Oneida Financial Corp. Reports 2006 First Quarter Operating Results (unaudited)

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    ONEIDA, N.Y., April 21 - Oneida Financial Corp. (Nasdaq: ONFC), the parent company of The Oneida Savings Bank, has announced first quarter operating results. Net income for the three months ending March 31, 2006 was $928,000, or $0.12 basic earnings per share compared to $975,000, or $0.13 basic earnings per share, for the three months ended March 31, 2005. The decrease in net income was primarily reflects of a decrease in net interest income and an increase in non-interest expenses, partially offset by an increase in non-interest income and a decrease in provision for taxes.

    Total assets increased $3.5 million or 0.8%, to $425.9 million at March 31, 2006 from $422.4 million at March 31, 2005. The increase in total assets is primarily due to an increase in loans receivable partially offset by decreases in investment and mortgage-backed securities. Loans receivable increased $20.1 million or 9.3% at March 31, 2006 as compared with March 31, 2005, after recording the sale of $16.2 million in fixed rate one-to-four family residential real estate loans sold during the intervening twelve month period. Investment and mortgage-backed securities decreased $25.2 million to $127.4 million at March 31, 2006 from $152.6 million at March 31, 2005. Cash and cash equivalents increased to $12.4 million at March 31, 2006 as compared with $10.6 million at March 31, 2005. The increase in cash and cash equivalents was supported by a $1.3 million or 0.4% increase in total deposits at March 31, 2006 compared with March 31, 2005. Premises and equipment also increased $4.1 million from March 31, 2005 to March 31, 2006 as a result of the construction of two banking offices replacing outdated facilities in Oneida and Chittenango, New York. In addition, the Company is constructing a 15,000 square foot insurance office located in Clay, New York which will replace three leased office locations. The Company also began construction of a new banking, insurance and retail center at the Griffiss Business and Technology Park in Rome, New York which is expected to be completed during the fourth quarter of 2006.

    Michael R. Kallet, President and Chief Executive Officer of Oneida Financial Corp., said, "Oneida Financial Corp. is pleased with our first quarter results in a challenging interest rate environment. Although a flattened treasury yield curve has resulted in a reduced level of net interest income and margin compression, the diversification of our business model has resulted in additional sources and volume of non-interest income. We maintain a positive outlook for 2006." During the first quarter of 2006 insurance commission income and deposit account fee revenue each increased 13.0%. Kallet continued, "The Company remains focused on growing our traditional banking franchise, Oneida Savings Bank, and our other financial services businesses through our insurance subsidiary, the Bailey Haskell & LaLonde Agency. We completed the acquisition of the Parsons & Cote insurance agency during the first quarter of 2006 and recently announced the development of a banking, insurance and retail center at the Griffiss Business and Technology Park in Rome, New York and the early 2006 planned acquisition of Benefits Consulting Group, located in Syracuse, New York." Kallet concluded, "The diversification Oneida Financial Corp. has achieved will allow the Company to maintain its leadership position and financial performance record."

    Net interest income decreased for the first quarter of 2006 to $3.2 million compared with $3.3 million for the first quarter of 2005. The decrease in net interest income primarily is due to a decrease in the net interest margin earned which was 3.40% for the three months ending March 31, 2006 as compared with 3.58% for the same period in 2005.

    Interest income was $5.3 million for the first quarter of 2006; an increase of 5.2% as compared with the same period in 2005 at $5.1 million. This increase in interest income during the three months ended March 31, 2006 resulted primarily from an increase in the average balances of interest- earning assets during the current period and an increase in the yield of 24 basis points on interest earning assets, given the increase in short-term market interest rates during the past twelve month period.

    Total interest expense increased to $2.2 million for the three months ended March 31, 2006. This is compared with interest expense of $1.8 million during the same 2005 period. The increase for the three months ended March 31, 2006 was due to an increase in the cost of interest-bearing liabilities of 49 basis points as well as an increase in the average balance of interest- bearing deposit accounts. Borrowed funds outstanding were $63.4 million at March 31, 2006, compared with $64.4 million in borrowings outstanding at March 31, 2005. Interest expense on deposits increased 29.0% during the first quarter of 2006 to $1.3 million as compared with the same period of 2005.

    Non-interest income was $3.4 million during the first quarter of 2006 compared with $2.9 million for the same 2005 period. The increase in non- interest income was primarily due to a $277,000 or 13.0% increase in commissions earned on the sale of financial products through the Company's insurance subsidiary for the three months ended March 31, 2006 as compared with the same period during 2005. In addition, service charges on deposit accounts increased $62,000 or 13.0% during the first quarter of 2006 as compared with the first quarter of 2005.

    Non-interest expense was $5.3 million for the three months ended March 31, 2006 compared with $4.9 million for the three months ended March 31, 2005. The increase in non-interest expense is primarily the result of operating expenses incurred associated with our insurance agency business and an increase in equipment expenses associated with the completion of two new banking facilities in Oneida and Chittenango, New York. Provisions for possible loan losses during first quarter of 2006 and 2005 totaled $80,000 respectively during both periods. The Company continues to monitor the adequacy of the allowance for loan losses given the risk assessment of the loan portfolio and current economic conditions. The ratio of the loan loss allowance to loans receivable is 0.88% at March 31, 2006 compared with a ratio of 0.92% at March 31, 2005.

    Stockholders' equity was $54.3 million, or 12.8% of assets at March 31, 2006 compared with $51.7 million, or 12.2% of assets, at March 31, 2005. The increase in stockholders' equity was primarily a result of valuation adjustments made for the Company's available for sale investment and mortgage- backed securities as well as the contribution of net earnings for the trailing twelve month period. In addition, stockholders' equity was reduced by management efforts to manage the Company's capital through the payment of cash dividends.

    This release may contain certain forward-looking statements, which are based on management's current expectations regarding economic, legislative, and regulatory issues that may impact the Company's earnings in future periods. Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products, and services.

    All financial information provided at and for the quarters ended March 31, 2006 and March 31, 2005 is unaudited. Selected financial ratios have been annualized where appropriate. Operating data is presented in thousands of dollars, except for per share amounts.

     At and for the At and for the

    Selected Financial Ratios Three Months Twelve months

    (unaudited) Ended Mar 31, Ended Dec 31,

     2006 2005 2005 2004

    Return on Average Assets 0.86% 0.92% 0.89% 0.77%

    Return on Average Equity 6.92% 7.39% 7.30% 6.49%

    Net Interest Margin 3.40% 3.58% 3.50% 3.40%

    Non-Performing Assets to

     Total Assets (end of period) 0.03% 0.12% 0.05% 0.14%

    Allowance for Loan Losses to

     Loans Receivable, net 0.88% 0.92% 0.83% 0.94%

    Average Equity to Average

     Assets 12.42% 12.43% 12.21% 11.84%

     At At % At At

    Selected Financial Data Mar 31, Mar 31, Change Mar 31, Dec 31,

    (in thousands except per 2006 2005 '06 vs '05 2004 2005

     share data) (unaudited)(unaudited) (unaudited) (audited)

    Total Assets $425,893 $422,447 0.8% $426,668 $436,761

    Loans receivable, net 234,998 214,913 9.3% 200,382 236,077

    Mortgage-backed securities 28,792 44,114 (34.7%) 49,810 29,097

    Investment securities 98,598 108,498 (9.1%) 116,971 106,432

    Goodwill and other

     intangibles 14,979 13,241 13.1% 12,703 14,364

    Interest bearing deposits 254,528 254,019 0.2% 256,662 250,142

    Non-interest bearing

     deposits 50,273 49,507 1.5% 49,367 51,044

    Borrowings 63,400 64,400 (1.6%) 64,900 77,270

    Stockholders' Equity 54,327 51,701 5.1% 51,786 53,588

    Book value per share

     (end of period) $7.12 $6.82 4.4% $6.95 $7.03

    Tangible value per share

     (end of period) $5.16 $5.10 1.2% $5.24 $5.15

    Selected Operating Data Three Months Ended % Year Ended

    (in thousands except per Mar 31, Mar 31, Change Dec 31,

     share data) 2006 2005 '06 vs '05 2005

     (unaudited)(unaudited) (audited)

    Interest income:

     Interest and fees on loans $3,805 $3,332 14.2% $14,197

     Interest and dividends

     on investments 1,527 1,734 (11.9%) 6,766

     Interest on fed funds 13 15 (13.3%) 49

     Total interest income 5,345 5,081 5.2% 21,012

    Interest expense:

     Interest on deposits 1,303 1,010 29.0% 4,546

     Interest on borrowings 854 741 15.2% 3,141

     Total interest expense 2,157 1,751 23.2% 7,687

    Net interest income 3,188 3,330 (4.3%) 13,325

     Provision for loan losses 80 80 - 360

    Net interest income after

     provision for loan losses 3,108 3,250 (4.4%) 12,965

    Other income:

     Net investment gains 31 3 933.3% 275

     Service charges on deposit

     accts 539 477 13.0% 2,145

     Commissions earned on

     sale of financial products 2,406 2,129 13.0% 8,163

     Other revenue from operations 448 324 38.3% 1,309

     Total non-interest income 3,424 2,933 16.7% 11,892

    Other expense:

     Salaries and employee benefits 3,374 3,111 8.5% 12,413

     Equipment and net occupancy 885 805 9.9% 3,315

     Intangible amortization 32 28 14.3% 113

     Other costs of operations 1,005 928 8.3% 3,768

     Total non-interest expense 5,296 4,872 8.7% 19,609

    Income before income taxes 1,236 1,311 (5.7%) 5,248

    Income tax provision 308 336 (8.3%) 1,390

    Net income $928 $975 (4.8%) $3,858

    Net income per common share

     (EPS - Basic) $0.12 $0.13 (7.7%) $0.51

    Net income per common share

     (EPS - Diluted) $0.12 $0.13 (7.7%) $0.50
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