10QSB 1 oco3rdq.htm OCONEE FINANCIAL CORPORATION QUARTERLY REPORT Prepared by Kilpatrick Stockton EDGAR Services

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


(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 $2 per share: 899,885 shares
outstanding as of November 13, 2001


 

 

 OCONEE FINANCIAL CORPORATION AND SUBSIDIARY 

 
    INDEX  
         
        Page No.
PART I   FINANCIAL INFORMATION    
         

Item 1.

Financial Statements    
         
    Consolidated Balance Sheet (unaudited) at September 30, 2001 3
         
    Consolidated Statements of Earnings (unaudited) for the Three
Months and the Nine Months Ended September 30, 2001 and  2000 

4

         
    Consolidated Statements of Comprehensive Income unaudited) for the Nine Months Ended September 30, 2001 and 2000  5
         
    Consolidated Statements of Cash Flows (unaudited) for the
Nine Months Ended September 30, 2001 and 2000
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   12
         

Item 6.

Exhibits and Reports on Form 8-K   12

 


 
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     (63,804)     (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

Consolidated Statements of Comprehensive Income

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

Consolidated Statements of Cash Flows

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

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

(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

13,300,000 

Dividends paid

(989,873)

(899,970)

Purchase and retirement of stock

(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
       (Leverage Ratio) 

8.4%

Minimum leverage requirement 

3.0%


Excess

 5.4%


 

11


 

 

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

None

 

Item 5.

Other Information

 

None

 

Item 6.

Exhibits and Reports on Form 8-K

 

(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.
          (Principal Executive Officer)

   
 

Date:     November 13, 2001

   
   
   
   
 

By         /s/ Jerry K. Wages

 
 

         Jerry K. Wages

 

         Executive Vice-President and C.F.O.
         (Principal Accounting Officer)

   
 

Date:     November 13, 2001

 

 

13