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12-6-09 Oconee State Bank makes progress in 3rd Quarter

The Bank turned a small profit in the third quarter. It also reports to be in full compliance with its Cease and Desist order. These are positive events and show some progress.

AVOC

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December 5, 2009

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Oconee State Bank makes progress in 3rd Quarter

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By Wendell Dawson, Editor, AVOC, Inc

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Oconee State Bank’s 3rd quarter 10-Q report has been filed with the SEC.   Review indicates two notable items.   The Bank turned a small profit in the third quarter.    It also reports to be in full compliance with its Cease and Desist order.   These are positive events and show some progress.

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The 3rd Quarter 10-Q report can be reviewed at:

http://www.sec.gov/Archives/edgar/data/1076691/000101968709004130/oconee_10q-093009.htm

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Oconee State Bank -FDIC Enforcement Order August 18, 2009

http://www.fdic.gov/bank/individual/enforcement/2009-08-09.pdf

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9-28-09 Fed & State Regulators take enforcement action with local Oconee County Banks;

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EXCERPTS - 3rd quarter 10-Q has been filed with the SEC

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

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FORM 10-Q

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

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For the quarterly period ended September 30, 2009

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Commission File Number 000-25267

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OCONEE FINANCIAL CORPORATION

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Financial Condition

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Since mid-2007, and particularly during the second half of 2008 and into 2009, the financial markets and economic conditions generally were materially and adversely affected by significant declines in the values of nearly all asset classes and by a serious lack of liquidity.  This was initially triggered by declines in home prices and the values of subprime mortgages, but spread to all commercial and residential mortgages as property prices declined rapidly and to nearly all asset classes.  The effect of the market and economic downturn also spread to other areas of the credit markets and in the availability of liquidity.  The magnitude of these declines led to a crisis of confidence in the financial sector as a result of concerns about the capital base and viability of certain financial institutions.  During this period, interbank lending and commercial paper borrowing fell sharply, precipitating a credit freeze for both institutional and individual borrowers.  Unemployment has also increased significantly.

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These factors have magnified the need for careful management of the Bank going forward.  Regulatory scrutiny within the banking industry has increased significantly, and as a result, the Bank’s management team and Board of Directors have implemented, and will continue to implement strategies to guide the Bank through this difficult market.  Management has focused on strategies to increase revenues and control expenses in an effort to return the Bank to profitability.  In addition, loan underwriting standards have been tightened and credit risk will continue to be closely monitored.  Balance sheet management strategies have been developed which will, in all likelihood, result in a decline in investment securities and deposit balances and in total assets in order to reduce interest expense and produce a better match in the bank’s funding and its funding needs.  In addition, the Board of Directors has engaged a consultant to evaluate the Bank’s current capital base and develop a strategy for capital management going forward.

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Total assets at September 30, 2009 were $ 291,265,000, representing a $ 16,891,000 (5.48%) decrease from December 31, 2008.  Investment securities decreased $ 9,785,000 as compared to December 31, 2008, primarily as a result of the Bank’s decision to allow the maturities and calls of investment securities to provide liquidity to replace deposits in a designed effort to shrink the Bank’s balance sheet.  Loans decreased $ 18,563,000 (9.48%) at September 30, 2009 as compared to December 31, 2008, primarily due to loan pay-downs and the shifting of $ 4,216,000 from loans to other real estate owned during the first nine months of 2009.  Deposits decreased $ 21,619,000 (7.86%) from December 31, 2008.  The decrease in deposits is primarily attributable to decreases in interest-bearing checking accounts of $ 21,097,000 as compared to December 31, 2008 balances.  Securities sold under repurchase agreements increased $ 4,871,000 at September 30, 2009 as compared to December 31, 2008, primarily due to two significant deposit relationships shifting their deposit relationships from interest-bearing checking and time deposit accounts into  repurchase agreements.  The allowance for loan losses at September 30, 2009 was $ 4,598,000, compared to the December 31, 2008 balance of $ 4,215,000, representing 2.59% of total loans at September 30, 2009, compared to 2.15% of total loans at December 31, 2008. Cash and cash equivalents increased $ 3,772,000 from December 31, 2008.  Total stockholders’ equity at September 30, 2009 of $ 25,687,000 decreased $ 110,000 (0.43%) from December 31, 2008 due to a net loss for the first nine months of 2009 of $ 616,000, offset by an increase in market value of investment securities, net of tax, of $ 473,000.

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