Oconee Federal Financial Corp. Announces Three and Nine Month Financial Results

  Oconee Federal Financial Corp. Announces Three and Nine Month Financial
  Results

Business Wire

SENECA, S.C. -- May 1, 2013

Oconee Federal Financial Corp. (Nasdaq: OFED) (the “Company”), the holding
company for Oconee Federal Savings and Loan Association (the “Association”),
announced today net income of $850,000 or $0.14 per diluted share for the
three months ended March 31, 2013, compared to net income of $948,000, or
$0.16 per diluted share, for the three months ended March 31, 2012. The
Company had net income of $3.0 million, or $0.48 per diluted share, for the
nine months ended March 31, 2012, compared to net income of $2.8 million, or
$0.46 per diluted share for the same period in 2012.

2013 Three and Nine Months Ended Highlights:

  *Continued strong earnings amidst a challenging economy and low interest
    rates
  *Continued strong asset quality as evidenced by decreased levels of
    nonperforming loans to total loans and nonperforming assets to total
    assets
  *Decreases in our provision for real estate owned and other related
    expenses of $188,000 and $471,000 for the three and nine months ended
    March 31, 2013, respectively
  *Three quarterly dividends of $.10 per share of common stock paid during
    the nine months ended March 31, 2013
  *Repurchased 189,350 shares of common stock during the three months ended
    March 31, 2013, which brought the total shares of common stock repurchased
    to 352,550 during the nine months ended March 31, 2013

“We continue to experience favorable interest rate spreads and margins despite
the low interest rate environment, and we are able to achieve strong earnings
by managing our overhead costs effectively,” stated T. Rhett Evatt, President
and Chief Executive Officer. “Our core business line remains unchanged with
92% of total gross loans made up of one-to-four family real estate loans. We
continue to adhere to conservative lending practices, which account for our
strong asset quality metrics, and we continue to strive to provide the best
banking services to customers in our market area.”

Results of Operations

Interest income decreased to $3.5 million for the three months ended March 31,
2013 from $3.8 million for the three months ended March 31, 2012. The decrease
was primarily the result of a decrease in the average yield on interest
earning assets to 3.78% for the three months ended March 31, 2013 from 4.13%
for the three months ended March 31, 2012 and a decrease in the average
balance of our interest-earning assets of $1.5 million to $364.7 million for
the three months ended March 31, 2013 from $366.2 million for the three months
ended March 31, 2012. Interest expense decreased to $513,000 for the three
months ended March 31, 2013 from $747,000 for the three months ended March 31,
2012. The decrease reflected a decrease in the average rate paid on deposits
during the three months ended March 31, 2013 to 0.72% from 1.04% during the
three months ended March 31, 2012 and a decrease in the average balance of
deposits of $1.2 million, or 0.42%, to $288.1 million for the three months
ended March 31, 2013 from $289.3 million for the three months ended March 31,
2012.

Net interest income was $2.9 million for the three months ended March 31, 2013
compared to $3.0 million for the same period in 2012. The net interest margin
for the three months ended 2013 was 3.22%, down 9 basis-points from 3.31% for
the three months ended March 31, 2012. This decrease in net interest margin is
primarily reflective of the decrease in the yield on our investment securities
of 24 basis-points and to a lesser extent a decrease in the yield on our loan
portfolio of 2 basis-points. These decreases in average yields on loans and
investments were partially offset by a 32 basis-point decrease in the average
rate paid on interest bearing deposits. The decrease in the net interest
margin for the three months ended March 31, 2013 as compared to the same
period in 2012 is due to the continuing low interest rate environment.

Interest income decreased by $886,000 to $10.6 million for the nine months
ended March 31, 2013 from $11.5 million for the nine months ended March 31,
2012. The decrease was primarily the result of a decrease in the average yield
on interest earning assets to 3.87% for the nine months ended March 31, 2013
from 4.22% for the nine months ended March 31, 2012, which offset the increase
in the average balance of interest-earning assets to $366.4 million from
$364.2 million for the same periods. Interest expense decreased to $1.7
million for the nine months ended March 31, 2013 from $2.5 million for the
nine months ended March 31, 2012. The decrease reflected a decrease in the
average rate paid on deposits during the nine months ended March 31, 2013 to
0.79% from 1.17% during the nine months ended March 31, 2012 and a decrease in
the average balance of deposits of $440,000, or 0.15%, to $288.2 million
during the nine months ended March 31, 2013 from $287.8 million during the
nine months ended March 31, 2012.

Net interest income was $8.9 million for the nine months ended March 31, 2013
compared to $9.0 million for the same period in 2012. The net interest margin
for the nine months ended March 31, 2013 was 3.25%, down 4 basis-points from
3.29% for the nine months ended March 31, 2012. This result reflected both a 9
basis-point decrease in the average yield earned on the loan portfolio and a
20 basis-point decrease on the average yield earned on the investment
portfolio. These decreases in average yields on loans and investments were
partially offset by a 38 basis-point decrease in the average rate paid on
interest bearing deposits. The decrease in the net interest margin for the
nine months ended March 31, 2013 as compared to the same period in 2012 is due
to the continuing low interest rate environment.

Noninterest income for the three months ended March 31, 2013 was $88,000
compared with $58,000 for the same period in 2012; the increase was primarily
related to an increase in other noninterest income of $55,000. Noninterest
income increased by $9,000 to $222,000 for the nine months ended March 31,
2013 from $213,000 for the nine months ended March 31, 2012. The increase was
primarily related to an increase in gain on sales of real estate of $19,000
and an increase in other noninterest income of $62,000 for the nine months
ended March 31, 2013 as compared with the same period in 2012. The increase in
other noninterest income is primarily related to gains recognized upon
foreclosure of one-to-four residential real estate loans of $65,000 for the
nine months ended March 31, 2013. These increases were offset, partially, by a
decrease in gain on sales of securities of $75,000 for the nine months ended
March 31, 2013 as compared with the same period in 2012.

Noninterest expense for the three months ended March 31, 2013 increased
slightly by $9,000 for the three months ended March 31, 2013 over the same
period in 2012. The significant decrease in the provision for real estate
owned and related expense of $188,000 for the three months ended March 31,
2013 was offset primarily by an increase in salary and employee benefits of
$159,000, most of which is related to our equity incentive plans that were not
in place during the three months ended March 31, 2012. Noninterest expense for
the nine months ended March 31, 2013 decreased by $300,000 to $4.0 million
compared to $4.3 million for the same period in 2012. The decrease in
noninterest expenses was primarily related to a decrease of $471,000 in the
provision for real estate owned and related expenses, a decrease of $55,000 in
professional and supervisory fees, a decrease of $44,000 for data processing
expenses, and a decrease of $59,000 in other noninterest expenses. The
decrease in our provision for real estate owned and related expenses is
primarily attributable to a lower provision for real estate owned during the
nine months ended March 31, 2013 of $4,000 compared with $337,000 during the
nine months ended March 31, 2012 and to some extent a decrease in real estate
owned related expenses. The decrease in these expenses is a reflection of a
decrease in the average balance of real estate owned for the nine months ended
March 31, 2013 to $903,000 as compared with the average balance for the same
period in 2012 of $1.9 million. Additionally, we have seen some slight and
continued improvement in residential real estate home values since the period
ended in 2012.

We recorded a provision for loan losses of $180,000 for the three months ended
March 31, 2013, compared with a provision of $82,000 for the three months
ended March 31, 2012. Net charge-offs for the three months ended March 31,
2013 were $299,000 compared to $0 for the three months ended March 31, 2012.
The provision for loan losses for the nine months ended March 31, 2013 was
$257,000 compared with a provision of $224,000 for the nine months ended March
31, 2012. Net charge-offs for the nine months ended March 31, 2013 were
$367,000 compared to $155,000 for the nine months ended March 31, 2012. The
increase in our provision reflected the increase in our net charge offs for
the three and nine months ended March 31, 2013 as compared to the same period
in 2012. Net charge offs for the three and nine months ended March 31, 2013
was primarily impacted by one large one-to-four family residential real estate
loan charge off during the three months ended March 31, 2013 of $277,000.
Management believes that this charge off is not a reflection of our asset
quality and is not indicative of a trend of increased loan losses.

Financial Condition at March 31, 2013 and June 30, 2012

Our nonperforming loans to total loans has decreased to 0.73% at March 31,
2013 from 0.91% at June 30, 2012, and our nonperforming assets to total assets
has decreased to 0.78% at March 31, 2013 from 0.84% at June 30, 2012. Our
allowance for loan losses as a percentage of total loans was 0.33% at March
31, 2013 compared to 0.34% at June 30, 2012, and our allowance for loan losses
as a percentage of nonperforming loans at March 31, 2013 was 44.62% compared
to 37.2% at June 30, 2012.

Our total assets decreased $2.9 million, or 0.78%, to $374.8 million at March
31, 2013 from $377.8 million at June 30, 2012. A substantial portion of this
decrease is reflected in the decrease in net loans of $22.9 million, or 9.2%,
offset partially by an increase in securities available-for-sale of $20.3
million, or 31.5%. We continue to deploy funds from loan repayments and
payoffs to purchase high-quality investment securities, which we have
classified as available-for-sale. The continued decrease in outstanding loans
reflects the continued decrease of loan demand in our market area. Our total
deposits increased modestly by $416,000 to $293.8 million at March 31, 2013
from $293.4 million at June 30, 2012. Total equity decreased to $79.2 million
at March 31, 2013 compared with $83.0 million at June 30, 2012. The decrease
in total equity is the result of the repurchase of 352,550 shares of treasury
stock for $5.5 million and the payment of dividends of $1.8 million, offset
partially by net income of $3.0 million and other comprehensive income of
$178,000 for the nine months ended March 31, 2013.

Cash Dividend Declared

The Company’s Board of Directors declared $0.10 per share cash dividends on
its common stock on January 27, 2013. Dividends were paid to stockholders of
record as of February 7, 2013. Total dividends paid for the three months ended
March 31, 2012 were $626,000. Total dividends paid during the nine months
ended March 31, 2013 were $1.8 million.

Stock Repurchase Program

During the three months ended March 31, 2013, the Company repurchased 189,350
shares of its common stock at a weighted average purchase price of $15.54 per
share pursuant to authorized stock repurchase programs approved by the Board
of Directors. During the nine months ended March 31, 2013, the Company
repurchased a total of 352,550 shares of common stock at a weighted average
purchase price of $15.54 per share pursuant to authorized repurchase programs
approved by the Board of Directors. On March 15, 2013, the Board of Directors
approved another stock repurchase program, authorizing the Company to
repurchase up to 175,000 shares of its common stock. The timing of the
purchases will depend on certain factors, including but not limited to, market
conditions and prices, available funds and alternative uses of capital.

The Company had previously purchased all of the authorized shares of its
common stock under the previous stock repurchase programs, and all previous
stock repurchase programs have been terminated at March 31, 2013. No other
stock repurchase programs remain in effect except for the program approved on
March 15, 2013.

About Oconee Federal

Oconee Federal Financial Corp. (NASDAQ Capital Market: OFED) is the holding
company of Oconee Federal Savings and Loan Association. Oconee Federal Savings
and Loan Association is a federally chartered savings and loan association
founded in 1924 and headquartered in Seneca, South Carolina. Oconee Federal
Savings and Loan Association is a community oriented financial institution
operating four full-service branch locations in Oconee County, South Carolina.

Safe-Harbor

This release contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 that are based on current
expectations, estimates and projections about the Company’s and the
Association’s industry, and management’s beliefs and assumptions. Words such
as anticipates, expects, intends, plans, believes, estimates and variations of
such words and expressions are intended to identify forward-looking
statements. Such statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
forecast. Therefore, actual results may differ materially from those expressed
or forecast in such forward-looking statements. The Company and Association
undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information or otherwise.

Oconee Federal Financial Corp.                                             
Selected Financial Information

                                                                             
                                             March 31      June 30,
                                                 2013          2012
                                                 (Dollars in thousands)
                                                                             
Financial condition data:                        (Unaudited)
Total assets                                     $  374,805   $  377,753
Investment securities                                92,987        73,273
Loans receivable, net                                226,939       249,832
Deposits                                             293,784       293,368
Total equity                                         79,207        82,984
                                                                             
Condition ratios:                                (Unaudited)
Total equity to total assets                         21.13   %     21.97     %
                                                                             
Total capital to risk weighted assets                44.91   %     45.25     %
Tier I capital to risk weighted assets               44.44         44.74
Tier I capital to adjusted total assets              19.17         19.94
                                                                             
Total nonperforming loans to total loans             0.73    %     0.91      %
Total nonperforming assets to total                  0.78          0.84
assets
Total nonperforming assets to loans and              1.27          1.25
real estate owned
Allowance for loan losses as a                       0.33          0.34
percentage of total loans
Allowance for loan losses as a                       44.62         37.23
percentage of nonperforming loans
                                                                             

                     For the Three Months        For the Nine Months
                     Ended                         Ended
                     March 31     March 31         March 31      March 31
                     2013         2012             2013          2012
                     (Dollars in thousands, except per share amounts)
                                                                             
Operating data:      (Unaudited)
Interest and         $  3,451     $  3,781         $  10,633     $  11,519
dividend income
Interest expense       513         747            1,706        2,535
Net interest income     2,938        3,034            8,927         8,984
Provision for loan      180          82               257           224
losses
Non-interest income     88           58               222           213
Non-interest           1,437       1,428          4,034        4,334
expenses
Income before income    1,409        1,582            4,858         4,639
taxes
Income taxes           559         634            1,885        1,821
Net income           $  850       $  948          $  2,973      $  2,818
                                                                             
Basic net income per $  0.14      $  0.16          $  0.49       $  0.46
share
Diluted net income   $  0.14      $  0.16          $  0.48       $  0.46
per share
Dividends declared   $  0.10      $  0.10          $  0.30       $  0.20
per share
                                                                             
Performance ratios:  (Unaudited)
Return on average       0.92   %     1.01   %         1.05    %     1.00     %
assets
Return on average       4.28         4.74             4.82          4.66
equity
Interest rate spread    3.06         3.09             3.08          3.05
Net interest margin     3.22         3.31             3.25          3.29
Average
interest-earning
assets to
average
interest-bearing        1.27   x     1.27   x         1.27    x     1.27     x
liabilities

Contact:

Oconee Federal Financial Corp.
Investor/Media Contact:
Curtis T. Evatt, 864-882-2765
Chief Financial Officer
 
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