----

----

**U.S.      SECURITIES AND EXCHANGE COMMISSION**

**Washington,      D.C.  20549**

**FORM      10-KSB**

| x      | Annual                Report Under Section 13 or 15(d) of the Securities Exchange Act of                1934For                the Fiscal Year Ended December 31, 2005 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                   |
|  ̈ | Transition                Report Pursuant to Section 13 or 15(d) of the Securities Exchange                Act of                1934                                  |

|  **Oconee                Financial Corporation**                              |
|------------------------------------------------------------------------------------|
|  (Name                of Small Business Issuer in its                Charter) |

| Georgia                                                                                           |   | 58-2442250                                                              |
|---------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|
| (State                or Other Jurisdiction of Incorporation                or Organization) |   | (I.R.S.                Employer Identification                No.) |

| 35                North Main Street, Watkinsville, Georgia 30677-0205                         |
|-----------------------------------------------------------------------------------------------|
| (Address                of Principal Executive Offices)   (Zip                Code) |

** **

**Documents      Incorporated by Reference**

----

----

**PART      I**

**ITEM      1.    ****DESCRIPTION      OF BUSINESS.**

**General**

**Services**

**Markets**

**Deposits**

|                                                                                 |   | Amount |        | Percentage |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |        |       |   |
| Non-interest              bearing demand deposits                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $      | 32,757,000  |       |   | 12.8% |
| Interest-bearing                NOW accounts                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   | 45,012,000  |       |   | 17.5% |
| Money                market deposit accounts                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   | 19,493,000  |       |   | 7.6% |
| Savings                deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 51,512,000  |       |   | 20.1% |
| Time                deposits less than $100,000                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 62,511,000  |       |   | 24.3% |
| Time                deposits of $100,000 or more                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 34,254,000  |       |   | 13.3% |
| Individual                retirement accounts                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | 11,260,000  |       |   | 4.4% |
| Total                Deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $      | 256,799,000 |       |   | 100.0% |

----

**Loans**

|                                                                             |   |  Amount |        |                        Percentage |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|----------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         |        |                                                                 |   |
| Residential                mortgage loans and commercial loans secured                by real estate                                                                                                                                                                                                                                                                                                                                                               |   | $            | 175,563,000 |                                                                 |   | 85.0% |
| Agricultural                loans                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |         | 136,000     |                                                                 |   | 0.1% |
| Commercial                and industrial loans                                                                                                                                                                                                                                                                                                                                                                                                                     |   |         | 20,877,000  |                                                                 |   | 10.1% |
| Credit                cards and related plans                                                                                                                                                                                                                                                                                                                                                                                                                      |   |         | 816,000     |                                                                 |   | 0.4% |
| Consumer                loans (excluding credit cards)                                                                                                                                                                                                                                                                                                                                                                                                             |        |              | 9,083,000   |                                                                      |  | 4.4% |
| LESS:                 Unearned income                                                                                                                                                                                                                                                                                                                                                                                                                         |   |         | (1,000      | )                                                                    |   | 0.0% |
| Total              Loans Net of Unearned Income                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $            | 206,474,000 |                                                                 |   | 100.0% |

|                               |   | 2005   |   | 2004   |    | 2003        |   | 2002    |        | 2001   |    | 2000        |   | 5-YearGrowth |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|---------|-------------|--------|---------|-------------|--------|---------|-------------|--------|--------------|-------------|
| Loans                                                                                                                                                                          |   | $      | 206.5  |   | $  |  186.1 |   | $  |  171.2 |   | $  |  179.6 |   | $       |  151.3 |   | $  |  123.3 |   | $  | 83.2 |   |
| Deposits                                                                                                                                                                       |   |   | 256.8  |   |    | 231.8       |   |    | 228.6       |   |    | 211.4       |   |         | 179.7       |   |   | 150.5 |   |   | 106.3 |   |
| Capital                                                                                                                                                                        |   |   | 23.7   |   |    | 22.3        |   |    | 20.8        |   |    | 19.0        |   |         | 16.8        |   |   | 15.1 |   |   | 8.6 |   |
| Total                  Assets                                                                                                                                                  |   |   | 285.1  |   |    | 256.9       |   |    | 252.0       |   |    | 246.6       |   |         | 212.5       |   |   | 181.9 |   |   | 103.2 |   |

**Lending      Policy**

** **

----

**Loan      Review and Non-Performing Assets**

**Investment      Policy**

| (1)     | Credit                  risk, or the risk of default of the issuer.                   Treasury and government agency securities comprised 61.1% of the                  portfolio; therefore the credit risk is primarily limited to the                  risk of                  default of the U.S. Government and its agencies.  State, County, and                  Municipal bonds represent 36.0% of the portfolio with the credit                  risk                  limited to the risk of default of the issuing authorities.  Other                  debt securities comprised 2.9% of the portfolio with the credit                  risk being                  the risk of default of the issuer of the debt                  security. |
|-----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)     | Interest                  rate risk, or the risk of adverse movements in interest rates on                  the value                  of the portfolio.                   In general, a rise in interest rates will cause the value of the                  Bank’s                  securities portfolio to decline.  The longer the maturity of an                  individual security, the greater the effect of change in interest                  rate on                  its value.  For a discussion of the Bank’s interest rate risk                  management policies and management, see “Management’s Discussion and                  Analysis of Financial Condition and Plan of Operation for the Years                  Ended                  December 31, 2005 and 2004 - Asset/Liability and Interest Rate                  Sensitivity                  Management.”  |
|-----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Competition**

** **

----

|                                                                                |   | TotalDeposits |    | MarketShare |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|---------|-------------|
| Oconee              State Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $             | 218,033 |        |   | 47.3% |
| North                Georgia Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |          | 103,643 |        |   | 22.5% |
| Athens                First Bank & Trust Company                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          | 86,579  |        |   | 18.8% |
| Bank                of America, N.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          | 29,213  |        |   | 6.3% |
| First                American Bank & Trust Company                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          | 12,008  |        |   | 2.6% |
| SunTrust                Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |          | 8,162   |        |   | 1.8% |
| Community              Bank & Trust                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |          | 3,122   |        |   | 0.7% |
| Total              Deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $             | 460,760 |        |   | 100% |

**Forward      Looking Statements**

**Supervision      and Regulation**

**General.**

----

|     ·   | making                or servicing loans and certain types of leases; performing certain                data                processing services; |
|--------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|     ·   | acting                as fiduciary or investment or financial                advisor; |
|--------------------------------------------|---------------------------------------------------------------------------------------|

|     ·   | providing                discount brokerage services; |
|--------------------------------------------|-------------------------------------------------------|

|     ·   | underwriting                bank eligible securities; |
|--------------------------------------------|-------------------------------------------------------|

|     ·   | underwriting                debt and equity securities on a limited basis through separately                capitalized subsidiaries; and |
|--------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

|     ·   | making                investments in corporations or projects designed primarily to promote                community welfare. |
|--------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|

|     ·   | lending,                exchanging, transferring, investing for others or safeguarding money                or                securities; |
|--------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

|     ·   | insuring,                      guaranteeing, or indemnifying against loss, harm, damage, illness,                      disability, or death, or providing and issuing annuities, and                      acting as                      principal, agent, or broker with respect                      thereto; |
|--------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|     ·   | providing                financial, investment, or economic advisory services, including advising                an investment company; |
|--------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

|     ·   | issuing                or selling instruments representing interests in pools of assets                permissible for a bank to hold directly;                and |
|--------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|     ·   | underwriting,                dealing in or making a market in                securities. |
|--------------------------------------------|------------------------------------------------------------------------------------------|

----

**Payment      of Dividends.**

|         (a)   | total                classified assets as of the most recent examination of the bank do                not                exceed 80% of equity capital (as defined by                regulation); |
|-----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|         (b)   | the                aggregate amount of dividends declared or anticipated to be declared                in                the calendar year does not exceed 50% of the net profits after taxes                but                before dividends for the previous calendar year;                and |
|-----------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|         (c)   | the                ratio of equity capital to adjusted assets is not less than                6%. |
|-----------------------------------------------------------------|---------------------------------------------------------------------------------------------------|

**Monetary      Policy.**

**Capital      Adequacy.**

----

|                                                                                 |   | 2005   |       | 2004   |   |
|--------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|
| Total                Risk-Based Capital                                              |   |   | 12.4%      |   |   | 12.0% |   |
| Tier                1 Risk-Based Capital                                             |   |   | 11.1%      |   |   | 10.8% |   |
| Leverage                Ratio (Tier 1 Capital                to Average Total Assets |   |   |  8.4% |   |   |  8.5% |   |

**Loans.**

**Transactions      with Affiliates. **

**Financial      Privacy.**

----

**Anti-Money      Laundering Initiatives and the USA Patriot Act.**

**Available      Information**

**Employees**

**ITEM      2.    ****DESCRIPTION      OF PROPERTIES.**

|        | (1)    | Main                Office35                North Main StreetWatkinsville,                Georgia 30677                                                                                                                             |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                |
|   | (2)    | Bogart                BranchU.S.                Highway 78Bogart,                Georgia 30622                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                |
|   | (3)    | Butler’s                Crossing Branch2000                Experiment Station RoadWatkinsville,                Georgia 30677                                                                                                  |
|        |   |                                                                                                                                                                                                                                |
|        | (4)    | Mortgage                Department/Operations Annex(Limited                Service/Support Offices for Main Office)Condominium                Units 10 and 12Durham                StreetWatkinsville,                Georgia 30677 |
|        |   |                                                                                                                                                                                                                           |
|        | (5)    | Athens                Branch500                North Milledge AvenueAthens,                Georgia 30605                                                                                                                            |

----

|   |   |                                                                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (6)    | East                Athens Wal-Mart Supercenter(In-Store                Full Service Branch)4375                Lexington RoadAthens,                Georgia 30605 |
|   |   |                                                                                                                                                               |
|   | (7)    | Operations                Center7920                Macon HighwayWatkinsville,                Georgia 30677                                                        |
|   |   |                                                                                                                                                               |

**ITEM      3.    ****LEGAL      PROCEEDINGS.**

In      the      ordinary course of operations, Oconee and the Bank are defendants in various      legal proceedings. In the opinion of management, there is no pending or      threatened proceeding in which an adverse decision could result in a material      adverse change in the consolidated financial condition or results of operations      of Oconee.

----

**ITEM      4.    **
**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS.**

**PART      II**

**ITEM      5****.    ****MARKET      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER      PURCHASES OF EQUITY SECURITIES.**

**Markets      For Capital Stock and Dividends**

|     |   | **Number****of** |   |  **Aggregate** |   | **Size                of Trades** |   | **Price                of Trades** |                   |
|----------|--------|------------------|--------|---------------------|--------|-----------------------------------|--------|------------------------------------|------------------------|
| **Year** |   | **Trades**       |   | **Shares**          |   | **Smallest**                      |   | **Largest**                        |                   | **Lowest** |   | **Highest** |   |
| 2005     |   |             | 78     |                |   | 8,005                             |   |                               | 1                share |   |   | 1,000                shares |   |   | $52.00 |   |   | $85.00 |   |
| 2004     |   |             | 35     |                |   | 1,980                             |   |                               | 1                share |   |   |                  300 shares |   |   | $72.00 |   |   | $85.00 |   |

**Share      Repurchases**

**   **

| **ITEM                6.** | **MANAGEMENT’S              DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION              FOR              THE YEARS ENDED DECEMBER 31, 2005 AND              2004.** |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**SUMMARY      OF CRITICAL ACCOUNTING POLICIES**

----

**Selected      Financial Information**

|                                                    |   |                                                                   | **2005**  |   |   | **2004**  |   |   | **2003**  |   |   | **2002**  |   |   | **2001**  |   |
|---------------------------------------------------------|--------|------------------------------------------------------------------------|----------------|--------|--------|----------------|--------|--------|----------------|--------|--------|----------------|--------|--------|----------------|--------|
|                                                    |   |  **(Amounts                in thousands, except per share data)** |           |
| Net                interest income                      |   | $                                                                      | 11,111         |   | $      | 10,003         |   | $      | 9,033          |   | $      | 8,665          |   | $      | 8,022          |   |
| Other                operating income                   |   |                                                                   | 2,513          |   |   | 2,217          |   |   | 3,003          |   |   | 2,504          |   |   | 1,922          |   |
| Provision                for loan losses                |   |                                                                   | 612            |   |   | 394            |   |   | 645            |   |   | 555            |   |   | 300            |   |
| Net                income                               |   |                                                                   | 3,056          |   |   | 2,531          |   |   | 2,678          |   |   | 2,612          |   |   | 2,393          |   |
| Net                income per common share              |   |                                                                   | 3.40           |   |   | 2.81           |   |   | 2.98           |   |   | 2.90           |   |   | 2.66           |   |
| Total                assets                             |   |                                                                   | 285,065        |   |   | 256,865        |   |   | 251,956        |   |   | 246,286        |   |   | 212,524        |   |
| Cash                dividends declared per common share |   |                                                                   | 1.10           |   |   | 1.00           |   |   | 1.00           |   |   | 1.00           |   |   | 1.00           |   |

----

**RESULTS      OF OPERATIONS **

**Net      Interest Income**

*.      *

*.      *

----

**Table      1 **

**Average      Balance Sheets and Interest Rates**

|                                                                                                   |   |                                            |        |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-------------|
|                                                                                                   |   | For                the Years Ended December 31, |        |
|                                                                                                   |   |                                            |        |   |   |   |   |
|                                                                                                   |   | 2005                                            |        | 2004 |   | 2003 |   |
|                                                                                                   |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   | AverageBalance                                  |        |  Interest |   | Yield/Rate |   | AverageBalance |   |  Interest |   | Yield/Rate |   | AverageBalance |   |  Interest |   | Yield/Rate |   |
|                                                                                                   |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets:                                                                                                |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                earning assets:                                                                |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment                securities:                                                                  |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                |   | $                                               | 27,975,015  |   | $ | 1,154,080 |   |   | 4.13% |   | $ | 30,278,801 |   | $ | 1,165,597 |   |   | 3.85% |   | $ | 29,174,332 |   | $ | 972,110 |   |   | 3.33% |   |
| Non-taxable                                                                                            |   |                                            | 16,966,818  |   |   | 801,772 |   |   | 4.73% |   |   | 16,617,082 |   |   | 801,396 |   |   | 4.82% |   |   | 16,534,171 |   |   | 786,847 |   |   | 4.76% |   |
| Other                Investment Securities                                                             |   |                                            | 2,112,050   |   |   | 117,679 |   |   | 5.57% |   |   | 2,222,672 |   |   | 109,441 |   |   | 4.92% |   |   | 1,536,662 |   |   | 68,662 |   |   | 4.47% |   |
| Federal                funds sold                                                                      |   |                                            | 10,356,173  |   |   | 342,585 |   |   | 3.31% |   |   | 7,448,265 |   |   | 100,011 |   |   | 1.34% |   |   | 16,185,123 |   |   | 169,988 |   |   | 1.05% |   |
| Loans                (including loan fees)                                                             |   |                                            | 194,200,656 |   |   | 13,925,648 |   |   | 7.17% |   |   | 178,449,084 |   |   | 11,509,253 |   |   | 6.45% |   |   | 182,933,219 |   |   | 12,472,490 |   |   | 6.82% |   |
| Total                interest-earning assets                                                           |   |                                            | 251,610,712 |   |   | 16,341,764 |   |   | 6.49% |   |   | 235,015,904 |   |   | 13,685,698 |   |   | 5.82% |   |   | 246,363,507 |   |   | 14,470,097 |   |   | 5.87% |   |
|  Allowance                for loan losses                                                         |   |                                            | (2,793,934  | ) |   |   |   |   |   |   |   | (2,803,003 | ) |   |   |   |   |   |   |   | (2,376,496 | ) |   |   |   |   |   |   |
| Cash                and due from banks                                                                 |   |                                            | 6,975,731   |   |   |   |   |   |   |   |   | 7,245,501 |   |   |   |   |   |   |   |   | 7,000,382 |   |   |   |   |   |   |   |
| Other                assets                                                                            |   |                                            | 9,754,382   |   |   |   |   |   |   |   |   | 10,029,256 |   |   |   |   |   |   |   |   | 8,740,202 |   |   |   |   |   |   |   |
| Total                assets                                                                            |   | $                                               | 265,546,891 |   |   |   |   |   |   |   | $ | 249,487,658 |   |   |   |   |   |   |   | $ | 259,727,595 |   |   |   |   |   |   |   |
|  Liabilities                and stockholders’ equity:                                       |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                           |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                              |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand                                                                 |   | $                                               | 57,304,533  |   | $ | 871,368 |   |   | 1.52% |   | $ | 57,964,350 |   | $ | 615,260 |   |   | 1.06% |   | $ | 56,018,253 |   | $ | 768,243 |   |   | 1.37% |   |
| Savings                                                                                                |   |                                            | 53,790,134  |   |   | 1,235,106 |   |   | 2.30% |   |   | 56,318,461 |   |   | 911,977 |   |   | 1.62% |   |   | 47,182,345 |   |   | 831,956 |   |   | 1.76% |   |
| Time                                                                                                   |   |                                            | 95,233,721  |   |   | 3,080,559 |   |   | 3.23% |   |   | 81,578,878 |   |   | 2,132,542 |   |   | 2.61% |   |   | 96,482,324 |   |   | 3,267,922 |   |   | 3.39% |   |
| Federal                Funds Purchased                                                                 |   |                                            | 71,964      |   |   | 1,527 |   |   | 2.12% |   |   | 35,669 |   |   | 1,508 |   |   | 4.23% |   |   | - |   |   | - |   |   |                            - |   |
| Federal                Home Loan Bank Advances                                                         |   |                                            | -           |   |   |                         - |   |   |                      - |   |   | - |   |   |                         - |   |   |                            - |   |   | 8,599,452 |   |   | 552,778 |   |   | 6.43% |   |
| Securities                sold under repurchase agreements                                             |   |                                            | 2,348,393   |   |   | 41,892 |   |   | 1.78% |   |   | 1,445,658 |   |   | 21,820 |   |   | 1.51% |   |   | 897,839 |   |   | 15,920 |   |   | 1.77% |   |
| Total                interest bearing liabilities                                                      |   |                                            | 208,748,745 |   |   | 5,230,452 |   |   | 2.51% |   |   | 197,343,016 |   |   | 3,683,107 |   |   | 1.87% |   |   | 209,180,213 |   |   | 5,436,819 |   |   | 2.60% |   |
|  Non-interest                bearing deposits                                                     |   |                                            | 31,835,382  |   |   |   |   |   |   |   |   | 29,102,010 |   |   |   |   |   |   |   |   | 28,432,352 |   |   |   |   |   |   |   |
| Other                liabilities                                                                       |   |                                            | 1,539,053   |   |   |   |   |   |   |   |   | 1,198,398 |   |   |   |   |   |   |   |   | 1,838,430 |   |   |   |   |   |   |   |
| Total                liabilities                                                                       |   |                                            | 242,123,180 |   |   |   |   |   |   |   |   | 227,643,424 |   |   |   |   |   |   |   |   | 239,450,995 |   |   |   |   |   |   |   |
|  Stockholders’                equity                                                        |   |                                            | 23,423,711  |   |   |   |   |   |   |   |   | 21,844,234 |   |   |   |   |   |   |   |   | 20,276,600 |   |   |   |   |   |   |   |
| Total                liabilities and stockholders’ equity                                        |   | $                                               | 265,546,891 |   |   |   |   |   |   |   | $ | 249,487,658 |   |   |   |   |   |   |   | $ | 259,727,595 |   |   |   |   |   |   |   |
|  Excess                of interest-bearing assets overinterest-bearing                liabilities |   | $                                               | 42,861,967  |   |   |   |   |   |   |   | $ | 37,672,888 |   |   |   |   |   |   |   | $ | 37,183,294 |   |   |   |   |   |   |   |
| Ratio                of interest-earning assets to interest-bearing                liabilities         |   |                                            | 120.53%     |   |   |   |   |   |   |   |   | 119.09 | % |   |   |   |   |   |   |   | 117.78% |   |   |   |   |   |   |   |
| Net                interest income                                                                     |   |                                            |        |   | $ | 11,111,312 |   |   |   |   |   |   |   | $ | 10,002,591 |   |   |   |   |   |   |   | $ | 9,033,278 |   |   |   |   |
| Net                interest spread                                                                     |   |                                            |        |   |   |   |   |   | 3.98% |   |   |   |   |   |   |   |   | 3.95% |   |   |   |   |   |   |   |   | 3.27% |   |
| Net                interest margin (1)                                                                 |   |                                            |        |   |   |   |   |   | 4.42% |   |   |   |   |   |   |   |   | 4.26% |   |   |   |   |   |   |   |   | 3.67% |   |
|                                                                                                   |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   |                                            |        |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Table      2**

**Volume-Rate      Analysis**

|                                                       |   | **2005                over 2004****Increase                (decrease) due to changes in:** |      |
|------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|-----------|
|                                                       |   | **Volume**                                                                                 |      | **Rate** |   | **Total** |   |
| Interest                income on:                         |   |                                                                                       |      |   |   |   |   |
| Investment                securities                       |   |                                                                                       |      |   |   |   |   |
| Taxable                                                    |   | $                                                                                          | (95,213   | ) | $ | 83,696 |   | $ | (11,517 | ) |
| Non-taxable                                                |   |                                                                                       | 16,571    |   |   | (16,195 | ) |   | 376 |   |
| Other                investment securities                 |   |                                                                                       | (6,123    | ) |   | 14,361 |   |   | 8,238 |   |
| Federal                funds sold                          |   |                                                                                       | 95,793    |   |   | 146,781 |   |   | 242,574 |   |
| Loans                (including loan fees)                 |   |                                                                                       | 1,026,397 |   |   | 1,389,998 |   |   | 2,416,395 |   |
|  Total                interest earning assets         |   |                                                                                       | 1,037,425 |   |   | 1,618,641 |   |   | 2,656,066 |   |
|  Interest                expense on:                  |   |                                                                                       |      |   |   |   |   |   |   |   |
| Deposits:                                                  |   |                                                                                       |      |   |   |   |   |   |   |   |
| Interest                bearing demand                     |   |                                                                                       | (9,914    | ) |   | 266,022 |   |   | 256,108 |   |
| Savings                                                    |   |                                                                                       | (59,098   | ) |   | 382,227 |   |   | 323,129 |   |
| Time                                                       |   |                                                                                       | 444,254   |   |   | 503,763 |   |   | 948,017 |   |
| Securities                sold under repurchase agreements |   |                                                                                       | 15,455    |   |   | 4,617 |   |   | 20,072 |   |
| Federal                Funds purchased                     |   |                                                                                       | 19        |   |   | - |   |   | 19 |   |
|  Total                interest bearing liabilities    |   |                                                                                       | 390,716   |   |   | 1,156,629 |   |   | 1,547,345 |   |
|  Net                interest income                   |   | $                                                                                          | 646,709   |   | $ | 462,012 |   | $ | 1,108,721 |   |

----

**Table      2**

**Volume-Rate      Analysis (continued)**

|                                                       |   | **2004                over 2003****Increase                (decrease) due to changes in:** |     |
|------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|----------|
|                                                       |   | **Volume**                                                                                 |     | **Rate** |   | **Total** |   |
| Interest                income on:                         |   |                                                                                       |     |   |   |   |   |
| Investment                securities                       |   |                                                                                       |     |   |   |   |   |
|  Taxable                                              |   | $                                                                                          | 36,037   |   | $ | 157,450 |   | $ | 193,487 |   |
| Non-taxable                                                |   |                                                                                       | 3,999    |   |   | 10,550 |   |   | 14,549 |   |
| Other                investment securities                 |   |                                                                                       | 13,294   |   |   | 27,485 |   |   | 40,779 |   |
| Federal                funds sold                          |   |                                                                                       | (91,761  | ) |   | 21,784 |   |   | (69,977 | ) |
| Loans                (including loan fees)                 |   |                                                                                       | (726,240 | ) |   | (236,997 | ) |   | (963,237 | ) |
|  Total                interest earning assets         |   |                                                                                       | (764,671 | ) |   | (19,728 | ) |   | (784,399 | ) |
|  Interest                expense on:                  |   |                                                                                       |     |   |   |   |   |   |   |   |
| Deposits:                                                  |   |                                                                                       |     |   |   |   |   |   |   |   |
| Interest                bearing demand                     |   |                                                                                       | 26,662   |   |   | (179,645 | ) |   | (152,983 | ) |
| Savings                                                    |   |                                                                                       | 161,095  |   |   | (81,074 | ) |   | 80,021 |   |
| Time                                                       |   |                                                                                       | (500,771 | ) |   | (634,609 | ) |   | (1,135,380 | ) |
| Securities                sold under repurchase agreements |   |                                                                                       | 69,139   |   |   | (63,239 | ) |   | 5,900 |   |
| Federal                Funds purchased                     |   |                                                                                       | 1,508    |   |   | - |   |   | 1,508 |   |
| Federal                Home Loan Bank Advances             |   |                                                                                       | (552,778 | ) |   | - |   |   | (552,778 | ) |
|  Total                interest bearing liabilities    |   |                                                                                       | (795,145 | ) |   | (958,567 | ) |   | (1,753,712 | ) |
|  Net                interest income                   |   | $                                                                                          | 30,474   |   | $ | 938,839 |   | $ | 969,313 |   |

**Provision      for Loan Losses**

**.      **

----

** **

**Non-Interest      Income**

** **

**Non-Interest      Expense**

** **

**Income      Tax Expense**

----

**ANALYSIS        OF FINANCIAL CONDITION**

**Summary**

**Investment      Securities**

**Table      3**

**Investment      Portfolio**

|                                               |   | 2005   |       | 2004   |   | 2003       |   |
|----------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
| **Available                  for sale**            |   |   |       |   |   |       |   |
| State,                  county and municipal       |   | $      | 18,475,471 |   | $      | 16,901,346 |   | $ | 18,165,794 |   |
| United                  States Government agencies |   |   | 20,654,830 |   |   | 17,670,308 |   |   | 19,300,929 |   |
| Mortgage-backed                                    |   |   | 10,703,439 |   |   | 10,662,410 |   |   | 14,508,176 |   |
| Other                  debt securities             |   |   | 1,500,000  |   |   | 1,497,500  |   |   | 1,500,000 |   |
|  Totals                                       |   | $      | 51,333,740 |   | $      | 46,731,564 |   | $ | 53,474,899 |   |

----

**Table      4**

**Maturity      Distribution and Weighted Average Yield on Investments (1)**

|                                      |   | U.S.                  Government Agencies |       |  Mortgage-Backed                  Securities                  (2) |   |  State,                  County andMunicipal |   |   Trust                  Preferred Securities |       |  Weighted                  Average                  Yields |   |
|-------------------------------------------|--------|-------------------------------------------|------------|------------------------------------------------------------------------|--------|---------------------------------------------------|--------|---------------------------------------------------------|------------|-----------------------------------------------------------------|--------|
|                                      |   |                                      |       |                                                                   |   |                                              |   |                                                    |       |                                                            |   |
| Within                  1 year            |   | $                                         | 2,966,994  |                                                                   | $      | -                                                 |   | $                                                       | 155,310    |                                                            | $      | - |   |   | 3.58% |   |
| After                  1 through 5 years  |   |                                      | 9,338,125  |                                                                   |   | 1,279,422                                         |   |                                                    | 1,424,384  |                                                            |   | - |   |   | 3.68% |   |
| After                  5 through 10 years |   |                                      | 8,349,711  |                                                                   |   | 1,829,290                                         |   |                                                    | 5,205,925  |                                                            |   | 1,000,000 |   |   | 4.65% |   |
| After                  10 years           |   |                                      | -          |                                                                   |   | 7,594,727                                         |   |                                                    | 11,689,852 |                                                            |   | 500,000 |   |   | 4.61% |   |
|  Totals                              |   | $                                         | 20,654,830 |                                                                   | $      | 10,703,439                                        |   | $                                                       | 18,475,471 |                                                            | $      | 1,500,000 |   |   |   |   |

**Loans**

**Table      5**

**Loan      Portfolio**

|                                                   |   | 2005   |        | 2004   |   | 2003        |   | 2002    |        | 2001   |   |
|--------------------------------------------------------|--------|--------|-------------|--------|--------|-------------|--------|---------|-------------|--------|--------|
| Commercial,                industrial and agricultural |   | $      | 21,012,994  |   | $      | 21,625,371  |   | $       | 21,208,190  |   | $      | 21,466,048 |   | $ | 18,154,481 |   |
| Real                estate - construction              |   |   | 72,533,344  |   |   | 55,157,066  |   |    | 43,831,025  |   |   | 51,268,113 |   |   | 45,386,203 |   |
| Real                estate - mortgage                  |   |   | 103,029,748 |   |   | 98,929,804  |   |    | 94,266,400  |   |   | 93,464,207 |   |   | 74,130,798 |   |
| Consumer                                               |   |   | 9,897,511   |   |   | 10,353,250  |   |    | 11,845,183  |   |   | 13,354,030 |   |   | 13,615,861 |   |
|                                                   |   |   | 206,473,597 |   |   | 186,065,491 |   |    | 171,150,798 |   |   | 179,552,398 |   |   | 151,287,343 |   |
| Less:                Allowance for loan losses         |   |   | (2,945,256  | )      |   | (2,531,330  | )      |    | (2,669,204  | )      |   | (2,098,691 | ) |   | (1,812,041 | ) |
|                                                   |   |   |        |   |   |        |   |    |        |   |   |   |   |   |   |   |
| Loans,                net                              |   | $      | 203,528,341 |   | $      | 183,534,161 |   | $  | 168,481,594 |   | $      | 177,453,707 |   | $ | 149,475,302  |   |

----

**Table      6**

**Maturity      and Repricing Data for Loans**

|   Maturity           |   | Commercial,                  Financial                  and Agricultural |       | RealEstate                  Construction |   |   Total |   |
|--------------------------------|--------|--------------------------------------------------------------------------|------------|------------------------------------------|--------|-------------------|--------|
| Within                  1 year |   | $                                                                        | 8,159,095  |                                     | $      | 58,464,620        |   | $ | 66,623,715 |   |
| 1                  to 5 years  |   |                                                                     | 9,519,689  |                                     |   | 14,068,724        |   |   | 23,588,413 |   |
| Over                  5 years  |   |                                                                     | 3,334,210  |                                     |   | -                 |   |   | 3,334,210 |   |
| Totals                         |   | $                                                                        | 21,012,994 |                                     | $      | 72,533,344        |   | $ | 93,546,338 |   |

|                                                          |   | FixedInterestRates |      | Variable InterestRates |   |   Total |   |
|---------------------------------------------------------------|--------|--------------------|-----------|-----------------------------|--------|-------------------|--------|
|  Commercial,                  financial and agricultural |   |               |      |                        |   |              |   |
| 1                  to 5 years                                 |   | $                  | 6,845,155 |                        | $      | 2,674,534         |   | $ | 9,519,689 |   |
| Over                  5 years                                 |   | $                  | 261,365   |                        |   | 3,072,845         |   | $ | 3,334,210 |   |
|                                                          |   |               |      |                        |   |              |   |   |   |   |
| Real                  estate construction                     |   |               |      |                        |   |              |   |   |   |   |
| 1                  to 5 years                                 |   | $                  | 2,456,937 |                        | $      | 11,602,787        |   | $ | 14,068,724 |   |
| Over                  5 years                                 |   | $                  | -         |                        | $      | -                 |   | $ | - |   |

**Allowance      for Loan Losses**

----

**Table      7**

**Allowance      for Loan Losses**

|                                                                                                                                        |   | 2005                                                |   | 2004   |   | 2003   |   | 2002   |   | 2001   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                        |   | (Amounts                are presented in thousands) |   |
| Balance                at beginning of year                                                                                                 |   | $                                                   | 2,531  |   | $      | 2,669  |   | $      | 2,099  |   | $      | 1,812 |   | $ | 1,808 |   |
| Charges-offs:                                                                                                                               |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial,                financial and agricultural                                                                                       |   |                                                | 160    |   |   | 453    |   |   | 35     |   |   | 138 |   |   | 275 |   |
| Installment                                                                                                                                 |   |                                                | 80     |   |   | 273    |   |   | 76     |   |   | 162 |   |   | 107 |   |
| Real                Estate                                                                                                                  |   |                                                | 13     |   |   | -      |   |   | 10     |   |   | - |   |   | - |   |
|  Total                charge-offs                                                                                                      |   |                                                | 253    |   |   | 726    |   |   | 121    |   |   | 300 |   |   | 382 |   |
| Recoveries:                                                                                                                                 |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial,                financial and agricultural                                                                                       |   |                                                | 40     |   |   | 178    |   |   | 28     |   |   | 9 |   |   | 70 |   |
| Installment                                                                                                                                 |   |                                                | 15     |   |   | 16     |   |   | 18     |   |   | 23 |   |   | 16 |   |
|  Total                recoveries                                                                                                       |   |                                                | 55     |   |   | 194    |   |   | 46     |   |   | 32 |   |   | 86 |   |
|  Net                charge-offs                                                                                                        |   |                                                | 198    |   |   | 532    |   |   | 75     |   |   | 268 |   |   | 296 |   |
|  Provisions                charged to operations                                                                                       |   |                                                | 612    |   |   | 394    |   |   | 645    |   |   | 555 |   |   | 300 |   |
|  Balance                at end of year                                                                                                 |   | $                                                   | 2,945  |   | $      | 2,531  |   | $      | 2,669  |   | $      | 2,099 |   | $ | 1,812 |   |
|  Ratios                of net charge-offs (recoveries) during the period to average loans                outstanding during the period |   |                                                | .10%   |   |   | .30%   |   |   | .04%   |   |   | .15% |   |   | .21% |   |

----

*(in      thousands)*

|                                       |   |                                      | Allocation                of Allowance for Loan                Losses  |   |   | %                of Allowance                for Loan                Losses  |   |   | %                of Loans by Category toTotal                Loans  |   |
|--------------------------------------------|--------|-------------------------------------------|----------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------|--------|
|                                       |   |  (in                thousands)  |                                                                             |   |   |                                                                                   |   |   |                                                                     |
| Commercial                                 |   | $                                         | 46                                                                               |   |   | 1.6%                                                                                   |   |   | 3.8%                                                                     |   |
| Commercial                Construction     |   |                                      | 271                                                                              |   |   | 9.2%                                                                                   |   |   | 14.0%                                                                    |   |
| Consumer                                   |   |                                      | 61                                                                               |   |   | 2.1%                                                                                   |   |   | 4.6%                                                                     |   |
| Mortgages                                  |   |                                      | 345                                                                              |   |   | 11.7%                                                                                  |   |   | 16.7%                                                                    |   |
| Non-residential                Real Estate |   |                                      | 1,246                                                                            |   |   | 42.3%                                                                                  |   |   | 37.8%                                                                    |   |
| Cross-allocated                            |   |                                      | 976                                                                              |   |   | 33.1%                                                                                  |   |   | 23.1%                                                                    |   |
| Total                                      |   | $                                         | 2,945                                                                            |   |   | 100.0%                                                                                 |   |   | 100.0%                                                                   |   |

**Nonperforming      Assets**

**Table      8 **

**Non-performing      Assets **

|                                                                                                      |   |  **December                31,** |           |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------------------------|----------------|
|                                                                                                      |   |                                  | **2005**  |   |   | **2004**  |   |   | **2003**  |   |   | **2002**  |   |   | **2001**  |   |
|                                                                                                      |   |                                  |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                real estate and repossessions                                                        |   | $                                     | 327,000        |   | $ | 839,000 |   | $ | 1,077,000 |   | $ | 292,000 |   | $ | 44,000 |   |
| Accruing                loans 90 days or more past due                                                    |   |                                  | 632,000        |   |   | 5,064,000 |   |   | 583,000 |   |   | 10,000 |   |   | 34,000 |   |
| Non-accrual                loans                                                                          |   |                                  | 2,151,000      |   |   | 1,080,000 |   |   | 1,503,000 |   |   | 2,597,000 |   |   | 911,000 |   |
| Interest                on non-accrual loans which would havebeen reported                                |   |                                  | 95,000         |   |   | 44,000 |   |   | 63,000 |   |   | 188,000 |   |   | 31,000 |   |
| Interest                recognized on non-accrual loans prior to reclassification of                loans |   |                                  | 86,000         |   |   | 18,000 |   |   | 37,000 |   |   | 98,000 |   |   | 57,000 |   |
| Restructured                debt                                                                          |   |                                  | -              |   |   | - |   |   | 3,189,000 |   |   | - |   |   | - |   |

----

**Deposits**

**Table      9**

**Deposits**

|                                       |   | December                31,    |        |
|--------------------------------------------|--------|--------------------------------|-------------|
|                                       |   | 2005                           |        | 2004 |   | 2003 |   |
|                                       |   | Average                Balance |        | Rate |   | Average                Balance |   | Rate |   | Average                Balance |   | Rate |   |
| Deposits:                                  |   |                           |        |   |   |   |   |   |   |   |   |   |   |
| Non-interest                bearing demand |   | $                              | 31,835,382  |   |   | - |   | $ | 29,102,010 |   |   | - |   | $ | 28,432,352 |   |   | - |   |
| Interest                bearing demand     |   |                           | 57,304,533  |   |   | 1.52% |   |   | 57,964,350 |   |   | 1.06% |   |   | 56,018,253 |   |   | 1.06% |   |
| Savings                                    |   |                           | 53,790,134  |   |   | 2.30% |   |   | 56,318,461 |   |   | 1.62% |   |   | 47,182,345 |   |   | 1.62% |   |
| Time                                       |   |                           | 95,233,721  |   |   | 3.23% |   |   | 81,578,878 |   |   | 2.61% |   |   | 96,482,324 |   |   | 2.61% |   |
|                                       |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   | $                              | 238,163,770 |   |   |   |   | $ | 224,963,699 |   |   |   |   | $ | 228,115,274 |   |   |   |   |

**Table      10**

**Maturity      of Time Deposits over $100,000**

| Within                3 months           |   | $      | 7,510,000  |   |
|------------------------------------------|--------|--------|------------|--------|
| After                3 through 6 months  |   |   | 4,382,000  |   |
| After                6 through 12 months |   |   | 13,213,000 |   |
| After                12 months           |   |   | 10,825,000 |   |
|                                     |   | $      | 35,930,000 |   |

**Transactions      with Related Parties**

**Liquidity**

----

** **
** **
** **

** **
** **

**Contractual      Obligations and Off-Balance Sheet Arrangements**

** **

**Capital      Resources**

**Table      11**

**Capital      Ratios**

|                                              |   | Risk-BasedCapital                RatiosActualas                ofDecember                31, 2005 |                       |
|---------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|----------------------------|
|                                              |   |                                                                                              |                       |
| Tier                1 Capital                     |   |                                                                                              | 11.1%                      |   |
| Tier                1 Capital minimum requirement |   |                                                                                              |                  4.0% |   |
| Excess                                            |   |                                                                                              |  7.1%                 |   |
|                                              |   |                                                                                              |                       |   |
| Total                Capital                      |   |                                                                                              | 12.4%                      |   |
| Total                Capital minimum requirement  |   |                                                                                              |                  8.0% |   |
| Excess                                            |   |                                                                                              |                  4.4% |   |
|                                              |   |                                                                                              |                       |   |
|                                              |   |  Leverage                RatioAtDecember                31, 2005                        |                       |
|                                              |   |                                                                                              |                       |   |
| Leverage                ratio                     |   |                                                                                              |                  8.4% |   |
| Leverage                ratio requirement         |   |                                                                                              |                  4.0% |   |
| Excess                                            |   |                                                                                              |                  4.4% |   |

----

**Table      12**

**Selected      Ratios**

|                                              |   | 2005   |   | 2004   |   | 2003   |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Net                income to:                     |   |   |   |   |   |   |   |
| Average                stockholders’ equity |   |   | 13.04% |   |   | 11.58% |   |   | 13.21% |   |
| Average                assets                     |   |   | 1.15%  |   |   | 1.01%  |   |   | 1.03% |   |
| Dividends                to net income            |   |   | 32.39% |   |   | 35.56% |   |   | 33.60% |   |
| Average                equity to average assets   |   |   | 8.82%  |   |   | 8.76%  |   |   | 7.81% |   |

**Asset/Liability      and Interest Rate Sensitivity Management**

----

|                                                         |   | At                December 31, 2005Maturing                or Repricing in(dollars                in thousands) |    |
|--------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------|---------|
|                                                         |   |  Three                Monthsor                Less                                                         |    | Four                Monthsto12                Months |   |  1                to 5Years |   |  Over                5Years |   |   Total |   |
| Interest-earning                assets:                      |   |                                                                                                            |    |   |   |   |   |   |   |   |   |
| Investment                securities                         |   | $                                                                                                               | 655     |   | $ | 2,988 |   | $ | 12,187 |   | $ | 35,773 |   | $ | 51,603 |   |
| Federal                funds sold                            |   |                                                                                                            | 11,109  |   |   | - |   |   | - |   |   | - |   |   | 11,109 |   |
| Loans                                                        |   |                                                                                                            | 123,208 |   |   | 35,344 |   |   | 45,137 |   |   | 66 |   |   | 203,755 |   |
|                                                         |   |                                                                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest-bearing assets                 |   | $                                                                                                               | 134,972 |   | $ | 38,332 |   | $ | 57,324 |   | $ | 35,839 |   | $ | 266,467 |   |
|                                                         |   |                                                                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                 |   |                                                                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                    |   |                                                                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                and demand                            |   | $                                                                                                               | 116,017 |   | $ | - |   | $ | - |   | $ | - |   | $ | 116,017 |   |
| Time                deposits                                 |   |                                                                                                            | 20,541  |   |   | 39,268 |   |   | 48,216 |   |   | - |   |   | 108,025 |   |
| Repurchase                agreements                         |   |                                                                                                            | -       |   |   | 2,244 |   |   | - |   |   | - |   |   | 2,244 |   |
|                                                         |   |                                                                                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest-bearing liabilities            |   | $                                                                                                               | 136,558 |   | $ | 41,512 |   | $ | 48,216 |   | $ | - |   | $ | 226,826 |   |
| Interest                sensitive difference per period      |   | $                                                                                                               | (1,586) |   | $ | (3,180) |   | $ | 9,108 |   | $ | 35,839 |   | $ | 40,181 |   |
| Cumulative                interest sensitivity difference    |   | $                                                                                                               | (1,586) |   | $ | (4,766) |   | $ | 4,342 |   | $ | 40,181 |   |   |   |   |
| Cumulative                difference to total earning assets |   |                                                                                                            | (0.6%)  |   |   | (1.8%) |   |   | 1.6% |   |   | 15.1% |   |   |   |   |

** **

----

** **

**Inflation**

**ITEM      7.    ****FINANCIAL      STATEMENTS.**

**ITEM      8.****    CHANGES      IN      AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL      DISCLOSURE.**

**ITEM      8A.         **
**CONTROLS      AND PROCEDURES.**

**Evaluation      of Disclosure Controls and Procedures**

**Changes      in Internal Control Over Financial Reporting**

----

**ITEM      8B.        OTHER      INFORMATION.**

**PART      III**

**ITEM      9.    DIRECTORS, EXECUTIVE      OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE      EXCHANGE ACT.**

** **

**ITEM      10.         ****EXECUTIVE      COMPENSATION.**

**               **

**ITEM      11.        ****SECURITY      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER      MATTERS.**

**ITEM      12.        ****CERTAIN      RELATIONSHIPS AND RELATED TRANSACTIONS.**

**ITEM      13.        ****EXHIBITS.**

| 1.                 | Report                of Independent Certified Public                Accountants |
|------------------------------|----------------------------------------------------------------------------------|

| 2.    |  Balance                Sheets  - December 31, 2005 and                2004 |
|----------------------|---------------------------------------------------------------------------------------|

| 3.                 | Statements                of EarningsFor                the Years Ended December 31, 2005, 2004, and                2003  |
|------------------------------|--------------------------------------------------------------------------------------------------------------------------------|

| 4.                 | Statements                of Changes in Stockholders EquityFor                the Years Ended December 31, 2005, 2004, and                2003 |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.                 | Statements                of Cash FlowsFor                the Years Ended December 31, 2005, 2004, and                2003 |
|------------------------------|----------------------------------------------------------------------------------------------------------------------------|

| 6.                 | Notes                to Financial Statements |
|------------------------------|----------------------------------------------|

----

| 3.1            | Articles                of Incorporation of Oconee Financial Corporation, dated August 27,                1998                (included as Exhibit 3.1 to Oconee’s 10-KSB filed with the SEC on March                30, 2004 and incorporated herein by reference).  |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  3.2      |  Amended                and Restated Bylaws of Oconee Financial Corporation, dated May 7,                2001                (included as Exhibit 3.2 to Oconee’s 10-KSB filed with the SEC on April 1,                2002 and incorporated herein by reference).    |
|  4        |  See                Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation                and                Amended and Restated Bylaws which define the rights of the holders                of                Common Stock of Oconee.                      |
|  4.1      |  Form                of Common Stock Certificate (included as Exhibit 4.1 to Oconee’s 10-KSB                filed with the SEC on March 31, 2005 and incorporated herein by                reference).                                                                |
|  10.1     |  Oconee                State Bank Officers’ Cash Incentive Plan (included as Exhibit 10.1 to the                Bank’s 10-KSB filed with the SEC on April 1, 2002 and incorporated herein                by reference).                                         |
|  14       |  Code                of Ethical Conduct (included as Exhibit 14 to Oconee’s 10-KSB filed with                the SEC on March 31, 2005 and incorporated herein by                reference).                                                                          |
|  21       |  Subsidiaries                of Oconee Financial Corporation.                                                                                                                                                                                                               |
|  24  |  Power                of Attorney (included herein on the signature page).                                                                                                                                                                                                  |
|  31.1     |  Certification                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                          |
|  31.2     |  Certification                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                                                                                                                                          |
|  32.1     |  Section                1350 Certification of Chief Executive Officer.                                                                                                                                                                                                      |
|  32.2     |  Section                1350 Certification of Chief Financial                Officer.                                                                                                                                                                                       |

**ITEM      14.             **
**PRINCIPAL      ACCOUNTANT FEES AND SERVICES**

----

**REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

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

----

----

**OCONEE        FINANCIAL CORPORATION**

**Consolidated        Balance Sheets**

**December        31, 2005 and 2004**

|                                                                                                                                                                                                                             |   | 2005   |        | 2004   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|
|  Assets                                                                                                                                                                                                                     |   |   |        |   |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |
| Cash                  and due from banks, including reserve                                                                                                                                                                      |   |   |        |   |   |
| requirements                  of $3,106,000 and $4,264,000                                                                                                                                                                       |   | $      | 7,955,659   |   |   | 6,591,366 |   |
| Federal                  funds sold                                                                                                                                                                                              |   |   | 11,109,000  |   |   | 9,162,000 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                                                       |   |   | 19,064,659  |   |   | 15,753,366 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
| Investment                  securities available for sale                                                                                                                                                                        |   |   | 51,333,740  |   |   | 46,731,564 |   |
| Other                  investments                                                                                                                                                                                               |   |   | 614,429     |   |   | 604,329 |   |
| Mortgage                  loans held for sale                                                                                                                                                                                    |   |   | 1,285,000   |   |   | 1,127,700 |   |
| Loans,                  net                                                                                                                                                                                                      |   |   | 203,528,341 |   |   | 183,534,161 |   |
| Premises                  and equipment, net                                                                                                                                                                                     |   |   | 5,819,466   |   |   | 6,012,802 |   |
| Accrued                  interest receivable and other assets                                                                                                                                                                    |   |   | 3,419,553   |   |   | 3,100,592 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
|                                                                                                                                                                                                                             |   | $      | 285,065,188 |   |   | 256,864,514 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
|  Liabilities                  and Stockholders’ Equity                                                                                                                                                                |   |   |        |   |   |   |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
| Deposits:                                                                                                                                                                                                                        |   |   |        |   |   |   |   |
| Demand                                                                                                                                                                                                                 |   | $      | 32,757,455  |   |   | 29,215,401 |   |
| Interest-bearing                  demand                                                                                                                                                                                         |   |   | 64,504,808  |   |   | 61,774,758 |   |
| Savings                                                                                                                                                                                                                          |   |   | 51,511,966  |   |   | 54,780,285 |   |
| Time                                                                                                                                                                                                                             |   |   | 108,024,795 |   |   | 85,982,659 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
| Total                  deposits                                                                                                                                                                                                  |   |   | 256,799,024 |   |   | 231,753,103 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
| Securities                  sold under repurchase agreements                                                                                                                                                                     |   |   | 2,244,232   |   |   | 1,188,796 |   |
| Accrued                  interest payable and other liabilities                                                                                                                                                                  |   |   | 2,287,826   |   |   | 1,587,534 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
| Total                  liabilities                                                                                                                                                                                               |   |   | 261,331,082 |   |   | 234,529,433 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
| Stockholders’                  equity:                                                                                                                                                                                     |   |   |        |   |   |   |   |
| Common                    stock, par value $2, authorized 1,500,000 shares, issued and                    outstanding                    899,815 shares at December 31, 2005 and 899,885 at December 31,                    2004 |   |   | 1,799,630   |   |   | 1,799,770 |   |
| Additional                  paid-in capital                                                                                                                                                                                 |   |   | 4,243,332   |   |   | 4,246,832 |   |
| Retained                  earnings                                                                                                                                                                                               |   |   | 17,857,970  |   |   | 15,792,228 |   |
| Accumulated                  other comprehensive income                                                                                                                                                                          |   |   | (166,826    | )      |   | 496,251 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
| Total                  stockholders’ equity                                                                                                                                                                                |   |   | 23,734,106  |   |   | 22,335,081 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |
|                                                                                                                                                                                                                             |   | $      | 285,065,188 |   |   | 256,864,514 |   |
|                                                                                                                                                                                                                             |   |   |        |   |   |   |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Consolidated        Statements of Earnings**

**For        the Years Ended December 31, 2005, 2004 and 2003**

|                                                                 |   | 2005   |       | 2004   |   | 2003       |   |
|----------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
| Interest                  income:                                    |   |   |       |   |   |       |   |
| Interest                  and fees on loans                     |   | $      | 13,925,648 |   |   | 11,509,253 |   |   | 12,472,490 |   |
| Interest                  on federal funds sold                      |   |   | 342,585    |   |   | 100,011    |   |   | 169,988 |   |
| Interest                  and dividends on securities:               |   |   |       |   |   |       |   |   |   |   |
| U.                  S. government agencies                           |   |   | 1,154,080  |   |   | 1,165,597  |   |   | 972,110 |   |
| State,                  county and municipal                         |   |   | 801,772    |   |   | 801,396    |   |   | 786,847 |   |
| Other                                                                |   |   | 117,679    |   |   | 109,441    |   |   | 68,662 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Total                  interest income                               |   |   | 16,341,764 |   |   | 13,685,698 |   |   | 14,470,097 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Interest                  expense:                                   |   |   |       |   |   |       |   |   |   |   |
| Interest-bearing                  demand deposits                    |   |   | 871,368    |   |   | 615,260    |   |   | 768,243 |   |
| Savings                  deposits                                    |   |   | 1,235,106  |   |   | 911,977    |   |   | 831,956 |   |
| Time                  deposits                                       |   |   | 3,080,559  |   |   | 2,132,542  |   |   | 3,267,922 |   |
| Federal                  Home Loan Bank advances                     |   |   | -          |   |   | -          |   |   | 552,778 |   |
| Other                                                                |   |   | 43,419     |   |   | 23,328     |   |   | 15,920 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Total                  interest expense                              |   |   | 5,230,452  |   |   | 3,683,107  |   |   | 5,436,819 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Net                  interest income                                 |   |   | 11,111,312 |   |   | 10,002,591 |   |   | 9,033,278 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Provision                  for loan losses                           |   |   | 612,000    |   |   | 394,200    |   |   | 645,000 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Net                  interest income after provision for loan losses |   |   | 10,499,312 |   |   | 9,608,391  |   |   | 8,388,278 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Other                  income:                                       |   |   |       |   |   |       |   |   |   |   |
| Service                  charges                                     |   |   | 1,588,053  |   |   | 1,036,863  |   |   | 1,069,199 |   |
| Gain                  on sale of securities                          |   |   | 7,019      |   |   | 46,798     |   |   | - |   |
| Mortgage                  banking income                             |   |   | 402,905    |   |   | 438,030    |   |   | 1,487,720 |   |
| Miscellaneous                                                        |   |   | 514,852    |   |   | 695,530    |   |   | 446,245 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Total                  other income                                  |   |   | 2,512,829  |   |   | 2,217,221  |   |   | 3,003,164 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Other                  expenses:                                     |   |   |       |   |   |       |   |   |   |   |
| Salaries                  and employee benefits                      |   |   | 5,187,641  |   |   | 4,840,367  |   |   | 4,741,913 |   |
| Occupancy                                                  |   |   | 1,333,568  |   |   | 1,279,339  |   |   | 1,022,610 |   |
| Other                  operating                                     |   |   | 2,088,603  |   |   | 2,160,937  |   |   | 1,882,481 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Total                  other expenses                                |   |   | 8,609,812  |   |   | 8,280,643  |   |   | 7,647,004 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Earnings                  before income taxes                        |   |   | 4,402,329  |   |   | 3,544,969  |   |   | 3,744,438 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Income                  tax expense                                  |   |   | 1,346,790  |   |   | 1,014,433  |   |   | 1,066,343 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Net                  earnings                                   |   | $      | 3,055,539  |   |   | 2,530,536  |   |   | 2,678,095 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
| Net                  earnings per share                              |   | $      | 3.40       |   |   | 2.81       |   |   | 2.98 |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |
|                                                                 |   |   |       |   |   |       |   |   |   |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Consolidated        Statements of Comprehensive Income**

**For        the Years Ended December 31, 2005, 2004 and 2003**

|                                                                                                                                                                 |   | 2005   |      | 2004   |   | 2003      |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|                                                                                                                                                                 |   |   |      |   |   |      |   |
| Net                  earnings                                                                                                                                        |   | $      | 3,055,539 |   |   | 2,530,536 |   |   | 2,678,095 |   |
|                                                                                                                                                                 |   |   |      |   |   |      |   |   |   |   |
| Other                  comprehensive (loss) income, net of income taxes:                                                                                        |   |   |      |   |   |      |   |   |   |   |
| Unrealized                  gains on securities available for sale:                                                                                                  |   |   |      |   |   |      |   |   |   |   |
| Holding                    gains (losses) arising during period, net of tax benefit (expense)                    of                    $403,047, $12,359 and $22,975 |   |   | (658,722  | )      |   | (20,199   | )      |   | (37,552 | ) |
| Reclassification                    adjustment for gains included in net earnings, net of tax of                    $(2,664),                    $(17,765) and $0    |   |   | (4,355    | )      |   | (29,033   | )      |   | - |   |
|                                                                                                                                                                 |   |   |      |   |   |      |   |   |   |   |
| Total                  other comprehensive (loss) income                                                                                                             |   |   | (663,077  | )      |   | (49,232   | )      |   | (37,552 | ) |
|                                                                                                                                                                 |   |   |      |   |   |      |   |   |   |   |
| Comprehensive                  income                                                                                                                                |   | $      | 2,392,462 |   |   | 2,481,304 |   |   | 2,640,543 |   |
|                                                                                                                                                                 |   |   |      |   |   |      |   |   |   |   |
|                                                                                                                                                                 |   |   |      |   |   |      |   |   |   |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Consolidated        Statements of Changes in Stockholders’ Equity**

**For        the Years Ended December 31, 2005, 2004 and 2003**

|                                                  |   |                                       |      |                                   |   |           |   | Accumulated                    |       |        |   |
|-------------------------------------------------------|--------|--------------------------------------------|-----------|----------------------------------------|--------|----------------|--------|--------------------------------|------------|-------------|--------|
|                                                  |   |                                       |      | Additional                             |   |           |   | Other                          |       |        |   |
|                                                  |   | Common                                     |      | Paid-In                                |   | Retained       |   | Comprehensive                  |       |        |   |
|                                                  |   |                    Stock    |      |                    Capital   |   |  Earnings |   | Income                  (Loss) |       |  Total |   |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |
| Balance,                  December 31, 2002           |   | $                                          | 1,799,770 |                                   |   | 4,246,832      |   |                           | 12,383,367 |        |   | 583,035 |   |   | 19,013,004 |   |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Cash                  dividends declared              |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| ($1.00                  per share)                    |   |                                       | -         |                                   |   | -              |   |                           | (899,885   | )           |   | - |   |   | (899,885 | ) |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Change                  in net unrealized gain (loss) |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| on                  investment securities available   |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| for                  sale, net of tax                 |   |                                       | -         |                                   |   | -              |   |                           | -          |        |   | (37,552 | ) |   | (37,552 | ) |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Net                  earnings                         |   |                                       | -         |                                   |   | -              |   |                           | 2,678,095  |        |   | - |   |   | 2,678,095 |   |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Balance,                  December 31, 2003           |   |                                       | 1,799,770 |                                   |   | 4,246,832      |   |                           | 14,161,577 |        |   | 545,483 |   |   | 20,753,662 |   |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Cash                  dividends declared              |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| ($1.00                  per share)                    |   |                                       | -         |                                   |   | -              |   |                           | (899,885   | )           |   | - |   |   | (899,885 | ) |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Change                  in net unrealized gain (loss) |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| on                  investment securities available   |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| for                  sale, net of tax                 |   |                                       | -         |                                   |   | -              |   |                           | -          |        |   | (49,232 | ) |   | (49,232 | ) |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Net                  earnings                         |   |                                       | -         |                                   |   | -              |   |                           | 2,530,536  |        |   | - |   |   | 2,530,536 |   |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Balance,                  December 31, 2004           |   |                                       | 1,799,770 |                                   |   | 4,246,832      |   |                           | 15,792,228 |        |   | 496,251 |   |   | 22,335,081 |   |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Purchase                  and retirement of stock     |   |                                       | (140      | )                                      |   | (3,500         | )      |                           | -          |        |   | - |   |   | (3,640 | ) |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Cash                  dividends declared              |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| ($1.10                  per share)                    |   |                                       | -         |                                   |   | -              |   |                           | (989,797   | )           |   | - |   |   | (989,797 | ) |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Change                  in net unrealized gain (loss) |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| on                  investment securities available   |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| for                  sale, net of tax                 |   |                                       | -         |                                   |   | -              |   |                           | -          |        |   | (663,077 | ) |   | (663,077 | ) |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Net                  earnings                         |   |                                       | -         |                                   |   | -              |   |                           | 3,055,539  |        |   | - |   |   | 3,055,539 |   |
|                                                  |   |                                       |      |                                   |   |           |   |                           |       |        |   |   |   |   |   |   |
| Balance,                  December 31, 2005           |   | $                                          | 1,799,630 |                                   |   | 4,243,332      |   |                           | 17,857,970 |        |   | (166,826 | ) |   | 23,734,106 |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Consolidated        Statements of Cash Flows**

**For        the Years Ended December 31, 2005, 2004 and 2003**

|                                                                         |   | 2005   |        | 2004   |   | 2003        |   |
|------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|-------------|--------|
| Cash                  flows from operating activities:                       |   |   |        |   |   |        |   |
| Net                  earnings                                           |   | $      | 3,055,539   |   |   | 2,530,536   |   |   | 2,678,095 |   |
| Adjustments                  to reconcile net earnings to net                |   |   |        |   |   |        |   |   |   |   |
| cash                  provided by operating activities:                      |   |   |        |   |   |        |   |   |   |   |
| Depreciation,                  amortization and accretion                    |   |   | 709,607     |   |   | 839,060     |   |   | 519,707 |   |
| Provision                  for loan losses                                   |   |   | 612,000     |   |   | 394,200     |   |   | 645,000 |   |
| Provision                  for deferred taxes                                |   |   | (110,503    | )      |   | 264,600     |   |   | (209,652 | ) |
| Gain                  on sale of investment securities                       |   |   | (7,019      | )      |   | (46,798     | )      |   | - |   |
| (Gain)                  Loss on sale and disposal of fixed assets            |   |   | 6,010       |   |   | (196,621    | )      |   | - |   |
| (Gain)                  Loss on sale of other real estate                    |   |   | (4,805      | )      |   | 1,291       |   |   | 85,855 |   |
| Change                  in:                                                  |   |   |        |   |   |        |   |   |   |   |
| Accrued                  interest receivable and other assets                |   |   | (278,477    | )      |   | (740,569    | )      |   | 76,806 |   |
| Accrued                  interest payable and other liabilities              |   |   | 700,292     |   |   | (96,154     | )      |   | (183,912 | ) |
| Mortgage                  loans held for sale                                |   |   | (157,300    | )      |   | 2,035,271   |   |   | 3,679,486 |   |
|                                                                         |   |   |        |   |   |        |   |   |   |   |
| Net                  cash provided by operating activities                   |   |   | 4,525,344   |   |   | 4,984,816   |   |   | 7,291,385 |   |
|                                                                         |   |   |        |   |   |        |   |   |   |   |
| Cash                  flows from investing activities:                       |   |   |        |   |   |        |   |   |   |   |
| Purchase                  of investment securities available for sale        |   |   | (18,153,167 | )      |   | (11,682,416 | )      |   | (54,834,174 | ) |
| Proceeds                  from calls and maturities of investment securities |   |   |        |   |   |        |   |   |   |   |
| available                  for sale                                          |   |   | 10,049,002  |   |   | 15,358,053  |   |   | 40,176,520 |   |
| Proceeds                  from sales of investment securities available      |   |   |        |   |   |        |   |   |   |   |
| for                  sale                                          |   |   | 2,433,884   |   |   | 2,846,870   |   |   | - |   |
| Proceeds                  from sales of other investments                    |   |   | -           |   |   | 161,100     |   |   | - |   |
| Purchase                  of other investments                               |   |   | (10,100     | )      |   | -           |   |   | - |   |
| Proceeds                  from liquidation of investment in unconsolidated   |   |   |        |   |   |        |   |   |   |   |
| subsidiary                                                                   |   |   | -           |   |   | -           |   |   | 325,000 |   |
| Net                  change in loans                                         |   |   | (20,718,845 | )      |   | (15,446,767 | )      |   | 7,141,514 |   |
| Purchases                  of premises and equipment                         |   |   | (515,946    | )      |   | (2,419,351  | )      |   | (1,565,629 | ) |
| Proceeds                  from sales of fixed assets                         |   |   | -           |   |   | 392,532     |   |   | - |   |
| Proceeds                  from sales of other real estate                    |   |   | 593,201     |   |   | 1,040,753   |   |   | 381,372 |   |
|                                                                         |   |   |        |   |   |        |   |   |   |   |
| Net                  cash used by investing activities                       |   |   | (26,321,971 | )      |   | (9,749,226  | )      |   | (8,375,397 | ) |
|                                                                         |   |   |        |   |   |        |   |   |   |   |
| Cash                  flows from financing activities:                       |   |   |        |   |   |        |   |   |   |   |
| Net                  change in deposits                                      |   |   | 25,045,921  |   |   | 3,132,531   |   |   | 17,257,228 |   |
| Net                  change in securities sold under repurchase agreements   |   |   | 1,055,436   |   |   | 290,328     |   |   | 156,072 |   |
| Repayment                  of Federal Home Loan Bank advances                |   |   | -           |   |   | -           |   |   | (13,300,000 | ) |
| Dividends                  paid                                              |   |   | (989,797    | )      |   | (899,885    | )      |   | (899,885 | ) |
| Purchase                  and retirement of common stock                     |   |   | (3,640      | )      |   | -           |   |   | - |   |
|                                                                         |   |   |        |   |   |        |   |   |   |   |
| Net                  cash provided by financing activities                   |   |   | 25,107,920  |   |   | 2,522,974   |   |   | 3,213,415 |   |
|                                                                         |   |   |        |   |   |        |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents        |   |   | 3,311,293   |   |   | (2,241,436  | )      |   | 2,129,403 |   |
|                                                                         |   |   |        |   |   |        |   |   |   |   |
| Cash                  and cash equivalents at beginning of year              |   |   | 15,753,366  |   |   | 17,994,802  |   |   | 15,865,399 |   |
|                                                                         |   |   |        |   |   |        |   |   |   |   |
| Cash                  and cash equivalents at end of year               |   | $      | 19,064,659  |   |   | 15,753,366  |   |   | 17,994,802 |   |
|                                                                         |   |   |        |   |   |        |   |   |   |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Consolidated        Statements of Cash Flows, continued**

**For        the Years Ended December 31, 2005, 2004 and 2003**

|                                                                |   | 2005   |      | 2004   |   | 2003      |   |
|---------------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|                                                                |   |   |      |   |   |      |   |
| Supplemental                  disclosures of cash flow information: |   |   |      |   |   |      |   |
| Cash                  paid during the year for:                     |   |   |      |   |   |      |   |
| Interest                                                       |   | $      | 5,051,279 |   |   | 3,702,218 |   |   | 5,609,479 |   |
| Income                  taxes                                  |   | $      | 1,163,000 |   |   | 894,000   |   |   | 1,213,446 |   |
|                                                                |   |   |      |   |   |      |   |   |   |   |
| Noncash                  investing and financing activities:        |   |   |      |   |   |      |   |   |   |   |
| Change                  in net unrealized gain on investment        |   |   |      |   |   |      |   |   |   |   |
| securities                  available for sale, net of tax     |   | $      | (663,077  | )      |   | (49,232   | )      |   | (37,552 | ) |
| Transfer                  of loans to other real estate             |   | $      | 112,665   |   |   | 781,608   |   |   | 1,232,564 |   |
| Financed                  portion of other real estate sold         |   | $      | -         |   |   | -         |   |   | 46,965 |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements**

**(1)              **
**Summary        of Significant Accounting Policies**

|   | Organization |
|--------|--------------|

|   | Oconee                  Financial Corporation (“OFC”) received regulatory approval to operate as a                  bank holding company on October 13, 1998, and began operations                  effective                  January 1, 1999. OFC is primarily regulated by the Federal Reserve                  Bank,                  and serves as the one-bank holding company for Oconee State                  Bank. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Oconee                  State Bank (the “Bank”) commenced business in 1960 upon receipt of its                  banking charter from the Georgia Department of Banking and Finance                  (the                  “DBF”). The Bank is primarily regulated by the DBF and the Federal Deposit                  Insurance Corporation and undergoes periodic examinations by these                  regulatory agencies. The Bank provides a full range of commercial                  and                  consumer banking services primarily in Oconee and Clarke counties                  in                  Georgia. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                  consolidated financial statements include the financial statements                  of                  Oconee Financial Corporation and its wholly owned subsidiary, Oconee                  State                  Bank (collectively called the “Company”). All significant intercompany                  balances and transactions have been eliminated in consolidation. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                  accounting principles followed by the Company, and the methods                  of applying                  these principles, conform with accounting principles generally                  accepted in                  the United States of America (“GAAP”) and with general practices in the                  banking industry. In preparing the financial statements in conformity                  with                  GAAP, management is required to make estimates and assumptions                  that affect                  the reported amounts in the financial statements. Actual results                  could                  differ significantly from these estimates. Material estimates common                  to                  the banking industry that are particularly susceptible to significant                  change in the near term include, but are not limited to, the determination                  of the allowance for loan losses and valuation of real estate acquired                  in                  connection with or in lieu of foreclosure on loans. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash                  and Cash Equivalents |
|--------|--------------------------------------------|

|   | For                  purposes of reporting cash flows, cash and cash equivalents include                  cash                  and due from banks and federal funds sold. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Investment                  Securities |
|--------|----------------------------------------|

|   | The                  Company classifies its securities in one of three categories: trading,                  available for sale, or held to maturity. Trading securities are                  bought and                  held principally for sale in the near term. Held to maturity securities                  are those securities for which the Company has the ability and                  intent to                  hold the security until maturity. All other securities not included                  in                  trading or held to maturity are classified as available for sale.                  At                  December 31, 2005 and 2004, the Company had classified all of its                  investment securities as available for                  sale. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Available                  for sale securities are recorded at fair value. Unrealized holding                  gains                  and losses, net of the related tax effect, on securities available                  for                  sale are excluded from earnings and are reported as a separate                  component                  of stockholders’ equity until realized. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A                  decline in the market value of any available for sale or held to                  maturity                  security below cost that is deemed other than temporary is charged                  to                  earnings and establishes a new cost basis for the                  security. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Premiums                  and discounts are amortized or accreted over the life of the related                  security as an adjustment to the yield. Realized gains and losses                  for                  securities classified as available for sale and held to maturity                  are                  included in earnings and are derived using the specific identification                  method for determining the cost of securities                  sold. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

| **(1)** | **Summary                  of Significant Accounting Policies,                  continued** |
|---------|---------------------------------------------------------------------------------------------|

|   | Other                  investments include Federal Home Loan Bank stock and other equity                  securities. No ready market exists for these securities and there                  is no                  quoted fair value. These investment securities are carried at                  cost. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Mortgage                  Loans Held for Sale |
|--------|-----------------------------------------------|

|   | Mortgage                  loans held for sale are carried at the lower of aggregate cost                  or market                  value. At December 31, 2005 and 2004, the cost of mortgage loans                  held for                  sale approximates the market value. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Loans                  are stated at the principal amount outstanding, net of the allowance                  for                  loan losses. Interest on loans is calculated by using the simple                  interest                  method on daily balances of the principal amount outstanding. Loan                  fees,                  net of certain origination costs, have been deferred and are being                  amortized over the lives of the respective                  loans. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Impaired                  loans are measured based on the present value of expected future                  cash                  flows, discounted at the loan’s effective interest rate, or at the loan’s                  observable market price, or the fair value of the collateral if                  the loan                  is collateral dependent. A loan is impaired when, based on current                  information and events, it is probable that all amounts due according                  to                  the contractual terms of the loan will not be                  collected. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Accrual                  of interest is discontinued on a loan when management believes,                  after                  considering economic conditions and collection efforts, that the                  borrower’s financial condition is such that collection of interest is                  doubtful. Interest previously accrued but not collected is reversed                  against current period earnings and interest is recognized on a                  cash basis                  when such loans are placed on non-accrual                  status. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                  allowance for loan losses is established through a provision for                  loan                  losses charged to earnings. Loans are charged against the allowance                  for                  loan losses when management believes the collectibility of the                  principal                  is unlikely. The allowance represents an amount which, in management’s                  judgment, will be adequate to absorb probable losses on existing                  loans                  that may become uncollectible. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Management’s                  judgment in determining the adequacy of the allowance is based                  on                  evaluations of the collectibility of loans. These evaluations take                  into                  consideration such factors as changes in the nature and volume                  of the loan                  portfolio, current economic conditions that may affect the borrower’s                  ability to pay, overall portfolio quality and review of specific                  problem                  loans. In determining the adequacy of the allowance for loan losses,                  management uses a loan grading system that rates loans in seven                  different                  categories. Grades four through seven are assigned allocations                  of loss                  based on standard regulatory loss percentages. All other loans                  are                  assigned loss allocations based on historical credit loss percentages.                  The                  combination of these results are compared quarterly to the recorded                  allowance for loan losses. Management uses an external loan review                  program                  to challenge and corroborate the internal grading system and provide                  additional analysis in determining the adequacy of the allowance                  and the                  future provisions for estimated loan                  losses. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | While                  management uses available information to recognize losses on loans,                  future                  additions to the allowance may be necessary based on changes in                  economic                  conditions. In addition, various regulatory agencies, as an integral                  part                  of their examination process, periodically review the Company’s allowance                  for loan losses. Such agencies may require the Company to recognize                  additions to the allowance based on judgments different than those                  of                  management. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Premises                  and Equipment |
|--------|-----------------------------------------|

|   | Premises                  and equipment are stated at cost less accumulated depreciation.                  Depreciation is computed primarily using the straight-line method                  over the                  estimated useful lives of the assets. Leasehold improvements are                  amortized                  over the shorter period of the useful life of the asset or the                  lease term.                  When assets are retired or otherwise disposed, the cost and related                  accumulated depreciation are removed from the accounts, and any                  gain or                  loss is reflected in earnings for the period. The cost of maintenance                  and                  repairs which do not improve or extend the useful life of the respective                  asset is charged to earnings as incurred, whereas significant renewals                  and                  improvements are capitalized. The range of estimated useful lives                  for                  premises and equipment are generally as                  follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  Buildings and improvements |  5                  - 40 years                  |
|----------------------------------|------------------------------------------------------|
|  Furniture and equipment    |  3                  - 10                  years |

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(1)              **
**Summary        of Significant Accounting Policies, continued**

|   | Other                Real Estate |
|--------|----------------------------------|
|   | Properties                  acquired through foreclosure are carried at the lower of cost (defined                  as                  fair value at foreclosure) or fair value less estimated costs to                  dispose.                  Accounting guidance defines fair value as the amount that is expected                  to                  be received in a current sale between a willing buyer and seller                  other                  than in a forced or liquidation sale. Fair values at foreclosure                  are based                  on appraisals. Losses arising from the acquisition of foreclosed                  properties are charged against the allowance for loan losses. Subsequent                  write-downs are provided by a charge to income through the allowance                  for                  losses on other real estate in the period in which the need                  arises. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Securities                  Sold Under Repurchase                  Agreements |
|--------|-------------------------------------------------------------------------------|

|   | Securities                  sold under repurchase agreements are treated as financing activities,                  and                  are carried at the amounts at which the securities will be repurchased                  as                  specified in the respective                  agreements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Deferred                  tax assets and liabilities are recognized for the future tax consequences                  attributable to differences between the financial statement carrying                  amounts of existing assets and liabilities and their respective                  tax bases.                  Additionally, the recognition of future tax benefits, such as net                  operating loss carryforwards, is required to the extent that realization                  of such benefits is more likely than not. Deferred tax assets and                  liabilities are measured using enacted tax rates expected to apply                  to                  taxable income in the years in which the assets and liabilities                  are                  expected to be recovered or settled. The effect on deferred tax                  assets and                  liabilities of a change in tax rates is recognized in income tax                  expense                  in the period that includes the enactment                  date. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In                  the event the future tax consequences of differences between the                  financial                  reporting bases and the tax bases of the Company’s assets and liabilities                  result in deferred tax assets, an evaluation of the probability                  of being                  able to realize the future benefits indicated by such assets is                  required.                  A valuation allowance is provided for the portion of the deferred                  tax                  asset when it is more likely than not that some portion or all                  of the                  deferred tax asset will not be realized. In assessing the realizability                  of                  the deferred tax assets, management considers the scheduled reversals                  of                  deferred tax liabilities, projected future taxable income, and                  tax                  planning strategies. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Mortgage                  Banking Income |
|--------|------------------------------------------|

|   | Mortgage                  banking income represents net gains from the sale of mortgage loans                  and                  fees received from borrowers and loan investors related to the                  Bank’s                  origination of single-family residential mortgage                  loans. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Net                  Earnings Per Share |
|--------|-----------------------------------------|

|   | 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 Company had no potential common share equivalents outstanding                  during                  2005, 2004 and 2003. For each of those years, net earnings per                  share is                  calculated using the weighted average shares outstanding during                  the period                  of 899,850 for 2005 and 899,885 for 2004 and                  2003. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Reclassification |
|--------|------------------|

|   | Reclassifications                  of certain amounts in the 2004 and 2003 financial statements have                  been                  made to conform with the financial statement presentation for 2005. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Accounting        Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB        Statements No. 3*

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(2)              **
**Investment        Securities**

|   | Investment                  securities available for sale at December 31, 2005 and 2004 are                  as                  follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|                                         |   |                    December 31, 2005    |       |
|----------------------------------------------|--------|---------------------------------------------------|------------|
|                                         |   |  Amortized                   Cost  |       | GrossUnrealizedGains  |   | GrossUnrealizedLosses  |   | EstimatedFair                   Value  |   |
|                                         |   |                                              |       |   |   |   |   |   |   |
| U.S.                  Government agencies    |   | $                                                 | 20,883,971 |   |   | 26,225 |   |   | 255,366 |   |   | 20,654,830 |   |
| State,                  county and municipal |   |                                              | 18,167,950 |   |   | 400,204 |   |   | 92,683 |   |   | 18,475,471 |   |
| Mortgage-backed                  securities  |   |                                              | 11,050,719 |   |   | - |   |   | 347,280 |   |   | 10,703,439 |   |
| Other                  debt securities       |   |                                              | 1,500,000  |   |   | - |   |   | - |   |   | 1,500,000 |   |
|                                         |   |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Total                                        |   | $                                                 | 51,602,640 |   |   | 426,429 |   |   | 695,329 |   |   | 51,333,740 |   |

|                                         |   |                    December 31, 2004    |       |
|----------------------------------------------|--------|---------------------------------------------------|------------|
|                                         |   |  Amortized                   Cost  |       | GrossUnrealizedGains  |   | GrossUnrealizedLosses  |   | EstimatedFair                   Value  |   |
|                                         |   |                                              |       |   |   |   |   |   |   |
| U.S.                  Government agencies    |   | $                                                 | 17,553,407 |   |   | 170,272 |   |   | 53,371 |   |   | 17,670,308 |   |
| State,                  county and municipal |   |                                              | 16,212,474 |   |   | 698,043 |   |   | 9,171 |   |   | 16,901,346 |   |
| Mortgage-backed                  securities  |   |                                              | 10,665,795 |   |   | 49,321 |   |   | 52,706 |   |   | 10,662,410 |   |
| Other                  debt securities       |   |                                              | 1,500,000  |   |   | - |   |   | 2,500 |   |   | 1,497,500 |   |
|                                         |   |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Total                                        |   | $                                                 | 45,931,676 |   |   | 917,636 |   |   | 117,748 |   |   | 46,731,564 |   |

|                                         |   |   | December                  31, 2005   |   |   | December                  31, 2004   |   |
|----------------------------------------------|--------|--------|------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                         |   |   | Less                  than 12 Months      |   |   | 12                  Months or More        |   |   | Less                  than 12 Months   |   |
|                                         |   |   | Fair                  Value               |   |   | UnrealizedLosses                          |   |   | Fair                  Value  |   |   | UnrealizedLosses  |   |   | Fair                  Value  |   |   | UnrealizedLosses  |   |
|                                         |   |   |                                           |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                  Government agencies    |   | $      | 13,316,682                                     |   |   | 149,246                                        |   |   | 5,390,000 |   |   | 106,120 |   |   | 8,455,689 |   |   | 53,371 |   |
| State,                  county and municipal |   |   | 4,550,179                                      |   |   | 85,490                                         |   |   | 200,250 |   |   | 7,193 |   |   | 1,710,998 |   |   | 9,171 |   |
| Mortgage-backed                  securities  |   |   | 6,875,287                                      |   |   | 192,272                                        |   |   | 3,828,152 |   |   | 155,008 |   |   | 6,053,266 |   |   | 52,706 |   |
| Other                  debt securities       |   |   | -                                              |   |   | -                                              |   |   | - |   |   | - |   |   | 997,500 |   |   | 2,500 |   |
|                                         |   |   |                                           |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   | $      | 24,742,148                                     |   |   | 427,008                                        |   |   | 9,418,402 |   |   | 268,321 |   |   | 17,217,453 |   |   | 117,748 |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(2)              **
**Investment        Securities, continued**

|                                        |   | Amortized                   Cost  |       | EstimatedFair                  Value |   |
|---------------------------------------------|--------|---------------------------------------------|------------|--------------------------------------|--------|
| Due                  within one year        |   | $                                           | 3,143,328  |                                 |   | 3,122,304 |   |
| Due                  from one to five years |   |                                        | 10,861,479 |                                 |   | 10,762,509 |   |
| Due                  from five to ten years |   |                                        | 14,564,195 |                                 |   | 14,555,636 |   |
| Due                  after ten years        |   |                                        | 11,982,919 |                                 |   | 12,189,852 |   |
| Mortgage-backed                  securities |   |                                        | 11,050,719 |                                 |   | 10,703,439 |   |
|                                        |   |                                        |       |                                 |   |   |   |
|                                        |   | $                                           | 51,602,640 |                                 |   | 51,333,740 |   |

**(3)              **
**Loans**

|                                                          |   | 2005   |        | 2004   |   |
|---------------------------------------------------------------|--------|--------|-------------|--------|--------|
|                                                          |   |   |        |   |   |
| Commercial,                  financial and agricultural  |   | $      | 21,012,994  |   |   | 21,625,371 |   |
| Real                  estate - mortgage                       |   |   | 103,029,748 |   |   | 98,929,804 |   |
| Real                  estate - construction                   |   |   | 72,533,344  |   |   | 55,157,066 |   |
| Consumer                                                      |   |   | 9,897,511   |   |   | 10,353,250 |   |
|                                                          |   |   |        |   |   |   |   |
| Total                  loans                                  |   |   | 206,473,597 |   |   | 186,065,491 |   |
| Less                  allowance for loan losses               |   |   | 2,945,256   |   |   | 2,531,330 |   |
| Total                  net loans                              |   | $      | 203,528,341 |   |   | 183,534,161 |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(3)               **
**Loans,        continued**

|                                                          |   | 2005   |      | 2004   |   | 2003      |   |
|---------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|                                                          |   |   |      |   |   |      |   |
| Balance                  at beginning of year            |   | $      | 2,531,330 |   |   | 2,669,204 |   |   | 2,098,691 |   |
| Provision                  for loan losses                    |   |   | 612,000   |   |   | 394,200   |   |   | 645,000 |   |
| Amounts                  charged off                          |   |   | (252,848  | )      |   | (726,021  | )      |   | (120,901 | ) |
| Recoveries                  on amounts previously charged off |   |   | 54,774    |   |   | 193,947   |   |   | 46,414 |   |
|                                                          |   |   |      |   |   |      |   |   |   |   |
| Balance                  at end of year                  |   | $      | 2,945,256 |   |   | 2,531,330 |   |   | 2,669,204 |   |

**(4)              **
**Premises        and Equipment**

**                   **

|                                           |   | 2005   |       | 2004   |   |
|------------------------------------------------|--------|--------|------------|--------|--------|
|                                           |   |   |       |   |   |
| Land                                           |   | $      | 1,083,436  |   |   | 1,083,436 |   |
| Buildings                  and improvements    |   |   | 4,570,374  |   |   | 4,436,164 |   |
| Furniture                  and equipment       |   |   | 4,730,100  |   |   | 4,586,894 |   |
| Leasehold                  improvements        |   |   | 58,902     |   |   | - |   |
| Construction                  in process       |   |   | 7,937      |   |   | - |   |
|                                           |   |   | 10,450,749 |   |   | 10,106,494 |   |
|                                           |   |   |       |   |   |   |   |
| Less                  accumulated depreciation |   |   | 4,631,283  |   |   | 4,093,692 |   |
|                                           |   |   |       |   |   |   |   |
|                                           |   | $      | 5,819,466  |   |   | 6,012,802 |   |

**(5)              **
**Deposits**

**                   **

| 2006       |   | $      | 59,809,437  |   |
|------------|--------|--------|-------------|--------|
| 2007       |   |   | 40,298,704  |   |
| 2008       |   |   | 3,268,236   |   |
| 2009       |   |   | 2,455,823   |   |
| 2010       |   |   | 2,111,174   |   |
| Thereafter |   |   | 81,421      |   |
|       |   | $      | 108,024,795 |   |

**(6)              **
**Income        Taxes**

|                                      |   | 2005   |      | 2004   |   | 2003      |   |
|-------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
| Current                                   |   | $      | 1,457,293 |   |   | 749,833   |   |   | 1,275,995 |   |
| Deferred                                  |   |   | (110,503  | )      |   | 264,600   |   |   | (209,652 | ) |
| Total                  income tax expense |   | $      | 1,346,790 |   |   | 1,014,433 |   |   | 1,066,343 |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(6)              **
**Income        Taxes, continued**

|                                                    |   | 2005   |      | 2004   |   | 2003      |   |
|---------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
| Pretax                  income at statutory rates  |   | $      | 1,496,793 |   |   | 1,205,290 |   |   | 1,273,109 |   |
| Add                  (deduct):                          |   |   |      |   |   |      |   |   |   |   |
| Tax                  exempt interest income             |   |   | (273,916  | )      |   | (269,092  | )      |   | (247,883 | ) |
| Non-deductible                  interest expense        |   |   | 23,923    |   |   | 17,714    |   |   | 23,685 |   |
| State                  taxes, net of federal effect     |   |   | 95,447    |   |   | 61,775    |   |   | 34,485 |   |
| Other                                                   |   |   | 4,543     |   |   | (1,254    | )      |   | (17,053 | ) |
|                                                    |   | $      | 1,346,790 |   |   | 1,014,433 |   |   | 1,066,343 |   |

|   | The                  following summarizes the sources and expected tax consequences                  of future                  taxable deductions (income) which comprise the net deferred tax                  asset. The                  net deferred tax asset is a component of other assets at December                  31, 2005                  and 2004. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                          |   | 2005   |      | 2004   |   |
|-------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|
| Deferred                  income tax assets:                                  |   |   |      |   |   |   |   |
| Allowance                  for loan losses                                    |   | $      | 1,010,901 |   |   | 859,954 |   |
| Other                  real estate                                            |   |   | 43,547    |   |   | 64,507 |   |
| Total                  gross deferred income tax assets                  |   |   | 1,054,448 |   |   | 924,461 |   |
| Deferred                  income tax liabilities:                             |   |   |      |   |   |   |   |
| Premises                  and equipment                                       |   |   | (381,671  | )      |   | (361,187 | ) |
| Unrealized                  gains on investment securities available for sale |   |   | 102,074   |   |   | (303,638 | ) |
|                                                                          |   |   |      |   |   |   |   |
| Total                  gross deferred income tax liabilities             |   |   | (279,597  | )      |   | (664,825 | ) |
| Net                  deferred income tax asset                           |   | $      | 774,851   |   |   | 259,636 |   |

**(7)              **
**Federal        Home Loan Bank Advances**

|   | The                  Bank has access to advances with the Federal Home Loan Bank (“FHLB”)                  whereby the FHLB will provide the Bank credit facilities. Any amounts                  advanced by the FHLB are secured under a blanket floating lien                  on all of                  the Bank’s 1-4 family first mortgage loans. The Bank may draw advances up                  to 75% of the outstanding balance of these loans based on the agreement                  with the FHLB. There were no advances outstanding at December 31,                  2005 and                  2004. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**(8)              **
**Related        Party Transactions**

|   | The                  Company conducts transactions with directors and executive officers,                  including companies in which they have beneficial interests, in                  the normal                  course of business. It is the policy of the Company that loan transactions                  with directors and officers are made on substantially the same                  terms as                  those prevailing at the time made for comparable loans to other                  persons.                  The following is a summary of activity for related party                  loans: |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Beginning                  balance |   | $      | 4,956,000  |   |
|------------------------------------|--------|--------|------------|--------|
| New                  loans         |   |   | 7,402,000  |   |
| Repayments                         |   |   | (2,708,000 | )      |
|                               |   |   |       |   |
| Ending                  balance    |   | $      | 9,650,000  |   |

----

**Notes        to Consolidated Financial Statements, continued**

**(9)             **
**Commitments**

|   | The                  Company is a party to financial instruments with off-balance-sheet                  risk in                  the normal course of business to meet the financing needs of its                  customers. These financial instruments include commitments to extend                  credit and standby letters of credit. Those instruments involve,                  to                  varying degrees, elements of credit risk in excess of the amount                  recognized in the balance sheet. The contract amounts of those                  instruments                  reflect the extent of involvement the Bank has in particular classes                  of                  financial instruments. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  |   | Contractual                  Amount |       |
|-------------------------------------------------------|--------|-------------------------------------|------------|
|                                                  |   |  2005                          |       |  2004 |   |
| Financial                  instruments whose contract |   |                                |       |   |   |
| amounts                  represent credit risk:       |   |                                |       |   |   |
| Commitments                  to extend credit    |   | $                                   | 52,219,000 |   |   | 33,388,000 |   |
| Standby                  letters of credit            |   | $                                   | 515,000    |   |   | 1,207,000 |   |

|   | Commitments                  to extend credit are agreements to lend to a customer as long as                  there is                  no violation of any condition established in the contract. Commitments                  generally have fixed expiration dates or other termination clauses                  and may                  require payment of a fee. Since many of the commitments may expire                  without                  being drawn upon, the total commitment amounts do not necessarily                  represent future cash requirements. The Company evaluates each                  customer’s                  creditworthiness on a case-by-case basis. The amount of collateral                  obtained, if deemed necessary by the Bank, upon extension of credit                  is                  based on management’s credit evaluation. Collateral held varies but may                  include unimproved and improved real estate, certificates of deposit,                  or                  personal property. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Standby                  letters of credit written are conditional commitments issued by                  the                  Company to guarantee the performance of a customer to a third party.                  Those                  guarantees are primarily issued to businesses in the Company’s delineated                  trade area. The credit risk involved in issuing letters of credit                  is                  essentially the same as that involved in extending loan facilities                  to                  customers. The Company holds real estate, equipment, automobiles                  and                  customer deposits as collateral supporting those commitments for                  which                  collateral is deemed necessary. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                  Company has $7,000,000 available for the purchase of overnight                  federal                  funds from two correspondent financial institutions as of December                  31,                  2005 and 2004. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**(10)           **
**Profit        Sharing Plan**

|   | The                  Company has a contributory profit sharing plan which is available                  to                  substantially all employees subject to certain age and service                  requirements. Contributions to the plan are determined annually                  by the                  Board of Directors. The total contributions by the Company for                  2005, 2004                  and 2003 were approximately $309,000, $256,000 and $299,000,                  respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(11)            **
**Regulatory        Matters**

|   | The                  Company is subject to various regulatory capital requirements administered                  by the federal banking agencies. Failure to meet minimum capital                  requirements can initiate certain mandatory and possibly additional                  discretionary actions by regulators that, if undertaken, could                  have a                  direct material effect on the Company’s financial statements. Under                  capital adequacy guidelines and the regulatory framework for prompt                  corrective action, the Bank must meet specific capital guidelines                  that                  involve quantitative measures of the assets, liabilities and certain                  off-balance-sheet items as calculated under regulatory accounting                  practices. The capital amounts and classification are also subject                  to                  qualitative judgments by the regulators about components, risk                  weightings,                  and other factors. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                  capital ratios for the Company are essentially the same as those                  of the                  Bank. Therefore, only the Bank’s capital ratios are presented in the                  following table (dollars in                  thousands): |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          |   |                                 |   |                               |   |                               |   |                               |   | To                  Be Well        |   |
|-----------------------------------------------|--------|--------------------------------------|--------|------------------------------------|--------|------------------------------------|--------|------------------------------------|--------|------------------------------------|--------|
|                                          |   |                                 |   |                               |   |                               |   |                               |   | Capitalized                  Under |   |
|                                          |   |                                 |   |                               |   | For                  Capital       |   | Prompt                  Corrective |   |
|                                          |   |                    Actual  |   | Adequacy                  Purposes |   | Action                  Provisions |   |
|                                          |   | Amount                               |   | Ratio                              |   | Amount                             |   | Ratio                              |   | Amount                             |   | Ratio |   |
| **As                  of December 31, 2005:** |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |
| Total                  Capital                |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |
| (to                  Risk-Weighted Assets)    |   | $                                    | 26,511 |                               |   | 12.4%                              |   | $                                  | 17,164 |                               |   | 8.0% |   | $ | 21,455 |   |   | 10.0% |   |
| Tier                  1 Capital               |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |   |   |   |   |   |   |
| (to                  Risk-Weighted Assets)    |   | $                                    | 23,827 |                               |   | 11.1%                              |   | $                                  | 8,582  |                               |   | 4.0% |   | $ | 12,873 |   |   | 6.0% |   |
| Tier                  1 Capital               |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |   |   |   |   |   |   |
| (to                  Average Assets)          |   | $                                    | 23,827 |                               |   | 8.4%                               |   | $                                  | 11,351 |                               |   | 4.0% |   | $ | 14,188 |   |   | 5.0% |   |
|                                          |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |   |   |   |   |   |   |
| **As                  of December 31, 2004:** |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |   |   |   |   |   |   |
| Total                  Capital                |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |   |   |   |   |   |   |
| (to                  Risk-Weighted Assets)    |   | $                                    | 24,256 |                               |   | 12.0%                              |   | $                                  | 16,123 |                               |   | 8.0% |   | $ | 20,154 |   |   | 10.0% |   |
| Tier                  1 Capital               |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |   |   |   |   |   |   |
| (to                  Risk-Weighted Assets)    |   | $                                    | 21,781 |                               |   | 10.8%                              |   | $                                  | 8,062  |                               |   | 4.0% |   | $ | 12,092 |   |   | 6.0% |   |
| Tier                  1 Capital               |   |                                 |   |                               |   |                               |   |                               |   |                               |   |   |   |   |   |   |   |   |   |
| (to                  Average Assets)          |   | $                                    | 21,781 |                               |   | 8.5%                               |   | $                                  | 10,268 |                               |   | 4.0% |   | $ | 12,836 |   |   | 5.0% |   |

**(12)           **
**Stockholders’        Equity**

|   | Dividends                  paid by the Bank are the primary source of funds available to the                  Company                  for payment of dividends to its stockholders and for other working                  capital                  needs. Banking regulations limit the amount of dividends that may                  be paid                  without prior approval of the regulatory authorities. These restrictions                  are based on the level of regulatory classified assets, the prior                  year’s                  net earnings, and the ratio of equity capital to total assets.                  Approximately $1,543,000 is available for payment of dividends                  from the                  Bank to the Company in 2006. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(13)           **
**Fair        Value of Financial Instruments**

|   | The                  Company is required to disclose fair value information about financial                  instruments, whether or not recognized on the face of the balance                  sheet,                  for which it is practicable to estimate that value. The assumptions                  used                  in the estimation of the fair value of the Company’s financial instruments                  are detailed below. Where quoted prices are not available, fair                  values are                  based on estimates using discounted cash flows and other valuation                  techniques. The use of discounted cash flows can be significantly                  affected                  by the assumptions used, including the discount rate and estimates                  of                  future cash flows. The following disclosures should not be considered                  a                  surrogate of the liquidation value of the Company, but rather a                  good faith                  estimate of the increase or decrease in value of financial instruments                  held by the Company since purchase, origination or                  issuance. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(13)            **
**Fair        Value of Financial Instruments, continued**

|                                                |   |                    2005  |    | 2004                   |   |
|-----------------------------------------------------|--------|------------------------------------|---------|-----------------------------|--------|
|                                                |   | Carrying                           |    | Estimated                   |   | Carrying |   | Estimated |   |
|                                                |   | Amount                             |    | Fair                  Value |   | Amount |   | Fair                  Value |   |
| Assets:                                             |   |                               |    |                        |   |   |   |   |   |
| Cash                  and cash equivalents          |   | $                                  | 19,065  |                        |   | 19,065 |   |   | 15,753 |   |   | 15,753 |   |
| Investment                  securities              |   | $                                  | 51,334  |                        |   | 51,334 |   |   | 46,732 |   |   | 46,732 |   |
| Other                  investments                  |   | $                                  | 614     |                        |   | 614 |   |   | 604 |   |   | 604 |   |
| Mortgage                  loans held for sale       |   | $                                  | 1,285   |                        |   | 1,285 |   |   | 1,128 |   |   | 1,128 |   |
| Loans,                  net                         |   | $                                  | 203,528 |                        |   | 204,279 |   |   | 183,534 |   |   | 183,515 |   |
|                                                |   |                               |    |                        |   |   |   |   |   |   |   |   |   |
| Liabilities:                                        |   |                               |    |                        |   |   |   |   |   |   |   |   |   |
| Deposits                  and securities sold under |   |                               |    |                        |   |   |   |   |   |   |   |   |   |
| repurchase                  agreement               |   | $                                  | 259,043 |                        |   | 260,106 |   |   | 232,942 |   |   | 232,515 |   |

**(14)    **
**Other        Operating Expenses**

|                                                |   |  2005  |    |  2004  |   |  2003  |   |
|-----------------------------------------------------|--------|------------------|---------|------------------|--------|------------------|--------|
| Professional                  fees                  |   | $                | 367,823 |             |   | 337,210          |   |   | 337,226 |   |
| Marketing                  expenses                 |   | $                | 215,631 |             |   | 228,866          |   |   | 182,116 |   |
| ATM                  process and settlement charges |   | $                | 268,949 |             |   | 239,301          |   |   | 122,544 |   |

**(15)           **
**Oconee        Financial Corporation (Parent Company Only) Financial        Information**

|                                                              |   | 2005   |       |  2004 |   |
|-------------------------------------------------------------------|--------|--------|------------|------------|--------|
|  Assets                                                      |   |   |       |       |   |
| Cash                                                              |   | $      | 1,063,125  |       |   | 955,329 |   |
| Investment                  in subsidiary                         |   |   | 23,660,607 |       |   | 22,277,247 |   |
| Other                  assets                                     |   |   | 171        |       |   | 2,390 |   |
|                                                              |   |   |       |       |   |   |   |
|                                                              |   | $      | 24,723,903 |       |   | 23,234,966 |   |
|  Liabilities                  and Stockholders’ Equity |   |   |       |       |   |   |   |
| Other                  liabilities                                |   | $      | 989,797    |       |   | 899,885 |   |
| Stockholders’                  equity                       |   |   | 23,734,106 |       |   | 22,335,081 |   |
|                                                              |   | $      | 24,723,903 |       |   | 23,234,966 |   |

----

**OCONEE        FINANCIAL CORPORATION**

**Notes        to Consolidated Financial Statements, continued**

**(15)            **
**Oconee        Financial Corporation (Parent Company Only) Financial Information,        continued**

| Statements                  of Earnings                                                |
|----------------------------------------------------------------------------------------|
|                                                                                   |   |   |
| For                  the Years Ended December 31, 2005, 2004 and                  2003 |

|                                                              |   | 2005   |      | 2004   |   | 2003      |   |
|-------------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|                                                              |   |   |      |   |   |      |   |
| Dividends                  from subsidiary                        |   | $      | 1,039,797 |   |   | 899,885   |   |   | 899,885 |   |
|                                                              |   |   |      |   |   |      |   |   |   |   |
| Other                  expenses                                   |   |   | 49,474    |   |   | 50,936    |   |   | 47,689 |   |
|                                                              |   |   |      |   |   |      |   |   |   |   |
| Earnings                  before income taxes and equity in       |   |   |      |   |   |      |   |   |   |   |
| undistributed                  earnings of subsidiary             |   |   | 990,323   |   |   | 848,949   |   |   | 852,196 |   |
|                                                              |   |   |      |   |   |      |   |   |   |   |
| Income                  tax benefit                               |   |   | 18,780    |   |   | 19,335    |   |   | 18,104 |   |
|                                                              |   |   |      |   |   |      |   |   |   |   |
| Earnings                  before equity in undistributed earnings |   |   |      |   |   |      |   |   |   |   |
| of                  subsidiary                                    |   |   | 1,009,103 |   |   | 868,284   |   |   | 870,300 |   |
|                                                              |   |   |      |   |   |      |   |   |   |   |
| Equity                  in undistributed earnings of subsidiary   |   |   | 2,046,436 |   |   | 1,662,252 |   |   | 1,807,795 |   |
|                                                              |   |   |      |   |   |      |   |   |   |   |
| Net                  earnings                                     |   | $      | 3,055,539 |   |   | 2,530,536 |   |   | 2,678,095 |   |

|                                                             |   | 2005   |       | 2004   |   | 2003       |   |
|------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
| Cash                  flows from operating activities:           |   |   |       |   |   |       |   |
| Net                  earnings                                    |   | $      | 3,055,539  |   |   | 2,530,536  |   |   | 2,678,095 |   |
| Adjustments                  to reconcile net earnings           |   |   |       |   |   |       |   |   |   |   |
| to                  net cash provided by operating activities:   |   |   |       |   |   |       |   |   |   |   |
| Equity                  in undistributed earnings of subsidiary  |   |   | (2,046,436 | )      |   | (1,662,252 | )      |   | (1,807,795 | ) |
| Change                  in:                                      |   |   |       |   |   |       |   |   |   |   |
| Other                  assets                                    |   |   | 2,219      |   |   | (2,390     | )      |   | 2,513 |   |
| Other                  liabilities                               |   |   | 89,911     |   |   | (1,043     | )      |   | 2,379 |   |
| Net                  cash provided by operating activities  |   |   | 1,101,233  |   |   | 864,851    |   |   | 875,192 |   |
| Cash                  flows from financing activities:           |   |   |       |   |   |       |   |   |   |   |
| Dividends                  paid                                  |   |   | (989,797   | )      |   | (899,885   | )      |   | (899,885 | ) |
| Purchase                  and retirement of common stock         |   |   | (3,640     | )      |   | -          |   |   | - |   |
|                                                             |   |   |       |   |   |       |   |   |   |   |
| Net                  cash used by financing activities           |   |   | (993,437   | )      |   | (899,885   | )      |   | (899,885 | ) |
|                                                             |   |   |       |   |   |       |   |   |   |   |
| Change                  in cash                             |   |   | 107,796    |   |   | (35,034    | )      |   | (24,693 | ) |
| Cash                  at beginning of year                  |   |   | 955,329    |   |   | 990,363    |   |   | 1,015,056 |   |
| Cash                  at end of year                             |   | $      | 1,063,125  |   |   | 955,329    |   |   | 990,363 |   |

----

**SIGNATURES**

|         |                                                                                |                                                                                                                                                                                                                                                                                       |
|--------------|-------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | **OCONEE                FINANCIAL CORPORATION****(Registrant)**                     |
|    |                                                                           |                                                                                                                                                                                                                                                                                  |
|         | By:                                                                       | /s/ B.Amrey              Harden                                          |
|         | B.Amrey                HardenPresident                  and Chief Executive Officer |

**POWER      OF ATTORNEY AND SIGNATURES**

| **Signature**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | **Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                          |                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| /s/                G. Robert Bishop                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| G.                Robert Bishop                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| /s/                Jimmy L. Christopher                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Jimmy                L. Christopher                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| /s/                Douglas D. Dickens                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Chairman                of the Board of Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Douglas                D. Dickens                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| /s/                John A. Hale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Vice                Chairman of the Board of Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| John                A. Hale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| /s/                B. Amrey Harden                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | President                and Chief Executive Officer, Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| B.                Amrey Harden                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| /s/                Henry C. Maxey                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Henry                C. Maxey                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| /s/                Carl R. Nichols                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Carl                R. Nichols                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

----

|                                               |                                                                     |
|----------------------------------------------------|--------------------------------------------------------------------------|
| /s/                Ann Breedlove Powers            | Director                                                                 |
| Ann Breedlove Powers                               |                                                                     |
|                                               |                                                                     |
|                                               |                                                                     |
| /s/                Steven                A. Rogers | Vice                President and Controller, Chief Accounting Officer   |
| Steven                A. Rogers                    |                                                                     |
|                                               |                                                                     |
|                                                    |                                                                     |
| /s/                Jerry K. Wages                  | Senior                Executive Vice President and Chief Financial  |
| Jerry                K. Wages                      | Officer,                Corporate Secretary, and Director                |
|                                               |                                                                     |
|                                               |                                                                     |
| /s/ Tom              F. Wilson                     | Executive                Vice President and Chief Loan Officer,          |
| Tom                F. Wilson                       | Director                                                                 |
|                                               |                                                                     |
|                                                    |                                                                     |
| /s/                Virginia S. Wells               | Director                                                                 |
| Virginia                S. Wells                   |                                                                     |

----

**INDEX      TO EXHIBITS**

| **Exhibit**    | **Description**                                                                                                                         |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------|
|  21       |  Subsidiaries                of Oconee Financial Corporation.                                                                 |
|  24  |  Power                of Attorney (included herein on the signature page).                                                         |
|  31.1     |  Certification                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002. |
|  31.2     |  Certification                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002. |
|  32.1     |  Section                1350 Certification of Chief Executive Officer.                                                             |
|  32.2     |  Section                1350 Certification of Chief Financial                Officer.                                              |