Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
OFED > SEC Filings for OFED > Form 10-Q on 7-Nov-2012All Recent SEC Filings

Show all filings for OCONEE FEDERAL FINANCIAL CORP.

Form 10-Q for OCONEE FEDERAL FINANCIAL CORP.


7-Nov-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

This Quarterly Report contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include:

statements of our goals, intentions and expectations;

statements regarding our business plans and prospects and growth and operating strategies;

statements regarding the asset quality of our loan and investment portfolios; and

estimates or our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

our ability to manage our operations under the current adverse economic conditions (including real estate values, loan demand, inflation, commodity prices and employment levels) nationally and in our market areas;

adverse changes in the financial industry, securities, credit and national and local real estate markets (including real estate values);

increased competition among depository and other financial institutions;

our ability to improve our asset quality even as we increase our non-residential lending;

our success in increasing our commercial real estate and commercial business lending, including agricultural lending;

changes in the interest rate environment that reduce our margins or reduce the fair value of our financial instruments and real estate;

declines in the yield on our assets resulting from the current low interest rate environment;

our ability to successfully implement our business strategies;

risks related to high concentration of loans secured by real estate located in our market areas;

increases in deposit and premium assessments;

legislative or regulatory changes, including increased compliance costs resulting from the recently enacted financial reform legislation, that adversely affect our business and earnings;

changes in the level of government support of housing finance;

our ability to enter new markets successfully and capitalize on growth opportunities;

our reliance on a small executive staff;

changes in consumer spending, borrowing and savings habits;


Table of Contents

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

risks and costs related to operating as a publicly traded company;

changes in our organization, compensation and benefit plans;

loan delinquencies and changes in the underlying cash flows of our borrowers resulting in increased loan losses;

changes in our financial condition or results of operations that reduce capital available to pay dividends; and

changes in the financial condition or future prospects of issuers of securities that we own, including our stock in the FHLB of Atlanta.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Annual Report on Form 10-K for Oconee Federal Financial Corp. for the year ended June 30, 2012, as filed with the Securities and Exchange Commission.

Comparison of Financial Condition at September 30, 2012 and June 30, 2012

Our total assets increased $1.9 million, or 0.50%, to $379.7 million at September 30, 2012 from $377.8 million at June 30, 2012. The increase was primarily due to an increase in total cash and cash equivalents of $2.3 million, or 4.9% and an increase in securities available-for-sale of $6.1 million, or 9.3%. The increase in cash and cash equivalents is the result of net loan repayments and maturities and paydowns of held-to-maturity securities, net of the cash used to purchase additional securities classified as available-for-sale. Loans decreased $6.1 million, or 2.4%, and held-to-maturity securities decreased $350 thousand, or 4.0%. Securities classified as available-for-sale increased $6.0 million, or 9.3%. The continued decline in outstanding loans is the result of the continued decline of loan demand in our market area, and we use the additional source of funds from loan repayments to invest in high-quality investment securities.

Total loans decreased by $6.1 million, or 2.4% to $243.8 million at September 30, 2012 from $249.8 million at June 30, 2012. Our one-to four-family real estate loans decreased by $5.9 million, or 2.5%, to $228.2 million at September 30, 2012 from $234.1 million at June 30, 2012 resulting from decreased demand in our market area. The decrease in one-to four-family real estate loans was offset partially by a slight increase in construction and land loans to $7.3 million at September 30, 2012 from $7.2 million at June 30, 2012. All other loan categories decreased slightly from June 30, 2012 to September 30, 2012 by $266 thousand.

Deposits increased $144 thousand, or 0.05%, to $293.5 million at September 30, 2012 from $293.4 million at June 30, 2012. The increase was primarily attributed to an increase in NOW and demand accounts of $1.2 million, or 6.1%, offset by decreases in regular savings and other deposits, money market deposits and certificates of deposit of $642 thousand, $368 thousand and $168 thousand, respectively. The increase in NOW and demand accounts were primarily attributable to non-interest bearing demand deposits. We generally do not accept brokered deposits and no brokered deposits were accepted during the three months ended September 30, 2012.

We had no advances from the Federal Home Loan Bank of Atlanta as of September 30, 2012 or June 30, 2012. We have credit available under a loan agreement with the Federal Home Loan Bank of Atlanta in the amount of 11% of total assets (as of September 30, 2012), or approximately $41.6 million.

Total equity equaled $83.8 million at September 30, 2012, compared to $83.0 million at June 30, 2012. The increase of $863 thousand was primarily related to net income for the three months ended September 30, 2012 of $1.0 million less $643 thousand in dividends for the same period and other comprehensive income of $383 thousand.


Table of Contents

Non-Performing Assets



The table below sets forth the amounts and categories of our non-performing
assets at the dates indicated.



                                                                September 30,       June 30,
                                                                    2012              2012
                                                                   (Dollars in thousands)
Non-accrual loans:
Real estate loans:
One- to four-family                                            $         1,776    $      2,157
Multi-family                                                                 -               -
Home equity                                                                  -               -
Non-residential                                                              -               -
Construction and land                                                        -               -
Total real estate loans                                                  1,776           2,157
Consumer and other loans                                                     -               -
Total nonaccrual loans                                         $         1,776    $      2,157
Accruing loans past due 90 days or more:
Real estate loans:
One- to four-family                                            $           567    $        145
Multi-family                                                                 -               -
Home equity                                                                  -               -
Non-residential                                                              -               -
Construction and land                                                        -               -
Total real estate loans                                                    567             145
Consumer and other loans                                                     -               -
Total accruing loans past due 90 days or more                              567             145
Total of nonaccrual and 90 days or more past due loans         $         2,343    $      2,302
Real estate owned:
One- to four-family                                            $           820    $        854
Multi-family                                                                 -               -
Home equity                                                                  -               -
Non-residential                                                              -               -
Other                                                                        -               -
Other nonperforming assets                                                   -               -
Total nonperforming assets                                     $         3,163    $      3,156

Troubled debt restructurings                                                 -               -
Troubled debt restructurings and total nonperforming assets    $         3,163    $      3,156

Total nonperforming loans to total loans                                  0.95 %          0.91 %
Total nonperforming assets to total assets                                0.83 %          0.84 %
Total nonperforming assets to loans and real estate owned                 1.28 %          1.25 %

There were no other loans that are not disclosed above where there is information about possible credit problems of borrowers that caused us serious doubts about the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure of such loans in the future.

Interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms was $59 thousand and $41 thousand for the three months ended September 30, 2012 and 2011, respectively. Interest of $8 thousand and $5 thousand was recognized on these loans and is included in net income for the three months ended September 30, 2012 and 2011, respectively.


Table of Contents

Analysis of Net Interest Margin

The following tables set forth average balance sheets, average yields and rates, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the tables as loans carrying a zero yield. The yields set forth below include the effect of net deferred costs, discounts and premiums that are amortized or accreted to income.

                                                     For the Three Months Ended September 30,
                                                  2012                                    2011
                                                Interest                                    Interest
                                    Average        and        Yield/         Average           and       Yield/
                                    Balance     Dividends      Cost          Balance        Dividends     Cost
                                                               (Dollars in Thousands)
Assets:
Interest-earning assets:
Loans                              $ 248,053   $     3,370        5.39 %  $      266,257   $     3,670     5.47 %
Investment securities                 75,221           266        1.40            45,132           172     1.51
Other interest-earning assets         30,991            18        0.23            35,895            29     0.32
Total interest-earning assets        354,265         3,654        4.09           347,284         3,871     4.42
Noninterest-earning assets            24,472                                      26,514
Total assets                       $ 378,737                              $      373,798

Liabilities and equity:
Interest-bearing liabilities:
NOW and demand deposits            $  18,552   $         3        0.06 %  $       16,333   $         6     0.15 %
Money market deposits                 12,060            14        0.45            10,072            11     0.43
Regular savings and other
deposits                              34,478            55        0.64            33,933            41     0.48
Certificates of deposit              225,130           553        0.97           228,200           888     1.54
Total interest-bearing deposits      290,220           625        0.85           288,538           946     1.30
Total interest-bearing
liabilities                          290,220                                     288,538
Noninterest bearing deposits           3,068                                       2,149
Other noninterest-bearing
liabilities                            2,034                                       2,536
Total liabilities                    295,322                                     293,223
Equity                                83,415                                      80,575
Total liabilities and equity       $ 378,737                              $      373,798

Net interest income                            $     3,029                                 $     2,925
Interest rate spread                                              3.24 %                                   3.12 %
Net interest margin                                               3.39 %                                   3.34 %
Average interest-earning assets
to average interest-bearing
liabilities                             1.22 X                                      1.20 X


Table of Contents

Comparison of Operating Results for the Three Months Ended September 30, 2012 and September 30, 2011

General. We recognized net income of $1.0 million for the three months ended September 30, 2012 as compared to net income of $977 thousand for the three months ended September 30, 2011. The increase of $40 thousand was primarily attributable to a decrease in noninterest expense of $100 thousand for the three months ended September 30, 2012 to $1.3 million from $1.4 million for the three months ended September 30, 2011, offset by a decrease in noninterest income of $11 thousand for the three months ended September 30, 2012.

Interest Income. Interest income decreased by $217 thousand to $3.7 million for the three months ended September 30, 2012. The decrease was primarily the result of a decrease in the average yield on interest earning assets to 4.09% for the three months ended September 30, 2012 from 4.42% for the three months ended September 30, 2011, which offset the increase in the average balance of interest earning assets of $7.0 million to $354.3 million for the three months ended September 30, 2012 from $347.3 million for the three months ended September 30, 2011.

Interest income on loans decreased by $300 thousand, or 8.2%, to $3.4 million for the three months ended September 30, 2012 from $3.7 million for the three months ended September 30, 2011. The decrease resulted from a decrease in the average balances of loans of $18.2 million to $248.1 million for the three months ended September 30, 2012 from $266.3 million for the three months ended September 30, 2011 and a decrease in the yield on loans from 5.47% for the three months ended September 30, 2011 to 5.39%. Interest income on investment securities increased by $94 thousand to $266 thousand for the three months ended September 30, 2012 from $172 thousand for the three months ended September 30, 2011. The increase reflected an increase in the average balance of securities to $75.2 million for the three months ended September 30, 2012 from $45.1 million for the three months ended September 30, 2011. The increase in average balances offset the decrease in yields on such securities to 1.40% from 1.51% for the same periods. The increase in average balances of our investment securities is reflective of our efforts to invest excess funds available from loan repayments coupled with a declining demand for residential mortgage loans in our market area.

Interest Expense. Interest expense decreased $321 thousand, or 33.9%, to $625 thousand for the three months ended September 30, 2012 from $946 thousand for the three months ended September 30, 2011. The decrease reflected a decrease in the average rate paid on deposits in the three months ended September 30, 2012 to 0.85% from 1.30% in the three months ended September 30, 2011, which more than offset an increase in the average balance of deposits of $1.7 million to $290.2 million for the three months ended September 30, 2012 from $288.5 million for the three months ended September 30, 2011. The largest decrease in interest expense came from certificates of deposit, which decreased $335 thousand, or 37.7% as the average balance of certificates of deposits decreased $3.1 million and the average rate paid on these deposits to 0.97% from 1.54%.

Net Interest Income. Net interest income increased by $104 thousand, or 3.6%, to $3.0 million for the three months ended September 30, 2012 from $2.9 million for the three months ended September 30, 2011. The increase resulted from an increase in our interest rate spread to 3.24% from 3.12% and an increase in our net interest margin to 3.39% from 3.34% for the same periods. The increase in our interest rate spread was largely due to our declining cost of funds, which reflected the continuing decline across the U.S. Treasury yield curve.

Provision for Loan Losses. We recorded a provision for loan losses of $141 thousand for the three months ended September 30, 2012, compared to a provision of $28 thousand for the three months ended September 30, 2011. Net charge-offs for the three months ended September 30, 2012 were $68 thousand compared to $54 thousand for the three months ended September 30, 2011. The increase in net charge-offs is reflective of the increasing balance of impaired loans. The total balance of impaired loans at September 30, 2012 was $2.8 million as compared to $2.5 million at June 30, 2012 and $1.5 million at September 30, 2011. Concomitantly, increases in impaired loans resulted in increases to our provision for loan losses. At September 30, 2012, June 30, 2012, and September 30, 2011, a total allowance for loan losses of $192 thousand, $101 thousand, and $21 thousand, respectively, was specifically allocated to loans deemed to be impaired.

We used the same methodology in assessing the allowances for both periods. To the best of our knowledge, we have recorded all losses that are both probable and reasonably estimable for the three months ended September 30, 2012 and 2011.

Noninterest Income. Noninterest income decreased by $11 thousand to $86 thousand for the three months ended September 30, 2012 from $97 thousand for the same period in 2011. The decrease in noninterest income was primarily attributed to a decrease of $67 thousand of gain on sales of securities, which was partially offset by an increase of $45 thousand in gain on sales of real estate owned for the three months ended September 30, 2012 compared to the period ended September 30, 2011.


Table of Contents

Noninterest Expense. Noninterest expense decreased by $100 thousand to $1.3 million for the three months ended September 30, 2012 from $1.4 million for the same period in 2011. The decrease was primarily attributable to decreases in data processing expenses of $16 thousand, professional and supervisory fees of $49 thousand, FDIC deposit insurance premiums of $14 thousand, the provision for real estate owned and related expenses of $107 thousand and other noninterest expense of $50 thousand, respectively. These decreases were partially offset by an increase in salaries and employee benefits of $124 thousand. The decrease in our provision for real estate owned and related expenses is a reflection of a decrease in the balance of real estate owned to $820 thousand at September 30, 2012 as compared to $854 thousand at June 30, 2012 and a decrease in legal and other administrative fees associated with real estate owned properties. Salaries and employee benefits increased primarily due to increases in ESOP expense to $48 thousand for the three months ended September 30, 2012 compared to $30 thousand for the three months ended September 30, 2011 and stock-based compensation expense of $58 thousand for the three months ended September 30, 2012 related to our equity incentive plans.

Income Tax Expense. Income tax expense for the three months ended September 30, 2012 was $670 thousand compared $630 thousand for the three months ended September 30, 2011. Our effective income tax rate remained relatively the same at 39.8% and 39.2% for the three months ended September 30, 2012 and 2011.

Liquidity and Capital Resources

Our primary sources of funds are deposits and the proceeds from principal and interest payments on loans and investment securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. We generally manage the pricing of our deposits to be competitive within our market and to increase core deposit relationships.

Liquidity management is both a daily and long-term responsibility of management. We adjust our investments in liquid assets based upon management's assessment of
(i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and investment securities, and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning overnight deposits, federal funds sold, and short and intermediate-term U.S. Government sponsored agencies and mortgage-backed securities of short duration. If we require funds beyond our ability to generate them internally, we have credit available under a loan agreement with the Federal Home Loan Bank of Atlanta in the amount of 11% assets (as of September 30, 2012), or approximately $41.6 million.

Common Stock Dividend Policy. The Company paid a dividend of $0.10 per share, or $643 thousand, on August 23, 2012 to shareholders of record at August 9, 2012.


Table of Contents

  Add OFED to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for OFED - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.