Executive Summary

Q4 FY2014 net income was $0.854M and diluted EPS $0.15, down versus Q4 FY2013 ($1.067M, $0.18), as higher professional/supervisory fees (merger-related) offset stable net interest income .
Net interest margin expanded sequentially and YoY to 3.39% (Q3: 3.33%, Q2: 3.32%; Q4 FY2013: 3.24%), helped by lower cost of funds, while asset yields held at 3.77% .
Asset quality improved YoY: nonperforming loans/total loans fell to 0.71% (0.89% prior year); nonperforming assets/total assets fell to 0.66% (0.82%) .
Dividend maintained at $0.10 per share and stock repurchases continued; pending Stephens Federal merger targeted for legal closing on Oct 1, 2014, expected to add ~$150M of assets—key forward catalyst .

What Went Well and What Went Wrong

What Went Well

Net interest margin expanded to 3.39% (from 3.33% Q3 and 3.24% prior-year quarter) on lower deposit costs; interest-earning asset yield held steady at 3.77% .
Asset quality strengthened: provision for loan losses only $26K in Q4 and nonperforming ratios improved YoY; net charge-offs were $0 in Q4 .
Management highlighted improved loan demand and reduced early payoffs versus FY2013, supporting modest portfolio growth in one-to-four family and construction loans .

What Went Wrong

Noninterest income declined sharply YoY in Q4 ($110K vs $188K) mainly due to lower gains on securities ($19K vs $119K), trimming total pre-tax earnings .
Noninterest expense rose 14.6% YoY in Q4 to $1.676M, driven by $198K merger-related professional/supervisory fees, pressuring bottom-line results .
Deposits declined YoY to $281.0M (from $292.4M) as sustained low rates pushed depositors toward higher yields elsewhere; cash and equivalents fell as funds were redeployed to loans/securities .

Financial Results

Quarterly comparison (oldest → newest)

Metric	Q2 FY2014 (Dec 31, 2013)	Q3 FY2014 (Mar 31, 2014)	Q4 FY2014 (Jun 30, 2014)
Interest & Dividend Income ($000)	$3,266	$3,221	$3,253
Interest Expense ($000)	$383	$345	$324
Net Interest Income ($000)	$2,883	$2,876	$2,929
Provision for Loan Losses ($000)	$(40)	$41	$26
Noninterest Income ($000)	$240	$179	$110
Noninterest Expense ($000)	$1,581	$1,673	$1,676
Pre-tax Income ($000)	$1,582	$1,341	$1,337
Income Taxes ($000)	$568	$486	$483
Net Income ($000)	$1,014	$855	$854
Diluted EPS ($)	$0.18	$0.15	$0.15

Margins and spread (oldest → newest)

Metric	Q2 FY2014	Q3 FY2014	Q4 FY2014
Net Interest Margin (%)	3.32%	3.33%	3.39%
Interest Rate Spread (%)	3.22%	3.23%	3.29%

Year-over-year quarter comparison (Q4 FY2014 vs Q4 FY2013)

Metric	Q4 FY2013	Q4 FY2014
Net Income ($000)	$1,067	$854
Diluted EPS ($)	$0.18	$0.15
Interest & Dividend Income ($000)	$3,359	$3,253
Interest Expense ($000)	$468	$324
Net Interest Margin (%)	3.24%	3.39%

KPIs and balance sheet (period-end)

KPI	Jun 30, 2013	Jun 30, 2014
Total Assets ($000)	$370,095	$360,501
Net Loans ($000)	$221,163	$229,931
Deposits ($000)	$292,422	$281,015
Investment Securities ($000)	$96,024	$103,806
Total Equity ($000)	$76,162	$76,981
NPLs / Total Loans (%)	0.89%	0.71%
NPAs / Total Assets (%)	0.82%	0.66%
Allowance / Total Loans (%)	0.34%	0.37%
Equity / Assets (%)	20.58%	21.35%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Merger Closing (Stephens Federal)	Oct 1, 2014 (planned legal closing)	N/A	“Our plan is to effect the legal closing of the merger on October 1, 2014, pending approval by both regulatory agencies.”	New event timing
Pro Forma Asset Increase	At merger close	N/A	“The effect of the merger will result in an approximate increase in asset size of $150 million.”	New magnitude
Quarterly Dividend	Ongoing	$0.10/share prior quarters	$0.10/share declared July 24, 2014; payable Aug 21, 2014	Maintained
Stock Repurchase	Program since Jun 19, 2013	150,000 authorized; 89,900 repurchased by Dec 31, 2013	99,070 repurchased by FY2014; 38,400 remain	Continued execution

Earnings Call Themes & Trends

Note: No earnings call transcript was located in the document set; themes derived from Q2/Q3 10-Qs and the Q4 press release .

Topic	Previous Mentions (Q2 & Q3)	Current Period (Q4)	Trend
Net interest margin and cost of funds	NIM 3.32% (Q2); benefit from lower deposit costs	NIM 3.39%; spread 3.29% on lower cost of funds while asset yields steady	Improving (sequential/YoY)
Loan demand and prepayments	Rising loan demand; reduced refi-driven payoffs vs FY2013	“Encouraged to see a moderate increase in demand for loans and a halting of the early loan payoffs…”	Improving
Asset quality	NPLs rose in H1 FY2014 vs FY2013 but remained manageable; low charge-offs	NPL/loans down to 0.71%; provision only $26K; net charge-offs $0	Improving
Noninterest income	Gains on securities buoyed H1; variability noted	Gains lower YoY in Q4 ($19K vs $119K) impacting total noninterest income	Mixed/Down YoY in Q4
Operating expenses & merger costs	Professional/supervisory fees up on merger-related work	$198K merger-related fees in Q4; full-year professional fees up 77.7%	Up due to merger
Capital return	Quarterly $0.10 dividend; repurchase activity ongoing	$0.10 dividend declared; repurchased 99,070 shares in FY2014	Stable shareholder returns
Strategic expansion/Regulatory	Merger agreement signed; applications filed May 8, 2014	Target legal close Oct 1, 2014; expand footprint; OCC/FRB approvals pending	Advancing

Management Commentary

CEO (T. Rhett Evatt): “We had another strong year in FY 2014... encouraged to see a moderate increase in demand for loans and a halting of the early loan payoffs... We believe the modest loan growth trend will continue, and the addition of the new markets by virtue of our pending merger... will open up greater opportunities to increase our depositor base and expand our lending potential.”
CFO (H. Allen Salter): “Our plan is to effect the legal closing of the merger on October 1, 2014, pending approval by both regulatory agencies... The effect of the merger will result in an approximate increase in asset size of $150 million.”

Q&A Highlights

N/A—no earnings call transcript identified in the filings set; analysis relies on the furnished press release and quarterly reports .

Estimates Context

Consensus EPS and revenue estimates from S&P Global were unavailable at the time of analysis, so no comparison to Wall Street expectations could be made.

Key Takeaways for Investors

Margin story is positive: NIM expanded to 3.39% with spread at 3.29%, driven by lower deposit costs while asset yields held constant at 3.77% .
EPS and net income down YoY in Q4 ($0.15 vs $0.18; $0.854M vs $1.067M) as merger-related professional fees elevated OpEx and gains on securities normalized .
Asset quality improved materially YoY—NPL/loans to 0.71%, NPAs/assets to 0.66%; provision only $26K and zero net charge-offs in Q4 .
Deposits continued to decline YoY amid low-rate environment, but balances were redeployed into loans and higher-yielding securities, supporting NIM .
Shareholder returns steady: $0.10 quarterly dividend maintained; repurchases total 99,070 shares FY2014 with 38,400 remaining authorized .
Stephens Federal merger (planned Oct 1, 2014 legal close) is the next catalyst, adding ~$150M in assets and new markets, with OCC/FRB approvals pending .
Near-term: watch noninterest income volatility (security gains) and merger costs; medium-term: post-merger scale and footprint expansion to support deposit growth and lending .

Oconee Federal Financial Corp. (OFED)·Q4 2014 Earnings Summary