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 September 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
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(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 November 7, 2000
<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
INDEX
Page No.
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (unaudited) at September 30, 2000 3
Consolidated Statements of Earnings (unaudited) for the Three
and Nine Months Periods Ended September 30, 2000 and 1999 4
Consolidated Statements of Comprehensive Income (unaudited)
for the Nine Months Ended September 30, 2000 and 1999 5
Consolidated Statements of Cash Flows (unaudited) for the Nine
Months Ended September 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 8-10
PART II OTHER INFORMATION
Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheet
September 30, 2000
(Unaudited)
Assets
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<S> <C>
Cash and due from banks, including $100,000 bearing interest $ 7,798,806
Federal funds sold 4,900,000
Investment securities available for sale
(amortized cost of $30,671,013) 29,798,655
Mortgage loans held for sale 1,860,043
Loans 120,983,658
Less: Allowance for loan losses (1,700,696)
------------
Loans, net 119,282,962
------------
Premises and equipment, net 2,065,060
Accrued interest receivable and other assets 3,891,208
------------
Total Assets $ 169,596,734
============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits:
Noninterest-bearing $ 19,125,681
Interest-bearing 119,651,963
------------
Total Deposits 138,777,644
Securities sold under repurchase agreements 1,529,284
Federal Home Loan Bank advances 13,300,000
Accrued interest payable and other liabilities 1,012,560
------------
Total Liabilities 154,619,488
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 9,471,517
Unrealized gain (loss) on investment securities, net of tax (541,211)
------------
Total stockholders' equity 14,977,246
------------
Total liabilities and stockholders' equity $ 169,596,734
============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
For the Three Months and the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Interest Income:
Loans $ 3,145,927 $ 2,186,203 $ 8,272,510 $ 6,086,945
Investment securities:
Tax exempt 170,752 199,039 591,782 604,689
Taxable 295,222 289,952 1,066,923 868,978
Federal funds sold and other 60,930 57,759 230,611 179,948
-------------- -------------- -------------- --------------
Total interest income 3,672,831 2,732,953 10,161,826 7,740,560
-------------- -------------- -------------- --------------
Interest Expense:
Deposits 1,470,630 1,087,015 4,187,176 3,034,811
Other 129,383 9,310 153,240 26,747
-------------- -------------- -------------- --------------
Total interest expense 1,600,013 1,096,325 4,340,416 3,061,558
-------------- -------------- -------------- --------------
Net interest income 2,072,818 1,636,628 5,821,410 4,679,002
Provision for loan losses 159,300 12,600 263,100 37,800
-------------- -------------- -------------- --------------
Net interest income after provision for loan losses 1,913,518 1,624,028 5,558,310 4,641,202
-------------- -------------- -------------- --------------
Other Income:
Service charges on deposit accounts 219,045 183,898 625,801 539,968
Securities gains (losses), net (63,804) 2,890 (161,867) 11,712
Other operating income 194,252 144,380 488,116 446,374
-------------- -------------- -------------- --------------
Total other income 349,493 331,168 952,050 998,054
-------------- -------------- -------------- --------------
Other Expense:
Salaries and other personnel expense 799,315 649,587 2,391,280 1,948,697
Net occupancy and equipment expense 189,203 135,811 561,618 408,206
Other operating expense 344,872 330,648 1,054,464 1,005,741
-------------- -------------- -------------- --------------
Total other expense 1,333,390 1,116,046 4,007,362 3,362,644
-------------- -------------- -------------- --------------
Earnings before income taxes 929,621 839,150 2,502,998 2,276,612
Income taxes 288,936 244,896 733,248 642,204
-------------- -------------- -------------- --------------
Net earnings $ 640,685 $ 594,254 $ 1,769,750 $ 1,634,408
============== ============== ============== ==============
Earnings per common share based on average outstanding
shares of 179,979 in 2000 and 180,000 in1999: $ 3.56 $ 3.30 $ 9.83 $ 9.08
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Net earnings $ 1,769,750 1,634,408
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Holding gains (losses) arising during period, net of tax
of $181,049 and ($375,960) 295,395 (614,451)
Reclassification adjustments for gains (losses) included
in net earnings, net of tax of ($61,509) and $4,450 (100,358) 7,262
----------- -----------
Total other comprensive income (loss) 195,037 (607,189)
----------- -----------
Comprehensive income $ 1,964,787 1,027,219
=========== ===========
</TABLE>
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<PAGE>
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
For Each of the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,769,750 $ 1,634,408
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Provision for loan losses 263,100 37,800
Depreciation, amortization and accretion 218,903 174,490
Loss (Gain) on sale of investment securities 161,867 (11,712)
Change in assets and liabilities:
Interest receivable and other assets (338,513) (610,220)
Interest payable and other liabilities 181,698 705,501
Mortgage loans held for sale 7,347 471,081
-------------- --------------
Net cash used by operating activities 2,264,152 2,401,348
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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 1,739,310 3,985,504
Proceeds from sales of investment securities
available for sale 8,847,572 699,314
Purchases of investment securities held to maturity 0 (1,854,069)
Purchases of investment securities available for sale (2,950,769) (5,064,008)
Purchase of Federal Home Loan Bank stock (272,800) 0
Net changes in loans (27,684,911) (14,347,626)
Purchases of premises and equipment (683,218) (242,278)
-------------- --------------
Net cash used by investing activities (21,004,816) (16,326,984)
-------------- --------------
Cash flows from financing activities:
Net change in deposits 2,250,435 9,226,563
Net change in securities sold under repurchase agreements 663,376 225,588
Proceeds from Federal Home Loan Bank advance 13,300,000 0
Dividends paid (899,970) (720,000)
Purchase and retirement of stock (2,160) 0
-------------- --------------
Net cash provided by financing activities 15,311,681 8,732,151
-------------- --------------
Net increase (decrease) in cash and cash equivalents (3,428,983) (5,193,485)
Cash and cash equivalents at beginning of period 16,127,789 14,305,840
-------------- --------------
Cash and cash equivalents at end of period $ 12,698,806 $ 9,112,355
============== ==============
Supplemental cash flow information:
Cash paid for interest $ 3,695,102 $ 2,629,755
Cash paid for taxes $ 741,400 $ 662,840
</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>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the Nine-Month Periods Ended September 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 September 30, 2000 were $169,596,734, representing a
$17,458,166 (11.48%) increase from December 31, 1999. Deposits increased
$2,250,435 (1.65%) from December 31, 1999. Loans increased $27,653,381 (29.63%).
The increase in loan volume is due primarily to an increase in loans to finance
commercial real estate. The allowance for loan losses at September 30, 2000
totaled $1,700,696 compared to the December 31, 1999 total of $1,469,126,
representing 1.41% of total loans at September 30, 2000, compared to 1.57% at
December 31, 1999. Cash and cash equivalents decreased $3,428,983 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 $260,398 at September 30, 2000, representing an
increase of $181,990 (232.11%) from December 31, 1999. This increase is
primarily attributable to a $194,194 increase in nonaccruing loans and a $13,397
decrease in repossessed collateral. There were no related party loans which were
considered nonperforming at September 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.
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<PAGE>
RESULTS OF OPERATIONS
Net interest income increased $1,142,408 (24.42%) in the first nine
months of 2000 compared to the same period for 1999. Interest income for the
first nine months of 2000 was $10,161,826, representing an increase of
$2,421,266 (31.28%) over the same period in 1999. Interest expense for the first
nine months of 2000 increased $1,278,858 (41.77%) compared to the same period in
1999. The increase in net interest income during the first nine 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 nine months of 2000. The increase in interest expense is
primarily attributable to interest on a Federal Home Loan Bank advance in the
amount of $86,664 that the Bank secured during 2000, as well as growth in the
Bank's deposits and an increase in the interest rates paid on deposits.
The Bank analyzes its allowance for loan losses on a monthly basis. Due
to unbudgeted loan growth, the Bank has provided $107,400 over the budgeted
provision expense during the first nine months of 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 nine months of 2000 increased $644,718 (19.17%)
compared to the first nine months in 1999. The net increase is primarily
attributable to additional salary and benefits expense as a result of opening
a loan production office in July 1999 and a new branch in January 2000.
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. As of September 30,
2000, the Corporation had $13,300,000 in advances outstanding from the Federal
Home Loan Bank. This advance matures August 25, 2003, and carries an interest
rate of 6.34%. It is secured by the Bank's loans on 1 to 4 family residential
properties.
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<PAGE>
CAPITAL
The following tables present Oconee State Bank's regulatory capital position at
September 30, 2000, based on the regulatory capital requirements of federal
banking agencies.
Risk-Based Capital Ratios
-------------------------
Tier 1 Tangible Capital, Actual 12.2%
Tier 1 Tangible Capital minimum requirement 4.0%
-----
Excess 8.2%
-----
Total Capital, Actual 13.4%
Total Capital minimum requirement 8.0%
-----
Excess 5.4%
=====
Leverage Ratio
--------------
Tier 1 Tangible Capital to adjusted total assets
(Leverage Ratio) 9.5%
Minimum leverage requirement 3.0%
-----
Excess 6.5%
=====
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<PAGE>
PART II. OTHER INFORMATION
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
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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<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 C.E.O.
(Principal Executive Officer)
Date: November 13, 2000
-----------------------------------------
By: /s/ Jerry K. Wages
----------------------------------------
Jerry K. Wages
Executive Vice-President and C.F.O.
(Principal Accounting Officer)
Date: November 13, 2000
-----------------------------------------
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