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 June 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 August 14, 2001

OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
	INDEX
		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheet (unaudited) at June 30, 2001	3
	Consolidated Statements of Earnings (unaudited) for the Three Months and the Six Months Ended June 30, 2001 and  2000	4
	Consolidated Statements of Comprehensive Income unaudited) for the Six Months Ended June 30, 2001 and 2000	5
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 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	12-14
Item 5.	Other Information	14
Item 6.	Exhibits and Reports on Form 8-K	14

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheet
June 30, 2001
(Unaudited)
Assets
Cash and due from banks	$	7,850,213
Federal funds sold		10,449,000
Investment securities available for sale
(amortized cost of $33,592,993)		33,808,109
Mortgage loans held for sale		3,041,141
Loans		138,070,388
Less: Allowance for loan losses		(1,677,469)
Loans, net		136,392,919
Premises and equipment, net		2,269,649
Accrued interest receivable and other assets		4,241,439
Total Assets	$	198,052,470
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	21,765,261
Interest-bearing		143,838,840
Total Deposits		165,604,101
Securities sold under repurchase agreements		1,330,966
Federal Home Loan Bank Advances		13,300,000
Accrued interest payable and other liabilities		1,313,381
Total Liabilities		181,548,448
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		10,323,962
Accumulated other comprehensive income		133,458
Total stockholders’ equity		16,504,022
Total liabilities and stockholders’ equity	$	198,052,470
See accompanying notes to financial statements.

3

OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Earnings
For the Three Months and the Six Months Ended June 30, 2001 and 2000
(Unaudited)
		Three Months				Six Months
		Ended				Ended
		2001		2000		2001		2000
Interest Income:
Loans	$	3,365,848	$	2,748,521	$	6,715,084	$	5,126,583
Investment securities:
Tax exempt		173,487		212,938		342,501		421,029
Taxable		306,441		384,426		571,756		771,701
Federal funds sold and other		155,528		66,681		382,151		169,682
Total interest income		4,001,304		3,412,566		8,011,492		6,488,995
Interest Expense:
Deposits		1,822,795		1,402,426		3,579,872		2,716,546
Other		224,475		15,342		444,647		23,857
Total interest expense		2,047,270		1,417,768		4,024,519		2,740,403
Net interest income		1,954,034		1,994,798		3,986,973		3,748,592
Provision for loan losses		75,000		51,900		150,000		103,800
Net interest income after provision for loan losses		1,879,034		1,942,898		3,836,973		3,644,792
Other Income:
Service charges on deposit accounts		282,182		221,138		515,199		406,756
Securities gains (losses), net		0		(98,063)		0		(98,063)
Other operating income		219,106		131,360		488,767		293,864
Total other income		501,288		254,435		1,003,966		602,557
Other Expense:
Salaries and other personnel expense		975,954		805,919		1,932,071		1,591,965
Net occupancy and equipment expense		213,699		193,103		401,767		372,415
Other operating expense		461,500		372,503		882,285		709,592
Total other expense		1,651,153		1,371,525		3,216,123		2,673,972
Earnings before income taxes		729,169		825,808		1,624,816		1,573,377
Income taxes		203,000		235,433		479,532		444,312
Net earnings	$	526,169	$	590,375	$	1,145,284	$	1,129,065
Earnings per common share based on average
outstanding shares of 899,885 in 2001 and 2000:	$	0.58	$	0.66	$	1.27	$	1.25
See accompanying notes to financial statements.

4

OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
		2001	2000
Net earnings	$	1,145,284	1,129,065
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Holding gains (losses) arising during period, net of tax
of $185,640 and $25,770		303,402	42,046
Reclassification adjustments for (gains) losses included
in net earnings, net of tax of $0 and ($37,263)		0	(60,800)
Total other comprehensive income (loss)		303,402	(18,754)
Comprehensive income	$	1,448,686	1,110,311

          See accompanying notes to financial statements.

5

OCONEE FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
For Each of the Six Months Ended June 30, 2001 and 2000
(Unaudited)
		2001		2000
Cash flows from operating activities:
Net earnings	$	1,145,284	$	1,129,065
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Provision for loan losses		150,000		103,800
Depreciation, amortization and accretion		154,380		146,371
Loss on sale of investment securities		0		98,063
Change in assets and liabilities:
Interest receivable and other assets		(591,164)		(143,248)
Interest payable and other liabilities		25,476		154,897
Mortgage loans held for sale		(762,528)		(956,222)
Net cash provided by operating activities		121,448		532,726
Cash flows from investing activities:
Proceeds from maturities and paydowns of
investment securities available for sale		882,494		1,472,194
Proceeds from sales and calls of investment securities
available for sale		4,307,863		5,706,563
Purchases of investment securities available for sale		(8,421,835)		(2,950,769)
Net change in loans		(15,009,535)		(23,140,328)
Purchases of premises and equipment		(235,690)		(512,587)
Net cash used by investing activities		(18,476,703)		(19,424,927)
Cash flows from financing activities:
Net change in deposits		15,066,484		7,679,781
Net change in securities sold under repurchase agreements		494,879		507,339
Dividends paid		(989,873)		(899,970)
Purchase and retirement of stock		0		(2,160)
Net cash provided by financing activities		14,571,490		7,284,990
Net decrease in cash and cash equivalents		(3,783,765)		(11,607,211)
Cash and cash equivalents at beginning of period		22,082,978		16,127,789
Cash and cash equivalents at end of period	$	18,299,213	$	4,520,578
Supplemental cash flow information:
Cash paid for interest	$	3,198,356	$	2,205,217
Cash paid for taxes	$	564,366	$	484,378
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
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 June 30, 2001 were $198,052,470, representing a $16,127,311 (8.86%) increase from December 31, 2000. Deposits increased $15,066,484 (10.01%) from December 31, 2000. Loans increased $14,729,333 (11.94%). The increase in loan volume is due primarily to an increase in loans to finance commercial real estate. The allowance for loan losses at June 30, 2001 totaled $1,677,469, compared to the December 31, 2000 total of $1,807,671, representing 1.21% of total loans at June 30, 2001, compared to 1.47% at December 31, 2000. Cash and cash equivalents decreased $3,783,765 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 $532,082 at June 30, 2001, representing an increase of $276,312 (108.03%) from December 31, 2000. This increase is primarily attributable to a $239,619 increase in nonaccruing loans and a $36,537 increase in repossessed collateral. Nonaccrual loans represented 0.33% of total loans outstanding at June 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 June 30, 2001.

The Corporation’s subsidiary bank was most recently examined by its primary regulatory authority in October of 1999. There were no recommendations by the regulatory authority that in management’s opinion will have material effects on the Company’s liquidity, capital resources or operations.

8

Item 2.

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

Results of Operations

Net interest income increased $238,381(6.36%) in the first six months of 2001 compared to the same period for 2000. Interest income for the first six months of 2001 was $8,011,492, representing an increase of $1,522,497(23.46%) over the same period in 2000. Interest expense for the first six months of 2001 increased $1,284,116 (46.86%) compared to the same period in 2000. The increase in net interest income during the first six months of 2001 compared to the same period in 2000 is primarily attributable to the increase in the volume of loans. The increase in interest expense is primarily attributable to interest in the amount of $423,952 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 six months of 2001 was 4.64%, compared to 5.48% for the same time period during 2000. This decrease is primarily attributable to a 275 basis point decrease in the prime rate during the first six months of 2001.

The Bank analyzes its allowance for loan losses on a monthly basis. As of June 30, 2001, the provision for loan losses was $150,000, compared to $103,800 for the same period in 2000. The increase in the provision for loan losses is primarily attributable to growth in the loan portfolio. 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 six months of 2001 increased $401,409 (66.62%) compared to the first six months of 2000. This increase is attributable to a $211,719 increase in fee income on mortgage loans held for sale, as well as an $87,943 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 six months of 2001 increased $542,151 (20.28%) compared to the first six 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 June 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 June 30, 2001, based on the regulatory capital requirements of federal banking agencies.

Risk-Based Capital Ratios

Tier 1 Capital, Actual	10.5%
Tier 1 Capital minimum requirement	4.0%
Excess	6.5%
Total Capital, Actual	11.6%
Total Capital minimum requirement	8.0%
Excess	3.6%
Leverage Ratio
Tier 1 Capital to adjusted total assets
(Leverage Ratio	8.3%
Minimum leverage requirement	3.0%
Excess	5.3%

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
	(a)	Oconee Financial Corporation’s annual meeting of stockholders was held on May 7, 2001.
	(b)	The following is a summary of matters submitted to a vote of security holders:
		1.	The election * of the following directors to serve the current year term:
			G. Robert Bishop	Henry C. Maxey
			Jimmy L. Christopher	Carl R. Nichols
			Douglas D. Dickens	Ann B. Powers
			Walter T. Evans, Sr.	Jerry K. Wages
			John A. Hale	Virginia S. Wells
			B. Amrey Harden
			A tabulation of votes concerning the above issue is as follows:
			Shares voted by proxy in favor	132,055
			Shares voted in person in favor	2,217
			Shares voted in person against	0
			Shares abstained from voting	0
			Total shares represented	144,272
			Total shares outstanding	179,979
			* Directors were elected by slate, not individually. Vote tabulation is therefore by slate.

12

2.	The adoption of the following amendments to the bylaws of the corporation:
	(1)	Proposal to amend the Bylaws regarding the annual meeting that: (i) allows the Board of Directors to set the time and date for the annual meetings; and (ii) establishes a procedure regarding business that may be considered at annual meetings.
		Shares voted in favor	143,200
		Shares voted against	274
		Shares abstained from voting	798
	(2)	Proposal to amend the Bylaws to set forth a procedure by which shareholders may nominate directors.
		Shares voted in favor	139,733
		Shares voted against	127
		Shares abstained from voting	4,412
	(3)	Proposal to amend the Bylaws to allow the number of directors of the Corporation to be set by the resolution of the Board of Directors or by action of the shareholders.
		Shares voted in favor	138,081
		Shares voted against	1,703
		Shares abstained from voting	4,488
	(4)	Proposal to amend the Bylaws to limit those who may serve on the Board of Directors to those individuals who are shareholders of the Corporation.
		Shares voted in favor	141,287
		Shares voted against	1,035
		Shares abstained from voting	1,950
	(5)	Proposal to amend the Bylaws to eliminate the provision in the Bylaws that prohibits any individual, firm, or corporation from owning more than forty percent (40%) of the shares of the original capital stock of the Corporation.
		Shares voted in favor	134,802
		Shares voted against	6,369
		Shares abstained from voting	3,101
	(6)	Proposal to amend the Bylaws to adopt a provision to govern potential business combination transactions with interested shareholders.
		Shares voted in favor	139,043
		Shares voted against	481
		Shares abstained from voting	4,748
	(7)	Proposal to amend the Bylaws as to certain miscellaneous matters set forth on Exhibit F of the Proxy Statement.
		Shares voted in favor	138,627
		Shares voted against	544
		Shares abstained from voting	5,101

13

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.

14

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:     August 13, 2001

By         /s/ Jerry K. Wages

             Jerry K. Wages

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

Date:     August 13, 2001

15