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



Georgia


58-2442250(State
of Incorporation)


(I.R.S. Employer Identification No.)35 North Main StreetWatkinsville, Georgia

30677(Address of principal


(Zip Code)executive offices)


706-769-6611



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



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OCONEE FINANCIAL CORPORATION AND SUBSIDIARYINDEXPage No.PART I

FINANCIAL INFORMATIONItem 1.
Financial StatementsConsolidated Balance Sheet (unaudited) at June 30, 2001
3Consolidated Statements of Earnings
  (unaudited) for the Three
  Months and the Six Months Ended June 30, 2001 and  2000
4Consolidated Statements of Comprehensive Income
  unaudited) for the Six Months Ended June 30, 2001 and 2000
5Consolidated Statements of Cash Flows (unaudited) for the
  Six     Months Ended June 30, 2001 and 2000
6Notes to Financial Statements
  (unaudited)

7Item 2
Management's Discussion and Analysis of Financial
  Condition and Results of Operations
8-11PART II

OTHER INFORMATIONItem 1.
Legal Proceedings

12Item 2.
Changes in Securities

12Item 3.
Defaults Upon Senior Securities

12Item 4.
Submission of Matters to a Vote of Security Holders

12-14Item 5.
Other Information

14Item 6.
Exhibits and Reports on Form 8-K

14




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PART
        I. FINANCIAL INFORMATIONItem 1. Financial
        StatementsOCONEE
        FINANCIAL CORPORATION AND SUBSIDIARYConsolidated
        Balance SheetJune 30, 2001(Unaudited)AssetsCash and due from
        banks
      
      $
      7,850,213Federal funds
        sold
      
      
      10,449,000Investment
        securities available for sale(amortized cost
        of $33,592,993)
      
      
      33,808,109Mortgage loans
        held for sale
      
      
      3,041,141Loans
      
      
      138,070,388Less: Allowance
        for loan losses
      
      
      (1,677,469)Loans, net
      
      
      136,392,919Premises and
        equipment, net
      
      
      2,269,649Accrued interest
        receivable and other assets
      
      
      4,241,439Total Assets
      
      $
      198,052,470Liabilities
        and Stockholders EquityLiabilities:Deposits:Noninterest-bearing
      
      $
      21,765,261Interest-bearing
      
      
      143,838,840Total Deposits
      
      
      165,604,101Securities sold
        under repurchase agreements
      
      
      1,330,966Federal Home Loan
        Bank Advances
      
      
      13,300,000Accrued interest
        payable and other liabilities
      
      
      1,313,381Total Liabilities
      
      
      181,548,448Stockholders
        equity:Common
        stock, $2 par value;authorized
        1,500,000 shares;issued
        and outstanding 899,885 shares
      
      
      1,799,770Additional
        paid-in capital
      
      
      4,246,832Retained earnings
      
      
      10,323,962Accumulated other
        comprehensive income
      
      
      133,458Total
        stockholdersequity
      
      
      16,504,022Total liabilities
        and stockholders equity
      
      $
      198,052,470See accompanying
        notes to financial statements.


3

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OCONEE FINANCIAL CORPORATION AND SUBSIDIARYConsolidated Statements of EarningsFor the Three Months and the Six Months Ended June 30, 2001 and 2000(Unaudited)Three Months

Six MonthsEnded

Ended2001

2000

2001

2000Interest Income:Loans
$
3,365,848
$
2,748,521
$
6,715,084
$
5,126,583Investmentsecurities:Tax exempt

173,487

212,938

342,501

421,029Taxable

306,441

384,426

571,756

771,701Federal funds sold and other

155,528

66,681

382,151

169,682Total interest income

4,001,304

3,412,566

8,011,492

6,488,995Interest Expense:Deposits

1,822,795

1,402,426

3,579,872

2,716,546Other

224,475

15,342

444,647

23,857Total interest expense

2,047,270

1,417,768

4,024,519

2,740,403Net interest income

1,954,034

1,994,798

3,986,973

3,748,592Provision for loan losses

75,000

51,900

150,000

103,800Net interest income after provision for loan losses

1,879,034

1,942,898

3,836,973

3,644,792Other Income:Service charges on deposit accounts

282,182

221,138

515,199

406,756Securities gains (losses), net

0

(98,063)

0

(98,063)Other operating income

219,106

131,360

488,767

293,864Total other income

501,288

254,435

1,003,966

602,557Other Expense:Salaries and other personnel expense

975,954

805,919

1,932,071

1,591,965Net occupancy and equipment expense

213,699

193,103

401,767

372,415Other operating expense

461,500

372,503

882,285

709,592Total other expense

1,651,153

1,371,525

3,216,123

2,673,972Earnings before income taxes

729,169

825,808

1,624,816

1,573,377Income taxes

203,000

235,433

479,532

444,312Net earnings
$
526,169
$
590,375

$
1,145,284
$
1,129,065Earnings per common share based on averageoutstanding shares of 899,885 in 2001 and
  2000:
$
0.58
$
0.66

$
1.27
$
1.25See
  accompanying notes to financial statements.




4



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OCONEE FINANCIAL CORPORATION AND SUBSIDIARYConsolidated Statements of Comprehensive IncomeFor the Six Months Ended June 30, 2001 and 2000(Unaudited)2001

2000Net earnings
$
1,145,284

1,129,065Other comprehensive income, net of tax:Unrealized gains (losses) on securities
  available for sale:Holding gains (losses) arising during period, net of taxof $185,640 and $25,770

303,402

42,046Reclassification adjustments for (gains) losses includedin 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



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OCONEE FINANCIAL CORPORATION AND SUBSIDIARYConsolidated Statements of Cash FlowsFor Each of the Six Months Ended June 30, 2001 and 2000(Unaudited)2001

2000Cash flows from operating activities:Net earnings
$
1,145,284
$
1,129,065Adjustments to reconcile net earnings to netcash provided by operating activities:Provision for loan losses

150,000

103,800Depreciation, amortization and accretion

154,380

146,371Loss on sale of investment securities

0

98,063Change in assets and
  liabilities:Interest receivable and other assets

(591,164)

(143,248)Interest payable and other liabilities

25,476

154,897Mortgage loans held for sale

(762,528)

(956,222)Net cash provided by operating activities

121,448

532,726Cash flows from investing activities:Proceeds from maturities and paydowns ofinvestment securities available for sale

882,494

1,472,194Proceeds from sales and calls of investment securitiesavailable for sale

4,307,863

5,706,563Purchases 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

7,679,781Net change in securities sold under repurchase agreements

494,879

507,339Dividends paid

(989,873)

(899,970)Purchase and retirement of stock

0

(2,160)Net cash provided by financing activities

14,571,490

7,284,990Net decrease in cash and cash equivalents

(3,783,765)

(11,607,211)Cash and cash equivalents at beginning of period

22,082,978

16,127,789Cash and cash equivalents at end of period
$
18,299,213
$
4,520,578Supplemental cash flow information:Cash paid for interest
$
3,198,356
$
2,205,217Cash paid for taxes
$
564,366
$
484,378Noncash 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
$
899,970See accompanying notes to financial statements.




6

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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

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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

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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

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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

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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 RatioTier 1 Capital to adjusted total assets(Leverage Ratio
        8.3%Minimum leverage requirement
        3.0%Excess
        5.3%




11



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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)                                                      
|        |                                                          
|        | (b)                                                      
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          
|        |                                                          



12

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| |  |    |                                                                                  |                                                                                                                                                                                                                                                                      |        
| |  | -- | -------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------
| |  | 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

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|Item 5. | Other
      Information               
|------- | --------------------------------------
|        |                                       
|        | None                                  
|        |                                       
|Item 6. | Exhibits
      and Reports on Form 8-K
|        |                                       
|        | (a)                                   
|        |                                       
|        |                                       
|        |                                       
|        | (b)                                   
|        |                                       
|        |                                       













14

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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 CORPORATIONBy:        /s/
      B. Amrey HardenB. Amrey
      Harden, President and C.E.O.
                   (Principal
      Executive Officer)Date:
          August 13, 2001By         /s/
      Jerry K. WagesJerry K.
      WagesExecutive
      Vice-President and C.F.O.
                   (Principal
      Accounting Officer)Date:  
        August 13, 2001








15



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