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 June 30, 2000
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: 179,979 shares
outstanding as of August 14, 2000
<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page No.
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PART I FINANCIAL INFORMATION
<S> <S> <S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) at June 30, 2000 3
Consolidated Statements of Earnings (unaudited) for the Six
Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Comprehensive Income (unaudited)
for the Six Months Ended June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows (unaudited) for the Six
Months Ended June 30, 2000 and 1999 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
Consolidated Balance Sheet
June 30, 2000
(Unaudited)
Assets
------
<S> <C> <C>
Cash and due from banks, including $100,000 bearing interest $ 3,090,578
Federal funds sold 1,430,000
Investment securities available for sale
(amortized cost of $ 34,121,259) 32,904,296
Mortgage loans held for sale 2,823,612
Loans 116,446,388
Less: Allowance for loan losses (1,548,709)
----------------
Loans, net 114,897,679
----------------
Premises and equipment, net 1,982,338
Accrued interest receivable and other assets 3,560,265
----------------
Total Assets $ 160,688,768
================
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits:
Noninterest-bearing $ 23,017,574
Interest-bearing 121,189,416
----------------
Total Deposits 144,206,990
Securities sold under repurchase agreements 1,373,247
Federal funds purchased 0
Accrued interest payable and other liabilities 985,759
----------------
Total Liabilities 146,565,996
Stockholders' equity:
Common stock, $10 par value;
authorized 300,000 shares;
issued and outstanding 179,979 shares 1,799,790
Additional paid-in capital 4,247,150
Retained earnings 8,830,836
Unrealized gain (loss) on investment securities, net of tax (755,004)
----------------
Total stockholders' equity 14,122,772
----------------
Total liabilities and stockholders' equity $ 160,688,768
================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
For the Three Months and the Six Months Ended June 30, 2000 and 1999
(Unaudited)
Three Months Six Months
Ended Ended
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 2,748,521 $ 2,035,831 $ 5,126,583 $ 3,900,742
Investment securities:
Tax exempt 212,938 202,652 421,029 405,650
Taxable 384,426 287,237 771,701 579,026
Federal funds sold and other 66,681 37,166 169,682 122,187
-------------- -------------- -------------- --------------
Total interest income 3,412,566 2,562,886 6,488,995 5,007,605
-------------- -------------- -------------- --------------
Interest Expense:
Deposits 1,402,426 962,838 2,716,546 1,947,797
Other 15,342 11,628 23,857 17,437
-------------- -------------- -------------- --------------
Total interest expense 1,417,768 974,466 2,740,403 1,965,234
-------------- -------------- -------------- --------------
Net interest income 1,994,798 1,588,420 3,748,592 3,042,371
Provision for loan losses 51,900 12,600 103,800 25,200
-------------- -------------- -------------- --------------
Net interest income after provision for loan losses 1,942,898 1,575,820 3,644,792 3,017,171
-------------- -------------- -------------- --------------
Other Income:
Service charges on deposit accounts 221,138 182,440 406,756 356,071
Securities gains (losses), net (98,063) (16) (98,063) 8,822
Other operating income 131,360 133,169 293,864 301,995
-------------- -------------- -------------- --------------
Total other income 254,435 315,593 602,557 666,888
-------------- -------------- -------------- --------------
Other Expense:
Salaries and other personnel expense 805,919 696,207 1,591,965 1,299,110
Net occupancy and equipment expense 193,103 132,714 372,415 272,395
Other operating expense 372,503 316,825 709,592 675,092
-------------- -------------- -------------- --------------
Total other expense 1,371,525 1,145,746 2,673,972 2,246,597
-------------- -------------- -------------- --------------
Earnings before income taxes 825,808 745,667 1,573,377 1,437,462
Income taxes 235,433 189,076 444,312 397,308
-------------- -------------- -------------- --------------
Net earnings $ 590,375 $ 556,591 $ 1,129,065 $ 1,040,154
============== ============== ============== ==============
Earnings per common share based on average outstanding
shares of 179,979 in 2000 and 180,000 in1999: $ 3.28 $ 3.09 $ 6.27 $ 5.78
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Net earnings $ 1,129,065 1,040,154
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Holding gains (losses) arising during period, net of tax
of $25,770 and ($220,421) 42,046 (360,245)
Reclassification adjustments for gains (losses) included
in net earnings, net of tax of ($37,263) and $3,352 (60,800) 5,470
----------- ----------
Total other comprensive income (loss) (18,754) (354,775)
----------- ----------
Comprehensive income $ 1,110,311 685,379
=========== ==========
See accompanying notes to financial statements.
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</TABLE>
<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For Each of the Six Months Ended June 30, 2000 and 1999
(Unaudited)
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,129,065 $ 1,040,154
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Provision for loan losses 103,800 25,200
Depreciation, amortization and accretion 146,371 119,876
Loss (Gain) in sale of investment securities 98,063 (8,822)
Change in assets and liabilities:
Interest receivable and other assets (143,248) (543,239)
Interest payable and other liabilities 154,897 2,095,849
Mortgage loans held for sale (956,222) (438,611)
------------ ------------
Net cash used by operating activities 532,726 2,290,407
------------ ------------
Cash flows from investing activities:
Proceeds from maturities and paydowns of
investment securities held to maturity 0 496,179
Proceeds from maturities and paydowns of
investment securities available for sale 1,472,194 2,002,051
Proceeds from sales of investment securities
available for sale 5,706,563 504,984
Purchases of investment securities held to maturity 0 (1,854,069)
Purchases of investment securities available for sale (2,950,769) (953,978)
Net changes in loans (23,140,328) (9,312,202)
Purchases of premises and equipment (512,587) (156,894)
------------ ------------
Net cash used by investing activities (19,424,927) (9,273,929)
------------ ------------
Cash flows from financing activities:
Net change in deposits 7,679,781 (1,341,617)
Net change in securities sold under repurchase agreements 507,339 358,324
Dividends paid (899,970) (720,000)
Purchase and retirement of stock (2,160) 0
------------ ------------
Net cash provided by financing activities 7,284,990 (1,703,293)
------------ ------------
Net increase (decrease) in cash and cash equivalents (11,607,211) (8,686,815)
Cash and cash equivalents at beginning of period 16,127,789 14,305,840
------------ ------------
Cash and cash equivalents at end of period $ 4,520,578 $ 5,619,025
============ ============
Supplemental cash flow information:
Cash paid for interest $ 2,205,217 $ 1,643,219
</TABLE>
See accompanying notes to financial statements.
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<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 (the "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 and amounts due from banks.
(3) Net Earnings Per Common Share
-----------------------------
Earnings per common share are based on the weighted average number of
common shares outstanding during the period while the effects of
potential common shares outstanding during the period are included in
diluted earnings per share. The Corporation had no potential common
shares outstanding during 2000 and 1999.
(4) Implementation of Recent Accounting Pronouncements
--------------------------------------------------
The Corporation adopted Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities",
(SFAS No. 133") during the third quarter of 1999. As allowed by SFAS
No. 133, an entity may transfer any held to maturity security into the
available for sale or trading category without calling into question
the entity's intent to hold other securities to maturity in the future.
The result of the transfer of held to maturity securities to the
available for sale category was to increase stockholders' equity
approximately $22,000 which represented the net effect of the
unrealized gain associated with the held to maturity investments
transferred. There were no other financial statement effects associated
with the implementation of SFAS No. 133.
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<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Each of the Six Months in the Periods Ended
June 30, 2000 and 1999
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, 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 June 30, 2000 were $160,688,768, representing an
$8,550,200 (5.62%) increase from December 31, 1999. Deposits increased
$7,679,781 (5.63%) from December 31, 1999. Loans increased $23,116,111 (24.77%).
The increase in loan volume is due primarily to and increase in loans to finance
commercial real estate. The allowance for loan losses at June 30, 2000 totaled
$1,548,709 compared to the December 31, 1999 total of $1,469,126, representing
1.33% of total loans at June 30, 2000, compared to 1.57% at December 31, 1999.
Cash and cash equivalents decreased $11,607,211 from December 31, 1999.
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 $109,140 at June 30, 2000, representing an
increase of $30,732 (39.19%) from December 31, 1999. There were no related party
loans which were considered nonperforming at June 30, 2000.
The Corporation's subsidiary bank was most recently examined by its
primary regulatory authority in October of 1999. 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-
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
For the Six Months in the Period Ended
June 30, 2000 and 1999
Results of Operations
Net interest income increased $706,221 (23.21%) in the first six months
of 2000 compared to the same period for 1999. Interest income for the first six
months of 2000 was $6,488,995, representing an increase of $1,481,390 (29.58%)
over the same period in 1999. Interest expense for the first six months of 2000
increased $775,169 (39.44%) compared to the same period in 1999. The increase in
net interest income during the first six months of 2000 compared to the same
period in 1999 is primarily attributable to the increase in the volume of loans,
as well as a 100 basis point increase in the prime lending rate during the first
six months of 2000.
The Bank analyzes its allowance for loan losses on a monthly basis. As
of June 30, 2000, that analysis indicated an allowance reserve surplus of
$1,019,951. Due to this surplus, the Bank has provided the budgeted provision
for 2000. It is management's belief that the allowance for loan losses is
adequate to absorb possible losses in the portfolio.
Other expenses for the six months of 2000 increased $427,375 (19.02%)
compared to the first six months in 1999. The net increase is primarily
attributable to additional salary and benefits expense as a result of opening
two new branches during 1999.
Liquidity
The Corporation must maintain, on a daily basis, sufficient funds to
cover the withdrawals from depositors' accounts and to supply new borrowers with
funds. To meet these obligations, the Corporation keeps cash on hand, maintains
account balances with its correspondent banks, and purchases and sells federal
funds and other short-term investments. Asset and liability maturities are
monitored in an attempt to match these to meet liquidity needs. It is the policy
of the Corporation to monitor its liquidity to meet regulatory requirements and
their local funding requirements.
The Corporation maintains relationships with correspondent banks that
can provide funds to it on short notice, if needed. Presently, the Corporation
has arrangements with a commercial bank for short term unsecured advances up to
$4,000,000. Additional liquidity is provided to the Corporation through
available Federal Home Loan Bank advances up to $22,800,000.
-9-
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
For the Six Months Ended June 30, 2000
Year 2000 Compliance
The Bank did not experience any material disruptions in its operations
or activities as a result of the so-called "Year 2000" problem, nor did the Bank
incur material expenses in correcting perceived or suspected Year 2000 problems.
In addition, the Bank is not aware that any of its suppliers or customers has
experienced any material disruptions in their operations or activities.
The Bank does not expect to encounter any such problems in the
foreseeable future, although it continues to monitor its computer operations for
signs or indications of such problems and will do so through future identified
critical dates in 2000 and 2001. The Bank has developed contingency plans for
back up systems and business functions should any technical problems be
encountered. Specific guidelines have been established in case critical systems
or communications interruptions occur. Assignments have been established, as
well as step-by-step instructions should any system or process malfunction.
Based on information currently available, management does not believe that the
Bank will incur significant additional costs for Year 2000 issues.
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<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
For the Six Months Ended June 30, 2000
CAPITAL
The following tables present Oconee State Bank's regulatory capital position at
June 30, 2000, based on the regulatory capital requirements of federal banking
agencies.
Risk-Based Capital Ratios
-------------------------
Tier 1 Tangible Capital, Actual 12.1%
Tier 1 Tangible Capital minimum requirement 4.0%
-------
Excess 8.1%
=======
Total Capital, Actual 13.3%
Total Capital minimum requirement 8.0%
-------
Excess 5.3%
======
Leverage Ratio
---------------
Tier 1 Tangible Capital to adjusted total assets
(Leverage Ratio) 9.6%
Minimum leverage requirement 3.0%
------
Excess 6.6%
=======
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<PAGE>
PART II. OTHER INFORMATION
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) Oconee Financial Corporation's annual meeting of stockholders
was held on May 1, 2000.
(b) The following is a summary of matters submitted to a vote of
security holders:
1. The election * of the following directors to serve
the current year term:
G. Robert Bishop Henry C. Maxey
Steve W. Denman Carl R. Nichols
Douglas D. Dickens Ann B. Powers
Walter T. Evans, Sr. Jerry K. Wages
John A. Hale Virginia S. Wells
B. Amrey Harden
A tabulation of votes concerning the above issue is as
follows:
Shares voted by proxy in favor 121,941
Shares voted in person in favor 6,278
Shares voted in person against 0
Shares abstained from voting 0
Total shares represented 128,219
Total shares outstanding 179,979
* Directors were elected by slate, not individually.
Vote tabulation is therefore by slate.
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Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports On Form 8-K
--------------------------------
(a) Exhibits
--------
The following exhibits are required to be filed with this
Report on 10-QSB by Item 601 of Regulation S-B:
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
There were no 8-K filings during the quarter.
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OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
SIGNATURES
<PAGE>
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 C.E.O.
(Principal Executive Officer)
Date: August 14, 2000
By: /s/ Jerry K. Wages
-------------------------------
Jerry K. Wages
Executive Vice-President and C.F.O.
(Principal Accounting Officer)
Date: August 14, 2000
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