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EX-32 - CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER AND SENIOR VICE PRESIDENT - Oconee Federal Financial Corp.ex32.htm
EX-31.2 - CERTIFICATION OF SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER - Oconee Federal Financial Corp.ex31-2.htm
EX-31.1 - CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER - Oconee Federal Financial Corp.ex31-1.htm

 

 

UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 10-Q

 


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period ended March 31, 2020

 

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For transition period from           to

 

Commission File Number 001-35033

 


Oconee Federal Financial Corp.  

(Exact Name of Registrant as Specified in Charter)

 


 

Federal

 

32-0330122

(State of Other Jurisdiction

of Incorporation) 

 

(I.R.S Employer 

Identification Number)

 

 

201 East North Second Street, Seneca, South Carolina

 

29678

(Address of Principal Executive Officers)

 

(Zip Code)

 

(864) 882-2765

Registrant’s telephone number, including area code

 

Not Applicable

(Former name or former address, if changed since last report)

 


 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

OFED

 

The NASDAQ Stock Market, LLC

 

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 subject to such filing requirements for the past 90 days. Yes  ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

             

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of May 7, 2020, the registrant had 5,675,281 shares of common stock, $0.01 par value per share, outstanding.

 

 

 
 

 

OCONEE FEDERAL FINANCIAL CORP.

 

Form 10-Q Quarterly Report

 

Table of Contents

 

PART I.

 

2

     
ITEM 1.

FINANCIAL STATEMENTS

2

     

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

33

     

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

42

     

ITEM 4.

CONTROLS AND PROCEDURES

42

     

PART II.

 

43

     

ITEM 1.

LEGAL PROCEEDINGS

43

     

ITEM 1A.

RISK FACTORS

43

     

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

43

     

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

43

     

ITEM 4.

MINE SAFETY DISCLOSURES

43

     

ITEM 5.

OTHER INFORMATION

43

     

ITEM 6.

EXHIBITS

44

     

SIGNATURES

45

   

EXHIBITS

 

1 

 

 

OCONEE FEDERAL FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)

 

PART I

ITEM 1.

 FINANCIAL STATEMENTS

 

 

 

March 31,
2020

 

 

June 30,
2019 

 

    (unaudited)        

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

5,114

 

 

$

5,678

 

Interest-earning deposits

 

 

20,854

 

 

 

30,946

 

Fed funds sold

 

 

144

 

 

 

66

 

Total cash and cash equivalents

 

 

26,112

 

 

 

36,690

 

Securities available-for-sale

 

 

86,885

 

 

 

95,429

 

Loans

 

 

353,164

 

 

 

360,088

 

Allowance for loan losses

 

 

(1,296

)

 

 

(1,297

)

Net loans

 

 

351,868

 

 

 

358,791

 

Loans held for sale, at fair value

 

 

1,083

 

 

 

 

Premises and equipment, net

 

 

9,489

 

 

 

8,134

 

Real estate owned, net

 

 

295

 

 

 

811

 

Accrued interest receivable

 

 

 

 

 

 

 

 

Loans

 

 

1,055

 

 

 

1,137

 

Investments

 

 

329

 

 

 

447

 

Restricted equity securities, at cost

 

 

1,249

 

 

 

1,854

 

Bank owned life insurance

 

 

19,370

 

 

 

19,022

 

Goodwill

 

 

2,593

 

 

 

2,593

 

Core deposit intangible

 

 

233

 

 

 

305

 

Loan servicing rights

 

 

590

 

 

 

868

 

Deferred tax assets

 

 

604

 

 

 

1,187

 

Other assets

 

 

469

 

 

 

558

 

Total assets

 

$

502,224

 

 

$

527,826

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

Noninterest - bearing

 

$

37,012

 

 

$

36,232

 

Interest - bearing

 

 

369,351

 

 

 

382,874

 

Total deposits

 

 

406,363

 

 

 

419,106

 

Federal Home Loan Bank advances

 

 

5,000

 

 

 

19,000

 

Accrued interest payable and other liabilities

 

 

1,422

 

 

 

1,423

 

Total liabilities

 

 

412,785

 

 

 

439,529

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 100,000,000 shares authorized; 6,530,074 and 6,530,074 shares outstanding, respectively

 

 

65

 

 

 

65

 

Treasury stock, at par, 854,068 and 771,008 shares, respectively

 

 

(9

)

 

 

(8

)

Additional paid-in capital

 

 

9,192

 

 

 

10,986

 

Retained earnings

 

 

78,745

 

 

 

77,464

 

Accumulated other comprehensive income

 

 

1,903

 

 

 

394

 

Unearned ESOP shares

 

 

(457

)

 

 

(604

)

Total shareholders’ equity

 

 

89,439

 

 

 

88,297

 

Total liabilities and shareholders’ equity

 

$

502,224

 

 

$

527,826

 

 

See accompanying notes to the consolidated financial statements

 

2 

 

 

OCONEE FEDERAL FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Amounts in thousands, except share and per share data)

 

      Three Months Ended       Nine Months Ended  

 

 

 

March 31,
2020

 

 

 

March 31,
2019

 

 

 

March 31,
2020

 

 

 

March 31,
2019

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

4,174

 

 

$

4,123

 

 

$

12,436

 

 

$

11,942

 

Securities, taxable

 

 

368

 

 

 

396

 

 

 

1,149

 

 

 

1,211

 

Securities, tax-exempt

 

 

93

 

 

 

173

 

 

 

292

 

 

 

587

 

Other interest-earning assets

 

 

84

 

 

 

94

 

 

 

422

 

 

 

167

 

Total interest income

 

 

4,719

 

 

 

4,786

 

 

 

14,299

 

 

 

13,907

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

905

 

 

 

837

 

 

 

2,991

 

 

 

2,058

 

Other borrowings

 

 

13

 

 

 

178

 

 

 

198

 

 

 

424

 

Total interest expense

 

 

918

 

 

 

1,015

 

 

 

3,189

 

 

 

2,482

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

3,801

 

 

 

3,771

 

 

 

11,110

 

 

 

11,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

 

 

 

85

 

 

 

 

 

 

234

 

Net interest income after provision for loan losses

 

 

3,801

 

 

 

3,686

 

 

 

11,110

 

 

 

11,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

104

 

 

 

113

 

 

 

330

 

 

 

327

 

Income on bank owned life insurance

 

 

121

 

 

 

126

 

 

 

348

 

 

 

355

 

Mortgage servicing income

 

 

44

 

 

 

51

 

 

 

141

 

 

 

161

 

Gain on sale of mortgage loans

 

 

21

 

 

 

37

 

 

 

103

 

 

 

86

 

ATM & debit card income

 

 

82

 

 

 

72

 

 

 

255

 

 

 

225

 

Change in fair value of equity securities, net

 

 

(130

)

 

 

132

 

 

 

(98

)

 

 

90

 

Gain/(loss) on sale of securities, net

 

 

113

 

 

 

(51

)

 

 

125

 

 

 

(50

)

Gain on payoff of purchase credit impaired loans

 

 

277

 

 

 

42

 

 

 

309

 

 

 

64

 

Other

 

 

1

 

 

 

6

 

 

 

5

 

 

 

49

 

Total noninterest income

 

 

633

 

 

 

528

 

 

 

1,518

 

 

 

1,307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

1,628

 

 

 

1,779

 

 

 

4,796

 

 

 

5,192

 

Occupancy and equipment

 

 

556

 

 

 

463

 

 

 

1,483

 

 

 

1,340

 

Data processing

 

 

230

 

 

 

221

 

 

 

667

 

 

 

677

 

ATM & debit card expense

 

 

60

 

 

 

50

 

 

 

182

 

 

 

155

 

Professional and supervisory fees

 

 

132

 

 

 

112

 

 

 

460

 

 

 

513

 

Office expense

 

 

57

 

 

 

46

 

 

 

165

 

 

 

149

 

Advertising

 

 

72

 

 

 

68

 

 

 

199

 

 

 

177

 

FDIC deposit insurance

 

 

1

 

 

 

32

 

 

 

3

 

 

 

95

 

Foreclosed assets, net

 

 

123

 

 

 

31

 

 

 

267

 

 

 

56

 

Change in loan servicing asset

 

 

191

 

 

 

67

 

 

 

278

 

 

 

143

 

Other

 

 

196

 

 

 

191

 

 

 

601

 

 

 

611

 

Total noninterest expense

 

 

3,246

 

 

 

3,060

 

 

 

9,101

 

 

 

9,108

 

Income before income taxes

 

 

1,188

 

 

 

1,154

 

 

 

3,527

 

 

 

3,390

 

Income tax expense

 

 

242

 

 

 

202

 

 

 

556

 

 

 

649

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net income

 

$

946

 

 

$

952

 

 

$

2,971

 

 

$

2,741

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on securities available-for-sale

 

$

1,635

 

 

$

1,450

 

 

$

2,034

 

 

$

2,350

 

Tax effect

 

 

(341

)

 

 

(289

)

 

 

(426

)

 

 

(469

)

Reclassification adjustment for (gains)/losses realized

in net income

 

 

(113

)

 

 

51

 

 

 

(125

)

 

 

50

 

Tax effect

 

 

23

 

 

 

(11

)

 

 

26

 

 

 

(11

)

Total other comprehensive income

 

 

1,204

 

 

 

1,201

 

 

 

1,509

 

 

 

1,920

 

Comprehensive income

 

$

2,150

 

 

$

2,153

 

 

$

4,480

 

 

$

4,661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share: (Note 3)

 

$

0.17

 

 

$

0.17

 

 

$

0.52

 

 

$

0.48

 

Diluted net income per share: (Note 3)

 

$

0.17

 

 

$

0.16

 

 

$

0.52

 

 

$

0.47

 

Dividends declared per share:

 

$

0.10

 

 

$

0.30

 

 

$

0.30

 

 

$

0.30

 

 

See accompanying notes to the consolidated financial statements

 

3 

 

 

OCONEE FEDERAL FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(Amounts in thousands, except share and per share data)

For the three months ended March 31, 2020 and March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

Unearned

 

 

 

 

Common

 

Treasury

 

Paid-In

 

Retained

 

Comprehensive

 

ESOP

 

 

 

 

Stock

 

Stock

 

Capital

 

Earnings

 

Income (loss)

 

Shares

 

Total

Balance at December 31, 2018

 

$

65

 

 

$

(7

)

 

$

11,625

 

 

$

76,819

 

 

$

(1,809

)

 

$

(702

)

 

$

85,991

 

Net income

 

 

 

 

 

 

 

 

 

 

 

952

 

 

 

 

 

 

 

 

 

952

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,201

 

 

 

 

 

 

1,201

 

Reclassification of unrealized gain on equity

securities

 

 

 

 

 

 

 

 

 

 

 

109

 

 

 

(109

)

 

 

 

 

 

 

Purchase of 30,438 shares of treasury stock(1)

 

 

 

 

 

(1

)

 

 

(812

)

 

 

 

 

 

 

 

 

 

 

 

(813

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

40

 

 

 

 

 

 

 

 

 

 

 

 

40

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

(575

)

 

 

 

 

 

 

 

 

(575

)

ESOP shares earned

 

 

 

 

 

 

 

 

43

 

 

 

 

 

 

 

 

 

49

 

 

 

92

 

Balance at March 31, 2019

 

$

65

 

 

$

(8

)

 

$

10,896

 

 

$

77,305

 

 

$

(717

)

 

$

(653

)

 

$

86,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

$

65

 

 

$

(8

)

 

$

10,215

 

 

$

78,392

 

 

$

699

 

 

$

(507

)

 

$

88,856

 

Net income

 

 

 

 

 

 

 

 

 

 

 

946

 

 

 

 

 

 

 

 

 

946

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,204

 

 

 

 

 

 

1,204

 

Purchase of 42,981 shares of treasury stock(2)

 

 

 

 

 

(1

)

 

 

(1,109

)

 

 

 

 

 

 

 

 

 

 

 

(1,110

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

 

 

 

20

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

(593

)

 

 

 

 

 

 

 

 

(593

)

ESOP shares earned

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

 

50

 

 

 

116

 

Balance at March 31, 2020

 

$

65

 

 

$

(9

)

 

$

9,192

 

 

$

78,745

 

 

$

1,903

 

 

$

(457

)

 

$

89,439

 

 

 

(1)

The weighted average cost of treasury shares purchased during the three months ended was $26.71 per share. Treasury stock repurchases were accounted for using the par value method.

 

(2)

The weighted average cost of treasury shares purchased during the three months ended was $25.81 per share. Treasury stock repurchases were accounted for using the par value method.

 

See accompanying notes to the consolidated financial statements

 

4 

 

 

OCONEE FEDERAL FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY 

(Unaudited) 

(Amounts in thousands, except share and per share data)

For the nine months ended March 31, 2020 and March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

Unearned

 

 

 

 

Common

 

Treasury

 

Paid-In

 

Retained

 

Comprehensive

 

ESOP

 

 

 

 

Stock

 

Stock

 

Capital

 

Earnings

 

Income (loss)

 

Shares

 

Total

Balance at June 30, 2018

 

$

65

 

 

$

(7

)

 

$

12,000

 

 

$

76,136

 

 

$

(2,528

)

 

$

(801

)

 

$

84,865

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,741

 

 

 

 

 

 

 

 

 

2,741

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,920

 

 

 

 

 

 

1,920

 

Reclassification of unrealized gain on equity

securities

 

 

 

 

 

 

 

 

 

 

 

109

 

 

 

(109

)

 

 

 

 

 

 

Purchase of 49,877 shares of treasury stock(1)

 

 

 

 

 

(1

)

 

 

(1,427

)

 

 

 

 

 

 

 

 

 

 

 

(1,428

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

106

 

 

 

 

 

 

 

 

 

 

 

 

106

 

Dividends(2)

 

 

 

 

 

 

 

 

42

 

 

 

(1,681

)

 

 

 

 

 

 

 

 

(1,639

)

ESOP shares earned

 

 

 

 

 

 

 

 

175

 

 

 

 

 

 

 

 

 

148

 

 

 

323

 

Balance at March 31, 2019

 

$

65

 

 

$

(8

)

 

$

10,896

 

 

$

77,305

 

 

$

(717

)

 

$

(653

)

 

$

86,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

 

$

65

 

 

$

(8

)

 

$

10,986

 

 

$

77,464

 

 

$

394

 

 

$

(604

)

 

$

88,297

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,971

 

 

 

 

 

 

 

 

 

2,971

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,509

 

 

 

 

 

 

1,509

 

Purchase of 83,060 shares of treasury stock(3)

 

 

 

 

 

(1

)

 

 

(2,036

)

 

 

 

 

 

 

 

 

 

 

 

(2,037

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

59

 

 

 

 

 

 

 

 

 

 

 

 

59

 

Dividends(4)

 

 

 

 

 

 

 

 

29

 

 

 

(1,690

)

 

 

 

 

 

 

 

 

(1,661

)

ESOP shares earned

 

 

 

 

 

 

 

 

154

 

 

 

 

 

 

 

 

 

147

 

 

 

301

 

Balance at March 31, 2020

 

$

65

 

 

$

(9

)

 

$

9,192

 

 

$

78,745

 

 

$

1,903

 

 

$

(457

)

 

$

89,439

 

 

 

(1)

The weighted average cost of treasury shares purchased during the nine months ended was $26.88 per share. Treasury stock repurchases were accounted for using the par value method.

 

(2)

Approximately $85 of cash dividends paid on shares in the ESOP was used as an additional principal reduction on the ESOP debt, resulting in the release of approximately 7,100 additional shares. The portion of the dividend paid on allocated shares of approximately $49 and resulting release of approximately 4,500 shares, was treated as a dividend. The portion of the dividend paid on unallocated shares of approximately $36 and resulting release of approximately 2,600 shares, and was accounted for as additional compensation expense for the nine months ended March 31, 2019.

 

(3)

The weighted average cost of treasury shares purchased during the six months ended was $24.52 per share. Treasury stock repurchases were accounted for using the par value method.

 

(4)

Approximately $79 of cash dividends paid on shares in the ESOP was used as an additional principal reduction on the ESOP debt, resulting in the release of approximately 7,300 additional shares. The portion of the dividend paid on allocated shares of approximately $50 and resulting release of approximately 4,400 shares, was treated as a dividend. The portion of the dividend paid on unallocated shares of approximately $29 and resulting release of approximately 2,800 shares, and was accounted for as additional compensation expense for the nine months ended March 31, 2020.

  

See accompanying notes to the consolidated financial statements

 

5 

 

 

OCONEE FEDERAL FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

(Amounts in thousands, except share and per share data)

 

 

 

Nine Months Ended

 

 

 

 

March 31,
2020

 

 

 

March 31,
2019

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

2,971

 

 

$

2,741

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

 

 

 

234

 

Provision for real estate owned

 

 

117

 

 

 

18

 

Depreciation and amortization, net

 

 

932

 

 

 

879

 

Net accretion of purchase accounting adjustments

 

 

(50

)

 

 

(159

)

Deferred income tax expense/(income)

 

 

403

 

 

 

(46

)

Net loss on sale of real estate owned

 

 

120

 

 

 

9

 

Net gain on sale of premises and equipment

 

 

 

 

 

(29

)

Change in loan servicing asset

 

 

278

 

 

 

143

 

Net gain/(loss) on sales of securities

 

 

(125

)

 

 

50

 

Mortgage loans originated for sale

 

 

(9,603

)

 

 

(4,160

)

Mortgage loans sold

 

 

8,623

 

 

 

4,246

 

Gain on sales of mortgage loans

 

 

(103

)

 

 

(86

)

Change in fair value of equity securities

 

 

98

 

 

 

(90

)

Increase in cash surrender value of bank owned life insurance

 

 

(348

)

 

 

(354

)

Gain on payoff of purchased credit impaired loans

 

 

(309

)

 

 

(64

)

ESOP compensation expense

 

 

301

 

 

 

323

 

Stock based compensation expense

 

 

59

 

 

 

106

 

Net change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accrued interest receivable and other assets

 

 

289

 

 

 

72

 

Accrued interest payable and other liabilities

 

 

(1

)

 

 

622

 

Net cash provided by operating activities

 

 

3,652

 

 

 

4,455

 

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchases of premises and equipment

 

 

(1,798

)

 

 

(1,145

)

Disposal of premises and equipment

 

 

 

 

 

29

 

Purchases of securities available-for-sale

 

 

(21,627

)

 

 

(4,184

)

Proceeds from maturities, paydowns and calls of securities available-for-sale

 

 

16,708

 

 

 

8,546

 

Proceeds from sales of securities available-for-sale

 

 

14,762

 

 

 

12,228

 

Purchases of restricted equity securities

 

 

(213

)

 

 

(366

)

Sales of restricted equity securities

 

 

818

 

 

 

151

 

Proceeds from sale of real estate owned

 

 

279

 

 

 

541

 

Loan originations and repayments, net

 

 

7,282

 

 

 

(32,720

)

Net cash provided/(used) in investing activities

 

 

16,211

 

 

 

(16,920

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Net change in deposits

 

 

(12,743

)

 

 

16,417

 

Proceeds from notes payable to FHLB

 

 

5,000

 

 

 

54,100

 

Repayment of notes payable to FHLB

 

 

(19,000

)

 

 

(49,600

)

Dividends paid

 

 

(1,661

)

 

 

(1,639

)

Purchase of treasury stock

 

 

(2,037

)

 

 

(1,428

)

Net cash (used)/provided by financing activities

 

 

(30,441

)

 

 

17,850

 

 

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

 

(10,578

)

 

 

5,385

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

36,690

 

 

 

9,910

 

Cash and cash equivalents, end of period

 

$

26,112

 

 

$

15,295

 

 

See accompanying notes to the consolidated financial statements

 

6 

 

 

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

 

(1)

BASIS OF PRESENTATION, RISKS AND UNCERTAINTIES

 

Basis of Presentation:

 

The accompanying unaudited consolidated financial statements of Oconee Federal Financial Corp., which include the accounts of its wholly owned subsidiary Oconee Federal Savings and Loan Association (the “Association”) (referred to herein as “the Company,” “we,” “us,” or “our”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Intercompany accounts and transactions are eliminated during consolidation. The Company is majority owned (73.37%) by Oconee Federal, MHC. These financial statements do not include the transactions and balances of Oconee Federal, MHC.

 

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company’s financial position as of March 31, 2020 and June 30, 2019 and the results of operations and cash flows for the interim periods ended March 31, 2020 and 2019. All interim amounts have not been audited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year ending June 30, 2020 or any other period. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.

 

Reclassifications:

 

Certain amounts have been reclassified to conform to the current period presentation. The reclassifications had no effect on net income or shareholders’ equity as previously reported.

 

Cash Flows:

 

Cash and cash equivalents include cash on hand, federal funds sold, overnight interest-earning deposits and amounts due from other depository institutions.

 

Use of Estimates:

 

To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual results could differ.

 

Risks and Uncertainties:

 

On March 10, 2020, the World Health Organization declared the outbreak of novel coronavirus (“COVID-19”) a pandemic, which continues to spread throughout the world and has adversely impacted global commercial activity and contributed to significant declines and volatility in financial markets. The COVID-19 outbreak and government responses are creating disruption in global supply chains and adversely impacting many industries. The outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. The spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We have certain employees working remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

 

The rapid development and fluidity of this situation precludes any prediction as to the ultimate material adverse impact of the COVID-19 outbreak with regard to capital, liquidity, loan loss reserves, etc. Nevertheless, the outbreak presents uncertainty and risk with respect to the Company, its performance, and its financial results.

 

7 

 

 

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

 

(2)

NEW ACCOUNTING STANDARDS

 

Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848)”. Issued in March 2020, ASU 2020-04 provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments are effective as of March 12, 2020 through December 31, 2022. The Company does not expect these amendments to have a material effect on its financial statements.

 

ASU 2020-03, “Codification Improvements to Financial Instruments”. Issued in March 2020, ASU 2020-03 provides guidance that makes narrow-scope improvements to various aspects of the financial instrument guidance, including the current expected credit losses (CECL) guidance issued in 2016. The amendments were effective upon issuance. The Company does not expect these amendments to have a material effect on its financial statements.

 

ASU 2020-02, “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)”. Issued in February 2020, ASU 2020-02 provides guidance to add and amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 119 related to the new credit losses standard and comments by the SEC staff related to the revised effective date of the new leases standard. The amendments were effective upon issuance. The Company does not expect these amendments to have a material effect on its financial statements.

 

ASU 2019-12, “Income Taxes (Topic 740)”. Issued in December 2019, ASU 2019-12 provides guidance to simplify accounting for income taxes by removing specific technical exceptions that often produce information investors have a hard time understanding. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For the Company, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

 

ASU 2019-11, “Codification to Improvements to Topic 326, Financial Instruments – Credit Losses”. Issued in November 2019, ASU 2019-11 provides guidance that addresses issues raised by stakeholders during the implementation of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect a variety of Topics in the Accounting Standards Codification. For the Company, the amendments are effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. Early adoption is permitted in any interim period as long as an entity has adopted the amendments in ASU 2016-13. The Company does not expect these amendments to have a material effect on its financial statements.

 

ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)”. Issued in November 2019, ASU 2019-10 provides guidance to defer the effective dates for private companies, not-for-profit organizations, and certain smaller reporting companies (such as the Company) applying standards on current expected credit losses (CECL), derivatives, hedging and leases. For the Company, the new effective date for Credit Losses (CECL) will be for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. For the Company, the effective dates for Derivatives, Hedging and Leases were not deferred under this guidance. The Company does not expect these amendments to have a material effect on its financial statements.

 

ASU 2019-07, “Codification Updates to SEC Sections”. Issued in July 2019, ASU 2019-07 updates various Topics of the Accounting Standards Codification to align the guidance in various SEC sections of the Codification with the requirements of certain SEC final rules. The amendments were effective upon issuance and did not have a material effect on the financial statements.

 

ASU 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief”. Issued in May 2019, ASU 2019-05 provides entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. On October 16, 2019, the Financial Accounting Standards Board (“FASB”) announced a delay in the implementation schedule allowing certain entities, including smaller reporting companies (such as the Company) to adopt ASU 2016-13 in fiscal years beginning after December 15, 2022, and interim periods within those years. The Company does not expect these amendments to have a material effect on its financial statements.

 

8 

 

 

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

 

ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”. Issued in April 2019, ASU 2019-04 clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments. The amendments related to credit losses will be effective for the Company for reporting periods beginning after December 15, 2019. The amendments related to hedging will be effective for the Company for interim and annual periods beginning after December 15, 2018. The amendments related to recognition and measurement of financial instruments will be effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.

 

ASU 2019-01, Leases (Topic 842): Codification Improvements. Issued in March 2019, ASU 2019-01 aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Accounting Standards Codification (ASC) 842, Leases, with that of the existing guidance (ASC 820, Fair Value Measurement). As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply and costs incurred to acquire the asset, as per ASC 842, Leases. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in ASC 820, Fair Value Measurement) should be applied. The ASU also requires lessors within the scope of ASC 942, Financial Services—Depository and Lending, to present all principal payments received under leases within investing activities. Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. The amendment is effective for the Company for fiscal years beginning after December 15, 2018, and interim periods within those years. The Company adopted the new guidance effective July 1, 2019. This pronouncement will not have a material impact on the Company’s consolidated financial statements as the Company does not have any significant leases.

 

ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. Issued in August 2018, ASU 2018-13 provides guidance about fair value measurement disclosures. The amendment requires numerous removals, modifications and additions of fair value disclosure information. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years; early adoption is permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

 

ASU 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”. Issued in March 2017, ASU 2017-08 amends the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments were applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this standard on June 30, 2019 as reflected by a $245 adjustment to retained earnings.

 

ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. Issued in January 2017, ASU 2017-04 amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 should be adopted on a prospective basis. The Company does not believe that this new guidance will have a material effect on its consolidated financial statements.

  

9 

 

 

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

 

ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. Issued in June 2016, ASU 2016-13 provides financial statement users with more decision-useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect an entity’s current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets. For purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are measured at amortized cost, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Subsequent changes in the allowance for credit losses on PCD assets are recognized through the statement of income as a credit loss expense. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has determined that it will continue to prepare its credit loss allowance internally. The Company is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements. On October 16, 2019, the FASB announced a delay in the implementation schedule allowing certain entities, including smaller reporting companies (such as the Company) to adopt ASU 2016-13 in fiscal years beginning after December 15, 2022, and interim periods within those years.

 

There have been no accounting standards that have been issued or proposed by the FASB or other standards-setting bodies during this quarter that are expected to have a material impact on the Company’s financial position, results of operations or cash flows. The Company continues to evaluate the impact of standards previously issued and not yet effective, and have no changes in our assessment to disclose since filing of the Annual Report on Form 10-K.

 

(3)

EARNINGS PER SHARE (“EPS”)

 

Basic EPS is based on the weighted average number of common shares outstanding and is adjusted for ESOP shares not yet committed to be released. Unvested restricted stock awards, which contain rights to non-forfeitable dividends, are considered participating securities and the two-class method of computing basic and diluted EPS is applied. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as outstanding stock options, were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Diluted EPS is calculated by adjusting the weighted average number of shares of common stock outstanding to include the effect of contracts or securities exercisable (such as stock options) or which could be converted into common stock, if dilutive, using the treasury stock method. The factors used in the earnings per common share computation follow: 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,
2020

 

 

March 31,
2019

 

 

March 31,
2020

 

 

March 31,
2019

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

946

 

 

$

952

 

 

$

2,971

 

 

$

2,741

 

Less: distributed earnings allocated to participating

securities

 

 

(1

)

 

 

(2

)

 

 

(3

)

 

 

(4

)

Less: (undistributed income) dividends in excess of earnings allocated to participating securities

 

 

 

 

 

 

 

 

(2

)

 

 

(3

)

Net earnings available to common shareholders

 

$

945

 

 

$

950

 

 

$

2,966

 

 

$

2,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding including participating securities

 

 

5,705,937

 

 

 

5,759,840

 

 

 

5,721,903

 

 

 

5,765,601

 

Less: participating securities

 

 

(8,800

)

 

 

(15,355

)

 

 

(8,800

)

 

 

(15,355

)

Less: average unearned ESOP shares

 

 

(51,990

)

 

 

(71,107

)

 

 

(54,778

)

 

 

(73,799

)

Weighted average common shares outstanding

 

 

5,645,147

 

 

 

5,673,378

 

 

 

5,658,325

 

 

 

5,676,447

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.17

 

 

$

0.17

 

 

$

0.52

 

 

$

0.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

5,645,147

 

 

 

5,673,378

 

 

 

5,658,325

 

 

 

5,676,447

 

Add: dilutive effects of assumed exercises of stock options

 

 

71,002

 

 

 

123,144

 

 

 

67,598

 

 

 

123,526

 

Average shares and dilutive potential common shares

 

 

5,716,149

 

 

 

5,796,522

 

 

 

5,725,923

 

 

 

5,799,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.17

 

 

$

0.16

 

 

$

0.52

 

 

$

0.47

 

 

10 

 

 

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

 

 

For the three and nine months ended March 31, 2020, 11,200 shares were considered anti-dilutive as the exercise price was in excess of the average market price, and for the three and nine months ended March 31, 2019, 22,400 shares were considered anti-dilutive as the exercise price was in excess of the average market price.

 

(4)       SECURITIES AVAILABLE-FOR-SALE

 

Debt, mortgage-backed and equity securities have been classified in the consolidated balance sheets according to management’s intent. U.S. Government agency mortgage-backed securities consists of securities issued by U.S. Government agencies and U.S. Government sponsored enterprises. Investment securities at March 31, 2020 and June 30, 2019 are as follows:

 

 

 

 

 

 

Gross

 

 

Gross

 

 

Change in

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair Value

 

 

Fair

 

March 31, 2020

 

Cost

 

 

Gains

 

 

Losses

 

 

Equity Securities

 

 

Value

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FHLMC common stock

 

$

20

 

 

$

 

 

$

 

 

$

94

 

 

$

114

 

Certificates of deposit

 

 

2,493

 

 

 

52

 

 

 

 

 

 

 

 

 

2,545

 

Municipal securities

 

 

21,102

 

 

 

476

 

 

 

(4

)

 

 

 

 

 

21,574

 

SBA loan pools

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

15

 

CMOs

 

 

10,733

 

 

 

345

 

 

 

(1

)

 

 

 

 

 

11,077

 

U.S. Government agency mortgage-backed

securities

 

 

48,007

 

 

 

1,514

 

 

 

 

 

 

 

 

 

49,521

 

U.S. Government agency bonds

 

 

2,013

 

 

 

26

 

 

 

 

 

 

 

 

 

2,039

 

Total available-for-sale

 

$

84,383

 

 

$

2,413

 

 

$

(5

)

 

$

94

 

 

$

86,885

 

 

                               

 

 

 

 

 

Gross

 

 

Gross

 

 

Change in

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair Value

 

 

Fair

 

June 30, 2019

 

Cost

 

 

Gains

 

 

Losses

 

 

Equity Securities

 

 

Value

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FHLMC common stock

 

$

20

 

 

$

 

 

$

 

 

$

192

 

 

$

212

 

Certificates of deposit

 

 

2,493

 

 

 

11

 

 

 

(5

)

 

 

 

 

 

2,499

 

Municipal securities

 

 

24,968

 

 

 

295

 

 

 

(38

)

 

 

 

 

 

25,225

 

SBA loan pools

 

 

22

 

 

 

 

 

 

 

 

 

 

 

 

22

 

CMOs

 

 

14,889

 

 

 

111

 

 

 

(30

)

 

 

 

 

 

14,970

 

U.S. Government agency mortgage-backed

securities

 

 

40,366

 

 

 

228

 

 

 

(52

)

 

 

 

 

 

40,542

 

U.S. Government agency bonds

 

 

11,980

 

 

 

10

 

 

 

(31

)

 

 

 

 

 

11,959

 

Total available-for-sale

 

$

94,738

 

 

$

655

 

 

$

(156

)

 

$

192

 

 

$

95,429

 

 

Securities pledged at March 31, 2020 and June 30, 2019 had fair values of $14,404 and $26,029, respectively. These securities were pledged to secure public deposits and Federal Home Loan Bank (“FHLB”) advances.

 

At March 31, 2020 and June 30, 2019, there were no holdings of securities of any one issuer, other than U.S. Government agencies and U.S. Government sponsored enterprises, in an amount greater than 10% of shareholders’ equity.

 

 

11 

 

 

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data)

 

The following tables show the fair value and unrealized loss of securities that have been in unrealized loss positions for less than twelve months and for twelve months or more at March 31, 2020 and June 30, 2019. The tables also show the number of securities in an unrealized loss position for each category of investment security as of the respective dates.

 

 

 

Less than 12 Months

 

 

12 Months or More

 

 

Total

 

 

 

Fair Value

 

 

Unrealized
Loss

 

 

Number in Unrealized Loss(1)

 

 

Fair Value

 

 

Unrealized
Loss

 

 

Number in Unrealized Loss(1)

 

 

Fair Value

 

 

Unrealized
Loss

 

 

Number in Unrealized Loss(1)

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal securities

 

 

1,149

 

 

 

(4

)

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

1,149

 

 

 

(4

)

 

 

2

 

CMOs

 

 

573

 

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

573

 

 

 

(1

)

 

 

1

 

U.S. Government agency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agency

bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,725

 

 

$

(5

)

 

 

3

 

 

$

 

 

$

 

 

 

 

 

$

1,725

 

 

$

(5

)

 

 

3

 

 

 

 

Less than 12 Months

 

 

12 Months or More

 

 

Total

 

 

 

Fair Value

 

 

Unrealized
Loss

 

 

Number in Unrealized Loss(1)

 

 

Fair Value

 

 

Unrealized
Loss

 

 

Number in Unrealized Loss(1)

 

 

Fair Value

 

 

Unrealized
Loss

 

 

Number in Unrealized Loss(1)

 

June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

$

991

 

 

$

(5

)

 

 

4

 

 

$

 

 

$

 

 

 

 

 

$

991

 

 

$

(5

)

 

 

4

 

Municipal securities

 

 

745

 

 

 

(10

)

 

 

2

 

 

 

3,750

 

 

 

(28

)

 

 

7

 

 

 

4,495

 

 

 

(38

)

 

 

9

 

CMOs

 

 

 

 

 

 

 

 

 

 

 

3,059

 

 

 

(30

)

 

 

7

 

 

 

3,059

 

 

 

(30

)

 

 

7

 

U.S. Government agency

mortgage-backed securities

 

 

5,377

 

 

 

(9

)

 

 

5

 

 

 

11,198

 

 

 

(43

)

 

 

18

 

 

 

16,575

 

 

 

(52

)

 

 

23

 

U.S. Government agency

bonds

 

 

4,475

 

 

 

(23

)

 

 

4

 

 

 

2,013

 

 

 

(8

)

 

 

2

 

 

 

6,488

 

 

 

(31

)

 

 

6

 

 

 

$

11,588

 

 

$

(47

)

 

 

15

 

 

$

20,020

 

 

$

(109

)

 

 

34

 

 

$

31,608

 

 

$

(156

)

 

 

49

 

 

 

(1)

Actual amounts.

 

The Company evaluates securities for other-than-temporary impairments (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company considers the length of time and the extent to which the fair value has been less than amortized cost and the financial condition and near-term prospects of the issuer. Additionally, the Company considers its intent to sell or whether it will be more likely than not it will be required to sell the security prior to the security’s anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by federal Government agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

 

None of the unrealized losses at March 31, 2020 were recognized into net income for the three or nine months ended March 31, 2020 because the issuers’ bonds are of high credit quality, management does not intend to sell and it is more likely than not that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value of these securities is expected to recover as they approach their maturity date or reset date. None of the unrealized losses at June 30, 2019 were recognized as having OTTI during the year ended June 30, 2019.

 

12 

 

 

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data) 

 

The following table presents the amortized cost and fair value of debt securities classified as available-for-sale at March 31, 2020 and June 30, 2019 by contractual maturity. 

 

 

 

March 31, 2020

 

 

June 30, 2019

 

 

 

 

Amortized

 

 

 

Fair

 

 

 

Amortized

 

 

 

Fair

 

 

 

 

Cost

 

 

 

Value

 

 

 

Cost

 

 

 

Value

 

Less than one year

 

$

251

 

 

$

250

 

 

$

2,000

 

 

$

1,994

 

Due from one to five years

 

 

8,525

 

 

 

8,697

 

 

 

11,627

 

 

 

11,663

 

Due after five years to ten years

 

 

11,284

 

 

 

11,538

 

 

 

18,817

 

 

 

18,955

 

Due after ten years

 

 

5,563

 

 

 

5,688

 

 

 

7,019

 

 

 

7,093

 

Mortgage-backed securities, CMOs and FHLMC stock(1)

 

 

58,760

 

 

 

60,712

 

 

 

55,275

 

 

 

55,724

 

Total available for sale

 

$

84,383

 

 

$

86,885

 

 

$

94,738

 

 

$

95,429

 

 

 

(1)

Actual cash flows may differ from contractual maturities as borrowers may prepay obligations without prepayment penalty. FHLMC common stock is not scheduled because it has no contractual maturity date.     

 

The following table presents the gross proceeds from sales of securities available-for-sale and gains or losses recognized for the three and nine months ended March 31, 2020 and 2019:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

March 31,
2020

 

 

March 31,
2019

 

 

March 31,
2020

 

 

March 31,
2019

 

Available-for-sale:                                

Proceeds

 

$

9,494

 

 

$

11,035

 

 

$

14,762

 

 

$

12,228

 

Gross gains

 

 

122

 

 

 

10

 

 

 

137

 

 

 

13

 

Gross losses

 

 

(9

)

 

 

(61

)

 

 

(12

)

 

 

(63

)

 

The tax provision related to the net realized gain for the nine months ended March 31, 2020 was $26, and the tax benefit related to the net realized loss for the nine months ended March 31, 2019 was $11.

 

(5)     LOANS

 

The components of loans at March 31, 2020 and June 30, 2019 were as follows:

 

 

 

March 31,
2020

 

 

June 30,
2019

 

Real estate loans:

 

 

 

 

 

 

 

 

One-to-four family

 

$

284,226

 

 

$

289,077

 

Multi-family

 

 

1,506

 

 

 

1,605

 

Home equity

 

 

6,458

 

 

 

5,191

 

Nonresidential

 

 

14,671

 

 

 

19,350

 

Agricultural

 

 

1,525

 

 

 

1,510

 

Construction and land

 

 

34,194

 

 

 

33,651

 

Total real estate loans

 

 

342,580

 

 

 

350,384

 

Commercial and industrial

 

 

3,738

 

 

 

4,390

 

Consumer and other loans

 

 

6,846

 

 

 

5,314

 

Total loans

 

$

353,164

 

 

$

360,088

 

 

13 

 

 

OCONEE FEDERAL FINANCIAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data) 

 

The following tables present the activity in the allowance for loan losses for the three and nine months ended March 31, 2020 by portfolio segment:

 

Three months ended March 31, 2020

 

Beginning Balance

 

 

Provision

 

 

Charge-offs

 

 

Recoveries

 

 

Ending
 Balance

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four family

 

$

993

 

 

$

6

 

 

$

 

 

$

 

 

$

999

 

Multi-family

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Home equity

 

 

33

 

 

 

3

 

 

 

 

 

 

 

 

 

36

 

Nonresidential

 

 

77

 

 

 

(14

)

 

 

 

 

 

 

 

 

63

 

Agricultural

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Construction and land

 

 

94

 

 

 

10

 

 

 

 

 

 

 

 

 

104

 

Total real estate loans

 

 

1,205

 

 

 

5

 

 

 

 

 

 

 

 

 

1,210

 

Commercial and industrial

 

 

66

 

 

 

(7

)

 

 

 

 

 

 

 

 

59

 

Consumer and other loans

 

 

25

 

 

 

2

 

 

 

 

 

 

 

 

 

27

 

Total loans

 

$

1,296

 

 

$

 

 

$

 

 

$

 

 

$

1,296

 

 

  

Nine months ended March 31, 2020

 

Beginning Balance

 

 

Provision

 

 

Charge-offs

 

 

Recoveries

 

 

Ending Balance

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four family

 

$

995

 

 

$

4

 

 

$

 

 

$

 

 

$

999

 

Multi-family

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Home equity

 

 

24

 

 

 

12

 

 

 

 

 

 

 

 

 

36

 

Nonresidential

 

 

87

 

 

 

(24

)

 

 

 

 

 

 

 

 

63

 

Agricultural

 

 

3

 

 

 

1

 

 

 

 

 

 

 

 

 

4

 

Construction and land

 

 

94

 

 

 

10

 

 

 

 

 

 

 

 

 

104

 

Total real estate loans

 

 

1,207

 

 

 

3

 

 

 

 

 

 

 

 

 

1,210

 

Commercial and industrial

 

 

67

 

 

 

(8

)

 

 

 

 

 

 

 

 

59

 

Consumer and other loans

 

 

23

 

 

 

5

 

 

 

(1

)

 

 

 

 

 

27

 

Total loans

 

$

1,297

 

 

$

 

 

$

(1

)

 

$

 

 

$

1,296

 

 

14 

 

 

OCONEE FEDERAL FINANCIAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share data) 

 

The following table presents the recorded balances of loans and amount of allowance allocated based upon impairment method by portfolio segment at March 31, 2020:

 

 

 

Ending Allowance on Loans:

 

 

Loans:

 

At  March 31, 202

 

Individually Evaluated for Impairment

 

 

Collectively Evaluated for Impairment

 

 

 Individually Evaluated for Impairment

 

 

Collectively Evaluated for Impairment

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four family

 

$

 

 

$

999

 

 

$

2,473

 

 

$

281,753

 

Multi-family

 

 

 

 

 

4

 

 

 

 

 

 

1,506

 

Home equity

 

 

 

 

 

36

 

 

 

 

 

 

6,458

 

Nonresidential

 

 

 

 

 

63

 

 

 

575

 

 

 

14,096

 

Agricultural

 

 

 

 

 

4

 

 

 

320