deposits	97,537							83,972							85,557
Other liabilities	12,546							17,764							19,064
Total liabilities	770,905							694,992							684,034
Stockholders’ equity	98,997							93,782							94,314
Total liabilities and stockholders’ equity	$	869,902						$	788,774						$	778,348
Net interest income			$	5,137						$	5,023						$	19,922
Net interest spread						2.64	%						2.87	%						2.90	%
Net earning assets	$	104,023						$	90,949						$	94,870
Net yield on average interest-earning assets			2.69		%					2.94		%					2.95		%
Average interest-earning assets to average interest-bearing liabilities			115.74		%					115.33		%					116.37		%



	Six Months Ended June 30,														Twelve Months Ended Dec. 31,
	2015							2014							2014
	Average Outstanding Balance		Interest Earned/Paid			Yield/Rate		Average Outstanding Balance		Interest Earned/Paid			Yield/Rate		Average Outstanding Balance		Interest Earned/Paid			Yield/Rate
	Average Outstanding Balance		Interest Earned/Paid			Yield/Rate		Average Outstanding Balance		Interest Earned/Paid			Yield/Rate		Average Outstanding Balance		Interest Earned/Paid			Yield/Rate
	(Dollars inThousands)
Assets
Interest-earning Assets:
Loans receivable	$	381,565	$	7,798		4.09	%	$	340,367	$	7,350		4.32	%	$	348,136	$	14,928		4.29	%
Investment and mortgage-backed securities	295,367		3,621			2.45	%	286,941		3,738			2.61	%	292,039		7,508			2.57	%
Federal funds	60,618		37			0.12	%	37,063		12			0.06	%	28,811		25			0.09	%
Equity securities	4,021		47			2.34	%	5,473		48			1.75	%	5,297		95			1.79	%
Total interest-earning assets	741,571		11,503			3.10	%	669,844		11,148			3.33	%	674,283		22,556			3.35	%
Non interest-earning Assets:
Cash and due from banks	13,802							15,740							14,905
Other assets	91,508							88,420							89,160
Total assets	$	846,881						$	774,004						$	778,348
Liabilities and Stockholders’ Equity
Interest-bearing Liabilities:
Money market deposits	$	268,859	$	334		0.25	%	$	221,541	$	400		0.36	%	$	222,110	$	783		0.35	%
Savings accounts	142,529		187			0.26	%	136,565		176			0.26	%	136,520		363			0.27	%
Interest-bearing checking	82,212		16			0.04	%	78,296		31			0.08	%	77,503		58			0.07	%
Time deposits	143,294		656			0.92	%	142,417		700			0.99	%	142,210		1,386			0.97	%
Borrowings	625		1			0.32	%	1,000		26			5.24	%	796		35			4.40	%
Notes payable	—		—			—		401		7			3.52	%	274		9			3.28	%
Total interest-bearing liabilities	637,519		1,194			0.38	%	580,220		1,340			0.47	%	579,413		2,634			0.45	%
Non-interest-bearing Liabilities:
Demand deposits	96,860							82,219							85,557
Other liabilities	14,555							18,967							19,064
Total liabilities	748,934							681,406							684,034
Stockholders’ equity	97,947							92,598							94,314
Total liabilities and stockholders’ equity	$	846,881						$	774,004						$	778,348
Net interest income			$	10,309						$	9,808						$	19,922
Net interest spread						2.72	%						2.86	%						2.90	%
Net earning assets	$	104,052						$	89,624						$	94,870
Net yield on average interest-earning assets			2.78		%					2.93		%					2.95		%
Average interest-earning assets to average interest-bearing liabilities			116.32		%					115.45		%					116.37		%

General. Net income for the three months ended June 30, 2015 was $473,000 compared to $1.4 million for the three months ended June 30, 2014. For the three months ended June 30, 2015, diluted net income per share was $0.07 as compared with diluted net income per share of $0.20 for the three months ended June 30, 2014. Net income for the six months ended June 30, 2015 was $2.4 million compared to $3.4 million for the six months ended June 30, 2014. The decrease in net income for the six month period is primarily the result of a decrease in the change in fair value of our equity investments and an increase in non-interest expenses; partially offset by an increase in net interest income, an increase in net gains on sales of securities, an increase in non-interest income and a decrease in income tax provision.

Interest and Dividend Income. Interest and dividend income increased by $21,000, or 0.4%, to $5.7 million for the three months ended June 30, 2015 from $5.7 million for the three months ended June 30, 2014. Interest and fees on loans increased by $274,000 for the three months ended June 30, 2015 as compared with the same period in 2014. Interest and dividend income on mortgage-backed and investment securities decreased $274,000 to $1.7 million for the three months ended June 30, 2015 from $2.0 million for the three months ended June 30, 2014. Interest income earned on federal funds sold increased to $27,000 for the three months ended June 30, 2015 as compared with $6,000 for the three months ended June 30, 2014.

For the six months ended June 30, 2015, interest and dividend income increased $355,000, or 3.2%, to $11.5 million from $11.1 million for the six months ended June 30, 2014. Interest and fees on loans increased by $448,000 for the six months ended June 30, 2015 compared with the same period in 2014. Interest and dividend income on mortgage-backed and investment securities decreased $118,000 for the six months ended June 30, 2015 as compared with the six months ended June 30, 2014.

For the three months ended June 30, 2015, the increase in income on loans resulted from an increase of $44.8 million in the average balance of loans to $388.4 million in the second quarter of 2015 from $343.6 million in the second quarter of 2014 partially offset by a decrease of 21 basis points in the average yield on loans to 4.09% from 4.30%. At June 30, 2015, net loans receivable, including loans held for sale, were $391.0 million as compared with $344.0 million at June 30, 2014; reflecting an increase of 13.7%. For the six months ended June 30, 2015, the increase in loan interest income resulted from an increase of $41.2 million in the average balance of loans to $381.6 million from $340.4 million for the six months ended June 30, 2014 partially offset by a decrease of 23 basis points in the average yield on loans to 4.09% from 4.32%. The decrease in the average yield on loans is a result of the continued low market interest rate environment resulting in lower yields earned on new loans and variable rate loans.

The decrease in interest income from investment and mortgage-backed securities was the result of a decrease of $6.9 million in the average balance of investment and mortgage-backed securities to $290.0 million in the second quarter of 2015 from $296.9 million in the second quarter of 2014 along with a decrease in the average yield earned to 2.36% from 2.68%. For the six months ended June 30, 2015, interest on investment and mortgage-backed securities decreased $117,000 as compared with the same period in 2014 due to a decrease in average yield of 16 basis points partially offset by an increase in the average balance of $8.5 million. The increase in the average balance of investment and mortgage-backed securities is primarily the result of the increase in pledged collateral needed to support the increase in municipal deposit activity.

Interest income on federal funds sold increased $21,000 as a result of an increase in the average balance of federal funds sold to $82.4 million during the second quarter of 2015 as compared with $37.8 million during the second quarter of 2014 along with an increase in average yield of 7 basis points. For the six months ended June 30, 2015, interest income on federal funds sold increased $25,000 due to an increase in the average balance of $23.5 million and an increase in the average yield of 6 basis points.

Dividends from equity securities increased $2,000 to $26,000 due to an increase in the average yield of 88 basis points partially offset by a decrease in the average balance to $4.1 million for the three months ended June 30, 2015 from $5.9 million for the three months ended June 30, 2014. For the six months ended June 30, 2015, dividend income on equity securities decreased $1,000 as compared with the same period in 2014 due to a decrease in the average balance of $1.5 million partially offset by an increase in the average yield of 59 basis points.

Interest Expense. Interest expense decreased $93,000, or 13.5%, to $595,000 for the three months ended June 30, 2015 from $688,000 for the three months ended June 30, 2014. The decrease in interest expense was primarily due to a decrease in interest paid on deposit accounts during the second quarter of 2015 of $77,000, to $595,000 from $672,000 during the second quarter of 2014 and no borrowing expense for the three months ended June 30, 2015 compared with $13,000 for the three months ended June 30, 2014. Interest expense decreased $146,000, or 10.9%, to $1.2 million for the six months ended June 30, 2015 from $1.3 million for the six months ended June 30, 2014.

The decrease in interest expense paid on deposits was primarily due to a decrease in the average rate paid on deposits. Core deposits, consisting of money market accounts, savings accounts and interest-bearing checking accounts, experienced an increase in the average balance of $70.5 million, or 15.7%, to $519.1 million at an average cost of 0.21% during the second quarter of 2015 from $448.6 million at an average cost of 0.29% during the second quarter of 2014. During the same period, the average balance of time deposits decreased $1.9 million, or 1.3%, to $141.5 million in the second quarter of 2015 from $143.4 million during the second quarter of 2014 in addition to a decrease in the average rate paid on time deposits of 7 basis points. For the six months ended June 30, 2015, the average cost of deposits was 0.38% as compared with 0.46% for the six month period in 2014. The average balance of deposits increased $58.1 million for the six months ended June 30, 2015 as compared with the six months ended June 30, 2014. Total deposits increased $52.2 million from December 31, 2014, representing an increase in retail deposits of $23.3 million and an increase of $28.9 million in municipal deposits. The increase in municipal deposits is related to a continuing trend of local towns, villages, cities and school districts seeking a locally-based financial institution partner.

The decrease in borrowing expense for the second quarter of 2015 as compared to the second quarter of 2014 was due to a decrease of 521 basis points in the average rate paid on borrowed funds as well as a decrease in the average balance of borrowings outstanding in the June 30, 2015 period to $184,000 as compared with $1.0 million during the June 30, 2014 period. For the six months ended June 30, 2015, interest expense on borrowings decreased $25,000 due to a decrease in the average outstanding balance of borrowings to $625,000 as compared to $1.0 million for the six month period 2014. The change in the average balance and rate of borrowings reflects usage of our overnight line of credit during 2015 compared to a long term FHLB advance that matured during 2014.

Provision for Loan Losses. During the three months and six months ending June 30, 2015, the Bank made no provision for loan loss. The total provision for loan losses was $100,000 and $200,000 for the three months and six months ended June 30, 2014, respectively. Oneida Savings 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 continues to monitor the adequacy of the allowance for loan losses given the risk assessment of the loan portfolio and current economic conditions making appropriate provisions for loan losses on a quarterly basis.

Loans individually evaluated for impairment totaled $1.8 million at June 30, 2015 and had an allocated allowance for loan loss reserve of $168,000. Loans individually evaluated for impairment totaled $1.4 million at June 30, 2014 and had an allocated allowance for loan loss reserve of $86,000. The increase in loans individually evaluated for impairment during 2015 was due to a commercial relationship that was considered a troubled debt restructuring during the second quarter of 2015. Nonperforming loans totaled $367,000, or 0.09% of total loans at June 30, 2015, compared with $523,000, or 0.15% of total loans at June 30, 2014. Net charge-off activity for the six months ended June 30, 2015 was $43,000 as compared with $37,000 in net charge-offs during the six months ended June 30, 2014. The balance of the allowance for loan losses was $3.5 million, or 0.88% of loans receivable at June 30, 2015, compared with $3.3 million, or 0.95% of loans receivable at June 30, 2014.

We have identified the preferred and common equity securities we hold in the investment portfolio as trading securities and as such the change in fair value of these securities is reflected as a non-cash adjustment through the income statement. For the three months ended June 30, 2015, the market value of our trading securities decreased $220,000 as compared with an increase of $13,000 in the 2014 period. For the six months ended June 30, 2015, the market value of our trading securities increased $22,000 as compared with an increase of $823,000 for the same period in 2014.

Revenue derived from commissions and fees on sales of non-banking products increased $491,000, or 7.6%, to $6.9 million during the three months ended June 30, 2015 as compared with $6.5 million during the three months ended June 30, 2014. Revenue derived from non-banking subsidiaries increased $577,000, or 4.3%, to $14.0 million for the six months ended June 30, 2015 as compared with $13.4 million for the six months ended June 30, 2014. The increase was primarily due to the continued efforts to increase new business as well as maintaining existing account relationships.

Excluding deposit account service fees, other operating income decreased $622,000, or 56.1%, to $486,000 for the three months ended June 30, 2015 as compared to $1.1 million during the three months ended June 30, 2014. For the six months ended June 30, 2015, other operating income, excluding deposit account service fees, decreased $277,000, or 17.9%, to $1.3 million as compared to $1.5 million for the same period in 2014. The decrease for both the three months and six months from the prior year was primarily the result of the receipt during the second quarter of 2014 of $614,000 from the proceeds of a bank-owned like

Mortgage loan sale and servicing income decreased $17,000 to $231,000 for the six months ended June 30, 2015 as compared with $248,000 for the six months ended June 30, 2014. The Bank sells substantially all of its newly originated fixed-rate residential mortgage loans with maturities exceeding 15 years on a servicing retained basis in the secondary market. These loan sales help the bank provide its customers with a fixed rate loan product while controlling interest rate risk.

Non-Interest Expense. Non-interest expense increased by $1.1 million, or 9.3%, to $12.4 million for the three months ended June 30, 2015 from $11.3 million for the three months ended June 30, 2014. For the six months ended June 30, 2015, non-interest expense increased $1.6 million, or 7.2%, to $23.8 million as compared with $22.2 million for the same period in 2014. Excluding merger related expenses, non-interest expense increased $278,000, or 1.3%, to $22.5 million for the six months ended June 30, 2015 as compared with $22.2 million for the same period in 2014. The increase in non-interest expense excluding merger related expenses was primarily due to an increase in compensation and employee benefits combined with operating expenses associated with the increase in sales of insurance and other non-banking products through our subsidiaries.

Salaries, wages and other compensation paid to the employees of Oneida Financial Corp. during the three months ended June 30, 2015 was $7.1 million; a decrease of $205,000, or 2.8%, from the second quarter of 2014. Compensation expense for the six months ended June 30, 2015 was $14.6 million; an increase of $84,000, or 0.6%, as compared with compensation expense of $14.5 million for the same period in 2014. The increase in compensation expense was primarily the result of the increase in sales of insurance and other non-banking products through our subsidiaries resulting in an increase in commissions paid and employee benefit expense.

Other operating expenses increased $118,000, or 4.5%, to $2.8 million for the three months ended June 30, 2015 as compared to $2.6 million during the three months ended June 30, 2014. For the six months ended June 30, 2015, other operating expenses increased $314,000, or 6.3%, to $5.3 million as compared with $5.0 million for the same period in 2014. The increase in other operating expenses was primarily the result of an increase in consulting and related expenses associated with the sales of insurance and other non-banking products through our subsidiaries.

Provision for Income Taxes. Provision for income taxes was $298,000 for the three months ended June 30, 2015, a decrease of $210,000 from the second quarter 2014 income tax provision of $508,000. For the six months ended June 30, 2015, the provision for income taxes was $961,000, a decrease of $267,000 from $1.2 million for the same period in 2014. The effective tax rate was 28.2% during the first six months of 2015 as compared with an effective tax rate of 26.7% for the same time period in 2014. The increase in the effective tax rates for both the quarter and year-to date 2015 as compared to the same period in 2014 was due to changes in the Bank’s tax exempt and tax preferred investment income and the overall tax rate in effect for the year.

Liquidity and Capital Resources. Our primary source 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 borrowings when and 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.

Our primary investing activities are the origination of residential mortgages, commercial loans and consumer loans, as well as the purchase of mortgage-backed and other debt securities. During the second quarter of 2015, loan originations totaled $33.7 million compared to $24.5 million during the second quarter of 2014. The purchases of securities available-for-sale totaled $7.0 million during the second quarter of 2015 as compared to $19.5 million during the second quarter of 2014. The purchases of investment securities were funded with cash and cash equivalents.

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. If Oneida Savings Bank requires funds beyond its ability to generate them internally, it has the ability to borrow funds from the FHLB. Oneida Savings 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

In the normal course of business, the Company extends commitments to originate residential and commercial loans and other consumer loans. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since the Company does not expect all of the commitments to be funded, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. Collateral may be obtained based upon management’s assessment of the customer’s creditworthiness. Commitments to extend credit may be written on a fixed rate basis exposing the Company to interest rate risk given the possibility that market rates may change between the commitment date and the actual extension of credit. As of June 30, 2015, the Company had outstanding commitments to originate loans of approximately $26.9 million, which generally have an expiration period of less than 120 days. Commitments to sell residential mortgages amounted to $75,000 at June 30, 2015 for loan closings pending and are to be delivered on a best effort basis.

The Company extends credit to consumer and commercial customers, up to a specified amount, through lines of credit. The borrower is able to draw on these lines as needed, thus the funding requirements are generally unpredictable. Unused lines of credit amounted to $58.1 million at June 30, 2015 and generally have an expiration period of less than one year. It is anticipated that there will be sufficient funds available to meet the current loan commitments and other obligations through the sources described above. The credit risk involved in issuing these commitments is essentially the same as that involved in extending loans to customers and is limited to the contractual notional amount of those instruments.

Cash, interest-earning demand accounts at correspondent banks, federal funds sold, and other short-term investments are the Company’s most liquid assets. The level of these assets are monitored daily and are dependent on operating, financing, lending and investing activities during any given period. Excess short-term liquidity is usually invested in overnight federal funds sold. In the event that funds beyond those generated internally are required due to higher expected loan commitment fundings, deposit outflows or the amount of debt being called, additional sources of funds are available through the use of repurchase agreements, the sale of loans or investments or the Company’s various lines of credit. As of June 30, 2015, the total of cash, interest-earning demand accounts and federal funds sold was $84.4 million.

On July 2, 2013, the Federal Reserve Board and FDIC approved final rules implementing changes to the regulatory capital framework for financial institutions. The final rules, which are subject to a multi-year phase-in period, began for the Bank on January 1, 2015. Under the final rules, minimum requirements increased for both the quantity and quality of capital held by the Bank. The final rules include a new minimum common equity Tier 1 capital to risk-weighted assets (CET) ratio of 4.5%, in addition to raising the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and requiring a minimum leverage ratio of 4.0%. The final rules also established a new capital conservation buffer of 2.5% of risk-weighted assets, which is phased-in over a four-year period beginning January 1, 2016.



	Actual				For Capital Adequacy Purposes				Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of June 30, 2015:
Total Capital
(to Risk Weighted Assets)	$	76,582	15.87	%	$	38,606	8	%	$	48,258	10	%
Tier I Capital
(to Risk Weighted Assets)	$	73,123	15.15	%	$	28,955	6	%	$	38,606	8	%
CET Risk-based Capital
(to Risk Weighted Assets)	$	73,123	15.15	%	$	21,716	4.5	%	$	31,368	6.5	%
Tier I Capital
(to Average Assets)	$	73,123	8.66	%	$	33,774	4	%	$	42,218	5	%



	Actual				For Capital Adequacy Purposes				Capitalized Under Prompt Corrective Action Provisions


	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of December 31, 2014:
Total Capital
(to Risk Weighted Assets)	$	75,363	16.54	%	$	36,456	8	%	$	45,570	10	%
Tier I Capital
(to Risk Weighted Assets)	$	71,861	15.77	%	$	18,228	4	%	$	27,342	6	%
Tier I Capital
(to Average Assets)	$	71,861	9.36	%	$	30,720	4	%	$	38,400	5	%



	Three Months Ending June 30,				Six Months Ending June 30,
	2015		2014		2015		2014
Performance Ratios:
Return on average assets	0.22	%	0.72	%	0.58	%	0.87	%
Return on average equity	1.91	%	6.09	%	4.99	%	7.29	%
Return on average tangible equity	2.60	%	8.49	%	6.82	%	10.21	%
Interest rate spread	2.64	%	2.87	%	2.72	%	2.86	%
Net interest margin	2.69	%	2.94	%	2.78	%	2.93	%
Efficiency ratio	92.67	%	84.44	%	87.81	%	84.49	%
Non-interest income to average total assets	3.74	%	4.20	%	3.93	%	4.22	%
Non-interest expense to average total assets	5.68	%	5.73	%	5.61	%	5.75	%
Average interest-earning assets as a ratio to average interest-bearing liabilities	115.74	%	115.33	%	116.32	%	115.45	%
Asset Quality Ratios:
Non-performing assets to total assets	0.05	%	0.08	%	0.05	%	0.08	%
Non-performing loans to total loans	0.09	%	0.15	%	0.09	%	0.15	%
Net charge-offs to average loans	0.01	%	0.01	%	0.01	%	0.01	%
Allowance for loan losses to non-performing loans	942.51	%	625.81	%	942.51	%	625.81	%
Allowance for loan losses to loans receivable	0.88	%	0.95	%	0.88	%	0.95	%
Capital Ratios:
Average equity to average total assets	11.38	%	11.89	%	11.57	%	11.96	%
Equity to total assets (end of period)	11.35	%	12.18	%	11.35	%	12.18	%
Tangible equity to tangible assets (end of period)	8.53	%	9.09	%	8.53	%	9.09	%

Various forms of market risk are inherent in the business of the Bank including concentration risk, liquidity management, credit risk and collateral risk among others. However, the Bank’s most significant form of market risk is interest rate risk, as the majority of the Bank’s assets and liabilities are sensitive to changes in interest rates. Ongoing monitoring and management of this risk is an important component of the Company’s asset and liability management process. The Bank’s interest rate risk management program focuses primarily on evaluating and managing the composition of the Bank’s assets and liabilities in the context of various interest rate scenarios. Factors beyond Management’s control, such as market interest rates and competition, also have an impact on interest income and expense. Based on the asset-liability composition at June 30, 2015, in a rising interest rate environment, Management would expect that the Company’s cost of shorter-term deposits might rise faster than its earnings on longer-term loans and investments. At June 30, 2015, the Bank had $96.8 million in time deposits scheduled to mature within one year. At that date, the average maturity of our investment portfolio was 4.7 years, and fixed rate residential mortgage loans totaled $72.3 million representing 19.1% of our loan portfolio. Conversely, as interest rates decrease, the prepayment of principal on loans and investments tends to increase, causing the Company to invest funds in a lower rate environment. To mitigate the effect of interest rate changes, Management has taken steps to emphasize core deposits, monitor certificate of deposit rates to better match asset changes, and sell substantially all newly originated longer term fixed rate loans in the secondary market without recourse. Management believes this approach will help reduce the exposure to interest rate fluctuations and enhance long-term profitability.

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

On March 12, 2015, John Solak (the "Second Plaintiff") filed a stockholder class action lawsuit in the Supreme Court of the State of New York, County of Oneida, against the Company, the directors of the Company and Community Bank System, Inc. Similar to the Plaintiff's lawsuit, the Second Plaintiff’s lawsuit purports to be brought on behalf of all of the Company’s public stockholders, excluding the directors of the Company. The complaint alleges that the directors of the Company breached their fiduciary duties to the stockholders by failing to take adequate steps to ensure that the Company’s stockholders receive adequate, fair and maximum consideration under the circumstances and by engineering the merger to the benefit of themselves and/or Community Bank System, Inc. without regard to the Company’s stockholders. The complaint further alleges that Community Bank System, Inc. aided and abetted the alleged breaches of fiduciary duty by the Company’s directors. The lawsuit seeks to enjoin the proposed merger from proceeding and seeks unspecified compensatory damages on behalf of the Company’s stockholders and/or rescission of the proposed merger transaction.

On June 9, 2015, the Company, Community Bank System, Inc, and the other defendants entered into a memorandum of understanding (the “MOU”) with the Plaintiff, Second Plaintiff and Third Plaintiff regarding the settlement of the lawsuits. Pursuant to the MOU, the Company agreed to provide additional information to Oneida Financial Corp. stockholders in the Proxy Statement/Prospectus of Oneida Financial Corp. and Community Bank System, Inc. dated May 6, 2015 (the “Proxy Statement/Prospectus”). The Company, Community Bank System, Inc. and the other defendants deny all of the allegations in the lawsuits. The Company, Community Bank System, Inc. and the individual director defendants believe the disclosures in the Proxy Statement/Prospectus were adequate under the law. Nevertheless, the Company, Community Bank System, Inc. and the other defendants have agreed to settle the lawsuits in order to avoid the costs, disruption, and distraction of further litigation. Any costs associated with settling the lawsuits was paid by the Company’s insurance carrier and the Company did not incur a loss on the settlement.

Exhibit 101 - The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Condition, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statement of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements tagged as blocks of text and in detail.



Maryland	80-0632920
(State or other jurisdiction of	(IRS Employer)
incorporation or organization)	Identification Number)



Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x



		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Consolidated Statements of Condition (unaudited) At June 30, 2015 and December 31, 2014	2

	Consolidated Statements of Operations (unaudited) For the three and six months ended June 30, 2015 and 2014	3

	Consolidated Statements of Comprehensive Income (Loss) (unaudited) For the three and six months ended June 30, 2015 and 2014	4

	Consolidated Statement of Changes in Stockholders’ Equity (unaudited) For the six months ended June 30, 2015	5

	Consolidated Statements of Cash Flows (unaudited) For the six months ended June 30, 2015 and 2014	6

	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition And Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42

Item 4.	Controls and Procedures	43

PART II.	OTHER INFORMATION	44

Item 1.	Legal Proceedings	44

Item 1a.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	45

	Signatures	46



	June 30, 2015
	Not Rated		Pass		Special Mention		Substandard		Doubtful
	Not Rated		Pass		Special Mention		Substandard		Doubtful
	(In thousands)
Commercial loans	$	14,054	$	40,731	$	492	$	1,768	$	—
Commercial real estate	16,898		73,682		1,523		3,856		—
Total	$	30,952	$	114,413	$	2,015	$	5,624	$	—



	December 31, 2014
	Not Rated		Pass		Special Mention		Substandard		Doubtful
	Not Rated		Pass		Special Mention		Substandard		Doubtful
	(In thousands)
Commercial loans	$	13,592	$	35,546	$	191	$	4,340	$	—
Commercial real estate	14,956		72,938		4,436		1,097		—
Total	$	28,548	$	108,484	$	4,627	$	5,437	$	—



	June 30, 2015
	Nonaccrual		Loans Past Due Over 90 days still Accruing
	Nonaccrual		Loans Past Due Over 90 days still Accruing
	(In thousands)
Commercial loans	$	35	$	—
Commercial real estate	—		—
Consumer loans	—		—
Home equity	4		—
Residential mortgages	328		—
Total	$	367	$	—



	2015		2014
Risk-free interest rate	0.00	%	1.50	%
Expected term	0.24 years		3.12 years
Expected stock price volatility	28.31	%	22.85	%
Dividend yield	4.66	%	4.66	%



	2015			2014
Intrinsic value of options exercised	$	144,025		$	10,835
Cash received from option exercises	169,178			56,650
Tax benefit realized from option exercises	(185		)	—
Weighted average fair value of options granted	0.9728			1.3039



Nonvested Shares	Shares	Weighted Average Grant Date Fair Value
Nonvested Shares	Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2015	78,000	$	10.46
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at June 30, 2015	78,000	$	10.46



		ONEIDA FINANCIAL CORP.
Date:	August 12, 2015	By:	/s/ Eric E. Stickels
		Eric E. Stickels
		President and Chief Operating Officer
Date:	August 12, 2015	By:	/s/ Deresa F. Durkee
		Deresa F. Durkee
		Senior Vice President and Chief Financial Officer