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, 2001
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
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
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
$2 per share: 899,885 shares
outstanding as of November 13,
2001
PART I. FINANCIAL INFORMATION | ||
Item 1. Financial Statements | ||
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY | ||
Consolidated Balance Sheet | ||
September 30, 2001 | ||
(Unaudited) | ||
Assets | ||
Cash and due from banks | $ | 8,094,921 |
Federal funds sold | 1,168,000 | |
Investment securities available for sale | ||
(amortized cost of $39,593,814) | 40,309,901 | |
Mortgage loans held for sale | 3,613,441 | |
Loans | 142,973,940 | |
Less: Allowance for loan losses | (1,713,627) | |
|
||
Loans, net |
141,260,313 | |
|
||
Premises and equipment, net | 2,244,606 | |
Accrued interest receivable and other assets | 4,015,015 | |
|
||
Total Assets |
$ | 200,706,197 |
|
||
Liabilities and Stockholders’ Equity | ||
Liabilities: | ||
Deposits: |
||
Noninterest-bearing |
$ | 19,713,421 |
Interest-bearing |
147,766,710 | |
|
||
Total Deposits |
167,480,131 | |
Securities sold under repurchase agreements | 1,069,501 | |
Federal Home Loan Bank Advances | 13,300,000 | |
Accrued interest payable and other liabilities | 1,469,382 | |
|
||
Total Liabilities |
183,319,014 | |
Stockholders’ equity: | ||
Common stock, $2 par value; |
||
authorized 1,500,000 shares; |
||
issued and outstanding 899,885 shares |
1,799,770 | |
Additional paid-in capital |
4,246,832 | |
Retained earnings |
10,896,320 | |
Accumulated other comprehensive income | 444,261 | |
|
||
Total stockholders’ equity |
17,387,183 | |
|
||
Total liabilities and stockholders’ equity |
$ | 200,706,197 |
|
||
See accompanying notes to financial statements. |
3
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY | ||||||||
Consolidated Statements of Earnings | ||||||||
For the Three Months and the Nine Months Ended September 30, 2001 and 2000 | ||||||||
(Unaudited) | ||||||||
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
2001 | 2000 | 2001 | 2000 | |||||
|
|
|
|
|||||
Interest Income: | ||||||||
Loans |
$ | 3,288,926 | $ | 3,145,927 | $ | 10,004,010 | $ | 8,272,510 |
Investment securities: |
||||||||
Tax exempt |
181,624 | 170,752 | 524,126 | 591,782 | ||||
Taxable |
431,468 | 295,222 | 1,003,224 | 1,066,923 | ||||
Federal funds sold and other |
77,752 | 60,930 | 459,903 | 230,611 | ||||
|
|
|
|
|||||
Total interest income |
3,979,770 | 3,672,831 | 11,991,263 | 10,161,826 | ||||
|
|
|
|
|||||
Interest Expense: | ||||||||
Deposits |
1,767,327 | 1,470,630 | 5,347,199 | 4,187,176 | ||||
Other |
226,179 | 129,383 | 670,827 | 153,240 | ||||
|
|
|
|
|||||
Total interest expense |
1,993,506 | 1,600,013 | 6,018,026 | 4,340,416 | ||||
|
|
|
|
|||||
Net interest income |
1,986,264 | 2,072,818 | 5,973,237 | 5,821,410 | ||||
Provision for loan losses | 75,000 | 159,300 | 225,000 | 263,100 | ||||
|
|
|
|
|||||
Net interest income after provision for loan losses |
1,911,264 | 1,913,518 | 5,748,237 | 5,558,310 | ||||
|
|
|
|
|||||
Other Income: | ||||||||
Service charges | 250,146 | 219,045 | 765,345 | 625,801 | ||||
Securities gains (losses), net | 0 | (63,804) | 0 | (161,867) | ||||
Mortgage banking income | 181,546 | 163,337 | 577,423 | 347,495 | ||||
Other operating income | 48,365 | 30,915 | 141,256 | 140,621 | ||||
|
|
|
|
|||||
Total other income | 480,057 | 349,493 | 1,484,024 | 952,050 | ||||
|
|
|
|
|||||
Other Expense: | ||||||||
Salaries and other personnel expense |
960,515 | 799,315 | 2,892,587 | 2,391,280 | ||||
Net occupancy and equipment expense |
226,648 | 189,203 | 628,415 | 561,618 | ||||
Other operating expense |
379,906 | 344,872 | 1,262,191 | 1,054,464 | ||||
|
|
|
|
|||||
Total other expense |
1,567,069 | 1,333,390 | 4,783,193 | 4,007,362 | ||||
|
|
|
|
|||||
Earnings before income taxes |
824,252 | 929,621 | 2,449,068 | 2,502,998 | ||||
Income taxes | 251,895 | 288,936 | 731,425 | 733,248 | ||||
|
|
|
|
|||||
Net earnings |
$ | 572,357 | $ | 640,685 | $ | 1,717,643 | $ | 1,769,750 |
|
|
|
|
|||||
Earnings per common share based on average | ||||||||
outstanding shares of 899,885 in 2001 and 2000: | $ | 0.64 | $ | 0.71 | $ | 1.91 | $ | 1.97 |
|
|
|
|
|||||
See accompanying notes to financial statements. |
4
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY |
||||
For the Nine Months Ended September 30, 2001 and 2000 |
||||
(Unaudited) |
||||
2001 |
2000 |
|||
|
|
|||
Net earnings |
$ |
1,717,643 |
1,769,750 |
|
Other comprehensive income, net of tax: |
||||
Unrealized gains (losses) on securities available for sale: |
||||
Holding gains (losses) arising during period, net of tax |
||||
of $375,810 and $181,049 |
614,205 |
295,395 |
||
Reclassification adjustments for (gains) losses included |
||||
in net earnings, net of tax of $0 and ($61,509) |
0 |
(100,358) |
||
|
|
|||
Total other comprehensive income (loss) |
614,205 |
195,037 |
||
|
|
|||
Comprehensive income |
$ |
2,331,848 |
1,964,787 |
|
|
|
See accompanying notes to financial statements.
5
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY |
||||
For Each of the Nine Months Ended September 30, 2001 and 2000 |
||||
(Unaudited) |
||||
2001 |
2000 |
|||
|
|
|||
Cash flows from operating activities: |
||||
Net earnings |
$ |
1,717,643 |
$ |
1,769,750 |
Adjustments to reconcile net earnings to net |
||||
cash provided by operating activities: |
||||
Provision for loan losses |
225,000 |
263,100 |
||
Depreciation, amortization and accretion |
191,218 |
218,903 |
||
Loss on sale of investment securities |
0 |
161,867 |
||
Change in assets and liabilities: |
||||
Interest receivable and other assets |
(364,740) |
(338,513) |
||
Interest payable and other liabilities |
(8,691) |
181,698 |
||
Mortgage loans held for sale |
(1,334,828) |
7,347 |
||
|
|
|||
Net cash provided by operating activities |
425,602 |
2,264,152 |
||
|
|
|||
Cash flows from investing activities: |
||||
Proceeds from maturities and paydowns of |
||||
investment securities available for sale |
1,199,177 |
1,739,310 |
||
Proceeds from sales and calls of investment securities |
||||
available for sale |
8,557,863 |
8,847,572 |
||
Purchases of investment securities available for sale |
(18,928,821) |
(2,950,769) |
||
Purchase of Federal Home Loan Bank stock |
0 |
(272,800) |
||
Net change in loans |
(19,951,929) |
(27,684,911) |
||
Purchases of premises and equipment |
(308,004) |
(683,218) |
||
|
|
|||
Net cash used by investing activities |
(29,431,714) |
(21,004,816) |
||
|
|
|||
Cash flows from financing activities: |
||||
Net change in deposits |
16,942,514 |
2,250,435 |
||
Net change in securities sold under repurchase agreements |
233,414 |
663,376 |
||
Proceeds from Federal Home Loan Bank advance |
0 |
13,300,000 |
||
Dividends paid |
(989,873) |
(899,970) |
||
Purchase and retirement of stock |
0 |
(2,160) |
||
|
|
|||
Net cash provided by financing activities |
16,186,055 |
15,311,681 |
||
|
|
|||
Net decrease in cash and cash equivalents |
(12,820,057) |
(3,428,983) |
||
Cash and cash equivalents at beginning of period |
22,082,978 |
16,127,789 |
||
|
|
|||
Cash and cash equivalents at end of period |
$ |
9,262,921 |
$ |
12,698,806 |
|
|
|||
Supplemental cash flow information: |
||||
Cash paid for interest |
$ |
5,324,232 |
$ |
3,695,102 |
Cash paid for taxes |
$ |
580,045 |
$ |
741,400 |
Noncash investing and financing activities: |
||||
Transfer from loans to other real estate owned |
$ |
73,164 |
$ |
- |
Financed sale of other real estate owned |
$ |
73,164 |
$ |
- |
Change in dividends payable |
$ |
989,873 |
$ |
899,970 |
Change in net unrealized gain on investment securities |
||||
available for sale, net of tax |
$ |
614,205 |
$ |
295,395 |
See accompanying notes to financial statements. |
6
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
Net 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 2001 and 2000.
(4) Stock Split
On April 16, 2001, the Board of Directors of the Corporation declared a 5 for 1 stock split payable to shareholders of record on May 8, 2001. All share and per share amounts have been changed to reflect the stock split as if it had occurred on December 31, 1999.
7
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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, 2001 were $200,706,197, representing a $18,781,038 (10.32%) increase from December 31, 2000. Deposits increased $16,942,514 (11.25%) from December 31, 2000. Loans increased $19,632,885 (15.92%). The increase in loan volume is due primarily to an increase in loans to finance commercial real estate. Investment securities increased $10,252,703 (34.11%) from December 31, 2000. The allowance for loan losses at September 30, 2001 was $1,713,627, compared to the December 31, 2000 balance of $1,807,671, representing 1.20% of total loans at September 30, 2001, compared to 1.47% at December 31, 2000. Cash and cash equivalents decreased $12,820,057 from December 31, 2000.
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 $543,130 at September 30, 2001, representing an increase of $287,360 (112.35%) from December 31, 2000. This increase is primarily attributable to a $251,348 increase in nonaccruing loans and a $21,559 increase in repossessed collateral. Nonaccrual loans represented 0.33% of total loans outstanding at September 30, 2001, compared to 0.18% of total loans outstanding at December 31, 2000. There were no related party loans which were considered nonperforming at September 30, 2001.
The Corporation’s subsidiary bank was most recently examined by its primary regulatory authority in May of 2001. 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
Results of Operations
Net interest income increased $151,827 (2.61%) in the first nine months of 2001 compared to the same period for 2000. Interest income for the first nine months of 2001 was $11,991,263, representing an increase of $1,829,437 (18.00%) over the same period in 2000. Interest expense for the first nine months of 2001 increased $1,677,610 (38.65%) compared to the same period in 2000. The increase in net interest income during the first nine months of 2001 compared to the same period in 2000 is primarily attributable to the increase in the volume of loans partially offset by the effects of a substantial decrease in the Bank’s prime lending rate during 2001. The increase in interest expense is primarily attributable to interest in the amount of $639,442 on a Federal Home Loan Bank advance that the Bank secured during 2000, as well as growth in the Bank’s deposits.
The Bank’s net interest margin for the first nine months of 2001 was 4.52%, compared to 5.52% for the same time period during 2000. This decrease is primarily attributable to a 400 basis point decrease in the prime rate during the first nine months of 2001.
The Bank analyzes its allowance for loan losses on a monthly basis. As of September 30, 2001, the provision for loan losses was $225,000, compared to $263,100 for the same period in 2000. The decrease in the provision for loan losses is primarily attributable to an additional discretionary provision made in 2000 due to unexpected loan growth. It is management’s belief that the allowance for loan losses is adequate to absorb possible losses in the portfolio.
Other income for the first nine months of 2001 increased $531,974 (55.88%) compared to the first nine months of 2000. This increase is primarily attributable to a $229,928 increase in fee income on mortgage loans held for sale, as well as an $42,323 increase in service charges on deposit accounts. The increase in fee income on mortgage loans held for sale is due to an increase in the number of mortgage loans that the Bank originated during 2001 as a result of mortgage interest rates being lower during 2001. The increase in service charge income is due to an increase in fees on deposit accounts that the Bank implemented during the third quarter of 2000.
Other expenses for the nine months of 2001 increased $775,831 (19.36%) compared to the first nine months in 2000. The net increase is primarily attributable a 21% increase in salaries and benefits expense due to the addition of new employees in response to the growth of the Bank and to merit increases based on employee performance.
9
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
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 $4,400,000. Additional liquidity is provided to the Corporation through available Federal Home Loan Bank advances up to $27,280,000. As of September 30, 2001, the Corporation had $13,300,000 in advances outstanding from the Federal Home Loan Bank. This advance matures August 25, 2003, and carries a fixed interest rate of 6.34%. It is secured by the Bank’s loans on 1 to 4 family residential properties.
10
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Capital
The following tables present Oconee State Bank’s regulatory capital position at September 30, 2001, based on the regulatory capital requirements of federal banking agencies. The capital ratios of the Corporation are essentially the same as those of the Bank at September 30, 2001 and therefore only the Bank’s ratios are presented.
Risk-Based Capital Ratios | |
Tier 1 Capital, Actual |
11.1% |
Tier 1 Capital minimum requirement |
4.0% |
|
|
Excess |
7.1% |
|
|
Total Capital, Actual |
12.3% |
Total Capital minimum requirement |
8.0% |
|
|
Excess |
4.3% |
|
|
Leverage Ratio |
|
Tier 1 Capital to adjusted total assets |
8.4% |
Minimum leverage requirement |
3.0% |
|
|
Excess |
5.4% |
|
|
11
PART II. OTHER INFORMATION
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Item 1. |
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None |
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Item 2. |
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None |
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Item 3. |
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None |
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Item 4. |
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None |
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Item 5. |
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None |
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Item 6. |
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(a) |
Exhibits |
||||
None |
|||||
(b) |
Reports on Form 8-K |
||||
There were no 8-K filings during the quarter. |
12
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. |
|
Date: November 13, 2001 |
|
By /s/ Jerry K. Wages |
|
|
|
Jerry K. Wages |
|
Executive
Vice-President and C.F.O. |
|
Date: November 13, 2001 |
13