----

**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**FORM        10-QSB**

**[X]  QUARTERLY        REPORT UNDER SECTION 13 OR 15(d)**

**OF        THE SECURITIES EXCHANGE ACT OF 1934**

**[   ]  TRANSITION        REPORT UNDER SECTION 13 OR 15(d)**

**OF        THE EXCHANGE ACT**

| Oconee                  Financial Corporation                                            |
|------------------------------------------------------------------------------------------|
| (Exact                  name of registrant as specified in its                  charter) |

| Georgia                                                                     |   | 58-2442250                                                            |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
| (State                  of Incorporation)                                   |   | (I.R.S.                  EmployerIdentification                  No.) |
|                                                                        |   |                                                                  |
|                                                                        |   |                                                                  |
| 35                  North Main StreetWatkinsville,                  Georgia |   |  30677                                                           |
| (Address                  of principalexecutive                  offices)   |   | (Zip                  Code)                                           |

----

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

**INDEX**

|                            |                                                                                                                     | Page                  No. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|---------------------------|
| PART                  I                                                                                                                                      | FINANCIAL                  INFORMATION                                                                                   |                      |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  1.                                                                                                                                     | Financial                  Statements                                                                                    |                      |
|                                                                                                                                                         |                                                                                                                     |                      |
|                                                                                                                                                         | Consolidated                  Balance Sheet (unaudited) at June 30, 2006                                                 | 3                         |
|                                                                                                                                                         |                                                                                                                     |                      |
|                                                                                                                                                         | Consolidated                  Statements of Earnings (unaudited) for the Three Months Ended and                  the Six |                      |
|                                                                                                                                                         |        Months                  Ended June 30, 2006 and 2005                           | 4                         |
|                                                                                                                                                         |                                                                                                                     |                      |
|                                                                                                                                                         | Consolidated                  Statements of Comprehensive Income (unaudited) for the Three Months                  and   |                      |
|                                                                                                                                                         |        the                  Six Months Ended June 30, 2006 and 2005                   | 5                         |
|                                                                                                                                                         |                                                                                                                     |                      |
|                                                                                                                                                         | Consolidated                  Statements of Cash Flows (unaudited) for the Six Months                                    |                      |
|                                                                                                                                                         |        Ended                  June 30, 2006 and 2005                                  | 6-7                       |
|                                                                                                                                                         |                                                                                                                     |                      |
|                                                                                                                                                         | Notes                  to Financial Statements (unaudited)                                                               | 8-9                       |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  2.                                                                                                                                     | Management's                  Discussion and Analysis or Plan of Operations                                              | 10-13                     |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  3.                                                                                                                                     | Controls                  and Procedures                                                                                 | 14                        |
|                                                                                                                                                         |                                                                                                                     |                      |
| PART                  II                                                                                                                                     | OTHER                  INFORMATION                                                                                       |                      |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  1.                                                                                                                                     | Legal                  Proceedings                                                                                       | 15                        |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  2.                                                                                                                                     | Unregistered                  Sales of Equity Securities and Use of Proceeds                                             | 15                        |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  3.                                                                                                                                     | Defaults                  Upon Senior Securities                                                                         | 15                        |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  4.                                                                                                                                     | Submission                  of Matters to a Vote of Security Holders                                                     | 15                        |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  5.                                                                                                                                     | Other                  Information                                                                                       | 15                        |
|                                                                                                                                                         |                                                                                                                     |                      |
| Item                  6.                                                                                                                                     | Exhibits                  and Reports on Form 8-K                                                                        | 15-16                     |
|                                                                                                                                                         |                                                                                                                     |                      |

----

**PART        I. FINANCIAL INFORMATION**

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

| Assets                                                                                                                                                                              |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                |   |   |   |
| Cash                  and due from banks, including reserve requirements of                  $25,000                                                                                |   | $ | 6,160,615 |   |
| Federal                  funds sold                                                                                                                                                 |   |   | 9,674,000 |   |
|                                                                                                                                                                                |   |   |   |   |
|                               Cash and cash equivalents                                                                 |   |   | 15,834,615 |   |
|                                                                                                                                                                                |   |   |   |   |
| Investment                  securities available for sale                                                                                                                           |   |   | 54,866,620 |   |
| Other                  investments                                                                                                                                                  |   |   | 670,329 |   |
| Mortgage                  loans held for sale                                                                                                                                       |   |   | 3,213,252 |   |
|                                                                                                                                                                                |   |   |   |   |
| Loans,                  net of allowance for loan losses of $3,068,079                                                                                                              |   |   | 207,025,250 |   |
|                                                                                                                                                                                |   |   |   |   |
| Premises                  and equipment, net                                                                                                                                        |   |   | 6,494,468 |   |
| Accrued                  interest receivable and other assets                                                                                                                       |   |   | 3,709,347 |   |
|                                                                                                                                                                                |   |   |   |   |
|                    Total                  assets                                     |   | $ | 291,813,881 |   |
|                                                                                                                                                                                |   |   |  |   |
| Liabilities                  and Stockholders’ Equity                                                                                                                         |
|                                                                                                                                                                                |   |   |  |   |
| Liabilities:                                                                                                                                                                        |   |   |  |   |
|        Deposits                                                                                                                                  |   |   |  |   |
|             Noninterest-bearing                                                                                         |   | $ | 34,325,328 |   |
|             Interest-bearing                                                                                            |   |   | 227,694,560 |   |
|                                                                                                                                                                                |   |   |   |   |
|                    Total                  deposits                                   |   |   | 262,019,888 |   |
|                                                                                                                                                                                |   |   |   |   |
|        Securities                  sold under repurchase agreements                                                                              |   |   | 3,308,182 |   |
|        Accrued                  interest payable and other liabilities                                                                           |   |   | 1,081,551 |   |
|                                                                                                                                                                                |   |   |   |   |
|                    Total                  liabilities                                |   |   | 266,409,621 |   |
|                                                                                                                                                                                |   |   |   |   |
| Stockholders’                  equity:                                                                                                                                        |   |   |   |   |
|        Common                  stock, $2 par value;                                                                                              |   |   |   |   |
|              authorized                  1,500,000 shares;                                                         |   |   |   |   |
|              issued                  and outstanding 899,815 shares                                                |   |   | 1,799,630 |   |
|        Additional                  paid-in capital                                                                                               |   |   | 4,243,332 |   |
|        Retained                  earnings                                                                                                        |   |   | 19,867,602 |   |
|        Accumulated                  other comprehensive income                                                                                   |   |   | (506,304 | ) |
|                                                                                                                                                                                |   |   |   |   |
|                    Total                  stockholders’ equity                 |   |   | 25,404,260 |   |
|                                                                                                                                                                                |   |   |  |   |
|                    Total                  liabilities and stockholders’ equity |   | $ | 291,813,881 |   |

----

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

|                                                                                                                                                                                   |   |  **Three                  Months Ended** |      |  **Six                  Months Ended** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|-----------|---------------------------------------------|--------|
|                                                                                                                                                                                   |   | **2006**                                      |      | **2005**                                    |   | **2006** |   | **2005** |   |
| Interest                  Income:                                                                                                                                                      |   |                                          |      |                                        |   |   |   |   |  |   |   |  |   |
|                       Loans                                                                                                                                        |   | $                                             | 4,219,017 |                                        |   | 3,286,159 |   |   | 8,204,169 |   |   | 6,511,088 |   |
|                       Investment securities:                                                                                                                       |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                            Tax exempt                                                                                                     |   |                                          | 206,778   |                                        |   | 191,487 |   |   | 425,422 |   |   | 385,275 |   |
|                            Taxable                                                                                                        |   |                                          | 388,546   |                                        |   | 268,145 |   |   | 759,328 |   |   | 552,283 |   |
|                       Federal funds sold and other                                                                                                                 |   |                                          | 151,158   |                                        |   | 117,242 |   |   | 337,768 |   |   | 165,382 |   |
|                               Total interest income                                                                        |   |                                          | 4,965,499 |                                        |   | 3,863,033 |   |   | 9,726,687 |   |   | 7,614,028 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
| Interest                  Expense:                                                                                                                                                     |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                       Deposits                                                                                                                                     |   |                                          | 1,923,090 |                                        |   | 1,200,575 |   |   | 3,692,282 |   |   | 2,266,214 |   |
|                       Other                                                                                                                                        |   |                                          | 15,406    |                                        |   | 11,434 |   |   | 26,853 |   |   | 19,149 |   |
|                               Total interest expense                                                                       |   |                                          | 1,938,496 |                                        |   | 1,212,009 |   |   | 3,719,135 |   |   | 2,285,363 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                               Net interest income                                                                          |   |                                          | 3,027,003 |                                        |   | 2,651,024 |   |   | 6,007,552 |   |   | 5,328,665 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
| Provision                  for loan losses                                                                                                                                             |   |                                          | -         |                                        |   | 204,000 |   |   | 120,000 |   |   | 408,000 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                    Net                  interest income after provision for loan losses |   |                                          | 3,027,003 |                                        |   | 2,447,024 |   |   | 5,887,552 |   |   | 4,920,665 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
| Other                  Income:                                                                                                                                                         |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                       Service charges on deposit accounts                                                                                                          |   |                                          | 384,580   |                                        |   | 487,330 |   |   | 756,859 |   |   | 768,994 |   |
|      Mortgage                  banking income                                                                                                                 |   |                                          | 88,004    |                                        |   | 108,916 |   |   | 163,018 |   |   | 182,665 |   |
|                       Gains (losses) on sales and disposal of premises and                  equipment                                                              |   |                                          | -         |                                        |   | - |   |   | 62,959 |   |   | (5,666 | ) |
|                       Gains on sales of other real estate owned                                                                                                    |   |                                          | -         |                                        |   | - |   |   | 384,006 |   |   | 17,597 |   |
|                       Securities gains, net                                                                                                                        |   |                                          | -         |                                        |   | 6,282 |   |   | - |   |   | 6,282 |   |
|                       Other operating income                                                                                                                       |   |                                          | 126,098   |                                        |   | 113,099 |   |   | 285,701 |   |   | 255,031 |   |
|                               Total other income                                                                           |   |                                          | 598,682   |                                        |   | 715,627 |   |   | 1,652,543 |   |   | 1,224,903 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|  Other                  Expense:                                                                                                                                                  |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                       Salaries and other personnel expense                                                                                                         |   |                                          | 1,359,454 |                                        |   | 1,295,154 |   |   | 2,768,375 |   |   | 2,606,570 |   |
|                       Net occupancy and equipment expense                                                                                                          |   |                                          | 301,340   |                                        |   | 323,382 |   |   | 629,265 |   |   | 637,393 |   |
|                       Other operating expense                                                                                                                      |   |                                          | 611,984   |                                        |   | 559,290 |   |   | 1,173,365 |   |   | 1,092,616 |   |
|                               Total other expense                                                                          |   |                                          | 2,272,778 |                                        |   | 2,177,826 |   |   | 4,571,005 |   |   | 4,336,579 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                               Earnings before income taxes                                                                 |   |                                          | 1,352,907 |                                        |   | 984,825 |   |   | 2,969,090 |   |   | 1,808,989 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
| Income                  taxes                                                                                                                                                          |   |                                          | 431,310   |                                        |   | 291,934 |   |   | 959,458 |   |   | 529,935 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                               Net earnings                                                                            |   | $                                             | 921,597   |                                        |   | 692,891 |   |   | 2,009,632 |   |   | 1,279,054 |   |
|                                                                                                                                                                                   |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share based on average outstanding                                                                                                                |   |                                          |      |                                        |   |   |   |   |   |   |   |   |   |
|                       shares of 899,815 in 2006 and 899,885 in 2005:                                                                                               |   | $                                             | 1.02      |                                        |   | 0.77 |   |   | 2.23 |   |   | 1.42 |   |

----

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

|                                                                                                                                                  |   |  **Three                  Months Ended** |     | **Six                  Months Ended** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|----------|---------------------------------------|--------|
|                                                                                                                                                  |   | **2006**                                      |     | **2005**                              |   | **2006** |   | **2005** |   |
|                                                                                                                                                  |   |                                          |     |                                  |   |   |   |   |   |
| Net                  earnings                                                                                                                    |   | $                                             | 921,597  |                                  |   | 692,891 |   |   | 2,009,632 |   |   | 1,279,054 |   |
|                                                                                                                                                  |   |                                          |     |                                  |   |   |   |   |   |   |   |   |   |
| Other                  comprehensive income, net of tax:                                                                                              |   |                                          |     |                                  |   |   |   |   |   |   |   |   |   |
|                       Unrealized gains on securities available for sale:                                                          |   |                                          |     |                                  |   |   |   |   |   |   |   |   |   |
|                            Holding gains arising during period, net of (benefit) tax                     |   |                                          |     |                                  |   |   |   |   |   |   |   |   |   |
|                               of ($139,198),$85,868, ($207,715) and ($107,529)            |   |                                          | (227,500 | )                                     |   | 140,339 |   |   | (339,478 | ) |   | (175,740 | ) |
|                            Reclassification adjustments for gains included in                  net  |   |                                          |     |                                  |   |   |   |   |   |   |   |   |   |
|                               earnings, net of tax of $0,$2,385,$0 and $2,385             |   |                                          | -        |                                  |   | (3,897 | ) |   | - |   |   | (3,897 | ) |
|                                                                                                                                                  |   |                                          |     |                                  |   |   |   |   |   |   |   |   |   |
|                            Total other comprehensive (loss) income                                       |   |                                          | (227,500 | )                                     |   | 136,442 |   |   | (339,478 | ) |   | (179,637 | ) |
|                                                                                                                                                  |   |                                          |     |                                  |   |   |   |   |   |   |   |   |   |
|                            Comprehensive income                                                          |   | $                                             | 694,097  |                                  |   | 829,333 |   |   | 1,670,154 |   |   | 1,099,417 |   |

----

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

|                                                                                                                                                                                                                                |   | **2006** |       | **2005** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|----------|--------|
| Cash                  flows from operating activities:                                                                                                                                                                              |   |     |       |     |   |   |   |
|      Net                  earnings                                                                                                                                                                         |   | $        | 2,009,632  |     |   | 1,279,054 |   |
|          Adjustments                  to reconcile net earnings to net                                                                                                                 |   |     |       |     |   |   |   |
|             cash                  provided by operating activities:                                                                                                     |   |     |       |     |   |   |   |
|                 Provision                  for loan losses                                                                                          |   |     | 120,000    |     |   | 408,000 |   |
|                 Provision                  for deferred taxes                                                                                       |   |     | 170,611    |     |   | - |   |
|                 Depreciation,                  amortization and accretion                                                                           |   |     | 308,428    |     |   | 350,664 |   |
|                 Gain                  on sale of investment securities                                                                              |   |     | -          |     |   | (6,282 | ) |
|                 Loss                  (gain) on sales and disposals of fixed assets                                                                 |   |     | (62,959    | )        |   | 5,666 |   |
|                 Gain                  on sale of other real estate owned                                                                            |   |     | (384,006   | )        |   | (17,597 | ) |
|                 Change                  in assets and liabilities:                                                                                  |   |     |       |     |   |   |   |
|                     Interest                  receivable and other assets                                                       |   |     | (534,181   | )        |   | (277,326 | ) |
|                     Interest                  payable and other liabilities                                                     |   |     | (216,478   | )        |   | 31,725 |   |
|                     Mortgage                  loans held for sale                                                               |   |     | (1,928,252 | )        |   | (601,077 | ) |
|                                                                                                                                                                                                                                |   |     |       |     |   |   |   |
|                            Net                  cash (used) provided by operating activities |   |     | (517,205   | )        |   | 1,172,827 |   |
|                                                                                                                                                                                                                                |   |     |       |     |   |   |   |
| Cash                  flows from investing activities:                                                                                                                                                                              |   |     |       |     |   |   |   |
|      Proceeds                  from sale of investment securities                                                                                                                                          |   |     | -          |     |   | 339,131 |   |
|                       Proceeds from calls, maturities, and paydowns                  of                                                                                                                         |   |     |       |     |   |   |   |
|          investment                  securities available for sale                                                                                                                     |   |     | 2,679,715  |     |   | 8,563,869 |   |
|                       Purchases of investment securities available for                  sale                                                                                                                    |   |     | (6,737,670 | )        |   | (13,220,154 | ) |
|                       Purchases of other securities                                                                                                                                                             |   |     | (55,900    | )        |   | (10,100 | ) |
|                       Net change in loans                                                                                                                                                                       |   |     | (3,616,909 | )        |   | (5,716,454 | ) |
|                       Purchases of premises and equipment                                                                                                                                                       |   |     | (1,081,773 | )        |   | (272,531 | ) |
|  Proceeds                  from sale of premises and equipment                                                                                                                                                                 |   |     | 139,184    |     |   | - |   |
|  Proceeds                  from sale of other real estate owned                                                                                                                                                                |   |     | 665,497    |     |   | 539,123 |   |
|                                                                                                                                                                                                                                |   |     |       |     |   |   |   |
|                                              Net cash used by investing activities           |   |     | (8,007,856 | )        |   | (9,777,116 | ) |
|                                                                                                                                                                                                                                |   |     |       |     |   |   |   |
| Cash                  flows from financing activities:                                                                                                                                                                              |   |     |       |     |   |   |   |
|      Net                  change in deposits                                                                                                                                                               |   |     | 5,220,864  |     |   | 5,538,690 |   |
|      Net                  change in securities sold under repurchase agreements                                                                                                                            |   |     | 1,063,950  |     |   | 1,470,101 |   |
|      Dividends                  paid                                                                                                                                                                       |   |     | (989,797   | )        |   | (899,885 | ) |
|                                                                                                                                                                                                                                |   |     |       |     |   |   |   |
|                            Net                  cash provided by financing activities        |   |     | 5,295,017  |     |   | 6,108,906 |   |
|                                                                                                                                                                                                                                |   |     |       |     |   |   |   |
| Net                  decrease in cash and cash equivalents                                                                                                                                                                          |   |     | (3,230,044 | )        |   | (2,495,383 | ) |
|                                                                                                                                                                                                                                |   |     |       |     |   |   |   |
| Cash                  and cash equivalents at beginning of period                                                                                                                                                                   |   |     | 19,064,659 |     |   | 15,753,366 |   |
|                                                                                                                                                                                                                                |   |     |       |     |   |   |   |
| Cash                  and cash equivalents at end of period                                                                                                                                                                         |   | $        | 15,834,615 |     |   | 13,257,983 |   |

----

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

|                                                                                                  |   | **2006** |      | **2005** |   |
|-------------------------------------------------------------------------------------------------------|--------|----------|-----------|----------|--------|
| Supplemental                  cash flow information:                                                  |   |     |      |     |   |
|      Cash                  paid for interest                                 |   | $        | 3,574,230 |     | $      | 2,243,786 |   |
|      Cash                  paid for taxes                                    |   | $        | 1,055,000 |     | $      | 578,000 |   |
|                                                                                                  |   |     |      |     |   |   |   |
| Noncash                  investing and financing activities:                                          |   |     |      |     |   |   |   |
|      Change                  in dividends payable                            |   | $        | 989,797   |     | $      | 899,885 |   |
|      Change                  in net unrealized gain on investment securities |   |     |      |     |   |   |   |
|         available                  for sale, net of tax       |   | $        | (339,478  | )        | $      | (179,637 | ) |
|                                                                                                  |   |     |      |     |   |   |   |

----

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

| (1) | Basis                  of Presentation |
|-----|----------------------------------------|

| (2) | Net                  Earnings Per Common Share |
|-----|------------------------------------------------|

----

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

| (3) | Allowance                  for Loan Losses |
|-----|--------------------------------------------|

|                                                          |   | **2006** |      | **2005** |   |
|---------------------------------------------------------------|--------|----------|-----------|----------|--------|
|                                                          |   |     |      |     |   |
| Balance                  at beginning of year                 |   | $        | 2,945,256 |     |   | 2,531,330 |   |
| Amounts                  charged off                          |   |     | (35,390   | )        |   | (159,987 | ) |
| Recoveries                  on amounts previously charged off |   |     | 38,213    |     |   | 50,478 |   |
| Provision                  for loan losses                    |   |     | 120,000   |     |   | 408,000 |   |
|                                                          |   |     |      |     |   |   |   |
| Balance                  at June 30                           |   | $        | 3,068,079 |     |   | 2,829,821 |   |

----

**MANAGEMENT’S        DISCUSSION AND ANALYSIS OF FINANCIAL**

**CONDITION        AND RESULTS OF OPERATIONS**

**Forward-Looking        Statements**

**Financial        Condition**

----

**Results        of Operations**

** **

**Interest        rate sensitivity**

----

**Liquidity**

----

**Contractual        Obligations and Commitments**

**Capital**

| Risk-Based                  Capital Ratios               |   |
|----------------------------------------------------------|--------|
|                                                     |   |
| Tier                  1 Capital, Actual                  |   |   | 11.6 | % |
| Tier                  1 Capital minimum requirement      |   |   | 4.0 | % |
|                                                     |   |   |  |   |
| Excess                                                   |   |   | 7.6 | % |
|                                                     |   |   |  |   |
| Total                  Capital, Actual                   |   |   | 12.9 | % |
| Total                  Capital minimum requirement       |   |   | 8.0 | % |
|                                                     |   |   |  |   |
| Excess                                                   |   |   | 4.9 | % |
|                                                     |   |   |  |   |
| Leverage                  Ratio                          |   |   |  |   |
|                                                     |   |   |  |   |
| Tier                  1 Capital to adjusted total assets |   |   | 9.1 | % |
| Minimum                  leverage requirement            |   |   | 3.0 | % |
|                                                     |   |   |  |   |
| Excess                                                   |   |   | 6.1 | % |

----

**CONTROLS        AND PROCEDURES**

----

**PART        II. OTHER INFORMATION**

**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

Item        1.            Legal        Proceedings

Item        2.            Unregistered        Sales of Equity Securities and Use of Proceeds

Item        4.           Submission        of Matters to a Vote of Security Holders
| (a)   | Oconee                Financial Corporation’s annual meeting of stockholders was held on May 1,                2006. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------|
| (b)   | The                following is a summary of matters submitted to a vote of security                holders: |
|-----------------|--------------------------------------------------------------------------------------------------------------|

|   | G.                  Robert Bishop                                                                                                              | Carl                  R. Nichols   |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|--------|
|   | Jimmy                  L. Christopher                                                                                                          | Ann                  B. Powers     |   |
|   | Douglas                  D. Dickens                                                                                                            | Jerry                  K. Wages    |   |
|   | John                  A. Hale                                                                                                                  | Virginia                  S. Wells |   |
|   | B.                  Amrey Harden                                                                                                               | Tom                  F. Wilson     |   |
|   | Henry                  C. Maxey                                                                                                                |                               |   |
|   |                                                                                                                                           |                               |   |
|   | A                  tabulation of votes concerning the above issue is as                  follows:                                              |                               |   |
|   |                                                                                                                                           |                               |   |
|   | Shares                  voted in favor                                                                                                         | 655,360                            |   |
|   | Shares                  voted in person against                                                                                                | 0                                  |   |
|   | Shares                  abstained from voting                                                                                                  | 0                                  |   |
|   |                                                                                                                                           |                               |   |
|   | Total                  shares represented                                                                                                      | 655,360                            |   |
|   | Total                  shares outstanding                                                                                                      | 899,815                            |   |
|   |                                                                                                                                           |                               |   |
|   | *                  Directors were elected by slate, not individually. Vote tabulation                  is                  therefore by slate. |                               |   |

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Item        6.           Exhibits        

| (a)   | Exhibits |                                                                                                                                                                                                                                                       |
|-----------------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |     |                                                                                                                                                                                                                                                       |
|            | 31.1     | Certification                  by B. Amrey Harden, CEO and President of the Corporation, as adopted                  pursuant to Section 302 of the Sarbanes-Oxley Act of                  2002.                                                           |
|            | 31.2     | Certification                  by Jerry K. Wages, Senior Executive Vice President and Chief Financial                  Officer of the Corporation, as adopted pursuant to Section 302                  of the                  Sarbanes-Oxley Act of 2002. |
|            | 32       | Certification                  of the Chief Executive Officer and the Chief Financial Officer                  pursuant to                  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                 |
|            |     |                                                                                                                                                                                                                                                       |

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**OCONEE        FINANCIAL CORPORATION AND SUBSIDIARY**

**SIGNATURES**

|   |           OCONEE                  FINANCIAL CORPORATION  By:                     /s/ B. Amrey                  Harden                                                                              B.                  Amrey Harden, President and CEO       (Principal                  Executive Officer)  Date:                       August                  14, 2006                                                                                          By:      /s/                  Jerry K.                  Wages                                                                                 Jerry                  K. Wages, Sr. Executive Vice President and CFO        Date:                       August                  14, 2006                                                                                          By:   /s/                  Steven A.                  Rogers                                                                              Steven                  A. Rogers       Vice                  President and Controller       (Principal                  Accounting Officer)  Date:                       August                  14, 2006                                                                                       |
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