<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20429
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ______________ to ________________
Commission File number 000-25267
Oconee Financial Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2442250
- ----------------------- -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
35 North Main Street
Watkinsville, Georgia 30677
- ---------------------- -----------
(Address of principal (Zip Code)
executive offices)
706-769-6611
-----------------
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subjected to such filing requirements for the past 90
days.
YES /XX/ NO / /
Common stock, par value $10 per share: 180,000 shares
outstanding as of May 10, 1999<PAGE>
<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) at March 31, 1999 3
Consolidated Statements of Earnings (unaudited) for the Three
Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Comprehensive Income (unaudited)
for the Three Months Ended March 31, 1999 and 1998 5
Consolidated Statements of Cash Flows (unaudited) for the Three
Months Ended March 31, 1999 and 1998 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheet
March 31, 1999
(Unaudited)
Assets
------
<S> <C>
Cash and due from banks $ 3,689,066
Federal funds sold 5,330,000
Investment securities held to maturity
(approximate market value of $16,888,339) 16,265,242
Investment securities available for sale
(amortized cost of $ 18,812,234) 18,708,027
Mortgage loans held for sale 1,384,539
Loans 80,022,202
Less: Allowance for loan losses (1,439,939)
--------------
Loans, net 78,582,263
--------------
Premises and equipment, net 1,463,469
Accrued interest receivable and other 2,652,333
--------------
Total Assets $ 128,074,939
==============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits:
Noninterest-bearing $ 17,481,014
Interest-bearing 96,484,572
--------------
Total Deposits 113,965,586
Securities sold under repurchase agreements 735,972
Accrued interest payable and other liabilities 506,057
--------------
Total Liabilities 115,207,615
Stockholders' equity:
Common stock, $10 par value;
authorized 300,000 shares;
issued and outstanding 180,000 shares 1,800,000
Additional paid-in capital 4,250,000
Retained earnings 6,881,975
Unrealized gain (loss) on investment securities, net of tax (64,651)
--------------
Total stockholders' equity 12,867,324
--------------
Total liabilities and stockholders' equity $ 128,074,939
==============
</TABLE>
See accompanying notes to financial statements.
-3-<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
For Each of the Three Months Ended March 31, 1999 and 1998
(Unaudited)
1999 1998
<S> <C> <C>
Interest Income:
Loans $ 1,864,910 $ 1,898,772
Investment securities:
Tax exempt 202,998 169,797
Taxable 291,789 257,482
Federal funds sold and other 93,860 62,511
------------ -------------
Total interest income 2,453,557 2,388,562
------------ -------------
Interest Expense:
Deposits 984,959 982,354
Other 5,809 3,536
------------ -------------
Total interest expense 990,768 985,890
------------ -------------
Net interest income 1,462,789 1,402,672
Provision for loan losses 12,600 15,180
------------ -------------
Net interest income after provision for loan losses 1,450,189 1,387,492
------------ -------------
Other Income:
Service charges on deposit accounts 173,631 166,460
Securities gains (losses), net 8,838 1,900
Other operating income 85,550 164,229
------------ -------------
Total other income 268,019 332,589
------------ -------------
Other Expense:
Salaries and other personnel expense 632,723 610,883
Net occupancy and equipment expense 139,683 125,890
Other operating expense 254,007 276,471
------------ -------------
Total other expense 1,026,413 1,013,244
------------ -------------
Earnings before income taxes 691,795 706,837
Income taxes 208,232 204,825
------------ -------------
Net earnings $ 483,563 $ 502,012
============ =============
Earnings per common share based on average outstanding
shares of 180,000 in 1997 and 1996: $ 2.69 $ 2.79
============ =============
</TABLE>
See accompanying notes to financial statements.
-4-<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
1999 1998
---------- ----------
<S> <C> <C>
Net earnings $ 483,563 502,012
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Holding gains (losses) arising during period, net of tax
of ($86,832) and $7,899 (141,915) 12,908
Reclassification adjustments for (gains) losses included
in net earnings, net of tax of $3,358 and $722 5,480 (1,178)
---------- ----------
Total other compressive income (loss) (136,435) 11,730
---------- ----------
Comprehensive income $ 347,128 513,742
========== ==========
</TABLE>
See accompanying notes to financial statements.
-5-<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
For Each of the Three Months Ended March 31, 1999 and 1998
(Unaudited)
1999 1998
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 483,563 $ 502,012
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Provision for loan losses 12,600 15,180
Depreciation, amortization and accretion 61,374 55,751
Change in assets and liabilities:
Interest receivable and other assets (247,159) (545,227)
Interest payable and other liabilities (877,239) (126,646)
Mortgage loans held for sale 327,761 (1,065,622)
--------------- ---------------
Net cash used by operating activities (239,100) (1,164,552)
--------------- ---------------
Cash flows from investing activities:
Proceeds from maturities and paydowns of
investment securities held to maturity 496,162 95,000
Proceeds from maturities and paydowns of
investment securities available for sale 1,667,057 2,369,047
Purchases of investment securities held to maturity (1,458,433) (265,223)
Purchases of investment securities available for sale (507,188) 0
Net changes in loans (3,242,396) (2,219,216)
Purchases of premises and equipment (26,072) (60,165)
--------------- ---------------
Net cash used by investing activities (3,070,870) (80,557)
--------------- ---------------
Cash flows from financing activities:
Net change in deposits (2,154,607) (1,867,866)
Repayments of long-term debt 177,803 (13,961)
--------------- ---------------
Net cash provided by financing activities (1,976,804) (1,881,827)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (5,286,774) (3,126,936)
Cash and cash equivalents at beginning of period 14,305,840 12,180,521
--------------- ---------------
Cash and cash equivalents at end of period $ 9,019,066 $ 9,053,585
=============== ===============
Supplemental cash flow information:
Cash paid for interest $ 650,765 $ 599,894
</TABLE>
See accompanying notes to financial statements.
-6-<PAGE>
<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
---------------------
The financial statements include the accounts of Oconee Financial
Corporation (the Corporation) and its wholly-owned subsidiary,
Oconee State Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The consolidated financial information furnished herein reflects
all adjustments which are, in the opinion of management,
necessary to present a fair statement of the results of
operations and financial position for the periods covered herein.
All such adjustments are of a normal recurring nature.
(2) Cash and Cash Equivalents
-------------------------
For presentation in the financial statements, cash and cash
equivalents include cash on hand, amounts due from banks and
federal funds sold.
(3) Comprehensive Income
--------------------
In 1997, the Financial Accounting and Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130"). SFAS 130 established
standards for the reporting and display of comprehensive income
and its components in a full set of general-purpose financial
statements. The Bank has elected to present comprehensive income
in a separate statement of comprehensive income. Accumulated
other comprehensive income is solely related to the net of tax
effect of unrealized gains on securities available for sale.
(4) Holding Company Formation
-------------------------
On December 15, 1998, the Bank's shareholders approved a Plan of
Reorganization and Agreement of Merger (the "Plan"), providing
for the merger of Oconee Interim Corporation, a wholly-owned
subsidiary of Oconee Financial Corporation, with and into the
Bank. The Plan called for stockholders to exchange each share of
Bank stock for one share of Oconee Financial Corporation stock.
The effective date of the Plan was
January 1, 1999, and is being accounted for in a manner similar
to a pooling of interests.
-7-<PAGE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Each of the Three Months in the Periods Ended
March 31, 1999 and 1998
FORWARD-LOOKING STATEMENT
This discussion contains forward-looking statements under the
private Securities Litigation Reform Act of 1995 that involve risk and
uncertainties. Although the Corporation believes that the assumptions
underlying the forward-looking statements contained in the discussion
are reasonable, any of the assumptions could be inaccurate, and
therefore, no assurance can be made that any of the forward-looking
statements included in this discussion will be accurate. Factors that
could cause actual results to differ from results discussed in
forward-looking statements include, but are not limited to: economic
conditions (both generally and in the markets where the Corporation
operates); competition from other providers of financial services
offered by the Corporation; government regulations and legislation;
changes in interest rates; material unforeseen changes in the
financial stability and liquidity of the Corporation's credit
customers; material unforeseen complications related to the Year 2000
issues for the Corporation, its suppliers, customers and governmental
agencies, all of which are difficult to predict and which may be
beyond the control of the Corporation. The Corporation undertakes no
obligation to revise forward-looking statements to reflect events or
changes after the date of this discussion or to reflect the occurrence
of unanticipated events.
FINANCIAL CONDITION
Total assets at March 31, 1999 were $128,074,939, representing a
$2,484,903 (1.90%) decrease from December 31, 1998. Deposits
decreased $2,154,602 (1.86%) from December 31, 1998. Loans increased
$4,626,857 (6.03%). The allowance for loan losses at March 31, 1999
totaled $1,439,939 compared to the December 31, 1998 total of
$1,427,420, representing 1.77% of total loans at March 31, 1999,
compared to 1.86% at December 31, 1998. Cash and cash equivalents
decreased $5,274,603 from December 31, 1998.
The total of nonperforming assets, which includes nonaccruing
loans, other real estate owned, repossessed collateral and loans for
which payments are more than 90 days past due were $70,572 at March
31, 1999, representing a decrease of $122,010 (63.35%) from December
31, 1998. There were no related party loans which were considered
nonperforming at March 31, 1999.
The Corporation's subsidiary bank was most recently examined by
its primary regulatory authority in March 1998. There were no
recommendations by the regulatory authority that in management's
opinion will have material effects on the Company's liquidity, capital
resources or operations.
-8-<PAGE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
For the Three Months in the Period Ended
March 31, 1999 and 1998
RESULTS OF OPERATIONS
Net interest income increased $51,279 (3.66%) in the first three
months of 1999 compared to the same period for 1998. Interest income
for the first three months of 1999 was $2,444,719, representing an
increase of $56,157 (2.35%) over the same period in 1998. Interest
expense for the first three months of 1999 increased $4,878 (0.49%)
compared to the same period in 1998. The increase in net interest
income during the first six months of 1998 compared to the same
period in 1997 is primarily attributable to the increase in the
volume of loans.
The provision for loan losses for the first six months of 1999
decreased $2,580 compared to the same period for 1998. It is
management's belief that the allowance for loan losses is adequate to
absorb possible losses in the portfolio.
Other expenses for the first three months of 1999 increased
$87,608 (8.65%) compared to the first three months in 1998. The net
increase is primarily attributable to additional salary and benefits
expense.
YEAR 2000 PREPAREDNESS
Generally, the year 2000 risk involves computer programs and
computer hardware that are not able to perform without interruption
into the year 2000. The arrival of the year 2000 poses a unique
worldwide challenge to the ability of all systems to correctly
recognize the date change from December 31, 1999 to January 1, 2000.
If Oconee's systems do not correctly recognize such a date change,
computer applications that rely on the date field could fail or create
erroneous results. Such erroneous results could affect interest,
payment or due dates or could cause the temporary inability to process
transactions, send invoices or engage in similar normal business
activities. If it is not adequately addressed by Oconee or its
suppliers and borrowers, the year 2000 issue could result in a
material adverse impact on Oconee's financial condition, liquidity and
results of operations.
OCONEE'S STATE OF READINESS - The Bank began its Year 2000
project in 1996. The Bank established a Year 2000 Task Force
comprised of executive and senior management of the Bank. The
chairman of the committee is the Bank's President and CEO. The Year
2000 Task Force continues to communicate the Year 2000 issue and the
Bank's status to the Board, employees, and the customers of the Bank.
The Bank has made a complete assessment of its information technology
systems and non-information technology systems and has contacted its
system vendors requesting information as to their Year 2000
preparedness.
-9-<PAGE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
For the Three Months Ended March 31, 1999
The Bank has developed a year 2000 plan with the following
phases: awareness, assessment, renovation, validation and
implementation. The Bank developed a specific timeline to follow
through each of these processes. The Bank is currently in the
validation phase. Testing of renovated computer systems deemed
mission critical for Year 2000 compliance was completed on March 10,
1999, with all other testing scheduled to be completed by June 30,
1999. Systems not deemed Year 2000 compliant will be upgraded or
replaced by June 30, 1999 in accordance with the Bank's overall
contingency plan.
COSTS TO ADDRESS YEAR 2000 ISSUES - The Bank currently estimates
that the total cost of such modifications for Year 2000 compliance
issues will be approximately $230,500 expensed over the course of five
years from 1998 through 2002 (including hardware/software expenses
which are permitted to be capitalized). Year 2000 expenditures for
1999 have been budgeted and are not expected to have a significantly
negative impact on results of operations, liquidity, or capital
resources. However, there can be no assurance that all necessary
modifications will be identified and corrected or that unforeseen
difficulties or additional costs will not arise.
RISKS OF THIRD PARTY YEAR 2000 ISSUES - The impact of year 2000
non-compliance by outside parties with whom Oconee transacts business
cannot be accurately gauged. Oconee has surveyed its major vendors
and suppliers to ascertain their year 2000 readiness. Although all
are not year 2000 compliant at this date, Oconee has received certain
assurances that such third parties will be ready for the year 2000
date change by the end of 1999, including any additional certification
from its major software provider.
The Bank will continue to monitor the progress of third party
vendors regarding their Year 2000 readiness focusing on mission
critical applications including, but not limited to, The Federal
Reserve Bank, Intercept, The Bankers Bank, telecommunication
providers, and power companies. The Year 2000 Task Force reviews
progress reports from third party vendors. Third party progress
reports may include, but are not limited to, updates from the company
website, written status reports from the third party vendor, and
verbal communication regarding the current status of the vendor. The
Bank is currently requesting the results from the testing and
validation of its mission critical third party vendors regarding
business contingency plans.
OCONEE'S CONTINGENCY PLAN - The Bank has established an overall
contingency plan, a liquidity plan, as well as a business resumption
contingency plan for implementation in the event of system or
operational failures. The Bank has developed business resumption
contingency plans that contain the following elements: (1) evaluates
options and selects the most reasonable
-10-<PAGE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
For the Three Months Ended March 31, 1999
contingency strategy; (2) identifies contingency plans and
implementation for each core business process; (3) establishes trigger
dates to activate the contingency plans; (4) assigns responsibility
for resumption of core business processes; (5) implements an
independent review of the feasibility of the contingency plan; and (6)
develops an implementation strategy for the century date change as
well as other critical dates. In general, the overall contingency
plan is designed to minimize the disruption of service to the Bank and
its customers in the event of a Year 2000 disruption.
The Bank is expected, by the Federal Deposit Insurance
Corporation, to substantially complete the four phases of the business
resumption contingency planning process as soon as possible, but no
later than June 30, 1999. Oconee has completed the organizational
planning, business impact, and contingency plan phases. The Bank is
reviewing and updating its current contingency plans, so that it will
be able to complete the validation phase by June 30, 1999.
The Bank's Year 2000 Liquidity Contingency Plan provides a ready
framework for meeting liquidity needs on an expedited basis. The Plan
identifies and assesses liquidity needs in connection with Year 2000,
further identifies and updates both primary and secondary sources of
liquidity, and provides policy and procedures for the use of liquidity
should the need for additional liquidity arise.
-11-<PAGE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
For the Three Months Ended March 31, 1999
CAPITAL
The following tables present Oconee State Bank's regulatory capital
position at
March 31, 1999:
Risk-Based Capital Ratios
-------------------------
Tier 1 Tangible Capital, Actual 14.9%
Tier 1 Tangible Capital minimum requirement 4.0%
------
Excess 10.9%
======
Total Capital, Actual 16.2%
Total Capital minimum requirement 8.0%
------
Excess 8.2%
======
Leverage Ratio
Tier 1 Tangible Capital to adjusted total assets
("Leverage Ratio") 10.2%
Minimum leverage requirement 3.0%
------
Excess 7.2%
======
-12-<PAGE>
<PAGE>
PART II. OTHER INFORMATION
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) The Corporation filed two Forms 8-K during the first
three months of 1999. The first of these forms was
filed on January 7, 1999 under Item 5, while the second
was filed on January 15, 1999 under Item 5. Both of
these Forms 8-K outlined and explained the
reorganization of Oconee State Bank into a wholly-owned
subsidiary of a newly formed bank holding company,
Oconee Financial Corporation.
-13-<PAGE>
<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
OCONEE FINANCIAL CORPORATION
By: /s/ B. Amrey Harden
B. Amrey Harden, President and CEO
(Principal Executive Officer)
Date: May 11, 1999
By: /s/ Jerry K. Wages
Jerry K. Wages
Executive Vice-President and CFO
(Principal Accounting Officer)
Date: May 11 1999
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001076691
<NAME> OCONEE FINANCIAL CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,689,066
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,330,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,708,027
<INVESTMENTS-CARRYING> 16,265,242
<INVESTMENTS-MARKET> 16,888,339
<LOANS> 81,406,741
<ALLOWANCE> 1,439,939
<TOTAL-ASSETS> 128,074,939
<DEPOSITS> 113,965,586
<SHORT-TERM> 735,972
<LIABILITIES-OTHER> 506,057
<LONG-TERM> 0
0
0
<COMMON> 1,800,000
<OTHER-SE> 11,067,324
<TOTAL-LIABILITIES-AND-EQUITY> 128,074,939
<INTEREST-LOAN> 1,864,910
<INTEREST-INVEST> 494,787
<INTEREST-OTHER> 93,860
<INTEREST-TOTAL> 2,453,557
<INTEREST-DEPOSIT> 984,959
<INTEREST-EXPENSE> 990,768
<INTEREST-INCOME-NET> 1,462,789
<LOAN-LOSSES> 12,600
<SECURITIES-GAINS> 8,838
<EXPENSE-OTHER> 1,026,413
<INCOME-PRETAX> 691,795
<INCOME-PRE-EXTRAORDINARY> 691,795
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 483,563
<EPS-PRIMARY> 2.69
<EPS-DILUTED> 2.69
<YIELD-ACTUAL> 5.22
<LOANS-NON> 152,581
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,427,420
<CHARGE-OFFS> 5,429
<RECOVERIES> 5,348
<ALLOWANCE-CLOSE> 1,439,939
<ALLOWANCE-DOMESTIC> 1,439,939
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
